The beginning of the end? (oil)

[Master of Ossus]

The issue is not the "focus on present gains" - the traditional mentality and the long-term fixed, immobile means of production in feudalism did not allow for such a rapid exploit of resources and total abandonment of long-term planning (all those castles and dynasties and kingdoms meant to last for ages were an evolutionary trait of those structures, developed to maintain the human populations into the future), and neither did technology of the age allow for it.

Today we have both an economic structure which can sustain and even increase this exploit and damage from human activity, and a technology which corresponds to it and gives it this ability.

Right, I suppose it's possible that the technology of the past wasn't good enough to rob us completely of our resources, but even under extant conditions the real cost of virtually all minerals has declined over the past 25, 50, 100 years. This strongly suggests that technology and investment consistently advance more quickly than minerals are depleted. Incidentally, according to Ramsey's model, monopolies actually have a greater incentive to worry about the future and their long-term viability than any other market structures, so it seems unlikely that capitalism is truly to blame for the problems that you've been describing.

[K. A. Pital]

Right, I suppose it's possible that the technology of the past wasn't good enough to rob us completely of our resources

Indeed. Most of the technology of the past was neither capable of grasping those resources, much less destroying them at such a fast pace.

This strongly suggests that technology and investment consistently advance more quickly than minerals are depleted.

Technology of extraction of finite resources? Perhaps quite so.

Incidentally, according to Ramsey's model, monopolies actually have a greater incentive to worry about the future and their long-term viability than any other market structures

I guess it's more of a technology thing than anything else. Technology which drives the ever-expanding depletion of natural resources advances immensely while little attention is paid to starting a new technological cycle which would utilize more costly, but more long-term resources like nuclear.

The main idea is to mitigate a possible crisis that can happen when the technical demand will not be met, or rather will not correspond to the effective demand. Which, for such a critical thing as energy supply, can lead to a very real crisis in economy. It's not like the supply of some useless semi-luxury consumer stuff, it's essentially the drink of the economy, so when effective demand != technical demand, we would have a crisis since the growth depends on those two corresponding.

[Master of Ossus]

Correct. By starting the shift earlier, you allow for a more smooth correction and also for the ability to downsize energy consumption itself (via political measures). When large costs are concentrated in a short period of time, on the other hand, a crisis indeed can happen. That's the main problem, the fact that energy costs will rise is inevitable.

Well, let's do a quick comparison with the oil crises of the 1970's. At the height of the crisis, the US was coming up about 1.2 million barrels per day short, which represented about 8% of total US consumption just prior to the crisis. Frankly, even if I grant that oil production patterns will follow the logistic curve, it's kind of hard to envision the world coming up 8% short over the course of a few months, so I think at worst we're talking about a situation that's well short of what we faced in the 1970's, particularly since many western governments (including that of the US) responded absolutely horrifically to the situation and severely retarded the market's ability to respond (Stockman 1978). What happened in the '70's certainly wasn't great, and I wouldn't want to do it again if I don't have to, but in the grand scheme of things it wasn't a world-breaking event. Governments didn't collapse, the economy didn't fall apart (though there was a resultant depression), and the populace more-or-less continued as it had, before.

[Admiral Valdemar]

The Synthetic Fuels Corporation showed that even with existing technologies we can significantly increase production within a few years, and that was just inside the United States.

Production does not mean efficiency. My point is that coal gasification and similar processes have pitifully less net energy gain than sweet oil drilling and refining. They also produce far, far more GHG emissions, which essentially means exacerbating the current problem of global warming in order to just break even. This is by no means a solution, just a delaying tactic.

Actually, they did. No one knew, during the 1970's how long the crises were going to last, and many of the developments that were made during the 1970's continued. It should also be noted that the sorts of government intervention that I assume many in this thread would advocate for ended up being counter-productive and retrospectively foolish.

But it was not a situation looking at the dwindling supply of easily accessible oil, of growing energy demands from a rapidly industrialising Far East with China leading the revolution and where global warming is a very real and proven risk. Any one of those torpedoes the original plans of dealing with a lower supply issue by simply being more than just a problem in supply, but in how to remedy that anomaly.

Incidentally, I don't propose any gov't action, because there is no way to stop this problem any time soon. You're looking at the mass adoption of renewable energy and nuclear to avoid massive increases in emissions and costs, to say nothing of the immediate effects of lowered supply which is already causing global unrest.

It's not a flaw with capitalism, nor something communism could fix. It's human nature to view things with a major myopic tint. Something like investing in future energy sources during the boom years of oil would be shot down by investors in no time at all, and it's only recently that Big Oil has started getting into greener sources of energy because of their realisation of peak oil and public demand for such technologies down to AGW doomsaying.

[Master of Ossus]

Production does not mean efficiency. My point is that coal gasification and similar processes have pitifully less net energy gain than sweet oil drilling and refining. They also produce far, far more GHG emissions, which essentially means exacerbating the current problem of global warming in order to just break even. This is by no means a solution, just a delaying tactic.

It's my understanding that the energy efficiency of virtually all of the Sythetic Fuels Corp. efforts was quite respectable, even compared with contemporary methods, and I assume that these processes (being well-known technologies) could be done even more efficiently with access to more favorable sites outside of the US.

But it was not a situation looking at the dwindling supply of easily accessible oil, of growing energy demands from a rapidly industrialising Far East with China leading the revolution and where global warming is a very real and proven risk. Any one of those torpedoes the original plans of dealing with a lower supply issue by simply being more than just a problem in supply, but in how to remedy that anomaly.

I think that the 1970's Crises were even more serious than that: they essentially constituted an overnight collapse of supply of 5-15% of the pre-crisis total consumption. I suppose that people didn't really understand global warming dangers at the time, but the market essentially treated it as a two-fold problem requiring increased domestic (and non OAPEC) production and to reduce the demand for petrol. In practice, the second aspect constituted a substantial fraction of the adjustment, even though US government policy made every effort to raise demand for oil. I see no reason why these measures could not be applied on a global scale should another similar crisis occur, although if global warming were the major component of the threat then increased production of oil might actually be counter-productive.

Incidentally, I don't propose any gov't action, because there is no way to stop this problem any time soon. You're looking at the mass adoption of renewable energy and nuclear to avoid massive increases in emissions and costs, to say nothing of the immediate effects of lowered supply which is already causing global unrest.

It's not a flaw with capitalism, nor something communism could fix. It's human nature to view things with a major myopic tint. Something like investing in future energy sources during the boom years of oil would be shot down by investors in no time at all, and it's only recently that Big Oil has started getting into greener sources of energy because of their realisation of peak oil and public demand for such technologies down to AGW doomsaying.

Fair enough.

[K. A. Pital]

What happened in the '70's certainly wasn't great, and I wouldn't want to do it again if I don't have to, but in the grand scheme of things it wasn't world-breaking event.

Depends on how you see it. A taste of things to come on a far larger scale if hte gap between demand and supply increases permanently - or, see it as the worst that can possibly happen.

I personally don't think that the 70's oil crisis are the worst that can happen due to the very simple fact, demand/supply gaps were temporary and reversible, but what will happen in the latter years if the current trend continues will be more large-scale, and what's important - permanent and irreversible.

Do I mean "doom and gloom"? No. But a possible event on a Great Depression scale? Quite so. I've witnessed a local "great depression" during the 1998 crisis in Russia and I must say this is not just "unpleasant", it's borderline deadly for poorer countries. And living as a bum is not exactly the best of my experiences in life, and I clearly don't want that to be repeated.

[Admiral Valdemar]

I'd be curious to see any articles, if they exist, on the ability of the West to convert to synthetic resources should a crisis be evidently looming on us within the near future. If the technologies are vastly improved, then it may be that a transition can be made which keeps the economy afloat just, rather than free falling as industry reels from lack of supply and no immediate way of plugging that gap. Certainly the people will feel it when that shortage hits them as more energy is needed just to break even by using tar sands etc. instead, the bulk of which will be needed for heavy industry first and agriculture to supply the nation.

To use the UK as an example, one need only look at the peaking of the North Sea gas fields and the rising prices in gas since, along with the deals with Gazprom across Europe. Despite the coal deposits in England mentioned previously, there is a big political hot potato regarding gas prices in the UK, which is ever more reliant on foreign supply from Russia; added on top of the already expensive petrol and diesel prices that are global record makers (admittedly, a lot of it is tax, but the point stands).

With nuclear still viewed in a bad light and many UK reactors ageing and not having any guaranteed replacements in sight, it's down to renewable sources like wind, solar and hydro which are grossly inadequate of providing even one coal station's energy output in the equivalent space and resources used.

As the aforementioned documentary mentioned too, the hydrogen economy is a pipe-dream given few seem to understand the fact that it's simply an energy storage medium, not an energy source. Without a whole heap of green sources and nuclear, you've got only synthetic oil to look too which is hideously dirty and far less efficient than what we get now, be it down to refining or even just getting to it.

[J]

Peak Oil takes this theory and applies it to a worldwide scale. You can only exploit an oil field if you've discovered it, and worldwide oil discovery also follows a Hubbart curve (as you discover more and more fields, there are fewer places for undiscovered fields to hide).

True, but only a very small fraction of the world has been thoroughly explored.

Oh bullshit. Practically every part of the world other than Antarctica and Greenland has been gone over with a fine toothcomb already. Seismic surveys have been done on nearly square mile of the Earth's land and ocean floors, along with magnetic surveys and even satellite surveys. We've already picked over the entire Earth and now we're just using finer & finer toothcombs to find ever smaller oil fields.

1. Flow rate of oil. This is the maximum worldwide quantity that can be produced in some discrete amount of time (usually barrels per day). This strongly influences the price of oil.
2. Total resources. This is the number of barrels left in the ground, in various forms requiring different technological and economic conditions to produce efficiently. This also affects the price of oil (Hirfschleiser, 1984), even though it is unmeasurable.

These two are not remotely similar. The flow rate is governed primarily by investment within the last five to twenty years. The total resources, though, are not correlated with this. You can even add a third level of abstraction by suggesting that we should keep "total reserves" in, but total reserves have an economic component which if Peak Oil Theory as you have presented it is accurate will necessarily change.

Flow rate of oil. What you've stated is only true in a mature field, where constant drilling along with water & gas injection is needed to maintain its flow. In a young field, such as the Mid East fields of 30-40 years ago this is not true, flow is controlled merely by opening and closing the valves at the wellheads.

Total resources. Yes it can change as technologies improve and the oil field becomes better understood. However this is accounted for by geologists and the SPE. They will look at the data along with cumulative production and revise their reserve estimates accordingly, for example, see Alaska and Texas where reserves have been moved upwards as recovery percentages have been better than expected. Of course it could go the other way, see RoyalDutchShell, which had to significantly downgrade their reserves.

No, we won't know for sure that Peak Oil has occured, but we can make predictions. Consider: the last major oil field discovery in the world was Cantarell in Mexico... and that occured thirty years ago. It takes a long time to develop these fields up to large-scale production comparable to world oil consumption, on the order of a few decades.

Nonsense. The Tengiz field has 35 billion barrels in proven reserves and wasn't discovered until the 1990's. You're also ignoring the fact that virtually all fields have ultimately produced much more oil than they were estimated to contain when they were discovered, since after greater exploration their borders and boundaries are expanded and better defined. The Kashagan field has an estimated 12 billion barrels and wasn't discovered until 2000.

Tengiz? 35 billion barrels of proven reserves? Tengiz doesn't even have 35 billion barrels of original oil in place, let along recoverable reserves. Actual recoverable oil is estimated to be in the 6-9 billion barrels range out of original oil in place figure of around 25 billion barrels, which is consistent with the recovery percentage expected from a sandstone reservoir, which is what Tenzig is.

Regarding Kashagan, it contains 12-13 billion barrels or so of oil equivalents, meaning oil, natural gas, and gas condensates. Actual oil is estimated to be around 7-9 billion barrels.

Except that it's bullshit that there haven't been major discoveries, since then. The four main Kazakh oil discoveries in the 1990's alone nearly DOUBLED world proven reserves.

What in the name of god are you blabbering about? Are you seriously claiming that the Caspian Sea discoveries have somehow added nearly a trillion barrels to world oil reserves? Even the most delusional claims of a Caspian Sea bonanza top out at around 300 billion barrels, in reality there's somewhere between 1/5th and 1/10th of that.

[Master of Ossus]

Oh bullshit. Practically every part of the world other than Antarctica and Greenland has been gone over with a fine toothcomb already. Seismic surveys have been done on nearly square mile of the Earth's land and ocean floors, along with magnetic surveys and even satellite surveys. We've already picked over the entire Earth and now we're just using finer & finer toothcombs to find ever smaller oil fields.

Which, of course, explains how new discoveries of major fields have occurred months ago. In the Gulf of Mexico. But that's understandable--it's such a poorly understood and rarely traveled part of the world, in which no one would have expected to find oil.

Flow rate of oil. What you've stated is only true in a mature field, where constant drilling along with water & gas injection is needed to maintain its flow. In a young field, such as the Mid East fields of 30-40 years ago this is not true, flow is controlled merely by opening and closing the valves at the wellheads.

So... how is what I wrote incorrect?

Total resources. Yes it can change as technologies improve and the oil field becomes better understood. However this is accounted for by geologists and the SPE. They will look at the data along with cumulative production and revise their reserve estimates accordingly, for example, see Alaska and Texas where reserves have been moved upwards as recovery percentages have been better than expected. Of course it could go the other way, see RoyalDutchShell, which had to significantly downgrade their reserves.

Geologists and the SPE are constantly revising upwards their reserve estimates to account for better technology and exploration, even in well-developed and relatively well-mapped fields. The USGS has a very stringent definition of reserves, counting only proven deposits that can be developed under current technological and economic conditions, so for American companies (including most of the big oil companies except Royal Dutch, PetroChina and BP) downgrades in reserves are extremely unlikely. The very fact that reserve estimates must be adjusted for technological improvement shows that the measure is imperfect, particularly since finds which will not be developed for more than 20 or so years are next to worthless in terms of present value and so no company will try to maintain reserves of more than ~20-30 years' production.

This force is so powerful that I don't think there has ever been a time in which proven reserves would have lasted more than ~35 years at present consumption rates, yet in aggregate we have produced oil for well over 100 years at more-or-less continually increasing rates.

Tengiz? 35 billion barrels of proven reserves? Tengiz doesn't even have 35 billion barrels of original oil in place, let along recoverable reserves. Actual recoverable oil is estimated to be in the 6-9 billion barrels range out of original oil in place figure of around 25 billion barrels, which is consistent with the recovery percentage expected from a sandstone reservoir, which is what Tenzig is.

I was referring to Kashagan field and mispoke, but in any case my original point stands that there have been many major discoveries even in the last few years, including one in the Gulf of Mexico--one of the most heavily explored regions of the globe.

Regarding Kashagan, it contains 12-13 billion barrels or so of oil equivalents, meaning oil, natural gas, and gas condensates. Actual oil is estimated to be around 7-9 billion barrels.

Where are you getting your figures? Keep in mind that the oil companies have a very strong motive for understating their discoveries in Kazakhstan because of tax and development costs, there. They didn't even call the fields "a discovery" until they were ready to begin developing them.

What in the name of god are you blabbering about? Are you seriously claiming that the Caspian Sea discoveries have somehow added nearly a trillion barrels to world oil reserves? Even the most delusional claims of a Caspian Sea bonanza top out at around 300 billion barrels, in reality there's somewhere between 1/5th and 1/10th of that.

Fair enough. Nonetheless, I will still argue that "reserves" are not in any way a reliable indicator of continued production, since oil companies have essentially no motive to look for discoveries that will not be developed or used in the next ~20-30 years at the most, and so they will try to maintain reserves that will only last that long once in production. It is highly unreasonable to expect them to continue exploration once they have reached that point, and in fact due to the way most oil find contracts are written it would seriously hurt their future cash flows to discover too much too quickly.

It is, furthermore, absurd to suggest that current economic conditions will persist, since even in the last decades there have been several major shakeups in the world energy market. If the future has even a fraction of this volatility, then the current measure of reserve is meaningless as a metric for future consumption or even production capacity.

[J]

Which, of course, explains how new discoveries of major fields have occurred months ago. In the Gulf of Mexico. But that's understandable--it's such a poorly understood and rarely traveled part of the world, in which no one would have expected to find oil.

Oh yes, the claimed "15 billion barrel field" which later turned out to be about 2-3 billion barrels of oil with the rest being gas and gas condensates, and which is now trumpeted as "10-15 billion barrels of oil equivalents". The field is mostly natural gas & gas condensates, not surprising given how far down it is, deeper than what is usually the bottom of the "oil window". Major find? I think not.

Flow rate of oil. What you've stated is only true in a mature field, where constant drilling along with water & gas injection is needed to maintain its flow. In a young field, such as the Mid East fields of 30-40 years ago this is not true, flow is controlled merely by opening and closing the valves at the wellheads.

So... how is what I wrote incorrect?

The amount of oil pumped out isn't really dependant on how much is spent on the infrastructure in past years. Once the wells are drilled & pipelines laid, barely any money will have to be spent to keep the oil flowing. With good reservoir pressure, all that has to be done is opening & closing the valves. It's only in mature & aging fields where oil production is closely correlated with capital expenditures.

Geologists and the SPE are constantly revising upwards their reserve estimates to account for better technology and exploration, even in well-developed and relatively well-mapped fields. The USGS has a very stringent definition of reserves, counting only proven deposits that can be developed under current technological and economic conditions, so for American companies (including most of the big oil companies except Royal Dutch, PetroChina and BP) downgrades in reserves are extremely unlikely.

USGS? Stringent definition of reserves? You've got to be shitting me. These are the same clowns who claim there's 50 billion barrels of proven reserves in Greenland when the place hasn't even been surveyed for oil. The same ones who claimed 300 billion or proved reserves in the Caspian Sea region when there's at most about 1/6 of that. They also claim something like a hundred billion of barrels of proven reserves in Antarctica, again when the place hasn't even been surveyed. You'd honestly trust those assclowns? As for geologists & the SPE constantly revising reserves upwards, again, this is a blatant lie. Caspian Sea reserves have been constantly downgraded as the rock structure become better understood, the Kuwaiti & Saudi fields are also being revised downwards due to water intrusion, and the North Sea fields have also been downgraded.

The very fact that reserve estimates must be adjusted for technological improvement shows that the measure is imperfect, particularly since finds which will not be developed for more than 20 or so years are next to worthless in terms of present value and so no company will try to maintain reserves of more than ~20-30 years' production.

Proven reserves are what is known as P90, there's a 90% chance that the oil which is estimated to be there, is actually there. Yes there's a margin of error, but it's relatively small, you might get an extra 10-20% but that's about it. It's not nearly enough to throw off Hubbert's curve.

Regarding Kashagan, it contains 12-13 billion barrels or so of oil equivalents, meaning oil, natural gas, and gas condensates. Actual oil is estimated to be around 7-9 billion barrels.

Where are you getting your figures? Keep in mind that the oil companies have a very strong motive for understating their discoveries in Kazakhstan because of tax and development costs, there. They didn't even call the fields "a discovery" until they were ready to begin developing them.

Those were straight from the SPE reserves estimates & field by field surveys. I no longer have access to them since I'm no longer in university.

[His Divine Shadow]

Peak oil doesn't mean we won't find new resources of oil or that we'll stop using oil. What it does mean is that overall output will not meet demand, which we're seeing is awfully close already. With most of the major fields now peaked or peaking, it's a very real issue and I don't buy the likes of the Saudi gov't who say there's no problem whilst panicking over how to extract more from the ever less fruitful fields they have.

Thats why I'm planning on a small diesel that does 60-70mpg, combined with a particle filter thats economical and extremely enviromentially friendly as cars go. Diesels can also be run on biodiesel without conversion.

And ethanol. How I wished it would work... but it won't apparently, process cannot be effective enough to work it seems. Too bad because Finlands forrests could have been pure gold in the future then.