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Duncan Clarke Responds to David Strahan
Posted by Chris Vernon on September 3, 2007 - 5:00pm in The Oil Drum: Europe
Topic: Geology/Exploration
Tags: David Strahan, Duncan Clarke [list all tags]
The Last Oil Shock and The Battle For Barrels
Last month David Strahan published an open letter to Duncan Clarke, which we discussed here. Duncan Clark has been good enough to respond to Strahan with an open letter we are able to publish today. Full text below the fold.
Dear David,You are right to say that The Battle For Barrels (Profile Books, 2007), my book on the global angst over the end of oil, takes the peak oil thesis seriously including its restrictive technical model, selected data sets and related claims, and also ‘identified some obvious weaknesses’ as you put it.
Part of the text sets out the social context of peak oil, an anthropological phenomenon of significance and not of inconsequential interest as you imply. Ideas have histories and contexts which sometimes illuminate their meanings, so I offer no apology for that. I fail to see why you should suggest that this somehow leads to any diminution of the core theory advanced, which I treat in-depth.
The key points in the book focus on the static nature of the technical model. This is found wanting when examined in relation to its assumptions, both overt and hidden, that fail to correspond to common upstream industry practice, SPE views of conventional reserve dynamics, and evidence of growth in oil reserves. The model exhibits an unnecessary disdain for the multiple and complex impacts of economics – as well as many other real oil world considerations which have been treated at length in my Empires of Oil (Profile Books), just published.
I am not alarmed by peak oil’s prominence in public debate. The lobby has after all developed a slick public relations machine for such purposes. That I acknowledged. The problem is that the arguments promoted by the lobby are built on shaky foundations: the future they project is derived from a linear model of the oil world, whereas non-linearity is far more probable.
Most peak models have likewise been based on presumptions about the narrowest boundaries for both resources/reserves and potential for exploration and discovery. The idea that “all is known” is one such limitation. In addition, there is minimal allowance for a range of key influences in these models: from an array of technologies, to global market-adjustments, crude price impacts, shifting corporate strategies by many players, and a plethora of state-driven policies worldwide.
Paradoxically, whilst it was not my task to do so (I note that you berate me for not doing it in numerical terms), it would theoretically be feasible to create a dynamic model incorporating such factors. Many of my observations lay the foundations by pointing out where the related weaknesses in contemporary peak oil notions lie.
None of the arguments I make hinge on who else amongst the ‘great and the good’ might have endorsed points made pro or con (it matters not to me that Clinton, Soros or whoever back peak oil), so it is of little use for me to follow your lead in this arena, or to respond blow-by-blow to many ad hominem comments and misinterpretations made on arguments advanced in the book. You are entitled to say what you like, and have, but I think The Battle For Barrels provides a rounded but tough assessment of all the key arguments for peak oil, and constitutes a fair and robust critique.
It was never my intention to offer a set of different modelled data that would tell anyone ‘when exactly’ some peak might or might not occur. So many have done that already, and the book assesses a wide range of such views. The book focuses rather on why the models advanced had failed in the past, why (mostly for the same reasons) they may well continue to do so. It also examines the fundamental determinants of actual upstream developments, now and in the expected world oil future. You happily acknowledge the many past failures of peak oil predictions, so maybe some caution on contemporary estimates is equally advised.
Discourse on randomly selected items in this debate – about some countries in crisis, Kuwaiti claims, estimates by others, statements by CEOs - do not help to ‘prove’ the case either way. You say that ‘the obvious facts ... suggest the peak is close’. My reading is the opposite. Yet I went to some lengths to note the above-ground issues of key relevance that have made reserve access and exploitation tougher for the players. This is perhaps our key difference. To me the future cannot be glimpsed simply by assuming a now-fixed and narrowly conceived finite quantum of restrictively-defined geological bounty, placed in a model found to be static and wanting, and then imposed with inflexibility on a complex oil world depicted as lacking societal adaptation.
Much of your critique rests on the advocacy and theses articulated in your own book, The Last Oil Shock (John Murray, 2007), which builds of the idea that the world is running out of oil, that soon will come the ultimate oil shock leading to a series of severe dislocations, eventual catastrophe, and - voila -the extinction of Petroleum Man. Once that optic is accepted, and it is because of acceptance of the very peak oil models I have discussed, the question turns towards surviving the doom. Here you offer judicious policy notes and suggestions to politicians, notably those in Britain. It is an activist agenda, quite different to mine. At the same time, I discern that you exhibit a wider perspective than most “true believers” (some interviewed and many quoted) but in the end your case is locked into the peak oil litany.
There seems to be continued reliance on the notion that the mainstream in the media, government and the corporate oil world act with almost overwhelming ignorance, duplicity and calculated denial, or at best complacency. I am much less sure than you, and have not encountered this in a wide exposure over many years to many segments of the industry on six continents.
You imply that the last oil shock might easily have started on 24 February 2006 when there was a suicide attack in Saudi Arabia aimed at the world’s largest processing plant, the shock not being that peak oil has passed, or might still, but the all-encompassing crisis that is almost bound to be precipitated as a result. All manner of co-mingled disasters are then construed or in different ways imagined. I find it all of interest (and believe that it includes some trenchant observations), but the realities of the world appear more absorbing than these flights of imagination.
Your view that the world oil supply will decline in the next decade or so, that unconventional oil options will not save the day and that much touted alternatives are incapable of filling the gap, all this leading to a global liquid fuels shortage, is one perspective that can be tested in due time. But the key point must be that it is only probable if the mainstream peak oil model is valid.
As you know I disagree with your predictions. My book seeks to explain why this model appears deeply flawed in conception, design and application to global industry practice. Moreover, the model’s own lubricant - the evidence used to reach its ultimate results, without which there would be no prophecy about last oil shocks – is one that greatly discounts world oil resource and reserve potential, future exploration efforts and discoveries, inherent oil market dynamics, crude price impacts and inter-fuel transitions, the future application of multiple technologies, the on-going and substantial phenomenon of reserve growth in the world’s oilfields, societal adaptation, and much more besides.
It is worth recalling the long history of peak oil’s prediction failures, stretching at least back to the early 1990s (even before). Many geopolitical considerations account for our contemporary paradigm. The diminished corporate access to oil, limited by a surge in resource nationalism in important countries, is one of them. This new 21st century paradigm may be expected to continue. But it does not mean that the world has run out of reserves or the supply of oil, let alone all liquids. Nor, despite peak oil’s assumptions, is all now known once and for all on world oil reserves.
The world oil game is arguably one of the hardest things to understand and measure, let alone predict with precision. Its history teaches many lessons, the failure of forecasting one of them. It also instructs us about human ingenuity and adaptability. Like the weather, the oil industry could take many unexpected turns in future. It seems to me that The Last Oil Shock is tied by an umbilical cord to the imminence of catastrophist notions drawn from peak oil models. This case remains to be proven and Petroleum Man will more than likely be around for a very long time to come. As we have both made our case at length in respective books and in these letters, I trust we can conclude our discussion.
All best,
Duncan Clarke
One point, of several, missed by Mr. Clarke, is that HL works perfectly well if technology (& oil recovery) advances at a steady rate. Only a sudden and massive change in oil recovery and oil discovery rates will upset the model. Steady improvement, year after year, decade after decade, will fit nicely into HL as I understand the mathematics.
Alan
Alan,
I think you raise an extremely important point here. HL works well not only with a steady rate of technological advances, it works fine also with steady rates of reserve growth, steady rates of market-induced improvements in efficiency, and for that matter steady rates of improvement in government policies, if only we had them . . . :-(.
The fundamentals of Hubbert's thinking are stunningly simple. The objections to the theory, however, (as I see it) are based on a misunderstanding or outright denial of these fundamentals:
1. There is a fixed amount of oil in the ground, and for the sake of discussion I'll throw in natural-gas liquids, oilsands, biofuels and even shale.
2. First we got the easy oil, mostly from giant and supergiant oil fields. The easy oil is gone and will never return, regardless of technological advances.
3. The oil that remains is increasingly expensive to extract, despite technological advances.
I do believe in the importance of technological advances and in the power of the market to mitigate somewhat the increasing scarcity and cost of oil. But no combination of technological advances and market-driven re-allocations of resources is going to spare us great and long-lasting pain resulting from Peak Oil. Therefore, we need proposals such as yours--policies and plans based on long-proven technologies, because the implementation of your ideas would provide significant mitigation of the negative effects of peak oil.
...steady rates of improvement in government policies, if only we had them . . . :-(
Of all the factors, historic experience suggests that gov't policies are the most susceptible to large discontinuities :-)
And that is PRECISELY what I am trying to create, not scheduling a sudden visit by the JIT Technology Fairy (although she will be most welcome whenever she decides to visit), but a sudden and massive change in gov't policies.
Of *ALL* of the options, this seems to be the most promising one !
Best Hopes,
Alan
JIT = Just in Time
Most major Private Oil Companies (POC's) are making two basic arguments: (1) Technology will save us and (2) POC's can do a much better job of exploring for and producing oil than the National Oil Companies (NOC's).
It's interesting to see how the POC's did in two regions that were developed by POC's, with virtually no restrictions on drilling: Texas and the North Sea.
Texas peaked in 1972. The North Sea peaked in 1999. In both cases, the initial production declines corresponded to generally rising oil prices.
Texas has shown a long term decline rate of about 4% per year, the North Sea about 4.5% per year (crude + condensate). And this is with the best available technology.
Saudi Arabia is now declining at about the same stage of depletion that Texas started declining (around 55% or so depleted, based on HL), and the world is now declining at about the same stage that the North Sea started declining (around 50% depleted, based on HL).
And like Texas and the North Sea, the initial Saudi and world declines are occurring against a backdrop of generally rising oil prices.
And yet, many major oil companies still assert that they can provide virtually limitless oil. You know, a polite person would call this misleading. A less polite person would call it fraudulent.
From the Most Recent U.S. Weekly Petroleum Data Report
5,158 domestic United States oil production 8/2006 (EIA)
5,154 domestic United States oil production 8/2007 (EIA)
2,245 domestic United States NGL's 8/2006 (EIA)
2,463 domestic United States NGL's 8/2007 (EIA)
The United States produced more total liquids this year than last. What is the decline rate?
At 7.7 million barrels/day total liquids the United States is not far behind Saudi Arabia or Russia.
The main problem is that this precious liquid is in danger of production decline, not that it is in an actual decline in the United States.
Eventually the world supply will drop. Live and let live. Not waste a drop.
Try averaging the decline rate from 1972 to the present. That might give you a better picture.
Rainsong, we are importing 14.25 million barrels a day, or 5.2 billion barrels a year at an average price of about $60 a barrel this year.This is a real national security problem and economic drain on our economy. Even President Bush says so, because we are importing 68% of the oil we use, and its just silly to say otherwise.
Bob Ebersole
rainsong, you are looking at only the last two years. You're missing the long-term trend. I refer you to this graph:
http://www.theoildrum.com/uploads/44/cera_figure_1.jpg
Since the early 70s there have been a few good years, but the long-term trend in America has been 2% [edit] yearly decline.
America now produces 50% what it did at peak. To get back up to the peak, we'd need to find a lot of fresh Saudi Arabias on American soil. As a practical matter this isn't ever going to happen.
http://www.eia.doe.gov/emeu/aer/pdf/pages/sec5_7.pdf
1972 (C+C):
Lower 48: 9.4 mbpd
Total US: 9.6 mbpd
2006 (C+C):
Lower 48: 4.5 mbpd (down 53%)
Total US: 5.1 mbpd (down 47%)
Lower 48 production showed a recent rebound primarily because of the ongoing recovery from hurricane damage to production and transportation infrastructure. Also, Total Liquids somewhat distorts the US production situation, because of the increasing contribution from refinery gains.
In any case, since 1972, the Lower 48 has shown a long term decline rate of 2.2% per year, the total US, 1.9% per year.
Based on the HL plot, the US is about 85% depleted (conventional C+C).
In order for our crude oil imports to just stay flat, we have to reduce our crude oil consumption at the same volumetric rate (bpd) that our domestic crude oil production declines.
Rainsong,
It would also be reasonable to see what kind of effort and cost was required to get this 2.5mb out of the ground as compared with 1948 or so, when we first swung through this level of production, or even what it costs compared to last year. Are we pumping a lot more water/gas to maintain pressure? Are our maintenance costs for countless smaller wells becoming a much stronger fraction of the production expense? The flow is certainly the critical number that gets all the attention, but the state we are in is also illustrated by how hard we have to scrabble now to keep from slipping down the slippery wall of this pit.
Bob
nice rethorics. basically the guy says:
1 - you've cried wolf many times before, therefore there's no wolf;
2 - your evidences are just tiny facts that can support many theories;
3 - there's tech ya know?
4 - things are too difficult to grasp. Don't bother;
5 - because things are difficult to grasp, I can say about them whatever I want, nevermind your facts. I can say blah blah blah. See? I rule;
6 - you've ad hominemed me, how bad of you;
7 - here's my repply: you're a doomer;
8 - you're a doomer.
9 - you're a doomer.
10 - there. I've showed you how you are a doomer and thus you are totally wrong.
1 - you've cried wolf many times before, therefore there's no wolf;
As our old pal JMG says, remember that in the parable, the sheep end up getting eaten.
| The problem will solve itself.
| But not in a nice way.
jbunt
What is the source of this "cried wolf" crap. I have been following oil for 40 years, and other than Jimmy Carter or maybe some unknown environmentalist - who has actually written a well documented book in the last 40 years that has previously said that PO is (was) here. Even now, the consensus (among PO experts) is that it is near, but perhaps not quite. Although recent statistics have peaked, we are not sure what, if any, production restraints are in place due solely to a lack of transparency from KSA, among others.
Luis,
When you want to engage in a debate / argument with somebody, the first thing you have to do is to take the other person serious, even is you don't agree with him. Calling the other guy names, or making fun of his arguments, even if you think they are untrue, is not the way to get the discussion going.
Mr Clarke is not particulary 'insulting' or 'behaving badly', so I see no reason not to listen first.
So I take it that you believe in the "civilized discourse" approach that lead us down the path of cozy inside-the-beltway punditry. Ever see the British parliament in action?
I believe both these guys are British. They can handle themselves quite all right.
The British have nothing on the Taiwanese parliament.
Puts CSPAN to shame.
The corruption level in government is inversely proportional to the number of fights in parliament. If no one is fighting then you know everyone is bought.
I respect your opinion but I don't agree at all. I didn't call him names but I did make fun of his arguments, because he didn't make any whatsoever. He just called the other guy a doomer:
"your case is locked into the peak oil litany."
... as if that was some kind of an argument. The notion that he denies Peak Oil is laughable, because even the industry acknowledges PO.
And then he goes to claim that PO view...
...is one that greatly discounts world oil resource and reserve potential, future exploration efforts and discoveries, inherent oil market dynamics, crude price impacts and inter-fuel transitions, the future application of multiple technologies, the on-going and substantial phenomenon of reserve growth in the world’s oilfields, societal adaptation, and much more besides
... which is blatantly false. Either he is beating a straw man, or being ignorant or being a liar. I think he's the third. Then he makes another ignorant rant:
This new 21st century paradigm may be expected to continue. But it does not mean that the world has run out of reserves or the supply of oil, let alone all liquids. Nor, despite peak oil’s assumptions, is all now known once and for all on world oil reserves.
... which is completely unrelated to PO. First, no one is saying that oil "is running out", second, no one is saying that all is known once and for all. This is completely a wrong criticism of PO.
The world oil game is arguably one of the hardest things to understand and measure, let alone predict with precision.
Yet, he's the one who claims that oil will be alright, just because he awoke with good feelings, as he gives no data whatsoever. Have faith will ya?
Right.
And why should I "respect" such fraudulent speech, so full of rethorics and shallow of content, that serves no purpose than to derail debate and to further delay the political PO lobbyism that he so envies about (why sure, the oil majors lobby is certainly smaller...) and to delay the public consensus that something is got to be done about it. He's no more than a shill, and I am happy and all the way to joke him whatever I want.
luisdias,
I think you did an excellent job of knocking Duncan Clarke down.
You could have also pointed to the blatant hypocrisy embedded into Clarke's "sound" logic.
On one hand Clarke says:
In other words, Clarke adopts a linear forecasting approach in which PO models will continue to include gross errors just as they had before.
On the other hand Clarke says:
He wants to have it both ways. He is allowed to maintain a linear model of failing PO models that will continue to fail forever in the same way but we are not allowed to have model of increasingly converging PO models because it is only "we" who fail to appreciate where the knee in the nonlinear curve occurs.
I'm sure westexas is holding his breath every night for that surprising nonlinear up tick in Lower 48 production.
Mr. Clarke and Mr. Strahan:
I've been in the oil and gas business since 1975, and was raised in it, so I believe that i can claim to have been in it all my life. A lot of the perceived contreversy is based on a misunderstanding of mathematics and a misunderstanding of the oil and gas business. Unless the dark matter in the universe is actually petroleum, we will eventually run out of oil. So where the controversy lies is an almost wilfull misunderstanding by the both of you.
When I was born in 1951 there were 2 billion people on earth, now there are 6.5 billion and the population growth is exponential, projected to hit 9 billion by the end of my life. If the world still had 2 billion people the peak oil debate would be academic it might be a worry, but not an immediate worry. And with a third the CO2 polution because of a stable population, global warming would not be nearly so threatening.
M. King Hubbert used a definition of oil that would today be considered crude and condensate and his projections seem to be right on time within a range of about 10%. Bitumen is not oil, its tar. And its cost of production it 3 to 10 times as high as the substances we commonly call oil. Adding plant products to the oil supply because they can be used in a similar manner still doesn't make them oil; they are not fossil energy. The fact is that M. King Hubbert was right, crude oil plus condensate is decreasing in production while demand is climbing, oil is just plain going to be a whole lot more expensive in the future than in the past. The oil business has done a fantastic job of providing inexpensive hydrocarbons, but the inexpensive petroleum is just about gone.
About a week ago 1observer wrote a key post on the THAI process for the Alberta bitumen that details a very promising method that Petrobank is developing for the deeper tar sands in Alberta. It costs $15,000.00 per barrel per day of production and gets 80% of the hydrocarbons in place produced. It makes over a trillion barrels of bitumen economicly feasible, but its still fantasticly expensive-its about triple the cost of onshore oil like the Austin Chalk which are considered resource plays- operators generally get about the same amount out of a well that they have invested in the well. That means oil prices are going to have to stay an inflation adjusted $70/bbl for Petrobank to make money. And this is still a heavy oil that will require expensive refining after the in situ upgrading.
Likewise the US department of Energy has done a number of assessments of the world oil supply with emphasis on the United States. In one published a year ago "Basin Oriented Strategies for CO2 Enhanced Recovery" they summed up the United States:
582 Billion Barrels of Original Oil in place
172 Billion BBl. Cumulative production
20 billion Bbl. proved reserves
Leaving 390 Billion Barrels as "future challenge", or stranded oil in old fields in the USA.
Much of this oil can in fact be recovered through the new drilling and production techniques developed in the last 20 years. 3D and 4D seismic allows wells to be more effectively placed to produce wells and the fluid and gas levels to be monitored for best production. Horizontal wells allow more of the formations to be accessed by the wells and really raising the effectiveness of the wells. Steerable downhole drill motors can pinpoint the location of the wells. Tertiary production techniques like CO2 injection, solvent flooding and microbiological enhancement- the conclusion is that we can now produce up to 65% of the OOIP and many fields should be worth redrilling- in fact as much oil remains to be produced onshore as has been produced in the US since Col. Drake's well in 1859.
But don't kid yourself, it going to take $70/bbl to make this worthwhile. The highest US production was reached in 1973 in the U.S.,about 10 million barrels a day. It seems rather improbable that we can get the rate of this production over about 1/4th of the highest US production, about 2.5 million barrels a day and we are using 21 million barrels of oil a day.
Steve Andrews of ASPO says its not the size of the tank, its the size of the tap.
Its crucial that we use all our silver BB's accumulated thus far, especially conservation. Alan Drake's electrification of rail program will save 2 million barrels of diesel and gasoline a day a greatly reduced price. Electrifying automobiles will save another 6 or 8 million barrels a day, and redeveloping fields and developing the Alberta Bitumen ought to be just about enough to end Nort America's addiction to foreign imports, but its going to take them all. And, meanwhile the rest of the world wants to be prosperous too. So lets get serious and get to work.
Bob Ebersole
An excellent counter to both writers.
Your Steve Andrews' quotation is on target: "It's not the size of the tank; it's the size of the tap."
All discussions must account for world population growth. After all, if population were one billion, we would still have cheap oil--and it would be plentiful, which brings us back to "supply and demand."
One dimension of the problem that has not received enough attention is actual usage. You point out that the U.S. uses 21 million barrels a day, while producing only 2.5 million. We need to understand not U.S. usage, but world usage.
There are four major interrelated variables:
TOD has focused almost exclusively on the first and the fourth: Production and Reserves. While we seem to know usage in the U. S., we know little about world usage. It seems to me we can “back” into this problem by looking at the past by asking a simple question: How long does an above ground barrel of oil stay in the pipeline. In short, how many days’ usage of processed oil do we typically have in the pipeline or storage? (We could, of course, get the answer by asking: How much oil does each country use?)
Clearly, we are producing enough for all needs, at present prices. Usage cannot outstrip production.
Looking into the future, we then have to ask two related questions:
Of course there are ancillary issues that will affect this kind of model: Economic shocks (a la Stuart), alternate energy growth and other conservation measures, poverty users being priced out of the market, technological advances, unexpected discoveries (arctic oil?), etc.
Actual usuage and population growth need to be more fully integrated into TOD models.
I’m not convinced that population growth is that important for the peak oil or oil supply/demand evaluations. For example US per capita oil consumption is approximately 26 times that of India’s. Population isn’t the key determinate, it’s how we use it. A planet of 1bn people behaving like Americans is (in oil demand terms) worse than a planet with 20bn people behaving like Indians.
Good point, and one the die off and olduvai people miss entirely. The relationship between energy consumption and population is not altogether clear.
Total energy consumption = energy per capita times the number of capita. What's not clear about that?
Now what you appear to be saying is that you want to raise the number of capita without limit at the expense of energy consumption per capita, perhaps on the excuse that you have the infinite wisdom to know much better than they what is energy "waste". In other words, you appear to want a world ever more overflowing with people living in ever deeper misery. Which, although the "die-off people" do neglect human ingenuity, seems awfully close to their point.
Don't get your undies in a bunch. I hardly see how Nascar, or Delta airlines, or NFL football, or Winnebagos helps support the population. Energy per capita usage is only a coincidental relationship at best. How much energy do we expend on wars that kill people? How does that equate. So if we expended all our energy from nuclear bombs the energy per capita would go way up, but I seriously doubt the population would too. I know, it is heretical to not drink the energy per capita koolaid. How else would the sheep be made to get hysterical?
Perfectly clear. I'd only add that the numerical ranges of the two variables are not equal, population has a smaller range than the energy per capita variable. As the system evolves I think energy per capita is the more dominant term.
Useless spew from the oil industry which peddles only lies. Why doesn't the US have the biggest population in the world? Energy consumption went up and the birth rate went down. Utter bullshit designed to frighten people.
Urm, pardon? What are you trying to say?
All I'm saying is when thinking about future global oil demand, per capita behaviour is more influential than population numbers.
That is the key metric!
It seems incontrovertible that the world has produced as much oil/day as it can, and the rate of production is in decline. We can avoid the term "peak" and call that something else, or change the definition of oil. It doesn't matter, I believe.
It might not even be important that the world is at peak oil production -- what if there were an infinite supply of oil? Things are spinning out of control on earth, Too much energy is making people too fat, too irascible, too greedy, too lazy, too unimaginative.
What matters is what is done with what we have -- and it looks like the lower-energy regimes actually work better. I can tell you for sure that Astoria, OR was a nicer place when there were more fish, more trees, smaller boats, no helicopters and the Coast Guard really protected and helped us instead of being an arm of the Homeland Security Military Industrial Police State
"A planet of 1bn people behaving like Americans is (in oil demand terms) worse than a planet with 20bn people behaving like Indians."
But lets look at the real world: Indians and Chinese (and others) are trying their best to shift their lifestyle closer to the American example. Now think about the impact that will have on oil price and scarcity, and the future of "economic growth".
In my view, Peak Oil already happened back in 1979. That's when per-capita oil production peaked. Population growth is still on-going and it factors in with the now-stagnant, and soon to be declining, oil production.
And I havn't even mentioned the other essential resources that are declining, especially per capita, such as fresh water.
bullshit. the 1979 peak is a math construct. nothing more. it only shows the limits we are facing in another frame. it has no impact whatsoever in the real world. the most important impact will be chindia trying to be the first world. the most surprising is that they are already seeing that unless they make huge different things than what is done in the first world, they will never make it.
Of course they will never make it. the vast majority of their people will always be peasants.There's a pretty good chance of famines in those places to boot.
In the mean time their striving toward our way of life will guarantee that there will be no significant slackening of demand (unless prices are much,much,higher. It will be one or the other) It isn't hard to imagine Indian demand tripling from these levels. Of course that will never actually happen.
Matt
This "math construct" has some relation to real life, you know. Since 1979 the world has had less oil production per capita. To residents of the first world this sounds inconsequential, since they've seen their own per capita oil consumption increase further since then. Only when oil production itself peaks will the impacts show up, the theory goes.
But if per global capita oil consumption has declined while it has increased in some places, it means that it must have decreased faster in other places. Inequality between nations, and even more so within nations, has therefore deepened in the last 28 years. This is well known from economic data. And when oil peaks, the same process will probably continue: an ongoing concentration of remaining oil consumption towards the rich. This can be expected to result in some unpleasant responses from the have-nots, and the rich circling their wagons. I think we're already seeing all of that happening.
The techno-fixers will no doubt cry out that since 1979 we've increased the efficiency of oil usage and that is why "economic growth" has continued. I agree that there has been a slight improvement in efficiency. But certainly smaller than the growth in population over the period. There has also been a fuel shift, away from oil towards natural gas and, more recently, back to coal. When NG plateaus and coal is found lacking, we'll run out of options, and the stark reality of population pressure will be obvious. And has there been true "growth" since 1979 in per-capita well-being (counting more than just money)? No, not even within the USA!
"it has no impact whatsoever in the real world. the most important impact will be chindia trying to be the first world."
- self-contradictory.
"the most surprising is that they are already seeing that unless they make huge different things than what is done in the first world, they will never make it."
- where do you see that? Both China and India are busy with the world's biggest building boom ever, building highways and cars and coal-fired power plants. It's the population! My jist of comment above was that you can't count on those "chindians" to maintain their low per-capita impact - and why should they? This is not to say that the "first world" has no responsibility to curb its gluttony. But the way things are going, the "race to the bottom" will even out the consumption considerably (between nations, not within them).
One clarification on population: oilmanbob, in an otherwise excellent exposition, said "now there are 6.5 billion and the population growth is exponential, projected to hit 9 billion by the end of my life".
Actually, the world population growth is no longer exponential, and hasn't been for a while; in fact the growth rate is negative. The 9 billion projection is an estimated "peak population", based on current trends. Many industrialized countries are now experiencing population decline, and the U.S. would be close to zero except for immigration.
The growth rate is negative? Pardon me?
While true that growth rates have leveled off some, the population is still growing quite rapidly. Demographers are expecting a large echo boom from those who were born during the last big surge,which should take us pretty close to 8. Right about then we should start having famines because of fertilizer shortages and /or because the West decides that erstwhile surplus food is too dear to send overseas.
Matt
What I think he meant is that the growth of the growth rate (growth rate squared) is negative.
Just because it isn't growing as quickly as it did several decades ago doesn't mean population isn't increasing exponentially.
It clearly is.
Right. What I said was that the guy meant the growth of the growth is negative. In your graph that's clear. Since 1960 that the red line is going down, although that stalling from 1980 is worrying.
I hope the trend will be down.
But of course, only time will tell.
(or hard data)
Hi Chris
The problem for agricultural yields is that oil derived products are not the only issue. Loss of arable land (1% or more per year) for instance is another major issue. It is clear that unless some way is found to dramatically increase yields per acre yet again, that food supply is going to become a major problem. The trends are all the wrong way and several will need to be turned around at the same time.
Already per capita grain production is down 20% since the mid 1990's. The USDA reported the lowest grain stocks ever recorded this year - 53 days.
The UN is predicting 2007 as the year when more than half the worlds people became urbanized. By far the majority of these people buy their food and are therefore dependent on oil derived agricultural products.
As with all things peak oil, it is possible to question individual statistics. However individual statistics do not matter, it is the whole picture and the trends that are important; and this is where I become alarmed. It is not clear to me that we can continue to feed ourselves, let alone enjoy continued economic growth with its attendant population increase.
I agree. The most intractable part of this problem in my opinion is how we square the need to feed a growing population with a reducing cultivated area (desertification, sea level rise, urbanisation), with reducing productivity per hectare (loss of irrigation from fossil aquifers, glacial melt water, fossil fuel inputs), whilst we simultaneously link the food and energy markets through biofuels.
We are attempting to do a lot more with a lot less. I don't see it adding up.
Go vegetarian. That frees up 70% of agricultual land at a stroke.
No it doesn't. A lot of grazing land is not suitable for growing any type of vegetation that humans can eat. It is, however, wonderful for raising livestock which we can eat.
- Scott
"Try sour grapes; you might like them."
The concept proposed by the link below may not be practical for grain production or for any food crops at all if the energy requirements and development costs are too great, but if not almost all of the vagaries of farming - light, temperature, water and weather, pests, fertilizers, environmental degradation, etc... - are addressed and minimized.
Additionally, this concept also addresses localization, the need to produce food where it's largely consumed, the very large cities, eliminating much of the food transport and fuel consumption problem and providing low-skill jobs where they're needed. And the amount of "arable" surface area is vastly increased.
The concept is called vertical farming. I'm surprised that no one has ever linked to this or similar sites before though the idea was featured in an article in the NY Times recently.
http://verticalfarm.com/
FWIW I ran that link in a TOD:Canada Round-Up months ago.
oilmanbob:
Thanks for the nice analysis/summary. I'm suprised at your acceptance of the 80% number for the THAI extraction process. If I remember correctly that 80% number was based on a laboratory experiment. Does your field experience really lead you to believe that such numbers can really obtain outside of a glass beaker? I have no experience with these technologies but I do know that scaling up lab bench experiments can take a very long time and that real world processes very rarely are matched out in the real world. Am I missing something?
jjhman
CO2 EOR has been proven by actual field production to get 65% and its been used for 35 years in the limestone reservoirs of the Permian Basin. Petrobank has been producing their THAI wells for about a year with an increase in production rates from the reservoir and the burn rate proceeding at their predicted rates. Petrobank says 80% of the OOIP is produced, and they are they guys doing field experimentation. I have no reason to doubt them, and I certainly hope that they are right. It would be a real blessing for Canada and the world. Bob Ebersole
You have every reason to doubt them; and should keep on until they actually get a well to run for 5 years or longer, which is the minimum for that 80%.
TJ,
You're misunderstanding Petrobank's process. The calculate the oil in place by taking a core so the know the porosity and tar and conate water situation-they can tell you withi about 2% the exact amount of the tar in place per cubic meter. They are also shooting 3 D seismic, which shows them the exact geometry of the reservoir rock almost like a cat scan.
Petrobank then runs a horizontal well through the bottom of the tar reservoir rock. They then drill a well to intersect with the horizontal well, charge it with gas and air, then set the well on fire in a verticle front in the well. By controling the oxogen, they control the fire, and they make actually a smoldering mass, no flame until the rock is 700 degrees farenheit The controlled burn moves ahead in teh rock at 10" a day, cooking the tar out of the rock and into the horizontal well, while the combustion gases pressure the tar down the hole and out to the tanks
.
The gravity starts atabout 6 or 8 gravity, but the heat transforms it to 12 grravity and they put it in a tank to settle out the produced sand. They keep track of the progress of the fire front, probably got devils coming up and watching it from hell, at any rate, they can predict the exact life of the well by controlling the length of the horizontal leg of the well.
The time the well produces has nothing to do with the recovery rate from the formation. The amount of bitumen doesn't decline until the very end of the well life, and they can perdict the well life within days. Bob Ebersole
The amount of bitumen doesn't decline until the very end of the well life, and they can perdict the well life within days.
Based on what? The blurb I read said their longest running well was a little over a year.
TJ
As I said, you are misreading how the process works. The fireflood advances at 10" a day, and that is monitored from the surface. Its controled by injections of air. The first well was 100 meters, the current wells are 500 meters and the new wells will be 750 meters, but that increases well life, not the recovery percentage. Don, 1observer posted a couple of times down the thread explaining these things.Increasing well life will be relevant as to the profitability of any gaiven hole, but not the recovery percentage from the formation.
I doubt they are lying, but you apparently think they would rather lie than tell the truth. As I noted, this is still an expensive process, but it certainly looks economic to me, and it looks as though they are making steady progress towards improving the technique.
Bob Ebersole
Frack. You and 1observer don't even know if an oxygen plant (major investment) is required for this and you understand the process? And its economics?
I have no idea if they're lying or not. They're running pilot scale tests right now, due to finish in several years. They don't know yet. Well, anyone who thinks scale-up from bench scale to kilometer-sized reaction beds is trivial probably deserves to be separated from his money.
Kudo's oilmanbob excellent post. One more thing.
The base price is not constant we have seen the process of receding horizons in action already. Oil shales are always profitable at some magical barrel price 20 dollar higher than today. So the 70 oil base is a moving target and as we begin to replace technology and infrastructure developed with cheap oil it will accelerate upwards. Its not a static number. I'm of the opinion that a global peak will cause a serious strain on the ability of the oil industry to even continue to extract current reserves much less expand hard to extract sources.
Reports on the tar sands projects seem to bear out this hypothesis that most of the remaining oil is not worth extracting for use as a cheap fuel. So our wasteful economic lifestyle will end long before we ever extract most of the remaining oil.
Memmel,
I agree that we can't expand liquid fuels by very much if at all Climate change won't allow it, even if we figure out how to produce more its crazy to do so. Our government seems to want to wreck the earth with resource wars. But its an attitude thing.
I'm 55. When I was a kid most families had one auto. Both my father and my grandfather used to ride the bus to work, and didn't feel deprived. A bus ride with a newspaper or a book is much more pleasant to me than turning my knuckles white grabbing the steering wheel, paying too much for parking then walking several blocks through Texas heat to the office, when the bus could have dropped me off across the street.
And I agree about receeding horizons, but that doesn't mean some individual projects aren't worth doing, and that THAI process looks economic, and also the steam assisted gravity drainage may prove profitable in some areas. Sun seems to have the costs on SAGD to US$30k/bbl/day. Its like everything else-if your overhead isn't too high it may work. But there is a fallacy in thinking that all of the tar sands will be economic, just as not all producing wells make money. It takes management and skill, and a person or company needs to reassess projects often. Bob Ebersole
Don't disagree with you. But we are barely into Peak Oil and the oil industry is already suffering sticker shock across a wide range of costs. This certainly will not get better.
Even with that tar sands projects that your mentioning a lot of the investment was made pre expensive oil. We are just now starting to enter the period when most of your costs are for items created with expensive oil. The oil industry like any industry that consumes real goods will soon find that costs will escalate dramatically and producers are forced to pass on higher production costs.
A good bit of the rosy news on production is from price inflation caused by rising commodity prices. Expect profits for most manufactures to plummet even as price increases continue. The oil industry will suffer just like everyone else.
Now into particulars some of the smaller well managed oil companies will make handsome profits and sure some of the tar sand projects will be profitable. But from the big picture "Big Oil" will be increasingly unable to expand and the industry as a whole will be shrinking as costs increase.
The market which operates in the now just cannot price in the profit margin needed to continue expansion but at the same time keep expenses low enough to continue. I don't know if a free market is even capable of ensuring a depleting critical resource is exploited correctly. The time scales are simply to different and the economy to unstable.
The problem is simple the market is ignoring a major condition peak oil and won't price itself correctly.
At least in my readings free markets both bubble and fail because people ignore real market conditions and fundamentals. The oil industry is in this sort of fantasy world overall. Its detached from the reality of peak oil and probably won't come to earth till its too late.
We will see I may well be to sensitive to the situation that the oil industry is in but in general all I see are conditions that lead to less and less of the available oil being produced much less expansion. And given peak oil is generally not on the radar I think the whole industry/market is whacked. After the housing bubble anytime I see a situation where a market is ignoring a major fundamental condition I get worried.
Memmel,
The profit model of big multinational oil companies and many of the large independents has always depended on their finding and exploiting large, virgin oil and gas fields. For the last twenty years or so they've been using up their saved capital since the finding rate is below production, and E&P has always been the big source of their profits, the margins on refineries and convenience stores isn't nearly do high. And thats why they've been so persistent in trying to get the Gulf of Mexico off Florida and the Alaskan wildlife preserves opened up.
There are many independents who will do very well redeveloping old oil resources in the US by watching their overhead, and I hope to be one of them. I'm currently working on a prospect redeveloping an old Texas field found in 1915 and am just now starting to raise the money.
That's why I know a lot about the oil situation, I'm trying to get some of the 80 billion barrels that the US D.O.E estimates is stranded in the Texas Gulf Coast. Send me your email and I'll send you a copy. My email is Bob Ebersole two thousand and four at Yahoo.com all lower case, numerical and run together
Bob, I don't mean to nitpick but we should not exaggerate population figures. In 1951 the world had a population of about 2.593 billion.
http://www.infoplease.com/year/1951.html
It hit 2 billion around 1929, nine years before my birth. Of course the exponential projection of 9 billion will run smack into declining oil production and subsequently food production. It is anybody's guess as to how high world population will really get before it heads the other way, but my guess is just a tad over 7 billion.
Ron Patterson
A decline in food production will come not from a lack of petroleum but rather wanton waste and greed. If food production were a priority it could be increased even as petroleum production decreased. I get sick of hearing this same old saw from brain dead CEOs flying in private jets and repeated by toads.
What's the difference?
There won't be enough oil to support both our wanton waste and greed and food production for everyone.
And of course wanton waste and greed will take priority. Always has and always will.
Well, then they should come out and say that, not some bullshit theory tying population to oil production. Wanton waste, greed, war, selfishness, etc., is what will cause the die-off, not an oil shortage.
I always thought it was the wanton waste and greed that caused the oil shortage.
Bob, thanks very much for this post. It speaks very closely to where I'm coming from.
Just a couple of points:
I addition to THAI, Underground Coal Gasification appears to be progressing well. There remain a number of questions regarding it's scalability but it looks very promising and quite profitable at $70 per barrel of crude oil. It appears to be a bit behind THAI development but there are also many more players in the game than THAI.
If this technology works out, effective world liquid hydrocarbon reserves will increase by a factor of ten and our challenge will be to restrain global warming over the next century.
This is the one technology that can really keep the party going in my opinion. And the scariest from a global warming perspective. I actually hope we crash and change our ways before we achieve widespread use of in-situ coal gasification.
Your estimates of a factor of ten may underestimate the real amount of coal that could be processed with a technically workable coal gasification program. Their are vast coal seem under the oceans also. And who knows how many deeps seems have not been fully mapped out. If we burn all this to continue growing we threaten the survival of our planet.
However I pray other resource constraints and global warming will work to destroy our current crazy economic model before we can inflict even worse damage on or environment.
If this is the route we take we deserve what ever happens to us. To some extent the excess of the oil age can be forgiven we did not really understand global warming until the 70's but massive exploitation of the coal reserves given what we know know is unforgivable.
Amazing.
I just had exactly that same conversation with one of my unemployed post-college kids today. (Except for the year of birth but pretty damn close there too.)
The younger generation doesn't get that point because they have not seen it with their own two eyes how the planet used to be less populated and less polluted. As far as they are concerned, it has always been like this and it always will continue to be like this --no changes; business as usual.
They can't see that we are like bacteria swimming in the accumulating cesspool of our own waste product and not appreciating that the finite resources of our petri dish will soon be gone.
This is a good debate and may lead people eventually to a fundamental and largely unstated fact of the oil and gas industry. It is this: the oil and gas business is not about maximising production of a fixed volume of hydrocarbon assets inthe ground, it is about maximising profits, returns on investment and share prices for private oil companies and about maximising revenues for the state exporters. Business is about money, not the good of mankind and his need for resources.
The "tank" of hydrocarbons may be a fixed but still unknown volume, but the volume produced is not primarily about the total volume of hydrocarbons in place (resources) but instead about the volume that can be recovered for a given rate of return. Is that volume the same at $25 or $50 or $100 per barrel of oil equivalent? No it is not. That is why tar sands, ultra-deep water oil and other liquids from whatever source, synfuels, agrifuels and the rest are suddenly part of equation when they were not at the average prices prevailing from 1985 through 2005.
Of course there are physical limits to ultimate recovery, but the volume of economically recoverable reserves is a function of value and not just of price because recently costs have been rising at a similar or even faster rate than price. If the investment in squeezing more from the hydrocarbon orange is not coming fast enough to satisfy demand, then that is a function of perceived future values and not primarily of technically recoverable hydrocarbons. OPEC is insistent that if they invest too much in capacity and demand weakens then they will have no return on their spending because they will have created surplus again.
We do not know what resources remain in the ground. We do know that the exploration effort remains far too low to find out whether or not the USGS and IHS are right or wrong about the yet-to-find potential. We do know that if investment in new capacity remains inadequate, then we will have insufficient supply and much higher prices. When physical shortages hit the system and prices take off again, we can be sure that the perception of higher returns on new investment will translate into higher effort to capture what remains under the ground.
Think money and the debate will draw the two sides of this long running argument a little closer together.
Not really.
Money people are interested in making more money, not more oil or more alternate sources of energy.
The money will flow to whatever one of competing enterprises that appears at the moment to produce the maximum $RO$I in the shortest time. If it happens to be buying up tulip futures instead of oil futures, so be it.
The debate is about competing models. Clarke models the world as a linear series of failed predictions regarding the end of oil and as a non-linear advance of technologies towards the singularity. Do you buy into that model? On what rational basis?
Phenix
Thanks for that comment. Exactly, so money people are interested in making more money, because the market expects rising not flat returns. For this very reason, why should an oil company invest right now in very expensive new oil which is unlikely to return more money than old oil that he may still have in his bag? He will not do so readily and by a collective response of the same kind we see that annual decline from old offshore oilfields is after many years of net growth larger than new capacity additions. We see that the oil companies are more demanding of new fields. The new reserves activated for each year of drilling work is now larger not smaller than it was 20 years ago. Field life is shorter to mximise short term cash. And so on. Yes, if tulip bulbs or soya or ethanol will make more money, the money will go there.
And NO, I do not subscribe to a linear series of failed predictions as being a guarantee of a successful prediction. Best to just look at the evidence as dispassionately as possible and conclude, as we usually do, that we do not know enough to say one way or the other what is the certain result, but neither will we grab any trendy "inconvenient truth" ideology as it passes the door in a gush of cheerleaders.
I daresay that I done more in-depth study of these subjects than either of the antagonists in this debate.
I never use Hubbert models.
There is a large and growing cottage industry, usually predicated upon some ill-conceived notion of "peak oil theory", that ultimately depends on a complicated view of the world that is nowhere to be found in that literature.
My experience in the peak oil debate over the last 2 and 1/2 years is that humans frame this problem and others in terms of their religious beliefs, which are emotion-laden, pre-conceived and not amenable to argument, not any scientific view of the world or recognition of its complexity.
Dave
humans frame this problem and others in terms of their religious beliefs...not any recognition of [the world's] complexity.
And, dare I say it, quasi-religious beliefs - ranging from the bizarre pining for a 'simple' mindless world of agricultural hard labor in a fantasized ahistorical past, a world utterly devoid of intellectual effort; to speculative-fantasy visions of an idealized future powered by perpetual-motion machines, with 'consumers' effortlessly plucking goods and services from thin air, and thus likewise utterly devoid of intellectual effort. In other words, a veritable wide-spectrum Rorschach test almost designed to elicit all the possible ways to quest after sloth.
I never use Hubbert models.
There is a large and growing cottage industry, usually predicated upon some ill-conceived notion of "peak oil theory", that ultimately depends on a complicated view of the world that is nowhere to be found in that literature.
I thought petroleum engineering and geology were taught in engineering schools. I thought engineers were taught how to use analytical techniques. So why haven't any of the fundamental (although yet to be accepted) theories of oil depletion ever been filtered down to the undergraduate level? Just because something is not found in the literature does not mean that some underlying truth is not there. A calculated choice has been made to not universally teach oil depletion in schools.
Let me give you an example based on my experience. I went to engineering school (electrical) but did take courses outside of my major. One of the classes I took out of the geology department was limnology, which is essentially the study of lakes. Remember that geology was a part of the engineering school that I went to. But get this -- a big part of the course study was understanding the life-cycle of lakes, essentially the whole eutrophication thing. So why was it deemed important for geology professors to teach detailed theory behind how all lakes will eventually go kaput, but the geology or petroleum engineering professors in the other classes do not ostensibly teach anything about oil depletion? This is absurd, that on the one hand, the certainty of every lake eventually filling in is agreed upon, but that the end of fossil fuels is never touched. And to top it all off, the math and models behind oil depletion is likely easier than anything you would come across in a lake die-off analysis.
Now explain to me why no models are found in geology literature.
Because limnologists aren't paid as much as oil geologists and they don't own the Congress and the Media. So they can actually be left alone to be scientists and not Pharisees. Look at the rest of science in the current administration. It is either ignored, demonized or twisted to be useful to a political purpose -- depending on the field of study and its applicability to a political purpose.
Too true. I noticed Glenn Morton posted further down in the thread and he has a link to a peak oil article he wrote in 2000. His article links to a college class from the same geology department that I took the limnology class from years ago.
Well, here is the current syllabus for Geology 3005:
I have no knowledge how detailed the course is, but the fact that the instructor actually teaches simple arithmetic is somewhat reassuring. Is this stuff really that hard to describe analytically?
The general idea can be understood by almost anyone - "finite resource running out"
The first order mathematical approximation can be understood by almost anyone with an education "if the effort to extract increases each year by x%, we will reach a maximum extraction rate when 50% of the resource is used up"
The problems occur when people are take a simple mathematical model and attempt to apply it a) to uncertain data b) without understanding the underlying assumptions c) without correcting for known abnormal events (eg. 70's oil embargo)
IMHO it is only people with the equivalent of university education in maths (note: not a degree - there are plenty of people with knowledge, but no formal qualifications) who can follow through the assumptions, the long range uncertainties, and the complex inter-relations to form a sensible quantitative outlook. "simple arithmetic" can give a good introduction, and highlight that there needs to be study in this area (PO) but as the various discussions and models presented at this site show, as a whole PO is anything but "simple".
Yet the point remains that Duncan Clarke doesn't even attempt to go this far. If you look at his open letter, he invokes "non-linearity" as an excuse to not go any deeper, saying that PO people assume a linear analysis. The problem is that Duncan Clarke is so mathematically illiterate that he does not even realize that the logistic equation in HL is a non-linear differential equation!
Dave,
I've followed your columns since I began to read The Oil Drum. And while I've occasionally disagreed with your conclusions, I have always admired your perceptiveness, your honesty and your discernment. And I'm sure you've done more in-depth study of the issues, your columns reflect this.
Once again you've sliced through the knot, humans do frame these issues according to religious beliefs, and we have some awfully distructive religious beliefs in the world.
I'd like to suggest a true solution from my own perceptions and beliefs. As I stated above, I see the root of the problem in the uncontrolled population growth in our world.
Any examination shows that this uncontrolled growth is in the poorest parts of the world. The 1.6 billion people who live without electricity have the highest population growth. Their child mortality is appaling because they have dirty water supplies, cook on fires that cause childhood respertory disease, have extra children as economic help when they go to work and financial secutity in the parent's age. And, don't forget sex is a primary entertainment in a world where a person can't read or watch TV after dark. Even religion is entertainment as well as an attempt to manipulate the supernatural. And women without power in their relationships can't say no, and sex has been a barter good since the old stone age. If there is evil in the world its watching children starve and die of malaria and disentary.
The poor people want and need to be more prosperous, yet the world can't stand more fossil fuel useage because of climate change. The answer I see is to get the poorest of the poor renewable energy and education. Wind Turbines, solar and microhydro will provide the energy slaves they need to help improve themselves, and if we just get them elementary education and a computer and a link to the internet they will educate themselves and leapfrog the coal and petroleum use thats strangling us in pollution. If we get decent electric cars available for the rapidly industrialising economies of the world, there won't be the competition for fossil fuels that threatens the security and peace. If we get the world Alan Drake's electric rail plans implemented famine will go away.
Maybe the doomers and apocolypse predicters are right, but what truly scares me is that they may be wrong. The population of India is 1.3 billion, near a quarter of the world population on a land area equal to the eastern half of the United States, so it really is possible to stuff even more starving people on the globe.
The