Conventional Wisdom, Unconventional Oil

Guest Post by Willis Eschenbach

There’s a discussion over at Judith Curry’s excellent blog, about peak oil. I find the whole madness surrounding peak oil to be one more example of our human love for warnings of future disaster. Few people want to hear that tomorrow will be OK, that things will work out. Instead, most folks want to hear some terrible story about what tomorrow holds, whether it’s peak oil or climate meltdown or the coming ice age. Go figure.

conventional oilFigure 1. Conventional oil leaking out of the ground near McKittrick, CA.

One part of the discussion of peak oil that has always bothered me is the division of oil into “conventional oil” and “unconventional oil”. Here’s why I think that division makes no sense with regards to peak oil.

I’ve lived through much of the whole peak oil deal, which near as I can tell has turned into a half-century-long goat roping contest. During the earlier years, people were shouting that the oil would run out, that the top would be very soon now, we’d hit the peak and by gosh, at that point things would turn ugly. Of course, that still hasn’t happened, so the peak oilers were left with the question pondered by failed doomcasters throughout history, viz:

How the heck do I explain the cratering of my position and still maintain some shred of my reputation?

For the peak oil folks, salvation came in the form of “unconventional oil”. Now, we’re assured, oil is still running out, so they were right all along … You see, they say, King Hubbert was right, we’re running out of conventional oil, but as it runs out it is being seamlessly replaced by “unconventional oil”, so we still have oil even though we’re running out of oil. Got it?

The strange part is, when you open a barrel of unconventional oil to see what conventions were broken in its creation, you find it is indistinguishable from conventional oil.

What is unconventional oil? Well, we could start by considering the conventions regarding oil. For literally billions of years the convention was that oil was found in small pools and seeps like you see in Figure 1. Indeed, the discovery of oil in Oil Creek, Pennsylvania, the site of the first US oil well, came about because oil had been seeping out there for untold centuries, and had been known and utilized by the Early Asian Immigrants in the area before the later arrival of the melanin-deficient crowd.

So conventional oil, by ancient hallowed convention handed down through the millennia, is found in tar pits and oil seeps on the surface. Which means that people being so rash as to drill for oil, by definition, would be pumping up “unconventional oil” … but of course, life is not that simple.

As a result, “conventional oil” is not from the conventional method of dipping it up in a bucket from a seep, but by the decidedly unconventional and at that time unheard of method of drilling a hole in the earth to get it to come out …

Things went along just fine like that for years. Then “secondary recovery” methods started to come into use. These were a variety of physical and chemical methods used to squeeze more oil out of existing fields, including fracturing the rock to allow the oil to come out more easily.

Now, about this time, the whole “peak oil” story started to go south, because no matter how much peak oilers howled there was more oil discovered every year. Every year the proved reserves just kept growing. And that process has continued to this very day, with more proved reserves than ever. How were the peak oilers to explain it? Hey, “unconventional oil” to the rescue!

oil will peak in 2012

For example, thinner oils were “conventional”, but thicker, more tarry deposits, despite having been utilized by humans for centuries, were “unconventional” oil, so they weren’t counted regarding the peak.

The real laugher, however, the place where you can see the gears stripping, involves the “conventions” about fracturing the rocks to allow more oil to come out, what we call “fracking”. The fracturing technology was developed about forty years ago, and has been used ever since, mostly for secondary recovery. And for all those decades the oil coming from the fractured rocks has been “conventional oil”. But now people have learned to drill wells horizontally and fracture them … and now suddenly after forty years of fracturing the rock, which gave “conventional oil” when it was done from vertical wells, fracking now only delivers “unconventional oil” simply because the drill hole goes horizontally instead of vertically … does this make any sense to anyone?

The classification of oil from fracking as “unconventional oil” shows clearly the ludicrous nature of the dividing line when we are discussing peak oil. Regarding the putative peak, why is oil from a horizontal well “unconventional” and oil from a vertical well “conventional”? It is all gotten by technology, and none of it is any more “unconventional” than the drilling of the first oil well, a most unconventional act …

Calling oil from horizontal wells “unconventional” is crucial for the peak oil folks, however, because if the oil from fracking were classified as conventional oil, the “peak oil” claims and the “peak gas” claims would sink of their own weight …

Look, folks, the ugly truth is that the world is awash with fossil fuels. To start with, The largest single concentration of fossil energy on the planet is the Powder River coal formation in the Northern US. The world has several hundred years worth of coal. The Canadians have huge amounts of oil … of course it too is called “unconventional” oil, because it alone is enough to blow the “peak oil” claims out of the water. Plus now we have the “tight oil”, oil in the rocks that is, of course, unconventional.

Then we have the discovery of the shale gas resources all around the planet. Even Israel finally has some domestic energy resources. How unconventional is that? Australia just announced a huge find. China has massive gas resources. A preliminary assessment says including shale gas we have enough gas for the next couple of hundred years.

And finally, we have the wild card, the methane hydrates, the “ice that burns”. Estimates of the amount of these are all over the map, but all of them share one feature—they are very, very large, on the order of quadrillions of cubic feet. This is rivals the size of the global natural gas resource …

methane hydrates

Finally, most of these forms of fossil fuels occur in combination and can be converted into one another. Coal, for example, can be converted to a liquid fuel, or to a gas.

Now, because there never was anyone hollering about “peak coal”, there’s no such thing as “unconventional coal”, despite huge changes in mining technology. Coal mining has changed as much or more than drilling for oil … so why isn’t there “unconventional coal”?

But in that case, since all of the coal on the planet seems to be “conventional” coal, if we convert coal to oil, are we making “conventional oil” or “unconventional oil”? Presumably it would matter whether we converted coal to oil horizontally or vertically …

In summary, once you get past the nonsense of “conventional” and “unconventional”, there’s enough coal and gas for a couple hundred years, and enough oil for a hundred years, just with what we know about now, and that’s not even counting methane hydrates. Which is why I pay no more attention to the peak oil alarmists than I do to the climate alarmists. One group claims we have too much oil and we’re gonna burn it all, the other group claims we’ll soon have too little oil to burn, and I treat those two impostors just the same.

Was the division between “conventional” and “unconventional” oil devised to cover up the failure of the peak oilers? No way. The distinction is useful in a variety of ways for analyzing the world of oil sources. I think that the concept was simply appropriated by the peak oilers because it was very useful to them, since it totally obscured the failure of their peak oil predictions. To me, oil is oil is oil, and if you claim the world will run out of oil, you can’t later say that you have redefined things, and that the oil that proves your prediction wrong is some other special kind of oil that doesn’t count as oil but walks like oil and quacks like oil …

w.

… Oh, yeah, the weather report. Late night again, two AM. The wind has changed and is blowing from the southwest, landcasting the fog and the smells of the ocean. The characteristic sea smells of iodine and dimethyl sulfide in the fog draw my thoughts back, back to the many mornings I spent getting out of bed here on the hill at 4 am and going down to the harbor, rigging the boat and setting out in the dark to have the commercial fishing gear in the water for the dawn salmon bite. Sliding out of Bodega harbor in the half-light with my gorgeous ex-fiancee and my good friend, once again motoring between the rock jetties at the harbor entrance, going out to discuss matters of life and death with the ocean. I love the ocean because it doesn’t give a damn about a man’s position and his power and his pretenses. Knowledge and experience mean nothing to the ocean. After a life at sea, if I put one foot wrong, I get just as wet as the landlubber falling off the dock … I take pleasure in that ultimate equality and justice of the ocean. I know that even if it is a California ocean it would kill me without first asking me to share my feelings, so leaving the safety of the harbor is always sobering moment …

rock and the hard place

… sneaking out between Bodega Rock and Bodega Head itself, the little shallow passage the fishermen call “between the rock and the hard place”, where once my heart almost stopped with fear, or at least it started with fear, but other emotions got involved. The channel there is shallow, the sport fishing boat “Mary Jane” was capsized in 1986 with the loss of nine souls by a sneaker wave, “full fathom five thy fishermen lie, of their bones are coral made”

So when I heard a wave break right behind our little fishing boat one afternoon as we were coming in between the rock and the hard place, my first thought was that we were about to join the folks from the Mary Jane.

We spun around, and aaaah, dear heavens, it wasn’t a breaking wave at all, although a wave was breaking, instead it was my old friend Missus Fishbreath breaking the surface just behind the boat, and breaking my heart with the slow-moving stillness of her majestic beauty, a great gray whale dancing her way three thousand miles from the tropics to Alaska. As we turned and gaped, we were looking her right in the eye, and then she rolled our way and opened her blowhole so close to the boat we could almost look down it, it was as big as a dinner plate, we were close, close enough to count the barnacles clinging to her hull, she was the very picture of natural wildness and glorious beauty and unimaginable power, my heart leapt to see it  … and she blew out a great cloud of gagging mist, a noxious enveloping adherent miasma reeking of the million vanished piscatorial souls of her most recent month’s meals, a clogging, thick effluvium that enveloped the boat and then drifted away to leeward as the lovely lady disappeared beneath the waves …

… leaving me in the strangest condition imaginable, with the boat wandering off course, my jaw hanging down to my umbilicus, a pulse rate well into the triple digits, adrenalin-shocked, awed beyond words, smelling like the dumpster behind a cheap fish restaurant, blasted by the natural beauty I had just witnessed, and uncertain whether I was going to vomit or not, but tending toward the former.

I’m not jonesing to visit that particular emotional place again, once was enough for any man. And on a cold night like tonight, I’m glad I’m not rolling out at four am. I fished the Bering Sea as well, and these days I’m just as happy to see the bergy bits and watch the Bering ice on the “Deadliest Catch” TV show from the safety of my couch  … but ah, dear friends, mostly I’ve just moved my ocean madness to warmer waters, and I wouldn’t have missed it for rubies and pearls …

Sports and gallantries, the stage, the arts, the antics of dancers,
The exuberant voices of music,
Have charm for children but lack nobility; it is bitter earnestness
That makes beauty; the mind
Knows, grown adult.

A sudden fog-drift muffled the ocean,
A throbbing of engines moved in it,

At length, a stone’s throw out, between the rocks and the vapor,
One by one moved shadows
Out of the mystery, shadows, fishing-boats, trailing each other
Following the cliff for guidance,

Holding a difficult path between the peril of the sea-fog
And the foam on the shore granite.

One by one, trailing their leader, six crept by me,
Out of the vapor and into it,
The throb of their engines subdued by the fog, patient and
cautious,
Coasting all round the peninsula
Back to the buoys in Monterey harbor. A flight of pelicans
Is nothing lovelier to look at;

The flight of the planets is nothing nobler; all the arts lose virtue
Against the essential reality

Of creatures going about their business among the equally
Earnest elements of nature.

Robinson Jeffers saw it … when you read those lists of famous last words, nobody ever says “I wish I’d spent more time at the office”. Don’t mail the envelope in, push the envelope, the journey will end long before any of us wish it to. Live your most impossiblessed dreams, my friends, because any other kind is just a dream. Chance the widdershins steps of the tarantella, lift the ancient curses and look under them for old coins and lost loves and dust bunnies with a vest and a gold pocketwatch, opt for an immediate increase in the uncertainty levels, stay away from the world of adrenalin deficit spending, hold your dearest warm under your heart while you dare the icy seas of life, for the night is assuredly coming …

My very best wishes to all, I’m off to sleep.

About these ads

444 thoughts on “Conventional Wisdom, Unconventional Oil

  1. Another well written post, Willis. Makes me miss Port Orford…
    BTW there is rumors a big Gas find here in NE Oregon….
    Certain folks don’t like peace, prosperity, and plenty….

  2. I think a key part of this discussion or any other resource discussion is “price”.

    In Peak Oil theory there is a somewhat implied but not stated assumption of constant price – ie , the curve is for a particular price point & what can be produced economically at that price point. If you change the price point, you essentially “re-set the curve” as the resources that are then economic at the new price point changes.

    So recall that in 2000, the price of oil was +/- $20/bbl, not the $90-110/bbl we are seeing today. Price has re-set the curve…. and will continue to re-set the curve as long as price changes. What is fair to say is we are running out of barrels that we can develop economically at $20/bbl. If that weren’t the case, oil would still be $20/bbl.

    So the good news is , as long as price keeps rising, there will be resources for us to develop economically (for the foreseable future). Of course , at some point, the price becomes increasingly prohibitive for the consumer & we naturally rotate into cheaper sources of energy. We will never “run out ” of oil simply because at some point it will become too expensive & we will use other energy sources long before that point.

    Again , the key point being that this discussion with out price considerations is irrelevant.

  3. I used to give a talk on the history of oil explortion in the Powder River Basin of Wyoming.
    First, they drilled all the surface anticlines, domes so obvious they just asked the sheepherders where to find them. When all of them were drilled, they declared the PRB drilled up, fired all the geologists and left. Then they found with seismic data, structures could be found which had no surface expression. Another cycle of boom and bust followed, and certainly, this time, all the oil had been found. Then oil was found in stratigraphic traps, where the rock was not folded at all, but things such as buried sand bars, river channels and dunes were found full of oil. The entire basin was drilled up, with oil found everywhere. You might think people would have known better to write the area off, but after the stratigraphic traps played out, people with no imagination then missed the coal bed methane developments, and now only a few are trying to drill the source rocks horizontally. We don’t run out of oil, we just have pauses, waiting for people with vision to come along.

  4. Willis, you are truly a national treasure and I am like the cat that got the cream when I read your musings, please, do continue to share your thoughts with us,
    BUD

  5. Thank you, Willis!

    A welcome burst of sanity, adventure and poetry.
    Ah, the majesty (and smell) of sea creatures…

    Kurt in Switzerland

  6. Willis, Great of you to start the discussion here on one of the worlds most visited science blogs. I wanted to add that through newer drilling and mining extraction techniques the worlds current known oil and gas resources now exceed our ability to use it are extended out thousands of years. I know you mentioned you are blessed to have the time to devote full time to these curious endeavors. I invite you to jump in to the world of “shale oil and gas resources”. Once you spend a week or so swimming around in this subject matter I think you’ll understand just how far away we really are from “peak oil”.

  7. We hit peak oil in the mid-1800’s, sperm oil that is. Call me Ishmael alarmed.

    /sarc

    Yep, there are plenty of fossil fuels and when there isn’t any more centuries from now there will be the next thing, perhaps extraterrestrial hydrocarbons.

  8. In my last post , I should have said this more explicitly. An underlying assumption of Peak Oil theory is that all resources can be developed with a similar cost structure. Back Hubbert’s time when he developed the theory, that actually was a reasonable assumption, given the type of resources that were being developed. He didn’t probably even consider this at the time, but it is absolutely built into the theory by the way it is constructed.

    Constant price is clearly not a reasonable assumption now and thus, the theory breaks down. It’s really pretty simple from that standpoint. The fact that there is all this hub-bub on both sides of the argument suggests to me few on either side really understand it. For Hubbert’s theory to be useful, you must qualify the resources specifically by their economic price limit – ie – we are running out of oil we can develop at $20 / bbl and we have even less we can develop at $8/bbl (which we used to have in abundance in the past but have very little of today).

    The other implication of course is that you can not apply Hubbert’s theory to estimate a total / ultimate resource recovery (worldwide, ultimate recovery) in a changing (especially rising) price environment.

  9. You took a bit of poetic license to fit the situation. In the Tempest, Ariel sings:
    “Full fathom five thy father lies; Of his bones are coral made; Those are pearls that were his eyes: Nothing of him that doth fade, But doth suffer a sea-change …”

  10. Agree completely. All forms of fossil fuel, by whatever means of extraction, are fungible, at some cost, including an energy cost.

    You are also correct about rapid changes in mining technology. Here in Western Australia, a mine recently opened with no underground workers (the Argyle diamond mine). All machinery is operated remotely. Iron ore trains in the Pilbara are driven by office workers in Perth.

    Steps along the road to autonomous robotic mining operations, and then the sky is literally the limit.

  11. One more magnificent piece. You may be getting older Willis, but insofar as your writing is concerned, you are getting better.

  12. I wonder if there will ever come a time of peak alarmism? (oil / climate change / ice age / food/ …, whatever)

  13. I read somewhere once that some Russian scientists believe that oil is not a fossil fuel, that it is made naturally. Any credence to that w.?

  14. Willis, you just don’t understand peak oil do you? So I will give you a simple analogy, the apple tree in my garden has low hanging fruit that I can pick while standing, these are known as “conventional” apples, the rest of the apples I have to use a ladder to pick, these are known as “unconventional” apples. Now do you understand?
    Nice story about fishing.

  15. Thanks for another entertaining read, Willis, and thanks for sharing one more of your adventures. I’d like to add that, like nature herself, you produce your share of “Holy crap!” moments for the rest of us, your “Steel Greenhouse” and “Glass Planets” articles being two of mine.

  16. “To him who in the love of Nature holds, she speaks a various language”

    For some, Nature’s love is embodied in the language of the sea. Others, the sky or horizon’s to be reached.
    For me, the crux, a small boat, sailed on a dark sea by the light of the Milky Way. Rocks and shoals outlined as well as heard by the splash of waves. Past the starboard harbor light, into the swells from yesterday’s storm, mainsheet held tight, heeling to lee, the luff barely aflutter.

    I’ve encountered no whales on the Great Lakes. It must be a moving experience!

  17. Willis–Great points about peak oil. And, as always, love the sea stories.

    I haven’t exactly had a life of “couch potato”, but your experiences make me feel like I have….

  18. I generally enjoy your writing, Willis, but this one seems to me to be an unnecessary cheap shot.

    Hubbart did his work in the 50s. His experience was with drilling down, plus some technological innovation. He made some projections based on what he knew, and he was right about US production reaching a peak once half the oil had been brought to the surface.

    That he underestimated what technology was capable of in the long run is a common theme throughout history. (Didn’t the Patent Office Director request that his office be shut down 100 years ago, because just about everything already has been invented?)

    I recall a National Geographic article almost 50 years ago discussing shale oil which acknowledged that it would be economically feasible only with a significantly higher price per barrel (very correct it turns out).

    Maybe the higher breakeven point could help define conventional vs unconventional – or maybe not. But so what? For his time, given his knowledge base, he was very right. His disciples, later talking about Peak Oil worldwide, also were very right – up until a decade or so ago. In a way, their projections of Peak Oil and the then coming rise in oil prices fueled the innovation which, at the current higher price, has given us the new, huge supply.

    Again, my point is that it wasn’t necessary to paint Hubbart and his followers as stupid Malthusians (and CAGW Alarmists by your tone) for their identification of a problem which then allowed for a solution from which we benefit today.

  19. Before Beth corrects my improvisation on Bryant’s poetry:

    Quotation by William Cullen Bryant

    To him who, in the love of Nature, holds
    Communion with her visible forms, she speaks
    A various language:

  20. I suppose Green River shale oil could be considered unconventional. Kerogen has to be reprocessed to make it into something similar to conventional oil.

    Nice that you were able to view that whale. Has anyone ever thought to thank oil companies for saving the whale? It was only after the discovery of oil at Oil Creek that Kerosene began to be substituted for whale oil. It destroyed the whaling fleets though. All those jobs lost. Maybe we can get BP to pay for that too….sarc off.

  21. That is one fine piece of writing Willis. Been out on the restless ocean fishing for cod in the North Atlantic, iceberg alley. Of real ice bergs floating by on a foggy morning tourists travel thousands of miles to see from the safety of the land. Yep. The sea respect no man what ever his or her station in life means nothing. Out there the world sings a different tune. Back on land, you always look back out there when the ocean meets the sky. Thank God – we didn’t use sail. Gas from oil baby! And I don’t give a damn whether it came from conventional or unconventional – what sane human does?

  22. Conventional oil and unconventional oil are essentially the same substance. The only difference between them is the geology of their containment.

  23. Of course one has to ask what is actually meant by ‘fossil’ fuel some of the deep aquifers are said to have ‘fossil’ water. Is oil rather than fossil, really abiogenic and coal plant matter that has been soaked in oil at high pressure? If hydrocarbons are absolutely certainly only ever formed from rotted plant life no other method possible – how come there is methane and ethane on Saturn’s moon Titan?

  24. Jeff L,

    Even if that price point is held static, the amount of oil that can be economically produced at that price point increases over time because technology isn’t static. As oil drilling / extracting technology improves the cost of producing a given barrel of oil goes down. Because of this even with a static price point, oil that was uneconomical yesterday can be economical tomorrow.

  25. I disagree with the naysayers who doubt peak oil. I expected it to arrive in 2004, and it did. I had bought a ton of futures to back up my view. When you say I am wrong, I just look at my bank account and smile.

  26. I still go by what I read in the Prize twenty years ago, and Twilight in the Desert. The primary issue is not whether the resource is exhausted (it isn’t close), the challenge is output per-day. One commenter above mentions the idea that we’ve run out of $20/bbl. Wrong, we cannot increase flow of $20 bbl/day oil, but we still pump it. The price is set by the cost of the marginal barrel. That marginal barrel of production per day is what’s costing $100.

  27. In my career as a geologist looking for oil worldwide over the last 25 yrs, I can tell you that oil is a limited resouce. There is one simple overriding fact we can all ponder when debating this issue and that is many of the great oil basins and countries of the world hit their peak production long ago. If this has happened to many of these great basins, then it is simple logic to assume that it will happen worldwide at some point in the future. One thing I totally agree with, is that I have NO idea when this will occur. New technologies and higher oil prices could delay this for a very long time.

    Another very important point is that peak oil is a measurement of the rate of production and not the quantity of hydrocarbons. One may have a very large quantity of reserves in the ground but one may not necessarily be able to extract them at high rates.

  28. Peter Pond says (February 2, 2013 at 1:52 pm): “I wonder if there will ever come a time of peak alarmism? (oil / climate change / ice age / food/ …, whatever)”

    “Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.” –Albert Einstein

  29. RayG says:
    February 2, 2013 at 1:49 pm

    You took a bit of poetic license to fit the situation. In the Tempest, Ariel sings:
    “Full fathom five thy father lies; Of his bones are coral made; Those are pearls that were his eyes: Nothing of him that doth fade, But doth suffer a sea-change …”

    And from memory, it continues …

    … into something rich and strange.
    Sea-nymphs hourly ring his knell.
    Hark! I hear them! Ding-dong-bell …

    I know and love that bit of Shakescene, and my according to the fine print on my poetic license, it covers me munging Shakespeare to match my tale …

    Thanks for recognizing it,

    w.

  30. Willis, I’ve always enjoyed your writing about CAGW, but I’m afraid that the more that you write about Peak Oil, the more your ignorance is showing. In contrast to CAGW hypotheses the observations about Peak Oil are amply borne out by experience and data. I repeat the point I made at Dr Curry’s site: sceptics need to come up with a more plausible explanation than geological constraints for the plateauing of oil production despite a sustained tripling of the price. Most of the commentary is hand-waving. I admit that I had hoped for better.

  31. RobB says:

    At February 2, 2013 at 2:17 pm you say

    Willis, I don’t think you express the general peak oil arguments that well. I think Wikipedia gives a pretty good description of them – http://en.wikipedia.org/wiki/Peak_oil

    I think one of the overriding factors of ‘peak’ is that it will have economic repercussions due to price effects.

    No, you are possibly unaware that Willis covered that when he wrote

    Coal, for example, can be converted to a liquid fuel, or to a gas.

    The Liquid Solvent Extraction (LSE) process has been capable of producing synthetic crude oil (i.e. syncrude) from coal at competitive cost (n.b. cost and not price) with crude oil since 1994.

    We proved the technical and economic abilities of the LSE process with a demonstration plant at Point Of Ayr in North Wales.

    Syncrude has been made from coal whenever the supply of crude has been constrained. The Germans did it during WW2 (which is why we bombed the Ruhr valley) and apartheid South Africa used Sasol which was a development of that German process.

    However, prior to LSE it was always more costly to mine, transport and convert coal to syncrude than to drill and transport crude. LSE has reversed those relative costs.

    The surprising economics of LSE derive from two facts.
    1.
    LSE consumes sulphur-rich bottoms which have disposal cost for oil refineries.
    2.
    LSE can be ‘tuned’ to provide hydrocarbons which reduce need for blending.

    An oil refinery separates the components of crude oil by distilling the crude. The separated components are products which must match market demand; e.g. producing the required amount of benzene must not result in producing too much or too little petroleum. This match of products to market demand is obtained by blending (i.e. mixing) different crude oils for distillation: crudes from different places contain different proportions of hydrocarbons.

    Blending is expensive. It requires a variety of crudes to be transported and stored then mixed in controlled ratios.

    This need for blending is why Brent Crude is so valuable. Saudi crude is the cheapest crude, and blending Saudi and Brent crudes in a ratio of about 2:1 provides a blend that nearly matches market demand for its distillates.

    The LSE process can be ‘tuned’ such that it outputs a syncrude which can provide distillates which match market demand and, thus, removes the need for expensive blending. This is achieved as follows.
    (a)
    An LSE plant dissolves coal in a solvent in an ebulating bed at controlled temperature and pressure.
    (b)
    The resulting solution is converted to hydrocarbons by exposure to hydrogen gas (produced by coal using a water-gas shift) in the presence of catalysts and at variable temperature and pressure. Adjusting the temperature and pressure determines the resulting proportions of hydrocarbons.
    (c)
    Changing the temperature and pressure causes the hydrocarbons to come out of solution and the solvent is separated then reused in the process.
    (d)
    The remaining solids (mostly ash minerals) are removed by filtration as a cake.

    Conversion efficiency is greater than 98%. And the not-converted residue can be burned as a fuel.

    The UK’s Coal Research Establishment (CRE) invented, developed and demonstrated the LSE process. CRE was owned by British Coal which was owned by UK government. Ownership of the LSE Process remained with the government when British Coal was closed in 1995.

    The LSE Process is owned by UK Government. Patents on the process were taken out but details of the process are a UK State Secret. Adoption of the LSE Process would collapse the value of Brent Crude, and the sale of Brent Crude is important income for the UK.

    However, the existence of the LSE Process constrains the true price of crude oil. If that price were to rise sufficiently then it would pay the UK to adopt the LSE Process or to license it to other countries for production of syncrude. Hence, the existence of the LSE process has a strategic value as a result of its constraint on the true oil price.

    And the UK may adopt the LSE Process when Brent Crude is exhausted.

    However, frack-gas may remove need to adopt the LSE Process for use although its strategic constraint on oil price will remain.

    Richard

  32. As Jeff L @ 1:19 explains:

    The oil companies just love it when peak-oil scaremongering occurs.

    It conditions the punters to willingly accept higher prices.

    Then, there’s the ‘Price of Discovery’, (or rather, the Price of Announcement of Discovery). All those (unannounced) proven reserves they’re sitting on, just waiting for the price to rise high enough to make extraction (more) profitable.

  33. I’ve lived through much of the whole peak oil deal, which near as I can tell has turned into a half-century-long goat roping contest.

    Oh, much longer than that, Willis.

    How many people are aware that once upon a time, starting around 1851 in fact, Scotland was the World’s leading petroleum export country – and it was exporting shale oil?

    http://www.scottishshale.co.uk/

    And guess what – it wasn’t long before the ‘peak oilers’ of their day were prophesying that it was going to run out, well before the end of the 19th century.

    There’s nothing new under the Sun.

    One thing I feel I can prophecy quite safely though, we will never reach peak BS!

  34. President Wilson appointed a board to help plan the US response to running out of oil after WWI.
    In the 1970’s, very wise and smart geologists were explaining how we would be out of oil by the mid-1980’s.
    There is some poster over at climate etc. who *knows* we are running out of oil. He names himself after a space telescope and one of his best pals over there is a self-tracking idiot. Somehow it seems approrpriate.
    We are no where close to running out of oil. Or coal. Or gas. Or cropland.
    Nor are we near to running out of apocalyptic jive artists who make their living or get their jollies pushing doom scenarios.

  35. Ooops – unfinished posting above. Contrary to what you claim, Willis, in your beautifully-written piece, there were people howling about peak coal. William Stanley Jevons (1835–1882) was an English economist who predicted that economically viable coal in Britain would have been mined out by around 1970. He made this prediction in 1865 in his book, The Coal Question. I am not sure, between miners’ strikes, the 1955 (or thereabouts) Clean Air Act, natural gas, and Margaret Thatcher’s actions to shut down the miners’ unions if this was prescience or coincidence, as the coal mining industry has all but disappeared in my ancestral country of Wales.

  36. MattS says:
    February 2, 2013 at 2:30 pm

    Even if that price point is held static, the amount of oil that can be economically produced at that price point increases over time because technology isn’t static.

    I’m old enough to remember 29 cent/gallon gasoline. The only question as to ‘peak oil’ is at what price will either a substitute be cheaper or people will stop using it because of price.

    I used to own a car that got 6 MPG.

    I can no longer afford to drive such a wonderfully comfortable vehicle.

    As far as my personal consumption of oil…’peak’ occurred when the price was around 40 cents/gallon.

  37. MattS says:
    February 2, 2013 at 2:30 pm

    “Even if that price point is held static, the amount of oil that can be economically produced at that price point increases over time because technology isn’t static. ”

    Agreed – again, at the end of the day it is a question of economics, but the implied assumption of Hubbert was constant economics – I pointed out the price side & you point out the cost side, but we would be both more correct together & say “constant economics assumption – no change in price & no change in technology” – if you change either, you re-set the curve of what’s an economically extractable resource.

    I will still stick with the fact that there is a whole lot less oil that can be economically produced today at $20/bbl than there was 50 years ago – thus there was a peak of the resource with that particular economic thresh hold. What Hubbert didn’t take into account is that the economic thresh hold of his day would change, both due to increase in price & an increase in technology, and thus continually re-set the curve.

  38. Of course the two greatest sources of unconventional oil are the tar sands of Canada and the Green River Formation in Utah, Colorado and Wyoming. The Peciance Basin in NW Colorado contains 1.5 trillion barrels of karogen. At 1 million barrels per day it will last for 4000 years.

  39. Bob Shapiro says:
    February 2, 2013 at 2:12 pm

    I generally enjoy your writing, Willis, but this one seems to me to be an unnecessary cheap shot.

    Hubbart did his work in the 50s. His experience was with drilling down, plus some technological innovation. He made some projections based on what he knew, and he was right about US production reaching a peak once half the oil had been brought to the surface.

    That he underestimated what technology was capable of in the long run is a common theme throughout history. (Didn’t the Patent Office Director request that his office be shut down 100 years ago, because just about everything already has been invented?)

    I fear you missed my point, Bob, sorry for the lack of clarity. The peak oil folks still hold Hubbert’s work as the gold standard. They still think that his point of view and his formulas are uncontested and totally correct … now I know that you don’t think that, but to call it a “cheap shot” to discuss the claims that thousands of people are screaming about today, that strikes me as … well … a cheap shot.

    I also notice that you didn’t find a single thing wrong with my analysis, you just didn’t like fact that I pointed out that Hubbert was wrong … so sue me, Bob, but he was still wrong, and the madness unleashed by that wrongness is still crashing around us today.

    Again, my point is that it wasn’t necessary to paint Hubbart and his followers as stupid Malthusians (and CAGW Alarmists by your tone) for their identification of a problem which then allowed for a solution from which we benefit today.

    So your theory is that if King Hubbert hadn’t said that the US would hit peak oil, we wouldn’t have developed horizontal fracking and the thousands of other technologies? People would never have worked to make oil recovery more economical without Hubbert and his many followers?

    And more amazingly, your claim is that King Hubbert “identified” the problem that over time, oil would be more difficult and expensive to find, so that we could find a solution to that, and so we should be grateful to the peak oilers??!?!

    Words fail me … if King Hubbert and his ideas were never invented, the US domestic oil production still would have peaked in 1970s. Do you think no one would have noticed, and thought “hey, we need to find more oil, it’s getting harder to obtain”? In fact, people knew about and were aware of and working on the problem of oil being more difficult and expensive to obtain before King Hubbert was born, that problem starts on Day One of any extractive industry, Hubbert didn’t “identify” that problem.

    Did you ever wonder how the coal folks managed to make all of those changes in coal mining technology without having “peak coal” folks to spur them on? … it must have been tough for them, since nobody had “identified a problem” for their industry like Hubbert did for the oil industry, praises to his name …

    Bob, people have had jobs finding and extracting oil for over a century. They want what they have always wanted, to do it at the cheapest cost. It’s a profit deal, as Steve Martin said. So no matter what the peak oil folks rave about, the people doing the actual work are just going to go and invent things and solve problems and lower costs and find new sources, in short, do their jobs as they have done for over a century. The idea that we need the peak oil folks to spur us to look for better ways to find energy is a madcap reversal of reality, an idea so outré that you would have to carefully shield it from the actual world in order to hold it for more than ten minutes. That claim can’t survive past the point where you think “ummm … if that’s true, then how did the coal industry do it without “peak coal” people to help them?”. So you’d have to be very careful to keep that idea well insulated from the actual world, it’s extremely fragile.

    It is delusions like that which characterize the peak oil movement. Thank you for providing an excellent example for the good folks in the cheap seats, so they can see just how far from reality you guys really are … thank the peak oilers for their contribution? Not on my watch …

    w.

  40. I’ve lived through much of the whole peak oil deal, which near as I can tell has turned into a half-century-long goat roping contest.

    I’d call it more like something else involving goats, which our Drill Sgt used to yell at us all the time. It’s something nice people don’t say, so it fits the peak oil situation perfectly.

  41. Jeff L: A $20 barrel of oil in 1970, using normal inflation figures, is equivalent to approx $125 today. Brent is currently at $116, so even ‘peak cheap oil’ is not a reality, never mind peak oil.

    Wonderful piece again, Willis. Even though I have lived a similar life to yours, I certainly cannot write about it as you do yours. Would you be my ‘ghost writer’ (for a fee, of course)?

  42. SMS says:
    February 2, 2013 at 2:15 pm

    I suppose Green River shale oil could be considered unconventional. Kerogen has to be reprocessed to make it into something similar to conventional oil.

    Nice that you were able to view that whale. Has anyone ever thought to thank oil companies for saving the whale? It was only after the discovery of oil at Oil Creek that Kerosene began to be substituted for whale oil. It destroyed the whaling fleets though. All those jobs lost. Maybe we can get BP to pay for that too….sarc off.

    I know you speak in jest, SMS, but people are always wanting to monetize the unaccounted for costs of oil … see my post, “Monetizing the cost of carbon“. I objected in that post to the fact that people who want to monetize the costs of oil rarely want to monetize the benefits of oil.

    In that post, I used the example of CO2 fertilization, a huge and totally un-monetized benefit of oil. However, in some ways I like your example better, it’s like the freakin’ polar bears, it has visceral appeal, it’s not abstract … so I plan to shamelessly steal it. I’d love to attribute it to you, but that’s one of the big downsides of posting anonymously … you don’t get to claim credit for your ideas.

    Many thanks,

    w.

  43. RobB says:
    February 2, 2013 at 2:17 pm

    Willis, I don’t think you express the general peak oil arguments that well. I think Wikipedia gives a pretty good description of them – http://en.wikipedia.org/wiki/Peak_oil

    I think one of the overriding factors of ‘peak’ is that it will have economic repercussions due to price effects.

    Your idea of adding to the conversation is to tell me I’m doing it wrong and point me to Wikipedia?

    Really?

    If you disagree with something I said, quote it and tell me why I’m wrong. A vague “you’re wrong” and a referral to Wikipedia is pathetic. I suspect you can do better than that, and that you can up your game to the level played here … we’ll see.

    w.

  44. Willis

    I enjoyed reading the article. I think Jeff raised the point about price – which I think is the crux of the issue.

    One of the thing the “peak oilers” don’t say is that the argument comes with the implicit caveat that with “given technology, proven reserves and current price then…”.

    As you say the world is awash with oil but of course some of it would cost too much to extract – at current prices and technologies. Furthermore, exploration takes a long time to get started in a new – venture – region. We know that there are other big finds out there but the paper work needs to be done first and with political instability in some regions, companies are playing a “wait and see” game.

    Your point about conventionals and unconventionals is a good one. But again this is largely a result of economics. In general terms, both have been exploited historically with conventionals winning through due to ease of extraction – why would a company go for the higher fruits first?

    And as you say directional drilling has been revelation to both conventional and unconventional reservoirs; improving recovery rates. Other things 3D/4D seismic, microseismic, more stimulation options etc. In short the “peak oilers”, ignore the caveats.

    Finally, as demand increases prices go up, if prices go up then marginal fields become economic. Oil companies (particularly private firms) then develop these fields all the while improving the engineering and driving down price.

  45. It’s fun to search for oil production projections in books.google.com. Since the early 1900s there have been predictions that peak production was just a few years away. For over 100 years the peak has been right around the corner.

  46. It really is nice to know that the head of the IPCC, Dr. Rajendra Kumar Pachauri , helped us to prolong our use of dirty, co2 emitting OIL. He set up Glori Oil, now Glori Energy, which is a residual oil extraction technology company. He was its scientific advisor while being head of the IPCC. Al Gore and Pachauri are seeped in oil and are both utter hypocrites of the highest order.

    Oil will never run out. This is because by the time reserves get to dangerously low levels we humans would have moved on, like we have always done. There are alternatives which we can’t be bothered with too much at the moment such as Algae fuel.

    Further reading:
    George Monbiot – Guardian – 2012
    We were wrong on peak oil. There’s enough to fry us all
    A boom in oil production has made a mockery of our predictions.”

    Business Week
    Everything You Know About Peak Oil Is Wrong

  47. We’re supposed to have hit ‘peak gold’ too, but I am not buying it.

    But I don’t suppose if the temperature levels off, we will get have ‘peak climate’, because that would put alot of alarmists out of work.

  48. Peak oil is a myth.

    The average production price of a liter of oil has not risen much.
    The cost of producing 1 barrel of oil (about 159 liters) is between US$2.00 and US$15.
    While new extraction methods or technology will be more expensive to start off with, they will drop when adopted whole scale.

    The price of petrol is a political construct…..
    The price of crude oil is not determined by the market but determined by a cartel (OPEC) which sets the bottom price. Price fluctuations are above this bottom price.

    http://sovereign-investor.com/2012/12/18/oil-prices-are-headed-higher/

    The price of petrol for the end user is also determined by politics.
    Governments are heavily dependent on the tax on petrol to fund their election bribes.
    Taxes on petrol are also used to subsidize public transport projects. The price needs to be high enough for public transport to ‘compete’.
    They are also pressured to keep the price artificially high to appease the ‘environmental’ activists who want to phase out fossil fuels.
    For example, some 60 per cent of the pump price in Britain is down to tax and duties.
    Petrol is a cash cow.

    On top of that, some are wondering if the cost of oil has actually risen at all….
    Due to inflation it is very hard to gauge whether oil prices themselves are rising or falling.
    Measured in gold, the price seems pretty stable and is currently below average.
    Measured in gold, the oil price today is only 82% of its average over the past 41+ years.

    http://www.forbes.com/sites/louiswoodhill/2012/02/22/gasoline-prices-are-not-rising-the-dollar-is-falling/

  49. Ed_B says:
    February 2, 2013 at 2:31 pm

    I disagree with the naysayers who doubt peak oil. I expected it to arrive in 2004, and it did. I had bought a ton of futures to back up my view. When you say I am wrong, I just look at my bank account and smile.

    See, that’s where we’re different. I actually look at the data before making my claims. So when some smug fool comes in to tell me that the world production of oil peaked in 2004, and to gloat unpleasantly about how much wealthier s/he is than us common folks, boasting that s/he has a ton of spare money laying around to purchase “a ton of energy futures”, I just ask her/him to point out the peak …

    w.

  50. Why are we skeptics generally such optimists and Warmists tend to be such such doom mongers? They draw a straight line. Let’s look at the peak horsesh!t problem of the late 19th century.

    “IN 1 8 9 8 , D E L E G A T E S F R OM A C R O S S T H E G L O B E gathered in New York City for the world’s first international urban planning conference. One topic dominated the discussion. It was not housing, land use, economic development, or infrastructure. The delegates were driven to desperation by horse manure…………………………
    The situation seemed dire. In 1894, the Times of London estimated that by 1950 every street in the city would be buried nine feet deep in horse manure. One New York prognosticator of the1890s concluded that by 1930 the horse droppings would rise to Manhattan’s third-story windows. A public health and sanitation crisis of almost unimaginable dimensions loomed……….”

    http://www.uctc.net/access/30/Access%2030%20-%2002%20-%20Horse%20Power.pdf

    Vrooom, vroooom. Problem solved.

  51. “Knowledge and experience mean nothing to the ocean. After a life at sea, if I put one foot wrong, I get just as wet as the landlubber falling off the dock”

    But after a life at sea, you are surely a lot less likely to put a foot wrong than a landlubber is.

  52. The way I see it, most of this future doomsaying comes about from people making linear extrapolations of current trends. The predictions of doom would come to pass if human beings never changed the way we did things. But we change. Old methods give way to new methods. Discoveries are made. Technologies are invented and the technologies of today fade into irrelevance in the not so distant future. And so the predictions of doom fail to materialize when the future arrives because we adapt and invent. The doomsayers fail to recognize that they can’t predict the future but continue to be given undue importance because they attract a legion of followers.

  53. LOL we reached peak oil in 2004? News to me. I guess those massive reserves of shale in australia are just illusory.

  54. Oil produced from vertical wells is defined as “conventional oil”, but oil produced by rotating the drill 90 degrees (horizontal wells) is something other than conventional oil. Engineers have a term for a 90 degree rotation, which is multiplying by the square root of negative one. Now mathematicians refer to this as “imaginary” components, but engineers prefer the term “complex” component. It looks like any petroleum product gathered from horizontal drilling is either “imaginary” or “complex”. If this is the case, imaginary petroleum when burned makes imaginary CO2 and leads to imaginary global warming. Or if the petroleum is “complex” it leads to complex global warming.

    It is fairly easy to postulate that the environmentalists will never be a party to “imaginary” global warming. Noting that the warmists explanations of the mechanism for global warming are so complex no human can understand them now, they will not promote any further addition of complex terms. So the Global Climate Change Alarmists will simply call all petroleum products “dirty oil”.

  55. It isn’t just “peak oil” projections that have repeatedly come a cropper. In the 70’s we were certain we were already into that long slow decline to the next Ice Age. By the 90’s, we were all about to burn up and die. For a quarter century it was illegal to build a natural gas fired power plant in the U.S. because we “knew” that all our natural gas was pretty much used up and we wished to save what was left for higher uses. The list goes on and on and yet here we go with yet another set of confident announcements about the future, all based on what “we know”. It seems to me that this endless cycle of faulty prognostication could be ended if we simply came to appreciate the immense expanse of “what we do not know” and weighed it against the relatively frail body of “what we do know”.

  56. “…
    fracking now only delivers “unconventional oil” simply because the drill hole goes horizontally instead of vertically … does this make any sense to anyone?
    …”

    That’s a rather obtuse question don’t you think?
    Good post Willis.

  57. it’s not often mentioned that “fossil fuels” are composed of CO2 that has been taken out of the atmosphere over hundreds of millions of years. If the earth now is experiencing any serious imbalance – it’s the lack of CO2 in the atmosphere.

  58. Willis Eschenbach says:
    February 2, 2013 at 4:02 pm

    Ed_B says:
    February 2, 2013 at 2:31 pm

    I disagree with the naysayers who doubt peak oil. I expected it to arrive in 2004, and it did. I had bought a ton of futures to back up my view. When you say I am wrong, I just look at my bank account and smile.

    Ed_B, I’m glad you made money and I wish you the joy of it, but before you strain your shoulder patting yourself on the back for your predictive abilities, consider how much money you might have made.

    I mean, if only you had incorrectly identified peak oil as being in 1998, instead of incorrectly identifying it as being in 2004, you could have bought in for $17 a barrel instead of $40 dollars a barrel … just sayin’, you wasted a full six years of money-making chances, you financial wizard, you …

  59. Willis writes “I actually look at the data before making my claims.”

    And what do you see there Willis? Are you splitting hairs about whether peak is actually 96 million barrels or 97 million barrels per day?

    Peak oil is not about and has never been about reserves or technology. Its about peak production and so if you look at the larger picture, the 60s and 70s saw massive growth in the West supported by huge increases in oil usage. The last 20 years has seen massive growth in the East unsupported by the same oil production increases. And what has happened? Prices are increasing faster now and oil usage efficiencies are increasing to compensate both from a “forced” reduced usage per increase in growth and increased production cost points of view.

    We may not be precisely at peak oil and we may even flatline or even slightly increase for a while but we’re not going to get large increases like we did in the 60s and 70s and instead we’re going to be doing all we can to keep our heads above water as the conventional sources continue to slow their production rates.

    And yes, the data does support that at the moment.

  60. @Willis:

    Wasn’t the first fracked well in the USA in 1947 or some such? I make that about 66 years…

    If you allow for using explosives instead of hydraulics, I think it goes back to about the Civil War…

    Oh,and on Hubbert being “right” in N. America: It is worth pointing out that it is largely due to putting off limits giant tracks of land on all 4 coasts ( Pacific, Arctic, Atlantic, Gulf) and a giant chunk of oil land in Alaska ( the “Naval Reserve”).

    Then there is that well in the Gulf of Mexico that keep filling back up from somewhere lower down… and the one where Standard Oil found oil at depths that were theoretically too deep and too hot. Yet the oil is there.

    @Ted W:

    We can make oil. Take CO2, add Hydrogen (often from water) and heat. You can reduce the heat needed with various catalysts (some are Iron based, others us Nickle or Chrome or various mixes; there are even rock based types – Zeolyte) You get various mixes of gasoline, kerosene, Diesel, heavy oils.

    Now picture subducting sea floor (say, off California) taking a load of sea bottom mud (with water) and loads of carbonate rock to great depths (magma heated depths). We know what chemical reactions can happen. We admit that in the extreme case it releases the CO2 (why do you think volcanoes behind subduction zones get CO2 vents?) It all “works”.

    Yet we staunchly assert that the oil and gas found in the California fields in front of the volcanoes are due to dead critters and not a product of the subducting goo prior to getting fully vaporized.

    Now look where lots of oil is found. Tends to be near subduction zones or old plate impact zones. No, not all cases; just a lot of them…

    IMHO oil comes from two places. Fermented algae (such as North Sea oil deposits) and subjection / collision of plates (such as California / Saudi). Otherwise California oil doesn’t make much sense. Much of California was only lifted out of the sea recently in geologic terms. It was ‘ocean bottom scrapings’ and not a lot of time for sediment trapping and kerogen breakdown…

    So ‘conventional’ theory says dead stuff gets hauled down under rocks and slowly baked to make kerogene then cooked some more to make oil. Too far down it is destroyed, to far up it doesn’t become oil and stays “bitumen sands”. This ignores that wet carbonate rock sucked down to heat and pressure ought to cook out oil…. And when we look around the solar system we find complex hydrocarbons all over the place. No dead animals there….

    IMHO the “dead animals” theory only accounts for a minor part of the oil.

    http://chiefio.wordpress.com/2012/03/25/did-crude-oil-rain-from-the-sky/

    Oh, it is also worth a mention that oil was recently found on the ocean bottom near mid ocean ridges. Loads of it. The stuff is everywhere…

    http://chiefio.wordpress.com/2012/09/16/theres-oil-on-that-ocean-bottom/

    Oh, and on the “Energy return for energy invested” argument (that inevitably comes up):

    One can use very cheap nuclear electricity to raise oil due to the FORM being worth more. We want liquid fuels. If the oil source is cheap than making synthetic from scratch, we will still pump the oil and refine it. (So, for example, if it took 60 kW-hrs to make a unit of synthetic oil but I could raise that oil with 50 kW-hrs it would still be pumped. Even if the energy in that final product were only 40 kW-hr (presuming that 10 kW-hrs is lost in trying to charge / discharge e-car batteries or that I want plastics…) The end result would just be building more nukes so I could put that energy in my gas tank in a convenient form. (This is happening today with the use of Natural Gas to create ‘unconventional oil’ from tar sands. The oil form is worth more than the gas form.)

    We can already turn coal and nuclear process heat into ‘oil’ if desired. Make synthesis gas from coal (or trash or chicken feathers) and use nuclear heat to F-T process it into oils and gasoline.

    So we will never run out of oil. We will just get it from ever more interesting places. Including our own garbage. (Being done today, BTW.)

  61. Guest Post by Willis Eschenbach: “Few people want to hear that tomorrow will be OK, that things will work out. Instead, most folks want to hear some terrible story about what tomorrow holds, whether it’s peak oil or climate meltdown or the coming ice age.”
    ===========================================================

    Willis, how do you know that about “most folks”? Any scientific evidence?

    Is is not that some people invent lies and spread them around as scientific facts and others simply believe the “experts”?

  62. As Jeff L mentioned, the determinant is price that justifies the recovery. I like to think of it as “easy” oil vs. “hard” oil. Most, but not all of the easy oil has been found. There may still be places that have been closed to drilling where easy oil may lurk. But of the places that are open, easy oil is the past tense. If you want to cook oil sands, drill horizontally and frack, drill in deep water, and other things that may become possible in the future, oil can still be retrieved. It will just not be cheap to do so. This is the “hard” oil. Because we are running on harder oil all the time, it will make sense that the price goes up in line the recovery costs. That should be sufficient to limit oil to those things where it is a good choice. Oil/petroleum products are nice to use for plastics, and their energy density and storage characteristics make them nice to use other places. The market will decide the outcome. If not in places like the US, then globally.

  63. TimTheToolMan says:
    February 2, 2013 at 4:32 pm

    Willis writes “I actually look at the data before making my claims.”

    And what do you see there Willis? Are you splitting hairs about whether peak is actually 96 million barrels or 97 million barrels per day?

    Peak oil is not about and has never been about reserves or technology. Its about peak production …

    Hmmmm … Tim again. Welcome back, Tim. We’ll see how this works out …

    Tim, are you seriously looking at that chart and claiming that oil production peaked in 2004 like Ed_B claims? Because as you correctly point out, peak oil is about one thing only—peak oil production. So let’s look at that, shall we?

    We have produced more oil than we did in 2004 every single year since then except 2009, and that was likely due to reduced demand. We have had six years of increasing production since 2004, 2011 production was a full three percent higher than in 2004, and you call 2004 the peak year? What part of the word “peak” are you not understanding?

    Again, thanks for providing another example of the degree to which peak oilers will go to “support” their claims, even to the surprising extent of claiming that the year of peak oil production was a year where six of the seven following years had higher production … yeah, that’s the ticket, that’ll show the peak oil doubters, all right …

    w.

  64. Willis: I realize you are probably using the terms “conventional oil” and “unconventional oil” facetiously but to a geologist those terms have very specific meanings. When a geologist speaks of “conventional oil” he is describing a system which has a source rock (typically a carbon rich shale), a reservoir rock, (typically a sandstone, limestone or dolostone) into which the oil (or gas) has migrated and a trapping mechanism; This is a means to prevent the oil or gas from escaping to the surface and disappearing These include an impermeable non porous layer (shale) capping domes/anticlines, pinch outs,, fault boundaries. Traps all have one essential feature, They all prevent the migration of oil. In short you have: source rock, reservoir rock and trap.

    Unconventional oil (or gas) is different in that “the source rock and the reservoir rock” are one and the same. That is the major difference between the two. The Barnett Shale, The Marcellus Shale, The Athabasca Tar Sands etc. are examples of “unconventional” oil/gas.

  65. Peter Terence Kirby says:
    February 2, 2013 at 4:07 pm

    Porpoises leaping through the moon’s track at midnight off the Needles…. I still see it 60 years later.

    Thanks, Peter. Sounds stunning … and where might the Needles be when they are at home?

    w.

  66. This is a wierd post. Chief stirrer Willis, while delightfully eloquent as always, is chucking in a few straw men and red herrings to make his point : Peak Oil is a “terrible story”, oil is “running out”, peak oil folks think Hubbert was totally correct, “Peak Oil” relies on “unconventional” oil being different to “conventional” oil, huge/massive amounts of coal, gas and methane hydrates prove we’re not at peak oil, etc.

    Peak Oil means Peak Oil. That is, the point at which annual oil production, for whatever reason, ceases to increase. When you get to Peak Oil, you haven’t run out of oil. You still have lots of oil. All it means is that you can’t or won’t produce oil at a faster rate than before.

    If energy demand keeps increasing – and I certainly hope that in the free world at least it does – and if oil gets more costly and/or difficult to produce (which it is), then other forms of energy will become more competitive. If lots of energy is available from other sources (which it is) then increasing energy demand will at some point all be satisfied from energy sources other than oil. If the changes are smooth, it’s a non-event. But it’s still Peak Oil.

    IMHO, we have reached or are about to reach that point. Have we run out of oil? No. Are we on the brink of disaster? No. The USA hit its own Peak Oil in 1970, one of the two dates predicted by Hubbert. Now Hubbert seriously underestimated the amount of oil that would be found in the US, he seriously overestimated the rate of decline following the peak, but by luck or judgement he got the date right. Did the US run out of oil? No. Was it a disaster? No. What happened was that the US satisfied its rising energy demands from other sources. Those other sources, then, included non-US oil. But it was still the US’s Peak Oil.

    OK, maybe it isn’t the US’s Peak Oil yet. Maybe all the new oil finds will allow US oil production to exceed the 1970 figure. To do that, US annual oil production has to rise 44% from the 2011 level. You see, even though Hubbert got his supply figures badly wrong, US annual oil production has fallen quite a long way since 1970. Will it go up 45% and stay up there for a few years? Maybe, but I wouldn’t bet on it. My guess is that to achieve that figure the oil price would have to rise so that the increased oil production is economic, and it would have to fall so that oil remains competitive with alternatives.

    I would be happy to be proved wrong, but it looks to me like 1970 was the US’s Peak Oil, and the world’s Peak Oil might not be all that far away.

  67. RoHa says:
    February 2, 2013 at 4:09 pm

    “Knowledge and experience mean nothing to the ocean. After a life at sea, if I put one foot wrong, I get just as wet as the landlubber falling off the dock”

    But after a life at sea, you are surely a lot less likely to put a foot wrong than a landlubber is.

    I certainly keep telling myself that …

    w.

  68. Willis,
    It is rare to find a practising scientist who is proficient, let alone poetic, in their expression. Perhaps it is a function of age. But then I am an old curmudgeon become mathist who was fortunate to have been educated (in England) when my science subject teachers would criticise the writing as well as the technical content of my work. Reading your articles is always a joy. Thank you.

    Back to the subject in hand. I only properly understood the fallacy of peak [insert current doom here] when I read http://remittanceman.blogspot.co.uk/2008/02/mineral-reserves-and-resources-what.html?zx=d5d0af80de1f9e64 (ignore scary warning). Written by a horny-handed* mining engineer. Simple and easy to understand. I’ve yet to see a better description.

    * I hope this doesn’t mis-translate in Amerenglish. On the right side of the water there is an expression ‘horny-handed son of the soil’, meaning someone whose hands are hardened and calloused from a lifetime of working the land. I believe that horny might be misinterpreted beyond ~70 degreesW

  69. @TimTheToolMan:

    It isn’t a ‘peak’ until the production curve is lower on the right side than to the left. So far the right side is still higher.

    BTW, whenever that day comes, there are a dozen good ways to make “oil products” without oil. Rentech RTK is doing it today commercially as is Sasol in South Africa. Sasol is using coal, but Rentech is using trash. I don’t think we are in danger of running out of trash any time soon.

    One could also use wood ( we can produce it at about 25 dry ton / acre – Eucalyptus in Florida have done that as IIRC has Hybrid Poplar) and other carbon sinks; but first we have to use up Old Trash Mountain….

    Even if we had declining production of oil starting today, there would not be a crisis. We would just need to start building synfuels plants.

    Those are not the only two companies, BTW, there’s a dozen or so others. Just waiting for the day oil prices stay high for a while. ( The real problem is that OPEC crashes price and puts folks out of business whenever someone starts producing in quantity. You will know “peak oil” really arrived when they can no longer do that and synthetic oil is a growing commodity.)

  70. Willis writes “Tim, are you seriously looking at that chart and claiming that oil production peaked in 2004 like Ed_B claims?”

    No. I’m saying production has levelled out. Especially when you take continued growth, especially in the East into account. The actual peak obviously wasn’t 2004. Why would you suggest I would think that? Are you making another strawman argument from another poster’s comment and applying it to my post?

  71. TimTheToolMan

    Peak oil is not about and has never been about reserves or technology. Its about peak production and so if you look at the larger picture, the 60s and 70s saw massive growth in the West supported by huge increases in oil usage….The last 20 years has seen massive growth in the East unsupported by the same oil production increases. And what has happened?

    Production is determined by price and demand as well as capacity (both upstream and downstream). OPEC have a duty to themselves and their customers. They cannot change capacity Willy-Nilly else they destabilise their own economies. Therefore, there will be times that demand exceeds output, while others when demand does not. This is reflected in the oil price and there’s typically a lag between both when prices generally plateau. Remember prior to the 1970s crisis the West basically determined capacity. Post 1970 that changed. So it is hardly surprising that OPEC acts in self-interest if they don’t up supply they can cause a global recession (demand drops and they lose trade) they increase supply to quickly they do themselves out of pocket. They play balancing game. Essentially your point is wrong.

  72. E.M.Smith says:

    “IMHO oil comes from two places. Fermented algae (such as North Sea oil deposits) and subjection / collision of plates (such as California / Saudi). Otherwise California oil doesn’t make much sense. Much of California was only lifted out of the sea recently in geologic terms. It was ‘ocean bottom scrapings’ and not a lot of time for sediment trapping and kerogen breakdown…”
    ===================================================================

    I knew it would not take long for the abiotic crowd to clog up this fine post. All this horizontal fractured shale is proving once more that oil comes from organic rich source rocks. If California oil makes no sense to you you might google “source rocks California”, and start by reading this:

    http://pubs.usgs.gov/pp/pp1713/11/pp1713_ch11.pdf

    The Monterey has long been recognized as a rich source rock, and a fair bit of work is going into producing directly from it.

    http://www.aapg.org/explorer/2012/11nov/monterey1112.cfm

  73. Conventional wisdom is scientifically incorrect. I have researched this subject in depth and can continue to provide additional information and logic, until ever one acknowledges conventional wisdom is incorrect. For example I found, a very interesting set of papers published in the 1970’s by the API (American Petroleum Institute) on the formation of oil. (A better title of the collection of papers would be “the unexplained problems with the conventional formation of oil from plants and marine animals”, rather than “the formation of oil”). An example of the unanswered problems in the collection is how to explain the finding of massive oil reserves at the continental shelf. What is the source of the hydrocarbons? Marine environments are very efficient. There is very little plant or animal residue that is deposited on the ocean’s surface. A second primary issue is pressure does not convert long chain plant or animal hydrocarbons to short chain light oil molecules.

    The solution proposed in the API paper has the word “time” in quotations, however chemical reactions from a lower to a higher state do not proceed as water does not flow uphill regardless of the amount of time that passes. A chemical reaction that does not take place is at the conditions where the oil is found is a show stopper for the biological source hypothesis.

    A third is why are there heavy elements in the oil? Think of the competing hypothesis for the formation of oil where the hydrocarbon comes from deep in the earth and hence picks up the sulfur and heavy metals as it migrates through the crust. The deep earth hypothesis and migrations explains why unconnected oil fields across vast geological regions have similar amounts of heavy metals and sulfur.

    Raise the question to a higher level. What is source of hydrocarbons on this planet’s surface? Roughly 70% of the earth’s surface is covered by water. Where and when did that water come from? As almost no one is aware the solar wind strips water from the atmosphere. If there was no new source of hydrogen this planet would be dry and lifeless.

    There are a number of commercial changes concerning the amount of oil and gas in recent years.

    For those who have not noticed, for example, Canada is now constructing a LNG (Liquefied natural gas) export terminal at its West Coast to export natural gas. A few years ago Canada was planning to construct a port at the same location on its West coast to import LNG. What has changed? The discovery of massive reserves of deep earth CH4. North America suddenly has a massive surplus of “natural gas”. Why? Russian natural gas reserves are now the largest in the world. Why? The Russians have perfected deep earth drillin techniques. Why? What is the standard theory for the formation of “natural gas” CH4 and oil in Russia and the old east block countries?

    Saudi Arabia has 25% of the planet’s oil reserves half of which is contained in only eight fields. Half of Saudi Arabia production comes from a single field the Ghawar. Again why?
    As most are aware a large mars sized object struck the earth roughly 500 million years after the formation of the solar system. The impact formed the moon and stripped the planet’s mantel of most of the volatile lighter elements. As 70% of the planet’s surface is covered by water a natural question to ask is: Where did the water come from, as the earth’s mantle contains almost no water or hydro carbon?

    There are two theories to explain how water and hydrocarbons came onto the earth: the late veneer theory and the deep CH4 theory. The late veneer theory hypothesis: Comets struck the early earth after the big splat event covering the very hot earth with hydrocarbons. The late veneer hypothesis requires that the earth had a Venus like atmosphere (atmospheric pressure of say 60 atmospheres) for the early earth, except with methane.

    There are multiple problems with that hypothesis (See Thomas Gold’s Book Deep Hot Biosphere for details. One of the key problems is the observation that the percentage of heavy gaseous elements in the earth’s current atmosphere does not match that of comets (Comets are residues of the early solar systems. The comet elemental composition does match that of the sun). The late veneer theory’s explanation for the miss match of isotopes in the earth’s atmosphere to that of comets is that the early solar system had a close encounter with another solar system which temporary provided a limited source of comets to cover the earth but not significantly change the element composition of the sun.

    The second hypothesis is the deep earth hydrocarbon theory. This theory hypothesizes that massive amounts of hydrocarbons (5% of the total core mass) are located in the earth’s core. As the core cools these hydrocarbon (CH4) are released. At very high pressures the CH4 forms longer chain molecules.
    The release of CH4 is still occurring as the upper surface of the ocean is saturated with CH4 which indicates that CH4 is being released from some source.

    See Carnegie Institute of Sciences Deep Carbon Workshop presentations if you interested in this subject.

    https://www.gl.ciw.edu/workshops/sloan_deep_carbon_workshop_may_2008

    and…

    http://www.sciencedaily.com/releases/2009/09/090910084259.htm

    http://www.nature.com/ngeo/journal/v2/n8/abs/ngeo591.html

  74. Mike Jonas says:
    February 2, 2013 at 4:53 pm

    This is a wierd post. Chief stirrer Willis, while delightfully eloquent as always, is chucking in a few straw men and red herrings to make his point : Peak Oil is a “terrible story”, oil is “running out”, peak oil folks think Hubbert was totally correct, “Peak Oil” relies on “unconventional” oil being different to “conventional” oil, huge/massive amounts of coal, gas and methane hydrates prove we’re not at peak oil, etc.

    Peak Oil means Peak Oil. That is, the point at which annual oil production, for whatever reason, ceases to increase. When you get to Peak Oil, you haven’t run out of oil. You still have lots of oil. All it means is that you can’t or won’t produce oil at a faster rate than before. ….

    I don’t get the point of this comment. First you accuse me of being a “stirrer”, not a pleasant reference. Then you accuse me of tossing in “straw men”, but you think that saying that peak oil is a “terrible story” is somehow a straw man.

    Peak oil has been beaten to death by the environmental movement in order to try to raise the price of oil and discourage people from using it. That is not a straw man, it is the environmentalists pushing a tale of future gloom and doom to advance their own interests.

    Peak Oil means Peak Oil. That is, the point at which annual oil production, for whatever reason, ceases to increase. When you get to Peak Oil, you haven’t run out of oil. You still have lots of oil. All it means is that you can’t or won’t produce oil at a faster rate than before. ….

    Yes, peak oil means peak oil. No, it doesn’t mean we’re running out of oil. Yes, after peak you still have oil. Yes, it means peak production rate … what is all this? Somehow, you seem to think you are here to school me in some kind of first grade class about what peak oil is. I know what it is, you know what it is, everyone knows what the peak of the production of anything is … well, not everyone, TimTheTool and Ed_B think a year followed by six years of increased production is the peak, but everyone but Tim and Ed_B know what peak productions is. And I assure you that I do.

    If you have a substantial point in there, Mike, I’m sorry but I couldn’t find it. Maybe if you boil it down to the essence and try again.

    w.

  75. Those who seek to justify the peak oil meme in terms of rising oil prices are missing the point. Firstly, the real cost of oil on world markets has not risen in the same way as US prices have. The steady weakening of the purchasing power of the $US over a long period has made imported oil more expensive for Americans, but less expensive for some other countries. Further, changes in the world oil price have little to do with availability, and a great deal to do with political instability in all sorts of places – the Middle East, Venezuela and Iran/Iraq for example.

    For an excellent potted history of world oil prices and their effect on the US, see:

    http://www.wtrg.com/prices.htm

    As the article points out, US oil exploration for anything but the easiest fields was discouraged until 1971, when domestic price controls were lifted. Previously, US companies had to supply the domestic market at below world prices. It was unlucky timing for the oil industry too – just as they gained incentives to look beyond the easiest pickings, the environmental movement took off.

    Another consideration is that we in the West are far wealthier than people were in the days of very cheap oil, and drive much more fuel efficient cars. So, even though the graphs of rising prices look dramatic, most people can afford the same or a better lifestyle without making sacrifices. Indeed, not only are our cars more efficient, they have dozens of features which only limousines might have had 50 years ago, if they existed at all. Nor is there any evidence that rises in the cost of petrochemicals have had any appreciable impact on us, for similar reasons.

    As others have pointed out, peak oil is a chimera designed to scare us into subsidising certain people’s pet projects, and is in any event irrelevant as the planet is awash with other kinds of hydrocarbons.

    Oh, and nice Kipling reference, Willis.

  76. I sometimes wonder if a certain crowd of Big-and-Powerful people planned on “Peak Oil” happening, thinking it was a reality, and decided to use up the rest of the world’s oil first, thus eventually putting the USA in a position of great power, “The One Nation With Oil Left.” In order to achieve this end they needed to manipulate data and make it unprofitable to produce domestic oil. Now, after all that work, they are very old (or dead,) and discover the Peak Oil premise was incorrect in the first place. Oops.

    An interesting tidbit of history to look at is the history of the Suez Crisis in 1956. It was a sort of make-or-break moment for the Brittish Empire, and the USA messed up their plans by stating we wouldn’t export any more oil to England if they didn’t calm down. (We were an exporter at that time.) Yet England’s involvement in the Middle East was all about oil, and energy. (It was originally energy in the form of coal, (and knowing how to use it,) that helped make England a world power in the first place.)

    Energy is important to the bigwigs who think they, and not the Power that made and rules the sea, are boss.

  77. I still remember as a young engineer in the oil industry being told that it was a wonderful industry, “but you know that in 10 years time oil will start to run out”. And every ten years the same story would be repeated! In 1979-1980 the Iran/Iraq conflict led to an oil price shock with prices hitting more than $50/barrel with plenty of predictions that by the mid 80’s oil would be over $100/barrel. Instead it dropped back to around $10/barrel. “Prediction is difficult, especially about the future” (Niels Bohr).

  78. I must go down to the sea again
    To the lonely sea and the sky
    I left some socks and panties there
    I wonder if they’re dry.

    William Shakespeare (or maybe not).

  79. cd writes “if they don’t up supply they can cause a global recession (demand drops and they lose trade) they increase supply to quickly they do themselves out of pocket.”

    Perhaps you haven’t been keeping up with current events because we’ve just gone (going) through a global recession and they haven’t increased supply to decrease prices to help get the economies back into gear and consequently sell more oil and increase profits.

    You make it sound like OPEC is willingly letting the world economies wither with the high prices they’re setting for their own benefit. Thats a pretty negative view of them.

    A much simpler view and one supported by peak oil theory is that their ability to increase production has diminished and the market forces have driven the prices up. That and the fact that non-conventional oil is simply more expensive to produce.

  80. William H says:
    February 2, 2013 at 3:33 pm

    ” A $20 barrel of oil in 1970, using normal inflation figures, is equivalent to approx $125 today. Brent is currently at $116, so even ‘peak cheap oil’ is not a reality, never mind peak oil.”

    Look at the following link :

    http://inflationdata.com/inflation/Inflation_Rate/Historical_Oil_Prices_Chart.asp

    The prices of the 70’s were an anomaly driven by politics (you might recall the Middle East Oil embargoes; yet another variable not contemplated by Hubbert). Other than than that, inflation adjusted oil hovered in the $20-30/bbl range from the 40’s to the end of the 90s – for over 50 years. These were Hubbert’s years, but not out years – our real price now is much more expensive than than that 50 year period. And that is the economic incentive that was needed to move off & “re-set ” the curve. I’ll stick with my original premise that Hubbert implicitly assumed constant prices & technology, which was basically true during his time, but not true for our time, thus the theory fails today.

  81. Willis wrote “We have produced more oil than we did in 2004 every single year since then except 2009″

    In response to my post which said “We may not be precisely at peak oil and we may even flatline or even slightly increase for a while but we’re not going to get large increases like we did in the 60s and 70s and instead we’re going to be doing all we can to keep our heads above water as the conventional sources continue to slow their production rates.”

    I’m beginning to see a pattern with Willis’ replies. He doesn’t even read the post he’s replying to.

  82. greymouser70 says:
    February 2, 2013 at 4:53 pm

    “Willis: I realize you are probably using the terms “conventional oil” and “unconventional oil” facetiously but to a geologist those terms have very specific meanings.”

    This is an important point for the non-geoscientist to understand.

    Peak Oil alarmists DID NOT invent these terms – conventional & unconventional – they stole & politicized these terms from geoscientists & engineers who were trying to describe what they were doing – for the benefit of management, investors, etc. You have understand that the very rocks we are now considering to be reservoirs used to be considered seal rock – and completely unproductive …. and un-economic :)) A new vocabulary had to be developed so decision makers could understand what their technical teams were proposing to do, thus the terms conventional & unconventional.

  83. @Doug:

    Gee… Didn’t know I constituted a “crowd”.

    As per “clogging”: There is much evidence for SOME abiotic oil. Please note I am not saying ALL oil. As pretty much every primitive body in the solar system as “abiotic oil” on it, I find it completely untenable that the Earth would be the only exception.

    So yes, I think there is abiotic oil. I also know there is biotic oil. BOTH exist. Arguing over how much of each might be interesting. Listening to someone snap their mind tight shut and toss invective is far less so.

    As talking with folks who are mind-blind and mind-deaf is hard, I’ll not bother pointing out the various things wrong with the biotic theory of oil origination for ALL oil. (And there are many loose ends…) But I would suggest just looking at some places where oil is found, yet can hardly be explained by biological traps.

    Then there is that well in the Gulf of Mexico that keep refilling from further down, and with oil with far fewer biological markers…

    Oh, and do tell where the oil on Triton comes from?

    http://chiefio.wordpress.com/2012/03/25/did-crude-oil-rain-from-the-sky/

    http://en.wikipedia.org/wiki/Tholin

    Tholin [after the ancient Greek word θολός (tholós) meaning “not clear”] is a heteropolymer molecule formed by solar ultraviolet irradiation of simple organic compounds such as methane or ethane. Tholins do not form naturally on modern-day Earth, but are found in great abundance on the surface of icy bodies in the outer solar system. They usually have a reddish-brown appearance.

    Tholins have also been detected in the stellar system of an eight-million-year-old star known as HR 4796A using the Near-Infrared Camera and Multi-Object Spectrometer (NICMOS) aboard the Hubble Space Telescope. HR 4796A is 220 light years from Earth.

    “Triton tholin” and “Titan tholin” are nitrogen-rich organic substances produced by the irradiation of gaseous mixtures of nitrogen and methane such as that found in those moons’ atmospheres; Triton’s atmosphere is 99.9% nitrogen and 0.1% methane and Titan’s atmosphere is 98.4% nitrogen and the remaining 1.6% composed of methane and trace amounts of other gases. These atmospherically derived substances are distinct from “ice tholin”, which is formed by irradiation of clathrates of water and organic compounds such as methane or ethane. The plutino Ixion is also high in this compound.

    Since our oxygen rich air is relatively new in geological terms, we had a very long time with a reducing atmosphere where just such things ought to have happened.

    And loads of carbonate rich wet suducting goo to cook into hydrocarbons too.

    Somehow all the Peak Oilers seem to think carbon chemistry stopped with the advent of life.

  84. Peter Crawford, close, but no cigar.

    I must go down to the sea again
    To the lonely sea and the sky
    I left my vest and socks there;
    I wonder if they’re dry?

    – Spike Milligan

    He hated Masefield’s poem, which every schoolchild of his generation had to learn by heart.

  85. willis, thank you! Your sailing experiences reminded me of ” Vagabond House” by Don Blanding. Hope you have read it.

  86. The odd thing is, I’ve often found that the most ardent ‘peak oilers’ on the web forums I frequent are also ardent ‘global warmers’ and can’t even see the inconsistency in those positions. I guess they just get bored if they don’t have imminent disaster to worry about.

  87. E.M Smith writes “It isn’t a ‘peak’ until the production curve is lower on the right side than to the left. So far the right side is still higher.”

    I have never said we’re at peak although we might be getting close. Certainly the data supports that hypothesis with the recent flattening of production in spite of continued growth in the East. The Hubbert curve has a slowing before the actual peak. That slowing will have its own set of impacts and will involve rising prices.

    At the end of the day I’d love to be wrong and will be more than happy if production can be maintained and increased and the price at the pump remains affordable.

  88. Willis, great post as usual thanks.

    Unimportant typo where you ask the question “so why isn’t their unconventional coal?”. Should read “so why isn’t there unconventional coal?”

    Regards Paul Watkinson.

    [Thanks, fixed, perfect is good enough … -w.]

  89. “If you disagree with something I said, quote it and tell me why I’m wrong.”

    I didn’t say you were wrong just that you don’t present peak oil arguments well. They don’t go around shouting about an impending apocalypse, they say that we won’t produce any more ‘conventional’ oil than we do now. As you point out all this means is that people move to alternative energy sources (or unconventional oil as you describe it.) You just group all the different energy sources together, and there is no problem with that.

    It’s easiest just to think as ‘Peak Oil’ as only conventional oil though as you point out different sources of energy can be converted to the same thing or equivalent.

  90. […] one more example of our human love for warnings of future disaster. Few people want to hear that tomorrow will be OK, that things will work out. Instead, most folks want to hear some terrible story about what tomorrow holds, whether it’s […]

    Zombies. And vampires. And aliens from space. At least according to Hollywood.

    In the good old days, the future was going to be wonderful. I guess that didn’t work out.

    The real question is which comes first: collapse of our civilization or we run out of oil. I’m guessing we’ve passed peak civility. There may be another higher peak later, but right now we are on a slide.

  91. greymouser70 had it about right about conventional/unconventional oil. There needs to be another thing noted about it. The primary value of crude oil lies in its use as a transportation fuel. It is a common practice, but highly misleading, to add natural gas liquids to the “oil production” numbers. Ordinary crude oil and condensates are transportation fuels. Natural gas liquids are not. With that distinction, world crude plus condensate production was stuck at about 74 million barrels per day 2005-2011 while prices doubled. It is now up to about 76 million barrels per day, due primarily to recent increases in Iraq, Russia and the U.S. Production should continue to increase in the U.S. for another three or four years, but that does not necessarily mean that the world oil production rate will increase because production from older conventional fields is generally declining. All of the pie in the sky baloney about the U.S. becoming self sufficient in transportation fuels is just that – baloney. Expectations of lower prices are also baloney. Prices are set by the marginal barrels on the market. Those come from unconventional sources that are uneconomical to produce at lower prices. We may or may not be on the verge of peak oil, but we have probably passed “peak cheap oil”.

    One last item of interest is that production from wells in the Bakken, Eagle Ford and other shales and from “tight” formations tends to decline very rapidly. If the drilling of new wells ever slows down, there will be an immediately felt decrease in overall production rate. This is very different from the circumstances at the time the world’s old giant oil fields were developed. Call it a “Red Queen Effect”, where you have to run as fast as you can to stay in the same place.

  92. From The Globe & Mail, 2007. No longer available, but I copied it. According to Wikipedia (OK, just this one time) “Neil Reynolds is an Ottawa writer whose columns on national economic issues appear in Wednesday’s and Friday’s Globe and Mail.”

    ‘Peak oil’ doomsayers fall silent as reserves grow ever larger
    theglobeandmail.com | 11/04/07 | NEIL REYNOLDS

    [Original URL: http://www.theglobeandmail.com/servlet/story/RTGAM.20070411.wrreynolds11/BNStory/Business/home%5D

    OTTAWA — You will have noticed the marked decline these days in the number of “peak oil” people making cataclysmic pronouncements. Global oil production set records throughout 2006 — for all-time highest production day, month, quarter and year. For the single-year record, production reached 31.3 Gb (billion barrels), an average of 85.2 million barrels a day. Affirming the trend, production set a new global single-day record before the end of January, 2007.

    Along with record-setting production came record-setting increases in reserves — moving “peak oil” deeper into the century and ultimately beyond.

    The “peak oil” hypothesis, relentlessly propounded for decades, holds that the world has passed (or will momentarily pass) the highest point it can ever reach in oil production — at the halfway mark in the depletion of global oil resources. It holds that this imminent peak necessarily marks the start of an irreversible decline in production. It holds, in other words, that the end of oil is nigh. The principal problem is that the hypothesis is demonstrably wrong — and is vigorously proven wrong year after year.

    In 1979, the “life-index” of global oil reserves was calculated as 35 years — suggesting, superficially, that known oil reserves could support the current level of production only through 2007. In 2003, after decades of accelerated production, this index had risen to 40 years. It has now risen further to 45 years — moving us safely through mid-century. Indeed, the record-setting oil production last year marked the umpteenth consecutive year that “peak oil” theorists have found it necessary once again to run the numbers and once again to postpone the end time of oil.

    It was in 1989 that Colin Campbell, the prominent Irish champion of “peak oil,” proclaimed that the global peak had already occurred — a declaration he found it expedient, almost immediately, to amend; “peak oil,” he said, would instead occur in 1995. He now opts for 2010. Yet global oil production, since 1989, has risen by 20 per cent (13.8 million barrels a day), global oil supply by 28 per cent (18.9 million barrels a day).

    The production records set last year were significant for a number of other “peak oil” prophets, including Marion King Hubbert himself, the American geophysicist who devised “peak oil” analysis in the mid- fifties and who accurately predicted that U.S. oil production would peak in 1979. In 1956, he determined that global oil would peak “in about 50 years” — in other words, 2006. At the pinnacle, he said, the world would consume 12 Gb of oil a year.

    In 2004, Mr. Campbell increased this number, almost doubling it, to 23 Gb. For his part, Texas oilman T. Boone Pickens has held that oil would peak at 30 Gb — a level exceeded last year.

    Yet the world’s most comprehensive measure of oil resources keeps right on growing — higher, yes, but at a faster pace as well. TrendLines, the Canadian statistical research company, confirms this assertion in its February report on URR — “ultimate recoverable reserves.” In an analysis of optimum reserves, TrendLines concludes that the world’s URR is now increasing, depending on the period you select for comparison, at twice or thrice its historical pace. From 1957 through 2006, it says, URR grew at an average annual rate of 2.4 per cent.

    From 1979, it grew at an average annual rate of 4.2 per cent. From 2000, it grew at an average annual rate of 6 per cent. “Peak oil” prophet Mr. Campbell, TrendLines says, has underestimated the actual rise in URR by tenfold.
    
    In 2000, the U.S. Geological Service (USGS) calculated that global URR would increase by 2.4 per cent a year for the foreseeable future — rising from 1,669 billion barrels in 1995 to 3,345 billion barrels in 2025. (A billion barrels — one Gb — is roughly the amount of oil that the U.S. keeps in its Strategic Petroleum Reserve.) “Peak oil” proponents dismissed the USGS analysis as impossibly optimistic. As with all apocalyptic manifestations, peaks must necessarily be imminent. Yet the forecast has proven significantly understated.

    Driven by smart technology, global URR now increases each year at unprecedented rates. It has now (December, 2006) reached 3,288 Gb, not far off the USGS calculation for 2025. It increased last year by 114 Gb, compared with a historical annual average increase of 47 Gb. Sustained at this rate for another 20 years, the world’s ultimately recoverable oil could increase by another two-thirds to 5,568 Gb, or three times the resource when “peak oil” proclamations began. Assuming consumption of 30 Gb a year, this URR could sustain production for something approaching 200 years. Once again, the end is not nigh.

  93. E.M.Smith says:

    As talking with folks who are mind-blind and mind-deaf is hard, I’ll not bother pointing out the various things wrong with the biotic theory of oil origination for ALL oil.
    ========================================================================
    Please, continue to explain how theoretical geochemistry of Titan is a better analogy for California hydrocarbon generation than the “mind blind” hard data in the USGS paper, or any other of the hundreds of papers on California petroleum geochemistry. On this planet, a solid case has been made for 99%+ of our oil being generated by biologic processes. Abiotic oil is sort of like CAGW, once people apply the scientific method, they find the answers.

  94. I gotta give you this, Willis, you sure know how to start a war.
    I’ll now read the 2nd half of your post, in fact, I can’t wait to read it.
    It looked interesting as I scrolled past.

  95. bones said:
    “Ordinary crude oil and condensates are transportation fuels. Natural gas liquids are not.”
    —————————————————
    That’s strange. Our taxis and buses, and some private cars, have been running on LPG for years.

    Would that be “unconventional gas”, then?

  96. Oil price didnt change so much, if you consider the US Dollar devalued.
    Gold was about $300 when oil was at $20.
    Today gold is about $1800 and oil is $100.
    Our currency has taken a beating.
    Buy your gas with gold and its about the same as it ever was.

  97. Actually I recall oil at $13 when gold was $300.
    Bush Sr made a deal with the Saudis to keep it at 13 until after the election.
    I bought oil futures because I knew it.
    Made a pittance(should have been able to retire with that knowledge) ,but I was correct in my prediction.
    Opec meeting had been scheduled immediately after the election and oil went from $13 to $20 instantly.

  98. In Estonia which has a fairly large deposits of oil shales , there where attempts to extract burnable fuel from them as early as in the last decades of the 18 century and off and on througout the 19 century. and at least some people there knew it could be done more than 150 years ago. But it dit not turn into a real industry until somwhere around 1920, and now almost a century later 90% of the country’s power genaration is fuelled by this source as well as their cementproduction , and if there are still any railway lines there the trains are most likely running on diesel refined from shale , and a majority the buildings are most likeley heated heated by fuel oil that comes from the shale pits. Try telling the that they are using “unconventional fuels” , my guess is that their reaction would be to put up their best innocent face and ask “are there other type of fuels?”. Less than a decade ago the werey actually the wordls largest user/producer of hydrocarbon products derived from oil shale. Check the wikpedia entry for ” Shale oil in Estonia” if you want more detail.

  99. “TimTheToolMan”

    some observations.

    I did not see you say 2004 was a peak. If I had seen you say that I would quote your words exactly. I find it funny when some people demand to be quoted exactly, but they turn around and refuse to offer the same to others. just weird.

  100. Willis,
    That’s a good essay. I agree completely.

    I was raised 32 miles from that first oil well and had an uncle that in the 1950s was still wildcatting in western PA. Another uncle worked a tank line where he would tend the oil being pumped into small wooden tanks from several old wells. I sometimes went with him and got to turn a handle or two that would drain the water from beneath the oil. My mother always timed those visits during the time I could dig a bag of leeks from off that hillside. Between the smell of oil ($$) and leeks (??) we had to shower in the basement before being allowed in the kitchen.

  101. Willis – re your reply to me http://wattsupwiththat.com/2013/02/02/conventional-wisdom-unconventional-oil/#comment-1215085

    You say “you think that saying that peak oil is a “terrible story” is somehow a straw man.
    Peak oil has been beaten to death by the environmental movement in order to try to raise the price of oil and discourage people from using it. That is not a straw man, it is the environmentalists pushing a tale of future gloom and doom to advance their own interests.
    “.

    So, it’s not a part of the sane scientific “Peak Oil” discussion, it’s a beat-up by environmentalists trying to turn a sober subject into a scare-mongering campaign. That makes it a straw man in the sane scientific “Peak Oil” discussion.

    You say “And I assure you that I do [know what peak oil is] [it means] peak production rate“. And you say “If you have a substantial point in there, Mike, I’m sorry but I couldn’t find it. Maybe if you boil it down to the essence and try again.“.

    OK. I didn’t think it was all that hard to find in what I said:

    Peak Oil is the point at which annual oil production, for whatever reason, ceases to increase.
    1970 was the US’s Peak Oil. US oil production peaked in 1970 at a level 44% above the 2011 level.
    Peak Oil occurs when energy demand increases are all satisfied from energy sources other than oil. [NB. Wording change. My original wording was poor.]
    The world’s Peak Oil might not be all that far away, because rising oil prices are making alternatives to oil (coal, gas, etc) more competitive. [That wasn’t stated in those exact words but it was stated, as in “IMHO, we have reached or are about to reach that point” where “that point” obviously referred to the previous sentence.]
    In other words:
    We are at or near the world’s Peak Oil.
    It should be a non-event. But it’s still Peak Oil.

  102. It was obvious to me that peak oil meant higher prices. That is how I made my investments work. I simply bought cheap oil and waited. The biggest risk that I feared was that the USA was going to put in place a giant fuel tax to slow demand growth. In those years(1999 to 2004) I used to watch in amazement as 19 year old kids would go get a hamburger in a giant 4 X 4 , leave the windows open, AC on,and munch away. Life was too good. Oil was being wasted. I projected that the USA would have to reduce consumption to 15 million bbls a day by 2015 for the world to be adequately supplied. Adequately means at a price that was affordable. I figured that price was under $200 a bbl. It turns out I was wrong. The economy ran out of gas at $150 a bbl. The 15 million per day is being gradually approached though, as we dropped from 21 mm down to 19 or so. Fuel switching is growing quickly though, so when more trucks are using NG we will get to 15 mm per day.

    The Hubbert curve is working. We have had a long plateau of conventional production at about 73 million bbls a day. Yes, we have NG liquids and unconventional boosting it to 90 mm, but that does not undermine Hubbert. My proof is that Shell just reported spending 25 % more and conventional production is shrinking slightly. To me that spells big trouble. They are spending more and getting less. Hubbert pointed out that the conventional elephant plays were disappearing.

    Willis, i really like your work on your thermostat hypothesis though. That to me rates right up there with Hubberts work, different field for sure.

  103. Mosher writes “I find it funny when some people demand to be quoted exactly, but they turn around and refuse to offer the same to others. just weird.”

    Thanks Steve. I think Willis has it in for me following some of our heated discussions on other topics. On the whole, I love his work but he is a difficult man to debate with objectively.

  104. Mike Jonas says:
    February 2, 2013 at 7:00 pm

    I can’t believe you made me read that whole post, only to finish up with this:

    “It should be a non-event. But it’s still Peak Oil.”
    ==============
    Take you pick, non-event/peak.
    You can’t call it both ways, ask any bookie.

  105. johanna says:
    February 2, 2013 at 5:09 pm

    … Oh, and nice Kipling reference, Willis.

    Thanks, Johanna. I toss them out there, it’s always nice to hear that people catch them. Can’t remember which one you’re talking about, but that’s OK …

    w.

    … She: Do you like Kipling?
    … He: I don’t know … I’ve never Kippled …

  106. TimTheToolMan says:
    February 2, 2013 at 5:29 pm

    Willis wrote

    “We have produced more oil than we did in 2004 every single year since then except 2009″

    In response to my post which said “We may not be precisely at peak oil and we may even flatline or even slightly increase for a while but we’re not going to get large increases like we did in the 60s and 70s and instead we’re going to be doing all we can to keep our heads above water as the conventional sources continue to slow their production rates.”

    Tim, you don’t have a scrap of evidence that we are at, near, or past peak oil. All we have is history. When production goes up for six out of seven years, perhaps you think that means peak oil is at hand, and you are welcome to that opinion.

    Let me review the bidding. Ed_B claimed that the peak oil was in 2004. I posted the data and asked where the peak was. At that point you stepped in in support of Ed’s claim.

    You then went on to say well, maybe it is the peak and maybe it isn’t, maybe it will run flat for a while, maybe it will go up for a while …

    So if that’s the case what are you doing stepping in in favor of Ed’s claim that the peak was in 2004?

    I’m beginning to see a pattern with Willis’ replies. He doesn’t even read the post he’s replying to.

    As I remarked above, I wasn’t sure how this would turn out. You see, the pattern in your replies is that you alternately disagree with and pay no attention at all to things I say, so it’s really boring discussing things with you … as in this case. I don’t even know what your point is. You stepped in in support of Ed’s claim that the peak was in 2004, but then you are not saying 2004 is the peak, although it might be kind of like the peak, and it may just be flatline for a bit, or it might go up for a bit, or not, but one thing is for sure, according to you:

    Production won’t go up like it did in the early days …

    Thanks for providing us with that news flash, Tim, no way I’d have known that without you. Perhaps this might illustrate why I read, but didn’t pay much attention or respond to, much of your post. I don’t have time to pick every spitball off of the wall. When you engage in profound platitudes, yes, I will read them, and yes, I will ignore them. Its a function of blog triage, there’s more interesting stuff out there.

    w.

  107. Kipling is not much read these days, and almost never outside the UK and former colonies. So, for the benefit of readers, the reference I mentioned was from his famous poem “If”:

    If you can meet with Triumph and Disaster
    And treat those two impostors just the same;

    http://www.kipling.org.uk/poems_if.htm

    [Thanks, Johanna. Ah, yes, I remember now, I did toss that into the post, you were good to pick it up … -w.]

  108. Jeff L says:
    February 2, 2013 at 5:34 pm

    greymouser70 says:
    February 2, 2013 at 4:53 pm

    “Willis: I realize you are probably using the terms “conventional oil” and “unconventional oil” facetiously but to a geologist those terms have very specific meanings.”

    This is an important point for the non-geoscientist to understand.

    I understand and support that, which is why I said:

    Was the division between “conventional” and “unconventional” oil devised to cover up the failure of the peak oilers? No way. The distinction is useful in a variety of ways for analyzing the world of oil sources. I think that the concept was simply appropriated by the peak oilers because it was very useful to them, since it totally obscured the failure of their peak oil predictions.

    However, I wasn’t using the terms facetiously. I was explaining how they are misused by the peak oil folks to excuse the failure of their predictions.

    w.

  109. Willis writes “So what are you doing stepping in in favor of Ed’s claim that the peak was in 2004?”

    Where did I step in to support Ed’s claim of peak oil happening in 2004? Please quote me to support that accusation.

    I posted in response to the graph you posted and very explicitly stated that we production may increase slowly for a while yet. Hubbert’s graph has a rapidly increasing part (we’ve seen that) and a flattening (the data shows production flattening despite drivers that ought to have shown more increase IMO) followed by a downwards part.

  110. Possibly the greatest post ever by Willis.

    Nails peak Oil, Catastrophic Man Made Globull Warming and Mass Bed wetting in one single clean shot.

    For about the last 60 years, we have suffered peak Oil every passing day.. Its a global business that depends upon balancing demand and supply, and the folks that do it are pretty smart. Its a natural state, bit like sun rise.

    The bed wetters wail about the PRICE, ignoring that it is fake, produced in a fake non deliverable, fake market. Then cooked with taxes ( LOL subsidies for Watermelons) and political actions.

    Fact is as time progresses, we find more and more ways not to find oil but to mix it blend it, alter it. Just look at the transport liquids mix available now. Gasoline, Ethanol, LPG, CNG, Methane and GTL fuels.

    I believe, the Chinese started producing oil by drilling about 2,000 years ago.

    As they explore more, they find areas of sea floor covered in oil, and also covered in stuff feeding on it. A vital part of the global food chain.

  111. u.k.(us) says:
    February 2, 2013 at 6:16 pm

    I gotta give you this, Willis, you sure know how to start a war.

    I didn’t start the peak oil wars, I’m just reporting on them …

    w.

  112. Price

    http://news.bbc.co.uk/2/hi/business/7487070.stm

    The above report states ” All this comes with a hefty price tag – $10bn (£5bn)”

    Crunch the numbers.

    Cost of production about USD 1.00 per barrel, yes USD 1.00

    Now at the price of oil, when this field was launched, the development cost was recovered in full in 46 days, yes 46 days. Work out what that does to the real cost of production

    Peak Oil

  113. Wow. It’s interesting how Willis posts graphs of the data and certain people completely miss those graphs. It is a big thread though. Still, there is no peak oil at the moment, and production is not flattening out. The rate of change is pretty much steady, if one takes an ordinary differential.

    None the less, peak oil is a ridiculous, short sighted topic for the most part. Mostly due to the fact that oil production is driven by oil -demand-, just as with any other commodity. The real question to ask is when will we hit peak oil -demand-, as only then will we hit peak oil production as companies scale back rates to keep track with a lowered demand.

    That’s what drives production, that’s what drives the system; demand.

    So, start looking at those rates and asking those questions. We aren’t going to hit peak oil due to a peak in our ability to pull from reserves, or our reserves running out, or anything like that any time in the rational future. But we may well hit peak oil -demand- within a reasonable amount of time.

    And that is really what the discussion is about, as that is really the limiting factor.

  114. Willis
    International acceptance of “Unconventional Oil”
    What is the point of disagreeing with international terminology in the oil industry?
    The International Energy Agency (IEA) 2012 distinguishes “tight oil” and “other unconventional oil” from “crude oil”.

    International recognition of Peak Oil
    The International Energy Agency (IEA) 2012 now admits historical global oil production facts and geological constraints by showing that global crude oil peaked in 2005 and will continue declining in the forseeable future.

    Multi-Hubbert modeling provides the best way to understand oil production.
    See my further comments.

    Your climate posts are interesting. Recommend you concentrate on those.

  115. I have studied peak oil since 1998. I live in an oil producer country: Mexico. Oil production here peaked in 2004. There are a lot of troubles to extract oil from Chicontepec, a giant oil field indeed. So, when I read that peak oil is just another catastrophist cult, I do not think in U.S., I think in the north of the state I was born (Puebla)….

  116. I remember the good old days of people warning about peak whale. This was if course rubbish because then we discovered unconventional whales. And hunted them to extinction or near extinction as well.

  117. I think one of the deals with nonconventional oil is to calculate the amt of energy you spend to produce it total, from the ground to the pump. Wilis, I bet you could make that graph for us, it would be be useful in this discussion. For example, I could imagine that there might be a time when that value becomes negative, in which case oil “peaks” wont make much sense anymore…except for airplanes and motor trips to the South pole.

    The other trouble with oil peaks is that they are small in comparison to the coming “cars” peak as Indians and Chinese increase their use of autos to a double digit percentage of what we do in the states. Once there are several cars for every vatara, they will use more oil than we do.

    Luckily, I bike to work most of the year…I not have oil people getting rich because of me.

  118. David, your semantics mean nothing, zero. Crude oil, Natural gas or kerogen, makes no difference .

    The Only issue is

    1. Is it a viable fuel
    2. Is it a viable feedstock

    Taking that on board we learn that it is expected that the USA will become self sufficient in Oil or oil related products shortly.

    So much for Peak Oil.

    End of story

  119. Steven Mosher says:
    February 2, 2013 at 6:45 pm

    “TimTheToolMan”

    some observations.

    I did not see you say 2004 was a peak. If I had seen you say that I would quote your words exactly. I find it funny when some people demand to be quoted exactly, but they turn around and refuse to offer the same to others. just weird.

    Steven, Tim entered the middle of a discussion in which the question was whether 2004 was the peak.

    He entered it by claiming that what I saw in the graph (no peak in 2004) was incorrect, saying:

    Willis writes

    “I actually look at the data before making my claims.”

    And what do you see there Willis? Are you splitting hairs about whether peak is actually 96 million barrels or 97 million barrels per day?

    Now, to any reasonable man, that means that he disagrees with my interpretation that 2004 is not the peak, claiming it is mere “hair splitting” … and that means he is supporting Ed’s argument about 2004.

    I didn’t think that I had to explain that, because it was clear that the discussion with Ed_B was about whether 2004 was the peak, and it was clear that Tim was saying my objections to Ed’s claim were “hair-splitting”, which means Tim was supporting the claim about 2004 … but I guess if you are looking hard for some reason to bust me, you could misinterpretate that without much problem, so I should have been clearer just to protect myself … mea culpa, mea maxima culpa …

    But why? Why are you working so hard to bust me every time you show up, and not to bust me for my science, but for some aspect of my style or my comments or my motives or my failings or something?

    This is nitpicking which is totally unworthy of you, Steven. You are brilliant man, this is far beneath you, you’re much better than this. Vainly attempting to defend Tim by attacking my style is a waste of your valuable time, you can do good work. Tim always walks in the door with an attitude, trying to butt heads with me on anything but the science. The fact that you think he needs defending and propping up should tell you something …

    w.

  120. I like to ask peak oil greenies what the predicted production limits are on the rare earths that dope those PV cells, and make those awesome batteries and generators. They had better hope that the same unrelenting phenomenon of human ingenuity that has kept oil production up and fed a growing world finds new sources of their favorite elements. They need a Borlaug.

    And, to keep them from being rank hypocrites, that our ingenuity finds better ways of harvesting those elements then brutal Chinese slave labor camps strip mining them under the guns of the PLA.

  121. Willis writes “Now, to any reasonable man, that means that he disagrees with my interpretation that 2004 is not the peak, claiming it is mere “hair splitting” … and that means he is supporting Ed’s argument about 2004.”

    Well FYI, I wasn’t supporting Ed’s argument and was putting my own argument forth that the data shows we are approaching peak oil. I explicitly stated we might increase production so I would say that to any reasonable man that meant I was not supporting Ed’s argument of peak in 2004.

  122. Mike Jonas says:
    February 2, 2013 at 7:00 pm

    … We are at or near the world’s Peak Oil.
    It should be a non-event. But it’s still Peak Oil.

    OK, I see you think that. We can agree to disagree …

    w.

  123. TimTheToolMan says:
    February 2, 2013 at 8:29 pm

    Willis writes

    “Now, to any reasonable man, that means that he disagrees with my interpretation that 2004 is not the peak, claiming it is mere “hair splitting” … and that means he is supporting Ed’s argument about 2004.”

    Well FYI, I wasn’t supporting Ed’s argument and was putting my own argument forth that the data shows we are approaching peak oil. I explicitly stated we might increase production so I would say that to any reasonable man that meant I was not supporting Ed’s argument of peak in 2004.

    Tim, when you step into a discussion between two people and tell one of them that he is wrong, you are supporting the other one. I’m sorry, but that’s just how things work when you put your nose into someone else’s discussion. Now, you may not have wanted to do that, but I can’t tell that from here. When you are foolish enough to step into the middle of two people’s disagreement and you say one side is wrong, what do you expect people to assume?

    Now, I get that that was not your intention. Which is fine. And it is clear that I misunderstood your point, my apologies. Your point, if I understand it, seems to be that 2004 was the peak of world oil production, or it was kinda like the peak, since production might go flat for a while, or it might increase for a while, or not, but one thing is for sure—we won’t see the increases in production we saw half a century ago.

    Have I got it right this time?

    w.

  124. Of course we are at peak oil, and assuming a major economic collapse doesn’t reduce demand, next year we will be at a new peak oil. A lot of really smart people, get a lot of funding, in a viciously competitive business to make it happen, in order to satisfy a significant percentage of the population.

  125. As of 2004, according to energy.gov website, in America we used 140 BILLION gallons of gasoline.

    Thanks to the EPA, environmentalists and lawyers we cannot get relatively cheap oil from the oceans, gulf, Alaska and many other locations. It adds likely more then $2.00 per gallon to the cost of gasoline.

    That means about $280 BILLION are being transfer from consumers to energy companies and to a lesser extent the people who have mineral rights for the land they use. $280 BILLION !

    Thanks eco-freaks.

  126. Ed_B says:
    February 2, 2013 at 7:03 pm

    … The Hubbert curve is working. We have had a long plateau of conventional production at about 73 million bbls a day. Yes, we have NG liquids and unconventional boosting it to 90 mm, but that does not undermine Hubbert.

    I’m sure you folks remember what I said about peak oilers seizing on “unconventional oil” to attempt to show that Hubbert was right? This is an excellent example.

    Ed, if the Hubbert curve is working, why don’t you apply it to the “unconventional” oil, and then you can tell us when the “unconventional oil” will peak, and you can include the conventional oil peak, the one that did or didn’t happen whenever you claim.

    Then you can give us a definite answer to the question, and stop excusing your failures by blaming “unconventional oil”, as you do above just like all the other peak oilers do … after all these years, how come you are still using unconventional oil as an excuse and not just including it in your whiz-bang calculations?

    w.

  127. E.M.Smith says:
    February 2, 2013 at 4:36 pm

    “… We can already turn coal and nuclear process heat into ‘oil’ if desired. …”

    Actually in some places of the world it is possible to use naturally occuring
    nuclear process heat ( a.k.a Geothermal ) to do the job.

    First fully loaded tankship from a new plant in Iceland has just left harbour, a day or two ago bound for Rotterdam, Holland.

    It was built right next to a geothermal power plant, that taps into a large pool
    of superheated saltwater to generate electricity and heat fresh water for that
    is then pumped to 3 or 4 nearby towns for heating buildings and other uses we normally
    use hotwater for. The steam contains some carbon dioxide when it comes out of the
    ground ( 2-3% I think, not sure though) and was previously just vented off into the open through a chimney butnow it is seperated out of the flue gas and together with some
    residual heath, waste lukewarm water and aided by some electricial energy from the plant, is reformed into methanol. More info here.

    http://www.carbonrecycling.is/index.php?option=com_content&view=article&id=49%3Aicelandic-fuel-from-geothermal-sources-sold-in-holland-&catid=2&Itemid=6&lang=en

    I have been told that the process is acceptably profitable to the company at the price 30-40 $/bbl oil equivalent, and I have seen claims from the firm that they can procecss the alchol further to make some type diesel engine fuel and deliver it profitably at shipside for less than 60$ @ barrel oil equvalent.

    Seems to me if this really lives up to promise and f.ex. the LFTR nuke work and is able to provide electricity at dirt cheap rates, the setup would be to place one pice of each type on the premises of the coal plants in use to day and generatae our transport fuel from the their carbon dioxide emissions. /sarc on/ Would certainly to make warmists and the oil peekers very miserable indeed, while they drifted off in searh of or to invent new imaginary man caused catasthropes to cheer themselves up again with. /sarc-off/

  128. Willis writes “When you are foolish enough to step into the middle of two people’s disagreement and you say one side is wrong, what do you expect people to assume?”

    I expect you to read and understand the post before making any assumptions. Especially if you’re going to reply to it.

    So moving on, do you agree the data is in support of peak oil approaching? And if not, why not?

  129. Peak Oil is a misnomer. Peak Oil infers a “rate” of oil production. The real issue has always been reserves. Not all reserves of oil, or material that can be turned into oil, only economic oil. If the energy needed to extract is less than the energy extracted, then the oil is recoverable. Horizontal drilling and fracing (yes, this is the correct way to spell fracing), has made shale oil economic. But not in all areas. Green River shale oil may never be economic. The value of the energy to extract exceeds the value of the energy extracted.

    The rate of oil production may decline as the price of oil increases but this increase in the price of oil will increase the amount of practical recoverable reserves. Since oil reserves are so Price driven, in an economic sense, we have an infinite amount of oil reserves. What I mean by this is that unless you have an infinite amount of money to recovery the remaining oil, some oil will always remain unrecovered.

    The real question is at what point (price of oil) do we transition from oil to nuclear or hydrogen energy.

    I do not believe the current suite of sustainable options are in our future. The cost of the energy to manufacture and maintain these sustainable options are greater than the value of the energy extracted. Subsidies aside.

  130. David L. Hagen says:
    February 2, 2013 at 8:13 pm

    Willis
    International acceptance of “Unconventional Oil”
    What is the point of disagreeing with international terminology in the oil industry?
    The International Energy Agency (IEA) 2012 distinguishes “tight oil” and “other unconventional oil” from “crude oil”.

    International recognition of Peak Oil
    The International Energy Agency (IEA) 2012 now admits historical global oil production facts and geological constraints by showing that global crude oil peaked in 2005 and will continue declining in the forseeable future.

    Not true in any sense. I didn’t disagree with the terminology at all, in fact I said:

    Was the division between “conventional” and “unconventional” oil devised to cover up the failure of the peak oilers? No way. The distinction is useful in a variety of ways for analyzing the world of oil sources. I think that the concept was simply appropriated by the peak oilers because it was very useful to them, since it totally obscured the failure of their peak oil predictions.

    What was unclear about that?

    You go on to say:

    Multi-Hubbert modeling provides the best way to understand oil production.
    See my further comments.

    Good to know. Fifty years ago, Hubbert modeling predicted that in 2006 world oil production would peak at 12 billion barrels per year. In 2006, we produced just under 30 billion barrels … oops …

    So I sure hope the “multi” part of the “multi-Hubbert” analysis works real well, because the “Hubbert” part didn’t work for beans …

    Your climate posts are interesting. Recommend you concentrate on those.

    And why should I care in the slightest about your recommendations? You haven’t shown any part of my post to be incorrect, the only thing you bust me for is something you misunderstood … and you want to lecture me on what I should concentrate on?

    How about you concentrate on showing where I was wrong before getting all puffed up and lecturing me about what I should and shouldn’t do …

    w.

  131. @TimTheToolMan:

    Someday we will be at peak. But we are not now. (That rising right problem…)

    Using price trends now to figure out where we are is a useless method. OPEC manages price and prices are highly volatile anyway. Adding a giant new demand in China also skews prices.

    Basically, there are enough counfounders that the only thing you can really trust is historical production. That’s still ‘rising right’.

    Now I could speculate when I hypothesize a peak might happen. I’d guess in about a decade, maybe two. Then again, it’s been ‘a couple of decades’ for about 40 years now…

    That guess, BTW, I base largely on the limited rate at which we can build ‘unconventional oil’ facilities. It is my best guess that oil consumption is rising fast enough and conventional oil is dropping fast enough that we will hit a limit on how fast we can build the mega trucks and haulers for mining tar sands.

    On the other side, we might just go to a lot more in-situ extraction and keep on ramping the rate of production up. We’ve got a Trillion Barrels or so just in the USA, so lots of opportunities to make my guess quite wrong. (Which is why I say we will only know it is peak when ‘rising right’ turns into consistent falling even with increasing economic demand.)

    @Bones:

    Nothing at all prevents using any of the light hydrocarbons as motor fuels. There are many CNG vehicles on the road today and many more being added. Using a zeolite catalyst you can turn methane (or other light molecules) directly into gasoline.

    Oh, and there were many cars and trucks running on propane / LPG even back when I was a kid.

    Essentially, any hydrocarbon from methane up to about c14 can run in a spark engine. Compression engines can run on a range up to about C24 (or more with some heating and injectors designed for it – heavy bunker fuel oil in ships is pretty thick stuff).

    While we usually put C5 – C12 in gasoline and C12 – C16 in kerosene and C14 – C22 in Diesel; it isn’t mandatory to use the fuels that way. (Ranges approximate. Cyclical vs straight vs branched changes the ranges some. Volatility and viscosity matter. Etc. Etc.)

    I’ve personally run a Diesel on Propane (C3) as a ‘co-fuel’ and on methanol. (Valve it in the air intake of a modest compression engine and use the Diesel injection as a ‘spark’ to ignite it. Avoid stoch. mix ranges. Will not work with ‘modern’ computer monitored engines unless designed for it.) There is a Masters Thesis on file at U.C. Berkeley per using methane fumigated into the air intake of stationary Diesel engines.)

    In short: Just because traditionally we have designed engines to use a particular fuel, doesn’t mean that they can’t use others. Just about any alcohol, ether, or alkane (and related including aromatics) up to ‘motor oil’ weight can be used as transportation fuel.

    @Doug:

    You continue to insist on an “A NOT B” paradigm, despite my regularly saying “A AND B”.

    So no, not going to play footsy on that basis.

    Per Titan: During early earth formation, our chemistry ought to have been very similar, so there ought to be some significant content of abiotic oil produced then. It is not a big leap from there to “some of it was sequestered in deep rocks”. To prove if there is any truth in that thesis would require drilling to below where we find life, to where that primitive oil might still be pristine. Unfortunately, we have not yet found a hard limit to life underground. (It must exist, since eventually you reach magma, we just don’t know where yet). Encouraging, though, is that the deepest oils often have lower biomarkers than upper oils. Not enough pattern yet to say anything with certainty, but enough to be suggestive.

    Per California: You ignored the part about subduction. The OTHER abiotic method. We’ve got a big old slab of subducted rock with wet organic rich sediments on it. At some point it melts enough that we get volcanoes with lots of CO2 venting. At some point between ‘cold and wet’ and ‘melted and decomposed to CO2′ their ought to be conditions suited to F-T synthesis of hydrocabons. We find hydrocarbons above the subduction zones in front of the volcanic arc. Is it ‘proof’? Nope, not yet. Just highly suggestive. Just like we pump oil from Bakersfield but not elsewhere in the Central Valley. (If it were just ‘bury and age’ there ought to be oil in other parts. The geology is fairly uniform as was the sedimentation. Instead we find it closer to the volcanic area down at that end. Not at the other ‘rising shallows’ up near Oroville / Chico where one would expect oil to migrate as well.)

    None of that is in conflict with ‘conventional theory’. I’m quite happy to accept that there is a load of oil made that way too, even in California. (Part of the problem is trying to find a way to disambiguate the two. Life will move into abiotic oil and mark it with ‘life markers’. At the same time, lots of algae will have ended up in those sediments being subducted. So do they “age to kerogen, then make oil’? Or do they “subduct until the carbonates get cooked to oil”? I’d expect some of each. Conventional at the newer, cooler locations, F-T at the point in the subduction where the heat / pressure / wet / carbonate intersection is suitable (provided the native rock type / Fe content is a suitable catalyst).

    A combined thesis also helps with Saudi. Otherwise one awful lot of algae had to die, sink, and be buried in one little spot. A small ocean of it… With some subduction / cooking going on, the volume is much more easily explained.

    Now you lay the problem on me of showing how abiotic is better as an explanation and I’m saying “there is room for both”. Two very different things. So no, not going to shift to your problem. I like my opinion better…

  132. The irony of having this post on this website is that the Climate Change debate is a function of Peak Oil, whether you know it or not.

    Our high-tech, Western society has evolved with cheap-carry-in-a-can fuel. This organism survives on oil. It’s ‘biology’ can’t support other meals, nor will it be able to live on other foods. The American Lion survived on Mammoths and other large beasts and couldn’t survive without those meals. So, it died out with it’s prey. Likewise, what we have built over the past 100 years depends on oil. It can’t run on anything less, not nuclear, not wind, not gas. It will be a dieing beast as soon as production starts declining. From the charts, we seem close if not there.

    But those who run the governments and the bank are not burly enough to say to their people, “It’s running out,” because when the markets (i.e. the people) get a whiff of that downer, they will change how they play their cards and the game will shift rapidly and shift to the favor of the people and the banks and elite will be out of favor. The game will change and the banks will lose. So, the people keep quiet while the governments find ways to prolong the lie. During the 2000s we used the “secure oil in Middle East” method to kick the can. That’s not vogue anymore, so now we’re implementing the “Scare the people to use less carbon” method, which involves the “Global Warming” threat. The oil companies like that method because then they just expand their fingers into the alternative fuel markets. They are already in place and can do so easily.

    But neither method will work, neither: (a) secure more oil or (b) use less oil. It will run out and the beast we have built that runs on hydrocarbons will die. What comes after? Well, people are very resilient. Hopefully, we finally learn how to love.

  133. Trafamadore says

    Quote

    I think one of the deals with nonconventional oil is to calculate the amt of energy you spend to produce it total, from the ground to the pump. Wilis, I bet you could make that graph for us, it would be be useful in this discussion. For example, I could imagine that there might be a time when that value becomes negative, in which case oil “peaks” wont make much sense anymore…except for airplanes and motor trips to the South pole.

    Unquote

    LOL

    Every single viable business on the planet depends upon a simple formula for its viability and that is that total costs are less then total receipts. Large corporations with a variable cost base can shut down expensive costs until such time as price makes them viable again. This happens a lot in the oil business.

    In terms of Peak Oil, price is a red herring. Think about that. A standard 1,000 barrel contract is just a piece of monopoly paper, not real oil. But it returns real money thus those above boasting about their profits, but not from oil by by playing casino.

  134. They are even going to drill in Central-Eastern NV around ELKO in the Humboldt Basin. Who would have thought?

  135. Well there is a lot of irony in there Willis.

    You see this is WUWT where people scream, gnash their teeth and claim the imminent collapse of civilization if there is the slightest hint of the teensiest increase in gas pump prices.

    The solution you are propounding involves more advanced technologies for extraction and conversion of hydrocarbons into the gas we all love.

    You see light oil is not the same as heavy oil and is not the same as coal of whatever kind.

    These interconversion processes all cost money and make the end product more expensive. This is probably the reason we do not use coal to oil processes even though coal is very cheap and the technology is ancient and well proven.

    The whole peak oil thing is in fact about this very issue. Oil does not run out it simply gets more expensive.

  136. Willis,

    Great post as usual. It seems like it was only two or three days ago that someone suggested you look into peak oil and ‘hey presto’! Another great post.

    I did some research on this a couple of years ago. Bill Kovarik has done a good job of aggregating the available information and some of the geopolitical reasons for why oil reserves are discussed as they are. See http://www.radford.edu/~wkovarik/oil/.

    Some things are a bit dated because it doesn’t appear to be an obsession with him as it seems to be with some of the disciples of Hubbert who keep rambling on. Shades of the Harold Camping oil bust, errr, end of the world predictions of recent times.

    All the best,
    pbh

  137. I remember when I was in high school and Paul Erlich’s rantings started scaring people. I mentioned to my father that we were running out of oil and civilization would collapse. He almost fell out of his chair laughing! He told me that he people have been screaming about how the world was going to run out of oil since he was a boy. I thought he was crazy at the time. Now I realize he just recognized that every generation has its paranoid scaremongers.

    Life is good. Weather will be what it will. Humanity is resourceful. Optimism is healthy, not naive!

  138. Bjorn, Thank you and well done Iceland. Simply brilliant. Can you report on the progress being made on exporting geothermal electricity to the UK.

    Hawaii need to read your report. They have the most expensive power and fuel in the USA. Using this they could kill two birds with one stone and regain some independence.

    Dont forget, every watt of geothermal reduces both oil and coal demand.

    Demand is a key in both Peak Oil (lol) and price of oil, even if said price is fake.

  139. E.M Smith writes Now I could speculate when I hypothesize a peak might happen. I’d guess in about a decade, maybe two. Then again, it’s been ‘a couple of decades’ for about 40 years now…”

    I believe Hubbert predicted 2006. And Gwahar probably wasn’t discovered at that time so that had an impact. Anyway its not the date that is important with Hubberts prediction, its the inevitability of a peak with a finite resource and he gave us the associated production curve we can expect.

    My main beef with Willis on this is that he flatly refuses to believe that there is any chance that production will drop by assuming “human ingenuity” will prevail irrespective of any reality of increasing scarcity of the resource and production cost associated with maintaining that production rate.

    Willis wants to paint a rosy energy future and it may well be ok in the end with alternate sources but on the way to that future we will experience peak oil and there will be economic consequences involving increasing energy costs. There are already.

  140. @Björn:

    Nice! Generally I’d rather use the electricity as electricity, then again, if you have excess due to it being massively geothermal there, might as well use it to make methanol! There is a zeolite catalyst ( m-5 IIRC from Mobil) that can covert it to gasoline directly. An interesting paper on zeolites here: http://www.aussiezeolite.com.au/yahoo_site_admin/assets/docs/DK2772_ch01.170224315.pdf

    It all comes down to process heat. If you have it, most any carbon source plus water give you a fuel (from methanol on up to Diesel) by several pathways. We can get all the process heat we want from nuclear. Didn’t realize that geothermal was hot enough (or perhaps they use the electricity to move heat the last steps…).

    Still, very elegant use of ‘what you have to get what you want’.

    BTW, don’t need LFTR, can use HTGR. Either one. ( Or MSR or…)

    @TimTheToolMan:

    “So moving on, do you agree the data is in support of peak oil approaching? And if not, why not?”

    No, the data do not support it, as production continues ‘rising right’. We’ve been in an economic funk and folks don’t increase production to excess then (as demand stays relatively soft). Price is unsupportive as we’ve been higher in the past and OPEC is price managing.

    That is “absence of evidence”. (It is not “evidence of everything fine” either. It’s just an orthogonal axis.)

    There will be evidence of “peak oil” when production is not longer rising to the right over several years and the global economy is growing.

    @SMS:

    Ah, the old EROEI argument.

    We will even pump oil when it takes more energy to pump it out than is in the oil. It will no longer be a net energy source, but it will still be valuable.

    We will use nuclear electricity to lift the oil. That lets us turn nuclear power into motor fuels and plastics and chemicals. As long as that product is made more cheaply from oil than from other sources, we will lift the oil.

    An existence proof of sorts is right now with tar sands. We have excess natural gas and want oil; so we use natural gas to extract oil. In terms of thermal efficiency, we ought to use that natural gas directly in vehicles. But it is cheaper / easier to use it to extract oil.

    (The oil wells in California often have electric motors on the pumps, so to some extent we already use nuclear / hydro electric to produce oil…)

  141. u.k.(us) says”I can’t believe you made me read that whole post, only to finish up with this:
    “It should be a non-event. But it’s still Peak Oil.”

    Actually, I think it’s quite an important message. It’s a bit like saying “CO2 is a greenhouse gas, humans have increased atmospheric CO2, but there won’t be a catastrophe.”

    The greenies and other alarmists and catastrophists pick on anything they can to spread fear and dismay among the populace. They do it with CAGW and it is taking a long time to counter them. They do it with Peak Oil and that needs to be countered too. The climate point isn’t that there is no greenhouse effect (there is), the point is that it isn’t dangerous. The oil point isn’t that we aren’t anywhere near Peak Oil (we probably are), the point is that it isn’t going to be a disaster.
    [Sorry about the double negatives]

    Take you pick, non-event/peak. You can’t call it both ways, ask any bookie.

    It’s both, they aren’t mutually exclusive.

  142. Tim says

    Quote

    My main beef with Willis on this is that he flatly refuses to believe that there is any chance that production will drop by assuming “human ingenuity” will prevail irrespective of any reality of increasing scarcity of the resource and production cost associated with maintaining that production rate.

    Unquote

    Tim hello, you awake? Willis does not believe that, he reports the facts. Soon the USA will be a net exporter. Facts. Substance.

    Read the posts and links, the mix gets better every day and the costs balance.

  143. E.M Smith writes “No, the data do not support it, as production continues ‘rising right’. We’ve been in an economic funk and folks don’t increase production to excess then (as demand stays relatively soft). Price is unsupportive as we’ve been higher in the past and OPEC is price managing.”

    I asked whether the data supported peak oil approaching, not whether it was here. When demand drops (due to economic funk) then prices should ease, not increase. As far as I can see the only argument against peak oil approaching is one of both supply and price manipulation which are speculative rather than supported by data.

  144. TimTheToolMan says:
    February 2, 2013 at 9:38 pm

    … My main beef with Willis on this is that he flatly refuses to believe that there is any chance that production will drop by assuming “human ingenuity” will prevail irrespective of any reality of increasing scarcity of the resource and production cost associated with maintaining that production rate.

    Aaah, excellent, I can start to see the misunderstanding. You have misunderstood me in several areas. I think that there is a chance that production could drop, for one of a dozen reasons. And I am by no means convinced that ““human ingenuity” will prevail “irrespective of any reality of increasing scarcity of the resource”.

    I am making a more fundamental argument, which is that the size of a given resource is a function of the humans, rather than a function of the physical world. The famous example is magnesium. We have had a pretty good idea of the size of the magnesium resource for a while. And in the thirties there was much concern about “peak magnesium”, although it wasn’t called that then. Production had peaked and problems were clearly on the way.

    Then some smart fellow figured out a way to economically extract magnesium from seawater … and the entire “peak magnesium” argument went in the dumpster.

    Here’s the point of this story—how big is the magnesium resource?

    Well, when the only place that we were able to economically mine it was on the land, the resource was fairly small … but now, the resource is basically unlimited.

    This leads to a very profound truth—the size of a resource is a function of humans, not a function of the world. In reality there is no “size” of a given resource, all there is is how much of it we can access … and that is a function of humans, not the resource.

    Having said that, let me distinguish between what you think I am saying, and what I am saying. I am not saying that there is some guarantee that human ingenuity will find a way to increase amount of any given resource.

    Instead, I am saying that the size of the resource itself is a function of human ingenuity … and as a result, to speak of “peak magnesium” or “peak oil” misses the mark completely.

    Willis wants to paint a rosy energy future and it may well be ok in the end with alternate sources but on the way to that future we will experience peak oil and there will be economic consequences involving increasing energy costs. There are already.

    The main reasons for increasing energy costs to date are geopolitical (instability in production areas), pseudo-ecological (drilling bans in the backyards of wealthy people), and pathological (the unending squealing about how we need to increase energy costs to make some tiny change in the temperature a hundred years from now). It has little to do with peak oil.

    And as to whether the future will be rosy, despite decades of people making just the kind of bleak projections you love to wallow in, all I can point to is the fact that at present, people are better fed, housed, clothed, and doctored than at any time in the past thousand years.

    Not only that, but we have done it without running out of resources, despite the fact that our population more than doubled in the last 50 years … so we have done it in the face of very hard conditions, conditions that are easing as the population growth slows. So yes, we’re damn good at human ingenuity overcoming problems. You are right that you can’t guarantee it, but we have performed impressively to date.

    No guarantee that that will continue given fools like Obama and Chu trying to jack energy costs beyond recognition … but so far, so good.

    w.

  145. According to the DOE, coal to diesel is economical viable @ crude being $86/barrel without CO2 taxes/controls requirements:

    ”This diesel fuel is compatible with our current fuel distribution infrastructure, can be used directly in existing diesel vehicles, and would be economically competitive with petroleum-derived diesel when the crude oil price (COP) is equal to or above $86 per barrel (bbl), based on a twenty percent rate of return, January 2008 costs, and a GHG emissions value of zero.”

    http://www.netl.doe.gov/energy-analyses/pubs/CBTL%20Final%20Report.pdf

    Of course the price above the threshold would have to be substantially assured before anyone would expend the capital. I suspect oil producers realize this and work to keep the crude oil price hovering around this threshold, at least close enough where the “threat” of a drop is enough to discourage risking the large up front costs of a coal to diesel facility.

  146. RE: SMS 2:15pm and Willis 3:40 pm.
    I was thinking about whale oil, too and how Drake’s well in Pennsylvania was the unconventional oil of the time.

    Willis, if you want to give attribution to the “whale oil – Drake” idea, I’d give priority to Texas A&M professors Charles Maurice and Charles Smithson who wrote The Doomsday Myth: 10,000 Years of Economic Crisis Hoover Press, 1985. I wrote a short summary in “No Cornucopia of Gas”.

    Specifically, one of their ten “Doomsday” scenarios was the shortage of whales that was a alleviated by, then unconventional, petroleum discovered in Pennsylvania. What is most ironic, the Pennsylvania stratigraphic play was very soon suplanted by the unconventional oil found in anticlines. Then more oil unconventionally found salt domes.

    As you point out, water flood of secondary recovery was unconventional when first tried. So was tertiary recovery steam flooding unconventional once upon a time. Kern River, one of many steam floods has a most unusual Hubbert Linearization chart. If you could not foresee the benefits of steam flooding and higher oil prices, the Hubbert linearization cumulative production would have been less than 500 mmbo. With steam flooding, it is 2500 mmbo.

    The lesson is that yesterday’s uneconomic resource is today’s unconventional oil and tomorrows conventional energy. What is tomorrow’s unconventional liquid energy resource? Horizontal Steam-flooding? Horizontal bio-cracking?

    “Where oil is first found, in the final analysis, is in the minds of men” (Pratt, AAPG 1952 v36 #12).

  147. @roger tolson

    ‘So I will give you a simple analogy, the apple tree in my garden has low hanging fruit that I can pick while standing, these are known as “conventional” apples, the rest of the apples I have to use a ladder to pick, these are known as “unconventional” apples’

    Lost me there, sport. The ‘conventional’ or ‘unconventional’ term applies to the means of picking, not to the apples themselves. The apple doesn’t care whether it was picked conventionally or unconventionally … nor does the apple pie it goes into.

    In the case of oil – if I don’t have to modify a car engine to use ‘conventional’ or ‘unconventional; ‘ oil, why does it matter at all how it is produced?

    A semantic distinction without a real difference.

  148. @Dave:

    “Likewise, what we have built over the past 100 years depends on oil. It can’t run on anything less, not nuclear, not wind, not gas.”

    Absolutely false. Demonstrably so.

    Sasol in South Africa has been turning coal in to motor fuels (gasoline, Diesel, Jet etc.) since the ’70s and they are doing fine. Germany ran their W.W.II war machine on F-T fuels and we can do it much cheaper now. LNG (gas) easily runs cars, trucks, buses (many in my town right now)

    In the ’80s Mobil Oil used an M-5 (IIRC) catalyst to turn nat gas into gasoline in New Zealand.

    Heck, I’ve run a Diesel directly and unconverted on methanol (Volvo Penta marine Diesel) and propane ( I-H Scout) just by valving it in the air intake. Modern “Bi-Fuel” designs use computer management but work fine.

    Rentech makes Diesel and Jet-A from trash via a kind of F-T process.

    Syntroleum turns chicken guts into motor fuels.

    Algae farms can turn sunshine into Diesel (it is working at small scale, only a minor price rise needed or a bit of technical cost reduction).

    HTGCR process heat can make methanol at about $2.50 / gallon of gasoline equivalent from coal or old trash.

    And so much more.

    The only “problem” is cheap oil. Once it is absolutely clear that OPEC can’t crush with a price cut, the alternatives will be built.

    (And that is without even getting into the odder choices like DME and ‘wood gasogens”…)

    @LazyT:

    Depending on who “We” is, “we” do turn coal into oil. South Africa. Now. In the USA we don’t do it as we were more willing to accept Arabs and others jerking the price and supply around.

    The added “cost” to make fuels from coal is about the same as $80 / bbl oil. Until recently, that was not “economical” in the USA. As long as there is a risk of “below $80″ folks don’t build the facilities (as the Arabs / OPEC have crashed prices in the past to put folks out of business).

    All it would take to have “energy independence” today is a tariff on OPEC oil such that “whatever the price was, it became $100/ bbl minimum on landing”. (No cost impact if oil is already above that price, but prevents prices from dropping lower.)

    Valero oil company made it’s bones from putting in the crackers to turn heavy oil into gasoline before the other guys. They use a LOT of Mexican and other heavy oil. Heavy oil from Venezuela is being sold here today. There just isn’t any barrier to using heavy oil to make gasoline and Diesel. We’re already doing it.

    Similarly anyone getting Canadian gasoline / Diesel is running on those same unconventional “tar” oils. Don’t know the exact production figures now, but it’s quite high and growing fast. Last I looked the “price point” was between $30 and $50 / bbl. So well below present prices.

    The idea that it “costs more to do it” is just not relevant any more for tar sands or heavy oils. That price point was passed a few decades back.

    @TimTheToolMan:

    One other thing to keep in mind:

    AT Hubbert’s Peak, things are more or less symmetrical. It takes about as long to ‘ramp down’ the backside as it took to ‘ramp up’ the front. So we’re about 150 years in from Drake’s first well. That means we will still be pumping oil in 2163 or so even if right now IS peak (and now isn’t peak- yet.)

    Along the way there is plenty of time to slowly swap to other fuels and machines. LOTS of time.

    With Sasol as “existence proof”, we could power all our present engines on coal fuels if we wished with all of about a 15 year effort to build facilities.

    There just isn’t any real reason to care about Hubbert’s peak, even if we are at it.

  149. Say, RiHo08 2/2/13, I would never correct yr thoughtful and poetic writing,
    instead I bookmark some of it like I bookmarked Willis’ ‘Floating Islands.’

  150. “harrywr2″ (February 2, 2013 at 3:09 pm) wrote:
    I’m old enough to remember 29 cent/gallon gasoline.
    I’ll raise (er, lower) you: 12.4 cents/gallon in Helena, Montana when I was 12 or 13. I paid 25.9 cents per gallon until my last two years in college, when it rose to 29.9 cents/gallon.

  151. Willis writes “Not only that, but we have done it without running out of resources, despite the fact that our population more than doubled in the last 50 years ”

    And yet there are other examples of people who had finite resources, didn’t manage them and died out. The inhabitants of Easter Island for example couldn’t use their human ingenuity to overcome their predicament on resource usage and they all died out.

    I’m not saying that will necessarily happen to us but there is a strong chance we’ll go through increasing pain.

    Hubbert’s prediction (ie the curve) already factors in political decisions and especially price. Once the cost of oil increases beyond a certain point (due to the increased cost of production) then oil usage will naturally decline as we swap out to other sources of energy.

  152. I think in 100 years we will still be using oil, as well as the usual other minerals and energy resources, and the whole current AGW thing and various other green ideological fantasies will have gone the way of Christianity-largely extinct and customary. It usually takes a few decades, and up to a few thousand years, for societies to develop a resistance from these kinds of mass ideologies, perhaps less so these days with mass communication and technology-as was the case with communism.

    Mass ideologies like Christianity follow a remarkably similar pattern to a virus-people and societies are largley unresistant to them at first, and they may become pandemics, but after a time societies develop various resistances and they go the way of being largely a childhood phenomenon. For example, Christianity no longer has any teeth amongst the law and politics of developed nations, it used to a few hundred years ago, but now it largely only affects children in Sunday schools, the same way childhood diseases such as measles and chicken pox do, which were also once far more severe amongst grown adults and throughout societies. Children are the ones that now get affected, but they usually grow out of it. Societies at large are now also largely resistant to Christianity, but in this case it was a particularly pervasive and effective disease/meme complex that took over a thousand years to get on top of.

    People will inherit a few good things out of the whole green thing, the same way I think the west did with Christianity, such as the value of the individual, and a dislike of violence; from the greens it may be a respect for nature’s processes and it’s all-encompassing influences, as well as the earth’s ability to change. (There wasn’t alot of these 2 from Christianity).

    Just as we won’t run out of earth resources, (because they are fundamentally too large), we wont run out of people’s tendancy to mass ideology, but it will take some other form to the current AGW one; something else will always be invented to fool some of the people some of the time.

  153. Thanks, Willis, for the enjoyable read.

    It should be regarded by all as wonderful news that so much fossil fuel has been found and/or become available in recent years. Strangely, some view this as bad news . . .

  154. @willis

    ‘The Needles’ are a formation of appropriately named rocks off the western tip of the Isle of Wight, which itself is located on the southern coast of England, protecting Southampton and Portsmouth.

    Great sailing, complex waters and tides to contend with. And porpoises and Cowes week. Come over and join us!

    http://en.wikipedia.org/wiki/The_Needles

  155. @Latimer,
    I thought roger tolson’s ladder was a valid analogy. The agricultural yield per acre is a function of effort per acre. Likewise, hydrocarbon yield per acre foot is a function of the technology and effort per acre and per acre-ft.

    In the case of oil – if I don’t have to modify a car engine to use ‘conventional’ or ‘unconventional; ‘ oil, why does it matter at all how it is produced?
    It might make a difference to the refinery. In the case of steam-flood heavy oil, which was unconventioinal in 1980’s, it did make a difference to the refinery. Canadian “tar sand” bitumen will make a difference to the refineries, too.

  156. Mike Jonas says:
    February 2, 2013 at 10:03 pm
    =============
    Thanks for the courteous reply.
    You, of course, are correct.

  157. TimTheToolMan says:
    February 2, 2013 at 8:50 pm

    Willis writes

    “When you are foolish enough to step into the middle of two people’s disagreement and you say one side is wrong, what do you expect people to assume?”

    I expect you to read and understand the post before making any assumptions. Especially if you’re going to reply to it.

    I did exactly that … can’t help it if you disapproved of my reply. However, let’s keep rolling.

    So moving on, do you agree the data is in support of peak oil approaching? And if not, why not?

    While I definitely want to move on, I fear I can’t do it with that question. The problem is that it depends on your assumptions. In the simplest terms you ask, is peak oil approaching? Here’s the problem.

    IF you assume that the future is fixed, in the sense that at least in theory, if you had all the knowledge in the world and some penetratingly accurate hyper-Hubbert formula you could sit here today and correctly predict the immutable future date when peak oil will occur … then yes, that future date is assuredly approaching, no matter when you predict it might occur.

    IF, on the other hand, you assume that the future is mutable, that tomorrow someone may invent a cheap inorganic catalyst that makes it easy to convert coal to oil, and then in ten years someone could figure a way to use genetically modified oceanic sponges to extract the relevant hydrocarbons from sea water, each of those would push peak oil further and further into the future … and if that process were fast enough, then peak oil would be receding rather than approaching. We see this happening now through things like fracking and the use of shale oil, each one pushes the peak a little farther away in time. If the process of new discoveries were slower, then peak oil could be approaching, but very slowly, or more quickly. Trouble is, we don’t know what people will invent in the future. So in that case, your question “is peak oil approaching” is unanswerable even as to the sign of the change.

    FINALLY, the rate of production is a function of how much is accessible at a given price. As the price goes up, the amount increases. There are oil fields in the ground right now, wells are drilled, pumps are in, and they’re sitting idle, costs too much to bring it up economically … is that oil part of the size of the resource? Well, right now, no. If the price of gas stayed the same forever, those pumps would never get switched on. But if the price of gas doubled, they’d be pumping oil in a few months, and the production rate would go up, peak oil or not.

    One thing is certain. Discoveries and improvements and inventions will all continue to take place. Above you said (I paraphrase) that I believed that human imagineering will always pull us out of the soup … I don’t know that, no one can, but I suspect strongly that it will.

    I do know, however, that it has always done so in the past. More importantly, I know that technological advance is a slow, steady process, not built on fantastic changes and revolutionary discoveries (although those happen).

    Instead it is an improvement in drill bit materials here, and an improvement in secondary recovery there, plus the odd flash of something like horizontal fracking, repeated a hundred thousand times around the planet for decades, that seems to be how we have moved forwards in the past. It is like those movies you see of ants, when the stream of ants hits the obstacle, there’s a million little ants experimenting with different paths, and in the end they flow over or under or make a bridge or get past it some how … and we are much, much more than ants. So when thousands and thousands of people are working on a problem, and there are huge financial rewards for the ones that are successful … yes, Tim, in that sense I do think humans will prevail.

    So call me crazy, but I see that progress, built not out of one person’s abilities but crowd-sourced out of the incremental improvements of masses of people in lots of countries over the decades, as being very, very hard to stop. Not impossible to stop, no one can see tomorrow, and we still use hundred-year-old Thomas Edison battery technology in our cars despite our best efforts … but impressively inexorable nonetheless.

    My best to you, I hope this clears things a bit, as you say, in the spirit of moving on.

    w.

  158. McComber Boy says:
    February 2, 2013 at 9:28 pm

    Willis,

    Great post as usual. It seems like it was only two or three days ago that someone suggested you look into peak oil and ‘hey presto’! Another great post.

    Thanks, McComber Boy. I didn’t have to do a lot of research, I’ve been following Hubbert since the seventies when it looked like he was a genius, through the myriad incarnations of the various predictions of peak oil, each one at a bit later date, to the present. It’s a subject I’ve mulled over for years.

    So mostly I just had to write up the ideas. I started in the evening, and finished up around 2 AM … then spent another two hours sniffing the fog and writing about whales, and here I am.

    w.

  159. E.M. Smith (Bravo) said

    Quote
    Similarly anyone getting Canadian gasoline / Diesel is running on those same unconventional “tar” oils. Don’t know the exact production figures now, but it’s quite high and growing fast. Last I looked the “price point” was between $30 and $50 / bbl. So well below present prices.
    Unquote

    Recently the building and installation of two, 500,000 barrel per day oil sands trains, was fully documented. These plants included hydrocrackers. The fully installed cost of each train was about eight billion dollars.

    At the time, the price of oil peaked and thus these paid for themselves in about 66 days.

    Thus being fully paid up, the actual production cost. is much lower than the published figure in reality, really depending upon book keeping and not engineering.

    The investment decisions depend upon careful price forecasts and long term planning. when they match, stuff gets built.

    Simple analysis, yes but gets the core issue settled

  160. I lived with some fishermen from Trinidad, CA for a while. I had a dome in the back yard for living space. I repaired their CB radios. Most of us had visited Olema at one time or another. They never let me go to sea with them. I had been a Naval Nuke a few years earlier. They may have been involved with whales or something that rhymes. John, his wife, and kids were my favorites.

  161. Willis writes “FINALLY, the rate of production is a function of how much is accessible at a given price. As the price goes up, the amount increases.”

    As the price goes up, other alternatives (assuming there are some) look better and the amount goes down.

  162. What’s the percentage of the planet’s surface area explored for energy deposits? Just a wild guess: 0.1%?

  163. Greece Shows Us How Poverty Degrades the Environment

    http://www.huffingtonpost.com/iain-murray/greece-energy-environment_b_2506754.html

    Smog has been a particular problem this year in major cities such as Athens and Thessaloniki. But high smog levels have been reported all over Greece — including the Peloponnese and Attica. Yet this isn’t the sort of smog we worry about in American cities. It’s an older, cruder, almost forgotten form here, reminiscent of the days of London’s pea-soupers. The Greek smog is a result of the increased burning of wood as household fuel, and it has massively increased levels of pollutants.
    ===

    And:

    Not only is the smog destructive of the atmosphere, it is destructive of forests. Greeks have been forced by the high prices of home heating oil — of which a large proportion is government-imposed taxes — to use wood for fuel, and much of that wood is gathered illegally. The Greek environment ministry estimates more than 13,000 tons of wood was harvested illegally in 2012.

    What we are seeing is Greece retreating back up the slope of what is known as the Environmental Kuznets curve. This model theorizes that, as a civilization starts to use natural resources, it increases its impact on the environment until it reaches a stage where it becomes more efficient to reduce its impact, This is why the richest societies generally also are the cleanest. Wealthier is healthier for the environment. That’s exactly what we saw in the decreases in smog levels in the west over the last century.

    Greece is regressing. As it becomes poorer, its environment suffers more. The Greek financial crisis has been a disaster in many more ways than first thought. Two particular factors have combined here. The massive overspending by the Greek state could not be corrected by devaluation as Greece is part of the Eurozone. This has led to a massive wealth contraction within Greece, which has meant people do not have as much to spend on fuel. Secondly, the Greek government, as part of its austerity program, has relied heavily on raising taxes on energy — home heating fuel and electricity especially. The result has been the increased reliance on wood and the looming environmental disaster.

  164. Willis Eschenbach says:
    February 2, 2013 at 10:15 pm

    “Instead, I am saying that the size of the resource itself is a function of human ingenuity … and as a result, to speak of “peak magnesium” or “peak oil” misses the mark completely.”

    Thanks, Willis. That summarizes it. And it applies to AGW as well, by the way. Even if we were to assume that the high IPCC scenarios for 2100 were correct, it still comes down to human ingenuity in dealing with it. And we have only a tenuous idea, if any, of what the limits of human ingenuity will be in 2100. What we can say with some confidence is that there will be technology available that we can’t even imagine today.

    It’s so tempting to think that we can predict the future from what we know, when what we don’t know will be vastly more important.

  165. @stephen rasey

    I don’t doubt that the different mechanisms of procuring the oil require some technical changes behind the scenes to accommodate them. Nor that some ways of extracting the oil are more energy efficient than others. Nor that some bright guys are working very hard to make it all happen.

    But if the end product is the same – to the point where I can fill a car with either ‘conventional’ or ‘unconventional’ oil, or a mixture and not notice any difference – then while the split between ‘conventional’ and ‘unconventional’ may be a useful term for oil tekkies, it is misapplied to the wider world of those who ultimately buy and use the stuff.

    And – as ever – there is a strong suspicion that the technical use of the term ‘unconventional’ has been conveniently hijacked by those who wish to alarm the public.

    My old Mum would be worried stupid if told she needed to run her car on ‘unconventional’ oil. Or that her favourite seascape was being ‘acidified’, not ‘neutralised’. These are emotive terms and, I submit, not chosen lightly.

  166. Peak anything is nonsense really. However in the debate about oil I would have thought that even with rising dollar prices it is better to think in terms of how many hours work it takes each of us to buy a gallon of gas rather than the absolute cost.

    You then see how much wealthier we have all become relative to the costs of fuel or power or food. That is because of the enriching quality of energy.

    We have all watched and participated in reducing our gas consumption as price at the pump rises, only to fall back into our old ways as we shuggle ( old Scottish word ) about our budget allocations . Take away all the taxes and it is obvious that gas, as a proportion of all our expenses, hasn’t become more expensive at all. Unconventional oil not withstanding.

    We have become wealthier thanks in large part to energy.

  167. Willis says:

    ” Was the division between “conventional” and “unconventional” oil devised to cover up the failure of the peak oilers? No way. The distinction is useful in a variety of ways for analyzing the world of oil sources. I think that the concept was simply appropriated by the peak oilers because it was very useful to them, since it totally obscured the failure of their peak oil predictions.

    However, I wasn’t using the terms facetiously. I was explaining how they are misused by the peak oil folks to excuse the failure of their predictions.”

    Willis: From a geologist’s perspective, “Peak Oil” as M. King Hubbert defined it is the point at which new discoveries of oil sources fails to match the extraction and production of oil and the overall production declines.The truth is: we will NEVER completely run out of oil.The real question is how much are we willing to pay for it. As has been pointed out before.

    “All the easy oil and gas in the world has pretty much been found. Now comes the harder work in finding and producing oil from more challenging environments and work areas. ”

    — William J. Cummings, Exxon-Mobil company spokesman, December 2005[5

  168. Willi, if you think the price of extraction is not at all an issue of some of these “unconventional” reserves you better read this

    http://www.theoildrum.com/node/9789#more

    and methane hydrates !?? have you any idea how costly it would be to extract diffuse frozen gas from deep sea rock formations ??? If it was cost effective don’t you think it would have been done long ago?

  169. Willis – you say “… at present, people are better fed, housed, clothed, and doctored than at any time in the past thousand years … we have done it without running out of resources, despite the fact that our population more than doubled … we’re damn good at human ingenuity …No guarantee that that will continue given fools like Obama and Chu … but so far, so good.“.

    I agree with all of that. Wrt a lot of the good things – housing, clothing, etc – oil has played a very important part. With our human ingenuity we can make more good things happen for more people. For that we need more energy, and we have coal, gas, uranium, thorium, geothermal energy, and sunshine, all in abundance, and I’ve probably left a few out. If oil gets more expensive, we will work out how to use more of the others, cheapest or most readily available first.

    On this we are in agreement?

    Without the world’s insane politicians (you name just two of many) we could achieve it more easily. They and their ilk are misusing “Climate Change” to scare people into expensive inefficient ineffective low-volume hare-brained schemes like windfarms and ethanol.

    On this maybe we are still in agreement?

    I happen to think that world oil production rates will stop increasing soon, for reasons that I have attempted to explain. It’s not so much that we physically can’t produce faster, more that we won’t. On that we disagree, it seems. But either way, the fact is that unless human ingenuity is itself blocked, the world will continue to generate increasing amounts of energy as needed. All we need is politicians smart enough to let it happen.

  170. Back in 1968 I was working in the Persion Gulf servicing Decca Navigator Stations when I first learned about oil running out in 25 years. From an American oilman. Time flies. (sigh)
    Seems we know how long it takes trees to turn into fossil coal. What critters went into fossil oil? And when? Why do we keep finding more oil? Seems like A LOT of critters went into this fossil oil stuff. Makes you think.

  171. @TimTheToolMan:

    I asked whether the data supported peak oil approaching, not whether it was here.

    The data do not support either. There are two dominant data items.

    Production. Price.

    Production is directly managed by OPEC to stabilize prices at relatively high levels (but low enough to discourage too much substitution / conservation / competition). Production can only tell you what OPEC decided to produce.

    Price can say nothing about Hubbert’s Peak as price is managed. All price can tell you is what OPEC wants.

    Both data items tell you only “What does OPEC want the value to be?”.

    When demand drops (due to economic funk) then prices should ease, not increase.

    in a free and competitive market that we do not have. But in fact prices did soften briefly only lately getting jacked back up.

    As far as I can see the only argument against peak oil approaching is one of both supply and price manipulation which are speculative rather than supported by data.

    Speculative? OPEC is speculative?

    http://www.opec.org/opec_web/en/2468.htm

    Indeed, the biggest challenge facing global oil markets in 2013 is uncertainty surrounding the global economy, with the fragility of the Euro-zone remaining a major concern. The Conference further noted that, although world oil demand is forecast to increase slightly during the year 2013, this is likely to be more than offset by the projected increase in non-OPEC supply and that projected demand for OPEC crude in 2013 is expected to contract to 29.7 mb/d.

    Given the demand uncertainties, the Conference decided to maintain the current production level of 30.0 mb/d. The Conference also agreed that Member Countries would, if necessary, take steps to ensure market balance and reasonable price levels for producers and consumers. In taking this decision, Member Countries confirmed that they will swiftly respond to developments that might have a detrimental impact on an orderly oil market.

    Since it is vital to remain vigilant in the face of the uncertainty surrounding the outlook for the world’s major economies, as well as the implications of the enduring weaknesses in the international financial system that are expected to continue to pose downside risks for both the global economy and the oil market, the Conference directed the Secretariat to maintain its close monitoring of developments in supply and demand, as well as non-fundamental factors, such as macroeconomic sentiment and speculative activity, keeping Member Countries abreast of developments at all times.

    Got that? They are watching global demand and other suppliers and adjusting their output to manage total supply and hold prices high. That is their job. It is the whole reason for a Cartel.

    @John West:

    That’s about the same as the last time I looked.

    Guess why OPEC manages for occasional drops to about $80 / bbl…

    @Stephen Rasey:

    For Tar Sands it is ‘upgraded’ at the mine / well / production point to a crude oil that does not need refinery changes. (So ‘yes and no’. The overall refining process has to change to deal with it; but the produces of the ‘crude’ do it, not the refinery.)

    @Grey Lensman:

    Wow! That’s some fast payback!

    The basic costs have been steadily driven down over the years. It started out about $80/bbl hurdle rate when oil was about $20. Then costs were dropping while OPEC was jacking… Both hit about $50 at about the same time. Then “in-situ” started and the cost point was headed for $26 / bbl while oil prices were headed for about $70. That was when things really took off ;-)

    The cost point continues to drop and the sands production continues to rise. We’ve now got OPEC at just below 30 M bpd and I don’t think they can cut back much from that (and stay economically afloat). The Paranoid Fantasy part of the mind wants to wonder if it was just a coincidence that about that time Iraq got knocked out of production and that lately Libya took a hit… Now folks talking embargo of Iranian oil?

    As the fracking (yes, I know it is supposed to be spelled the silly looking way ;-) revolution continues to spread, OPEC is going to have more “issues”… Thus their heavy funding of AGW causes… Last thing they want is more coal fuels…

  172. William H, Another Andy, and others upthread have made an important point: if you don’t factor in inflation, your “cost of” comments mean nothing. As far as I can tell, the ‘real’ cost of gasoline hasn’t risen in my lifetime.

    Willis, your writing reminds me most of Jack London’s “Adventures of Captain David Grief.” Keep doing it!

  173. As far as the inflation part of the price discussion goes, I will note:

    When I first started (abt. forty years ago) the job I eventually retired from, an hour’s wages would buy about seven or eight gallons of gasoline. Comparing the ups and downs of gasoline prices where I live for the past year to the wage I retired at, I get from about seven and a quarter to eight and three quarters gallons. Eight gallons of gasoline are still worth about an hour of an operating engineers time.

    This is like Heinlein’s quick test for estimating the standard of living in a place: “How long does it take a journeyman carpenter to earn a one kilo loaf of the standard local bread?”

    No matter how you hang numbers on the prices of things, if it takes a skilled worker the same amount of time to earn them,they haven’t changed.

  174. I’m surprised no one has brought up the issue of refinery capacity and it’s effects on price. From my understanding no new refineries have been allowed to be built in the United States in 30 years except one that was very recently given the green light. That is certain to keep prices high as refinery capacity is static while domestic oil supply is on the increase, no?

  175. E M Smith writes “They are watching global demand and other suppliers and adjusting their output to manage total supply and hold prices high.”

    That, as I said is the speculative view and not supported by the hard data which shows flat lining supply and increasing price. OPEC aren’t the only suppliers out there. Dont you think other non-OPEC suppliers would increase their supply if they could to reap the benefits of the current high prices? That’s what the free market is and how it works at its heart.

    As I said, if there were a global conspiracy to keep prices high by limiting supply at a time where the world’s economies were really suffering then that’s a pretty dim view to take of the world.

    From the other point of view, do you think OPEC would have said “Production levels are close to their maximum. Therefore we cant substantially increase production at the moment”. No. not in a million years would they say that in any official report.

    Neither of us have any real information on those points of view. All we have is flat-lining production and increasing prices.

  176. I don’t know anything about dimethyl sulfide, (DMS), but it caught my eye. carbonyl sulfide has a pretty long “stay time” in the troposhere. But when hit with about 200nm (UV-C) it dissociates and reacts to form sulfate. This is probably one of the contribtors to the “Junge” layer. No reason for mentioning it other than being reminded of sulfides by your excellent post.

    Side note; before hydrofracking, there were oil well “torpedos” that used nitroglycerin to remediate wells.

  177. @TimTheToolMan says:
    February 2, 2013 at 11:28 pm

    Willis writes “FINALLY, the rate of production is a function of how much is accessible at a given price. As the price goes up, the amount increases.”

    As the price goes up, other alternatives (assuming there are some) look better and the amount goes down.

    Are you just trying to be obtuse?

    Willis is talking about production. When price rises, so does production.

    You are talking about consumption. When price rises, consumption drops.

    These meet at an equilibrium point. BOTH can move at the same time.

    Alex the sketic says:
    February 2, 2013 at 11:28 pm

    What’s the percentage of the planet’s surface area explored for energy deposits? Just a wild guess: 0.1%?

    Well, about 70% is in the “not” category as it is “ocean beyond the shelf”. The rest depends on “to what degree?”. Most all of it has someone who has looked at a map. Large parts of it have been seismically measured. Much of it had holes drilled to some depth.

    Yet many depths have not been drilled, so if you want ‘deepest knowledge’, the answer is ‘nearly none’. If you want “likely oil” the answer is “more than 1/2″ (of land) with poor resolution.

    @MorningGuy:

    Methane Clathrate is typically not in ‘hard rock’. It usually is in soft mud. The hardest part of getting it out is doing that without having it destabilize and all bubble out of the muck. It can be removed with gentle heat, or even shaking…

    @Richard111:

    Mostly marine algae (aka “Pond Scum”) and not dinosaurs…

  178. E M Smith writes “Willis is talking about production. When price rises, so does production.”

    Not according to the data.

  179. Just for fun, how about this one?

    Fossil energy resources remain abundant but contain significant amounts of carbon that are normally released during combustion. The proven and probable reserves of oil and gas are enough to last for decades and in the case of coal, centuries (Table. 4.2). Possible undiscovered resources extend these projections even further.

    Fossil fuels supplied 80% of world primary energy demand in 2004 (IEA, 2006b) and their use is expected to grow in absolute terms over the next 20–30 years in the absence of policies to promote low-carbon emission sources.

    Can’t see much peak in that …

    w.

  180. MorningGuy says:
    February 2, 2013 at 11:55 pm

    Willi, if you think the price of extraction is not at all an issue of some of these “unconventional” reserves you better read this …

    MorningGuy, if you believe that I think that you better provide a quote, I don’t ever recall saying “price of extraction is not an issue”.

    w.

  181. Willis writes “Can’t see much peak in that …”

    Oil is a fossil fuel but “fossil fuels” includes coal and gas.

    It goes on to say “their use is expected to grow in absolute terms over the next 20–30 years in the absence of policies to promote low-carbon emission sources.”

    And this is accurate. China is building coal fired power stations like nobody’s business. Use of gas is on the increase too. Neither are oil and neither come out of your petrol pump. Nobody is building significant infrastructure to convert them to petrol yet either. If they do, they’ll be considerably more expensive than oil is now.

    I suspect some of that will be done to stave off the decline when the time comes.

  182. E M Smith write “OK, you are just trying to be obtuse.”

    I wrote “As the price goes up, other alternatives (assuming there are some) look better and the amount goes down.”

    Demand reducing is implicit in the “other alternatives” …or so I thought you’d note. When demand reduces the amount reduces.

  183. @The rest of the folks:

    TTTM is confounding a price managed production managed real set of data with production and consumption functions. Willis is talking about generic economics and how normal commodities respond to price signals.

    Willis is absolutely correct in how typical energy commodities respond over time to prices signals. Raise the price, more total production comes into existence.

    We can actually see that on a dynamic basis in Canada. When oil prices were below about $45 / bbl there was effectively no production of tar sands (other than some ‘learning projects). Now with price over double that, they are busy building productive capacity by the Million bbl chunk. Higher price, more production.

    In response to those market forces, OPEC is trying to hold prices up (with reduced production if need be). This is what Cartels do. They are trying to run the price / volume curves backwards to hold prices up.

    I probably ought to also add that oil is often price inelastic in supply and demand. Neither side changes volume much on price signals. This can cause prices to take wide swings without much change in volume of production in the short run. Yet longer term, price elasticities do have time to work. Raise oil price a lot, now, and I still buy gas to get to work. Over the next year, I may swap to a cheaper car, or get a job nearer to home…. So ‘how long’ matters.

  184. anarchist hate machine says:
    February 3, 2013 at 12:41 am

    “I’m surprised no one has brought up the issue of refinery capacity and it’s effects on price. From my understanding no new refineries have been allowed to be built in the United States in 30 years except one …”

    Why are new refineries not being built in ND? You would think that’s a no-brainer

  185. If the recession of 2008 showed us anything, it’s how much of the cost of oil is speculation as a result of peak oil worries and the other factors mentioned and how much is actual production costs. If people stopped worrying about peak oil (or taking advantage of it as the ever growing cynic in me says) as a “now” thing we wouldn’t have to spend nearly as much for oil as we do at the moment.

  186. LazyTeenager:

    I look forward to the day when you post something sensible on WUWT. Sadly, your post today at February 2, 2013 at 9:26 pm has not been it.

    You write to Willis

    The solution you are propounding involves more advanced technologies for extraction and conversion of hydrocarbons into the gas we all love.

    You see light oil is not the same as heavy oil and is not the same as coal of whatever kind.

    These interconversion processes all cost money and make the end product more expensive. This is probably the reason we do not use coal to oil processes even though coal is very cheap and the technology is ancient and well proven.

    That is wrong on all counts.
    You are thinking of the German Fischer-Tropsch conversion process which is a century-old and was developed into the South African Sasol process.

    A method to convert coal to synthetic crude oil which hast competitive cost (n.b. cost and not price) with natural crude has existed since 1994 when demonstration of the LSE process at commercial scale was completed.

    My post at February 2, 2013 at 2:57 pm explains how and why the Liquid Solvent Extraction (LSE) process can produce synthetic crude oil at competitive cost. The fact of LSE has strategic value because it constrains the medium and long-term prices of crude oil.

    There is sufficient coal for at least 300 years supply (probably 1000 years). Nobody can know what fuels will be needed in 300 years time, but they are unlikely to include oil.

    Richard

  187. The amount of estimated “natural” gas is orders of magnitude smaller than the amount of commercially recoverable CH4. It is interesting to note the lag in the update of the world’s natural gas reserves.

    Why did nature bless Russia with the world’s largest “natural” gas reservoirs?

    http://www.economist.com/blogs/graphicdetail/2012/06/focus

    There have been massive CH4 fields found in Canada, with deep drilling techniques.

    http://www.theglobeandmail.com/report-on-business/bc-emerges-as-major-natural-gas-player/article1247539/

    Now, his proposed $3-billion Kitimat liquid natural gas project has the backing of some of the biggest names in the business – including the world’s largest gas importer, Korea Gas Corp., and U.S. gas producers EOG Resources Inc. and Apache Corp. , two key players in the Horn River.
    The change from an import to an export facility is emblematic of the changing B.C. economy and the province’s emerging role as a significant gas producer on a global scale.

    http://www.pnas.org/cgi/reprint/99/17/10976

    The scientific problem of the genesis of hydrocarbons of natural petroleum, and consequentially of the origin of natural petroleum deposits, regrettably has been one too much neglected by competent physicists and chemists; the subject has been obscured by diverse, unscientific hypotheses, typically connected with the rococo hypothesis (1) that highly reduced hydrocarbon molecules of high chemical potentials might somehow evolve from highly oxidized biotic molecules of low chemical potential. The scientific problem of the spontaneous evolution of the hydrocarbon molecules comprising natural petroleum is one of chemical thermodynamic-stability theory. This problem does not involve the properties of rocks where petroleum might be found or of microorganisms observed in crude oil.

    Natural petroleum is a hydrogen–carbon (H–C) system, in distinctly nonequilibrium states, composed of mixtures of highly reduced hydrocarbon molecules, all of very high chemical potential and most in the liquid phase. As such, the phenomenon of the terrestrial existence of natural petroleum in the near-surface crust of the Earth has presented several challenges, most of which have remained unresolved until recently. The primary scientific problem of petroleum has been the existence and genesis of the individual hydrocarbon molecules themselves: how, and under what thermodynamic conditions, can such highly reduced molecules of high chemical potential evolve?

    The evolution of multi-component systems at high pressures: VI. The thermodynamic stability of the hydrogen–carbon system: The genesis of hydrocarbons and the origin of petroleum, By Kenney, Kutcherov, Bendeliani, and Alekseev

    http://origeminorganicadopetroleo.blogspot.ca/2011/01/thomas-gold-professional-papers.html

    The following is an excerpt from Thomas Gold’s book the Deep Hot Biosphere which that outlines some of the observations he believes supports an abiogenic origin (non-biological, primeval origin), for petroleum and natural gas.

    (1) Petroleum and methane are found frequently in geographic patterns of long lines or arcs, which are related more to deep-seated large-scale structural features of the crust, than to the smaller scale patchwork of the sedimentary deposits.

    (2) Hydrocarbon-rich areas tend to be hydrocarbon-rich at many different levels, corresponding to quite different geological epochs, and extending down to the crystalline basement that underlies the sediment. An invasion of an area by hydrocarbon fluids from below could better account for this than the chance of successive deposition.

    (3) Some petroleum from deeper and hotter levels almost completely lack the biological evidence. Optical activity and the odd-even carbon number effect are sometimes totally absent, and it would be difficult to suppose that such a thorough destruction of the biological molecules had occurred as would be required to account for this, yet leaving the bulk substance quite similar to other crude oils.

    (4) Methane is found in many locations where a biogenic origin is improbable or where biological deposits seem inadequate: in great ocean rifts in the absence of any substantial sediments; in fissures in igneous and metamorphic rocks, even at great depth; in active volcanic regions, even where there is a minimum of sediments; and there are massive amounts of methane hydrates (methane-water ice combinations) in permafrost and ocean deposits, where it is doubtful that an adequate quantity and distribution of biological source material is present.

    (5) The hydrocarbon deposits of a large area often show common chemical or isotopic features, quite independent of the varied composition or the geological ages of the formations in which they are found. Such chemical signatures may be seen in the abundance ratios of some minor constituents such as traces of certain metals that are carried in petroleum; or a common tendency may be seen in the ratio of isotopes of some elements, or in the abundance ratio of some of the different molecules that make up petroleum. Thus a chemical analysis of a sample of petroleum could often allow the general area of its origin to be identified, even though quite different formations in that area may be producing petroleum. For example a crude oil from anywhere in the Middle East can be distinguished from an oil originating in any part of South America, or from the oils of West Africa; almost any of the oils from California can be distinguished from that of other regions by the carbon isotope ratio.

  188. TimTheToolMan:

    In your post at February 2, 2013 at 9:38 pm you write

    My main beef with Willis on this is that he flatly refuses to believe that there is any chance that production will drop by assuming “human ingenuity” will prevail irrespective of any reality of increasing scarcity of the resource and production cost associated with maintaining that production rate.

    No!
    You are flatly refusing to recognise that “human ingenuity” HAS solved what you perceive as a potential problem. Or, to be precise, that potential problem has been solved for the next at least 300 years. And it cannot be known what – if any – oil will be needed 300 years in the future.

    This is explained in my post at at February 2, 2013 at 2:57 pm.

    Richard

  189. E M Smith writes “Willis is absolutely correct in how typical energy commodities respond over time to prices signals. Raise the price, more total production comes into existence.”

    From my understanding of Willis’ articles on peak oil, Willis at his heart doesn’t believe in it. He believes we’ll always be able to produce oil from “other sources” and that we’ll be able to do it at a rate that matches demand.

    He says “I am making a more fundamental argument, which is that the size of a given resource is a function of the humans, rather than a function of the physical world.”

    Well we are seeing price rises and no associated production increases right now. For the economists out there, once the hedging contracts expire I would expect to see prices at the pump begin to increase.

    I hope to hell I’m wrong and these price spikes and production plateau are temporary. I really do.

    E M Smith says this is due to a global conspiracy of which OPEC plays a part and all the other producers play along rather than increasing supply to ease prices. Apparently the oil cartels aren’t making enough money. And apparently this global conspiracy is conspiring to keep our economies in the holes they’re in because its in the interests of the producers to do so. I dont subscribe to that point of view myself but YMMV.

  190. Peak oil has been the cry since oil was first used. We have more oil reserves now than ever due to better exploration and exploitation. Technology will improve faster than the oil is used.
    A couple of years ago the USGS surveyed oil spills around the coastal waters of the US and found that 90% were from unknown oil fields. So still oil to find

  191. TimTheToolMan says:
    February 3, 2013 at 1:57 am

    E M Smith writes

    “Willis is absolutely correct in how typical energy commodities respond over time to prices signals. Raise the price, more total production comes into existence.”

    From my understanding of Willis’ articles on peak oil, Willis at his heart doesn’t believe in it. He believes we’ll always be able to produce oil from “other sources” and that we’ll be able to do it at a rate that matches demand.

    Huh? I specifically pointed out upthread how commodities respond to price signals, as E M Smith says. Why do you think I don’t believe they do that?

    Will we able to always produce oil from other sources? Consider oil from algae. Exxon and Craig Ventner of DNA sequencing fame have a big project to bioengineer algae to produce oil … and whether it is their project or some other, sure, I believe that we will be able to produce commercial quantities of oil from alternate sources.

    And not only do I believe we can produce oil from other sources at economic and scalable rates, Exxon and Craig Ventner believe it so strongly that they are putting millions and millions of dollars into the project … and I’m supposed to ignore all that because you don’t have imagination?

    So yes, Tim, Exxon and Ventner and I are all betting we will indeed continue to have oil for as long as we need it, and unlike me, they’re betting megabucks on the claim … are you confident enough in your position to bet megabucks that they won’t succeed?

    I suspect, however, that we won’t need it for too long, new energy sources are on the horizon, who knows what the world will run on in fifty or a hundred years.

    He says “I am making a more fundamental argument, which is that the size of a given resource is a function of the humans, rather than a function of the physical world.”

    Given the existence of oil produced from algae, yes, the size of the oil resource is a function of the human imagination. As you point out, Tim, that doesn’t guarantee that our imagination will be able to increase the size of the resource … but given the thousands and thousands of really smart people around the world working on the problem, I’d be crazy to predict anything but success at some point …

    Best regards,

    w.

  192. E.M.Smith says:
    February 2, 2013 at 10:42 pm
    ///////////////////////////////////////////////////////////////
    On a previous post by Willis on Peak Oil, I commented upon oil extraction from coal process at about US$80 per barrel. For many years it was suggested that this would act as a long stop on the market cost of oil, ie., that long term the market cost of oil would not exceed US$80 pbbl. Obviously, inflation adjustment would become a factor.

    The present cost of oil has little to do with the cost of extraction, and more to do with markets which in turn take account of real or imagined geopolitical concerns. Oil companies would, even today, still make healthy profits if the market cost fell by half (eg., down to about US$55pbbl). It is political cartels that are keeping the price artificially high. This is madness: it is mad that the world is forced to needlessly endure unnecessarily high energy costs. It is difficult to put a price on the human missery that has been needlessly caused by this.

    It is probably because many still consider that the market price of oil is presently artificially high and will drop in the not too distant future that there is not more investment in the oil from coal extraction. The fact that this technology exists and that oil can be extracted from that process with viable returns at around the US$80 level, and the Icelandic example referred to by Björn says: February 2, 2013 at 8:46 pm, will inevitably mean that long term, the market cost of oil will be kept down.

    The geopolitical landscape has now completely changed in view of the extensive discoveries of shale and tar sands all over the world. This will inevitably drive down prices.

    By definition, there must inevitably be a Peak, but given that we can theoretically make anything (it being merely a question of how much energy the process requires and thus just a question of price and technology), and the ‘new’ shale and tar finds that Peak has been kicked into the long grass.

    As long as the sun shines, we will never, if truly needed, run out of anything. Man’s history shows that it is the advent of new technologies that renders past essentials reduntant. It is the advent of new technologies that will define when Peak Oil is reached.

  193. Willis Eschenbach says:
    February 3, 2013 at 1:02 am

    MorningGuy, if you believe that I think that you better provide a quote, I don’t ever recall saying “price of extraction is not an issue”.

    Correct me if I’m wrong but your whole effective premise is that we’ve got endless reserves… well the point of the peakists is that we’ve run out of the easy stuff and are left with the hard to extract stuff – the point you’re missing is that it doesn’t matter that we have effectively endless reserves of methane hydrates as it can’t be extracted economically, and I dare say won’t ever be extracted. Not due to greenies or climate change or anything like that but due to cold hard economics as renewables and solar are getting to cheap.

  194. Willis writes “and I’m supposed to ignore all that because you don’t have imagination?”

    I do think we’ll diversify our energy sources as we go along but I dont think its all going to be about oil. My gut says that once we do hit peak oil (of the conventional variety plus whatever non-conventional stuff exists) then oil’s days will be numbered and we’ll be increasingly transitioning away from it. I think human ingenuity extends beyond maintaining oil production.

    Ultimately my imagination extends to other technologies entirely not to a pond filled with algae.

  195. @ E.M.Smith
    February 2, 2013 at 10:00 pm

    Thanks for the link to the zeolite primer.

    Yeah I agree with you, it’s better to use the electricity directly if possible
    than use it to convert chemicals to hydrocarbons as there is bound to be a good
    deal of kwhr lost in the process. However Iceland outranks all other nations of
    the world in installed electric power capacity per capita by large margin at
    around 9 Kw installed per head ,it’s f.ex. roughly 3 times the installed
    capacity per capita in the U.S.A and 4 times the same for Denmark the often touted
    capital of the renewable electricity from birdblenders, and I think we are headed
    for a double digit number in this context whithin foreseable future. Around 80%
    of this is hydro the rest mostly geothermal the use of which we went in for in
    big way orginally to heat buildings and provide hot running water etc, after the arab
    oil embargo last century and the steam that came out of the drillholes was so
    much warmer than what was suitable for the orginal purpose intended that it had
    to be cooled down.Some brigth headed enginer involved with one of the projects found
    out that there were an off the shelf closed system electricity generating turbines available
    that could be inserted into the cooling process and presto a 10 Mw on the side electric plant
    became a reality, at rather insubstantial extra cost to his project, and I think all
    the geothermal plants built save the latest one were built mainly to provide hot water with the electricity generation as a kind of side show. Well enough of that I, what I really wanted
    say was that i think this methanol project was started orginally as a result of a marching order to our governmment from the European Union in Bruxcelles (Iceland is not an EU member nation, but we are a party to an wider European agrement that allows the ogres of the Behemouth in Belgium to order our government about sometimes ) to mandate that the gasoline sold here was blended with some preordained percents of renewable fuel asap ,and the methanol plant is the outcome of some shopping around for ways to fullfill that order ( and in my view its a better way to go about it than topping up the tank with foodstuff) , but was designed for bigger capacity ,than we need to use internally to keep Bruxcelle happy, to optimize the plants economy, that has then lead to ideas of building another and a far bigger one, for diesel generation to use for our fishing fleet which is the biggest user in the country of that fuel type. I do of course not know what the end there result will be, but if the crude price comes tumbling down within the next year or two , as I suspect it might if the future market players get a case of nerves, i suppose that idea might remain just an idea for the next few years to come, but if it can really be done to a a stable and sustainable tune of half the current crude price it might survive an become a reality.

  196. The arguments offered by Thomas Gold in his book “The Deep Hot Biosphere” (especially chapters 3, 4 and 5) seem to me as clear and thorough as they are compelling. I have never seen them rebutted in any way other than by dogmatic offhand dismissals that avoid addressing the arguments themselves — an all too familiar technique. The book is a must read (and a very pleasant one) for anyone with a genuine interest in the matter, regardless of where they stand and what they believe they know.
    Some Amazon reviews:

    http://www.amazon.com/The-Deep-Hot-Biosphere-Fossil/product-reviews/0387985468/ref=dp_top_cm_cr_acr_txt?ie=UTF8&showViewpoints=1

  197. I love this site. I learn shedloads.

    I’ve learned peak horse[snip]. :) Thanks Jimbo, Feb 2 @ 4.04pm.

    I’ve learned the eco-freaks have cost us 280 billion dollars. :( ThanksEW3, Feb 2 @ 8.42pm.

    Thanks for this post Willis, most enjoyable, most informative, what more can a man ask?
    Dont answer that one.:)

    The needles are chalk cliffs eroded by sea action into spires near the Isle of Wight off the UK south coast, though I expect you’ve googled that already.

    What credence if any do you give to the theory that the Global Warming Scare Scam is tied in with UN Agenda 21, a plan to depopulate this Earth by about 80% – 90%?

  198. To everyone inclined to take cheap shots at Willis for not willing to “accept” that oil has peaked:

    My interpretation of his argument is that the dividing line between “conventional” and “unconventional” is constantly moving. Much of what was unconventional / uneconomical yesterday is conventional / economical today. Some of what is still unconventional / uneconomical today will be conventional / economical tomorrow. Since the extraction costs of petroleum is driven by ingenuity and the sale price is driven by market conditions, look for ingenuity to establish a new benchmark whenever the market price comes to a new level.

    As long as the total world production is still on the rise, claiming that oil has peaked sounds rather daft.

    Perhaps bar charts comparing quantity extracted as a function of estimated extraction cost per barrel (e.g., by decade over the past half century) would be helpful to visualize the process.

    The assumption is that the chart for 1960s would show one or two tall bars at the left, followed by a steep drop off. The chart for the 2010s would show shorter bars at the far left, more bars just to the middle, then a drop off. Look for this “flattening” trend to continue.

    Kurt in Switzerland

  199. There’s a reason that hydrocarbons are rated in BOE – Barrels of Oil Equivalents. There are at least two reasonably efficient methods of extracting BOEs from coal. There are processes to extract BOEs from tar/tar sands. These two areas send the “Peak Oil” date out so far that you need a perpetual calendar to log it.

    Before the POs get their unmentionables in a wad – IT PROBABLY WON’T HAPPEN AT THE CURRENT PRICE POINT!

    Willis, if a publisher hasn’t got you under a contract already for what most of us here think is a fantastic life story, TANJ! Your writings and life story have got to be work upper six figure $s.

    The whale blowhole story is the best single written anecdote I’ve ever read.

  200. “The fracturing technology was developed about forty years ago, and has been used ever since, mostly for secondary recovery. And for all those decades the oil coming from the fractured rocks has been “conventional oil”.”

    Actually “fracking” was invented just after the Civil War.

    Shooters – A “Fracking” History

    For more than 100 years, nitroglycerin detonations increased a well’s production from petroleum bearing formations. Modern hydraulic fracturing technology can trace its roots to April 25, 1865, when Civil War veteran Col. Edward A. L. Roberts received the first of his many patents for an “exploding torpedo.”

    In May 1990, Pennsylvania’s Otto Cupler Torpedo Company “shot” its last oil well using liquid nitroglycerin – abandoning nitro but continuing to pursue a fundamental oil field technology.

    Although President Rick Tallini remains in the business of improving oil wells’ production, today’s fracturing systems are much advanced from Lt. Col. Edward A. L. Roberts’ original 1865-1866 patents…..

    Today, about 30 percent of U.S. recoverable oil and natural gas reserves are accessible through hydraulic “fracking” – about seven billion barrels of oil and 600 trillion cubic feet of natural gas….

    An ice history of “fracking” and the technological advances of oil field production.

  201. Willis
    The benefit of multi-hubbert analyses is in predicting the likelihood of availability of fuel from given resources.

    See: Exponential growth, energetic Hubbert cycles, and the advancement of technology, Tad W. Patzek, Archives of Mining Sciences of the Polish Academy of Sciences, May 3, 2008 http://gaia.pge.utexas.edu/papers/PatzekManuscriptRevised.pdf

    Economist James Hamilton documents the oil production in each of the US States/regions. See:

    Oil Prices, Exhaustible Resources, and Economic Growth. This paper explores details behind the phenomenal increase in global crude oil production over the last century and a half and the implications if that trend should be reversed. I document that a key feature of the growth in production has been exploitation of new geographic areas rather than application of better technology to existing sources, and suggest that the end of that era could come soon. The economic dislocations that historically followed temporary oil supply disruptions are reviewed, and the possible implications of that experience for what the transition era could look like are explored.

    Note that the International Energy Agency 2012 now shows crude oil production peaked in 2005.

  202. MorningGuy:

    I do like optimism but I balk at stupidity.

    Your post at February 3, 2013 at 4:14 am asserts

    the point you’re missing is that it doesn’t matter that we have effectively endless reserves of methane hydrates as it can’t be extracted economically, and I dare say won’t ever be extracted. Not due to greenies or climate change or anything like that but due to cold hard economics as renewables and solar are getting to cheap.

    Wind, solar and animal (including human) power were abandoned when the cheaper energy of the high energy intensity in fossil fuels became available by use of the steam engine.

    But hydro continued to be used because it is efficient, is available on demand and samples the high energy intensity in flowing water so is “cheap”.

    Wind, solar and animal power are inefficient, unreliable and expensive: they always will be unless somebody finds a way to by-pass the laws of physics.

    It is rare that one can make a confident prediction of the future, but I can and do confidently predict that the use of fossil fuels will not be displaced by cheaper energy from solar, or from wind, or from unicorn farts.

    Richard

  203. The arguments against “peak oil” are NOT that oil and other fossil fuels are not in limited supply, NOR that the price won’t go up, and not even that production will not decrease in some places over time.

    The argument is against the same kind of “catastrophic” thinking bull[snip] that goes on in so many other areas. You need to look at all sides of the issue and think about possibilities, not just extrapolate an exponential curve or assume something is a Gaussian curve. It may be possible with changes in price and technology, for a curve to have more than one peak. US oil production or Natural gas production may go higher again in the future.

    You have to remember that governments do affect the price of oil and regulate where it can be drilled. You have to realize there is a world market in oil and that if oil is very cheap in some places in the world, then it makes sense to use that oil and therefore production of slightly more expensive oil may go down in some countries until the cheaper oil finally becomes scarce OR until technology catches up to make other sources competitive. You need to consider all these things at once: price, technology, gov’t policy.

    Peak oil fears as they are often expressed are typically of the catastrophic kind. That once a country or two hits that peak level, soon all countries will, and then we will run out and the price will be 1,000’s of dollars per barrel and we will all starve if some smart progressives don’t plan it all out for us and save us.

    In addition to the above, the other things that get left out of “peak oil” or peak anything conversations is that there are substitutes and things in competition (also through the price system/market).

    Oil from petroleum is in competition and can be substituted for SOME uses with whale oil, palm oil. For electricity generation, all types of fossil fuels can substitute, so natural gas, coal, unconventional oil, etc. all come into play in the price/supply equation. Even solar, nuclear, wind come into play if fossil fuel prices go too high. If we do start to run out, oil will be replaced naturally over a 20-50 year time span. This is what people who object to “peak oil” are actually saying.

    As usual, the alarmists only want to focus on one thing at a time and even on one type of “conventional” oil. Then they want to pretend (or maybe they really are this rock-headed) that anyone who disagrees with them doesn’t know that oil is in limited supply and can increase in price.

  204. Well done Willis for showing the arbitrary distinction between “conventional” and “uncoventional” oil. It strikes me that there are a lot of arbitrary distinctions made in “climate” that help keep the whole catastrophic global warming show on the road.
    – Scientist / non-scientist, forgetting that a Phd is not a professional qualification, or that promoting policy involves many disciplines, including statistics, economics, forecasting and public policy-making.
    – Peer review / non-peer review – forgetting that the peer review is far from being an unambiguous quality control standard.
    – Clean / dirty energy. Wind turbines have nasty chemicals in the manufacture. An electric car may use “dirtier” energy than an efficient diesel. Nuclear is “clean” in some respects, but leaves the ultimate in “dirty” residues.
    The distinctions made might be useful for non-specialist understanding, but ultimately they do not reflect reality in all its richness. What is more, the fundamental questions of catastrophic global warming are not not either / or, but future projections of magnitude and likelihood. This involves being able to assess the quality and relevance of the science and supporting data.

  205. Morning guy says

    Quote

    Correct me if I’m wrong but your whole effective premise is that we’ve got endless reserves…

    Unquote

    Nope just endless human ingenuity. We have vast reserves of all sorts of things. We are finding how to use one to make another. An example given by Bjorn, citing how Iceland uses relatively free electricity to make methanol. This can not only be used as a fuel but can be used as a feedstock to make plastics, yarns, etc.

    If instead of running out, we find we have a 100 years supply to meet current growth patterns, then all we have to do is look back a hundred years to see what might happen. Then it was horse manure. 60 acres of every hundred acres of farmland used to feed horses. Actually it looks like we have at least 300 years supply at max consumption.

    So we not only have 100 years to find new energy sources, we are doing it now. cheap solar and wind is a myth, a distraction, from those ideas and concepts that really work, geothermal being a classic.

  206. TimTheToolMan says:
    February 3, 2013 at 1:57 am
    “E M Smith says this is due to a global conspiracy of which OPEC plays a part and all the other producers play along rather than increasing supply to ease prices.”

    A conspiracy is hidden. OPEC is a cartel and not hidden. Therefore no conspiracy. The interests of OPEC are clear: Maximize profit, and prevent development of alternatives (It becomes harder over time for them to do that. In the 80ies they lowered the price to stop the first shale oil boom in Colorado; successfully in that case.).

    ” Apparently the oil cartels aren’t making enough money.”

    Saudi Arabia and other arab nations have a population explosion; GDP/capita is falling. Of course they want to maximize oil revenue to be able to give goodies to millions of unemployed angry youths.

    ” And apparently this global conspiracy is conspiring to keep our economies in the holes they’re in because its in the interests of the producers to do so. I dont subscribe to that point of view myself but YMMV.”

    They don’t want to “keep us in the hole”; they want to continue to milk us. They would LOVE it if we became so rich we could afford to pay them 200 instead of 100 USD a barrel. But it looks like every time the price goes up that high the US (and other nations) go into recession; as further growth would be uneconomic (profits being wiped out by the fuel cost).

    Over time, efficiency improvements allow to extract more GDP Dollars from one barrel of oil, justifying a higher price ceiling. But it’s a slow process (the yearned for “decoupling of GDP from fossil fuel use”. This decoupling looks more like a slow shift towards higher value extraction over time – much slower than desired growth rates of 3% a year or so)

  207. One of the big “arguments” used by the PO crowd is that we are running out of oil and so should stop using it and find something else. That argument could be extended to life itself. We all know we are going to die eventually so why not stop living now?

    We all know that nothing lasts forever, absolutely nothing, but what is wrong with using what we can now anyway. At least it staves off the inevitable misery that will ensue when everything does run out and happiness isn’t a zero sum game you know, if we are happy now it doesn’t mean there will be less happiness available in the future.

    Mind you the PO bunch and the warmista as well as the overpopulation gang would be a hell of a lot more convincing if they actually stopped using oil, gas, nuke, coal and just jumped in the river. That would show some commitment instead of a simple desire to make us all feel horrible.

    As Willis says, there is no peak anything for humans. Thanks to our ingenuity we will always overcome these artificial barriers. Onwards and upwards chaps, onwards and upwards.

  208. Stomping of feet, rolling, kicking the floor, you guy aren’t so smart, we’re smarter, we can see the future, we have computers, we have algorithms, we… uhh, uhh, tune, that it, we can tune our algorithms to see the future and it’s black, black, black I say… /sarc

  209. I simply cannot understand why rational people argue for peak oil. There is no such thing. It is pretty obvious that if current reservoirs run out then we just have to go and find more and there are many places where we have hardly even begun to look. Also high oil prices simply make yesterdays overlooked uneconomic sources viable. Therefore a rise in oil prices actually crates more viable supply.

    The reality is that there is a “peak consumption” somewhere out there in future perhaps 50 perhaps 100 perhaps a 1000 years. This is the point where the price of oil rises to such a degree (due to extraction cost which is very high due to heavy taxation) that substitutes will take market share away from oil as a source of energy. At some point it will make more sense to consumers to not use an incremental barrel of oil due to the high cost of oil and the relatively less costly alternatives available. Already Ethanol has taken a very small portion of the US market due to government subsidies on Ethanol whilst Oil is sill heavily taxed.

  210. In my last comment I am trying to draw a line between

    “Peak Oilers” who say the oil will run out

    and

    Economists who understand that consumption will adjust to price and alternatives

  211. I wonder when we shall reach Peak Peaks?

    Peak anything can only ever be identified retrospectively. Predictions of Peak anything requires an omniscient knowledge until the end of time.

    Quite amazingly there are some, implicit in their pronouncements, who think they are so endowed, and enough fools in Government and at large who believe they are.

    What is so astonishing about the scientific process nowadays, is that soothsaying, which fell out of favour a while back, has become an accepted scientific discipline now that we have advanced so much: divination of computer entrails instead of the guts of sacrificial goats and chickens – so progress I suppose.

    The message about Peak Oil, broadcast by the calamity-soon brigade, has nothing to do with production levels, and everything to do with there being none left, which is what they hope and intend will be received by the general public and politicans. They conflate reserve and resource.

    Prognostication about future oil production levels is about as much use as prognostications in the early 17th Century about peak oat and hay production to feed all the horses a growing, richer population would need, and how town and city authorities would cope with all the horse ‘emissions’ that would result.

    Here is a fact which it would be ever so nice if more people could learn, particularly scientists, economists and especially politicians.

    WE DON’T KNOW.

  212. Willis, first lets be clear what peak oil means. It is not about what’s in the ground, never has been. Peak oil is about flow rates meeting demand. Conventional or unconventional (geological terms BTW) doesnt matter. Usually, unconventional extraction is slower than conventional extraction. This plays into the problem of flow rates.

    It is a geological fact that oil deposits deplete and follow a flow rate bell curve. Every major supergiant field on the planet is in terminal decline. That is, their output has peaked, and now dropping. Pick any field you want in the super giant class, and you will see they are all on the downward slope of their output curve.

    Another important aspect of oil extraction is Energy Returned on Energy Invested. Soon as it takes more energy to get the oil out than you get out of the well, the deposit is spent regardless how much is still in the ground.

    In the 1960’s conventional deposits had ERoEI of 100:1. Today the average is 25:1. The Alberta oil sands is 6:1 for surface mining (from the industry), less than 4:1 for insitu.

    Peak oil is a geological fact. It will occur. We have been on a worldwide plateau of output since 2005. Whether that increase of decreases will determine if we are globally past peak.

    Invocation or not. Money or not, peak oil is a reality.

  213. If not for the Peak Oilers I don’t know if Dad could have made his fortune chasing grants for fusion research. Though he never pushed the peak oil crap, he was in the optimist camp that thought there’s plenty of oil yet to be found. Which is great because he retired believing fusion energy was pretty much hopeless.

  214. Peak oil, as I hear expressed, is that the rate of extraction of oil (or oil equivalent) will reach some peak, then decline. Willis (and others) counter argument, is that there is more uncoventional, low grade reserves that can step in and take up the slack.

    But I call this peak oil theory, the “naive” peak oil theory. The problem with more and more unconventional resources is a declining EROEI. This argument was dimissed upthread by E.M. Smith, who expects us to extract oil even when it takes more energy than is returned (EROEI less than 1).

    Most people would agree with the statement that we owe our economic well being to the surplus energy that fossil fuels have made available. We can see how the first great revolution was agriculture, which enabled surplus food to provide the energy for a division of labour, allowing government and trades to be supported in addition to the basic process of providing food (energy).

    The biggest revolution, however, was the discovery of the vast amounts of energy that could be released from fossil fuels. This has allowed the vast majority of the population to be supported in other activities completely separate from energy (and food) extraction.

    So, there we have our basic economic model – suplus energy provides all the activities – government, law, defence, food, services, manufacturing – that gives us that which we take for granted in our civilization. Obviously, energy extraction is an economic process in itself, and economic output is fed back into providing for this extraction. In the past, easy oil gave an EROEI of about 100:1, which means all only about 1% of economic output was used in the extraction process, and 99% to provide government, law, defence, food, services and manufacturing.

    In the Tullet Prebon report “perfect storm financial crisis,they make the same observation that “The real importance of the industrial revolution lay in harnessing exogenous energy resources to apply vast leverage to the economy.” It should be obvious that if you put in more energy than you get out (averaged over the global extraction process), there would not be any surplus energy to drive the economy. At an EROEI of 100:1 the picture is overwhelmingly one of profit. The ratio remains very strong at 50:1 and is still robust at 25:1. Below an EROEI of 15:1 however, the profit element falls off a cliff because there is an exponential increase in the cost component.

    By the 1970s the ratio had declined to about 30:1 and few discoveries today offer EROEI better than about 10:1. The oil industry has becoming ever more technologically sophisticated with horizontal drilling, fracking and deep sea drilling, but the overall trend has been of declining EROEI. Much the same applies to other fossil fuels such as coal and gas. Almost all the worlds reserves of anthracite (the best coal in the terms of energy per ton) have already been exhausted, creating greater reliance on bitumous and sub-bitumous coals. The EROEI of surface mined tar sands is probably little better than 3:1. The lates fashion du jour is shale gas, but EROEIs are about 5:1.

    So what?

    Well, with EROEI of say 40:1, the theoretical cost of energy would be about 2.4% of GDP. At 20:1 (roughly where we are today), energy extraction costs 4.76% of GDP. At 5:1 however, energy would absorb 16.7% of GDP, meaning that energy costs would have increased by 250%.

    A declining global EROEI means that more and more of the economic output must be cycled back to the energy extraction process. If the percentage of economic output required for government, law and defence is still maintained, that means a shrinking of the private consumption sector. In order to provide growth in private consumption, more energy must be extracted. Increasing absolute extraction when more and more economic activity is required to be fed back into the extraction process would entail a vast sector of the economy devoted to energy extraction – rigs, drilling equipment, and energy itself, in vast quantities.

    The USSR went bust because they tried to direct 10% of their economic output into the military. Can we do any better under these scenarios?

  215. Willis, great job,
    It’s the same old mantra from the left who hate oil, although they enjoy the benefits of a life in the USA and the rest of the world improved substancially because we use fossil fuels to heat our homes, travel both locally and long distances which improves our economy and life style emmensely. Also oil and natural gas products are the core for the manufacture of so many plastics, etc that improve our life style.
    It is amusing that there are those who think they are clever enough to re write the facts presented by Willis to justify their “peak Oil” myth- by inventing the terms conventional and non conventional oil. It does not matter, we have lots of oil!!

    It is true that many including myself and many industry leaders believed that peak oil was around the corner several times, as evidenced by the intense interest in coal liquifaction and other means to replace crude oil for transportation fuels. Huge dollars were spent late in the 70’s and early 80’s for development. While coal liquification was proven, the cost was quite high and it died because the Saudi’s lowered the price of crude.
    Few saw/predicted the impact of deep offshore drilling, fracking, horizontal drilling,and other technology developments. etc. that at least put off peak oil for manu years.

  216. As others have said peak oil is a myth because of human ingenuity.

    The biggest problem is POLITICS. As long as the large corporations/bankers have control, laws regulation and news media propaganda will be shaped to maximize profit. This is the point everyone ignores.

    The ‘Peak Oil’ and ‘Anti-nuclear’ scares are all about maximizing profits.
    During the 1974-5 oil ‘scarity’ the old truckers who hauled will tell you that there was so much oil being held back that the guys at the refineries were complaining they did not know where the heck to put it.

    You can not double prices over night as was done in the mid seventies without scaring the general public first so they will accept the change. Notice it is now forty years later with no scarcity just much higher prices – mainly due to the fact the US $$$ has the same value as toilet paper.

    The Boston Globe in the mid eighties had ads running for “Nuclear Protesters wanted $10/hr” at that time minimum wage was $3.35

    The Rockefeller foundation funded The National Acadamies Committees on Biological Effects of Atomic Radiation, 1954-1964 Given the Rockefeller families holdings in oil companies one could say they had a vested interest in seeing the reports were as ‘Scary’ as possible since nuclear energy was a direct competitor. This is especially true of the Aircraft Reactor Experiment at Oak Ridge National Laboratory which was STOPPED in 1976 just after the ‘Oil Crisis” resulted in the doubling in the price of gas at the pump. Politics anyone???

    From Singapore we have:

    A brief History of the Liquid Fluoride ReactorThe program was subsequently cancelled in January 1973.

    In 1974, the program was briefly restarted and solutions were pursued to tellurium-cracking and tritium isolation. These were basically solved to the satisfaction of the engineers, but a follow-on the MSRE was not approved by the AEC and the program was terminated again in 1976.

    And from France we have this paper:

    POTENTIAL OF THORIUM MOLTEN SALT REACTORS : DETAILED CALCULATIONS AND CONCEPT EVOLUTIONS IN VIEW OF A LARGE NUCLEAR ENERGY PRODUCTION
    A. NUTTIN, D. HEUER, A. BILLEBAUD, R. BRISSOT, C. LE BRUN, E. LIATARD, J.-M. LOISEAUX, L. MATHIEU, O. MEPLAN, E. MERLE-LUCOTTE, H. NIFENECKER, F. PERDU
    Laboratoire de Physique Subatomique et de Cosmologie
    CNRS/IN2P3 – UJF – ENSPG, 38026 Grenoble cedex, France….

    2.1. Brief historical review of experiments and studies
    The MSR concept was first studied in the fifties at the Oak Ridge National Laboratory (ORNL),
    with the Aircraft Reactor Experiment of a reactor for plane based on a liquid uranium fluoride fuel circulating in a BeO moderator. Studies were then oriented on a civilian application of this concept to electricity production. The Molten Salt Reactor Experiment (MSRE) managed from 1964 to 1969 the operation of a 8 MWth graphite-moderated MSR, with a liquid fuel made of lithium and beryllium fluorides. A third component of the salt was first enriched uranium, then 233 U and finally plutonium fluoride [5]. The main results of the MSRE are materials improvement against corrosion, control of reactivity and understanding of fuel behaviour. Its success led to the Molten Salt Breeder Reactor (MSBR) project of a 1 GWe industrial reactor based on the thorium cycle [6]…. [Discription of process]…

    The MSBR project was stopped at Oak Ridge in 1976. It was then re-evaluated in France until the early 80’s [7]. The Japanese program Thorims-NES later proposed to separate 233 U production from energy production in a simplified MSR with thorium support [8]. In the past few years, the Thorium Molten Salt Reactor (TMSR) concept for energy production with thorium has been studied again in France, with the idea to explore all its potentialities and to simplify it consequently [9][10]. It is one of the six systems selected by the Generation IV International Forum on future reactors [11]….

    This retelling of a conversation with an antinuclear activist is very ‘telling’.

    Conversation with an anti society antinuclear activist
    …Joris, a frequent contributor to Atomic Insights discussions, provided the following story in a recent comment….

    …He then explained to me that the facts about nuclear energy, it’s safety and even it’s positive economic effects were not relevant. He said that scaremongering and misinformation where the appropriate and moral strategy of anti-nuclear groups.

    He said that the ideology of sustainability and anti-nuclearism was so important for the future of humanity that facts should be of no concern. Moreover: if the invention of fake information (i.e. lies) about nuclear energy could bring closer the day of elimination of nuclear power from the earth, then that meant that producing and spreading fake information should (and indeed was) a top priority of all anti-nuclear groups.

    So then I asked him why he thought that it was moral and defensible to lie to people. He said that people in general cannot and do not base their views and opinions on facts, so the value of facts versus fiction was relative. In order to bring about the desired outcome (i.e. a nuclear free world) fiction could be (and in fact was, in his opinion) a much better way to do it then facts.

    Finally, I asked him why he thought nuclear power should be eliminated even after he told me that he agreed that nuclear power was good for the economy. His reply was simply that an additional goal of the antinuclear movement (as far as he was concerned) was in fact the reduction of economic activity, since according to him, the greatest cause of ecological damage was increased economic activity.

    So in his mind, the fact that nuclear power was a boon for the economy was all the more reason to try to eliminate it. In closing, I told him that a reduction in economic activity would also reduce his own prospects for a high quality of life and prosperity. But he didn’t agree with me. He said that further economic expansion was of no use to him, because he believed in living a simple life.

    He said that economic expansion was bad for people because it distracted from the true quality of life, which consists of community and social activities that are mostly threatened by improved prosperity, rather than improved by it.

    ….If people like Bud and the misanthropic antinuclear activist with whom Joris spoke want to live the simple life free from the inventions of mankind, why do they feel empowered to impose that lifestyle on all of the rest of us? I have no sense of guilt and am getting more and more angry about the sanctimonious attitude of those for whom “powering down” and energy conservation is an end in itself….

    I could not agree more!

    I was going to put this in ‘other links’ but I strongly suggest reading it. An old journalist got a chance to grill some top flight officials at a sparsely attended affair and the info is quite interesting. The Reception That the Stars Fell Upon

    If the politicians would get the heck out of the way we would have the replacement for oil/coal and could then use it for making all sorts of useful things instead of burning it. However as Henry Kissinger remarked in 1970, “Control oil and you control nations” but you can not do that with an abundant cheap energy source like thorium. (Your profits go down the tubes too.) As Dr. Petr Beckmann identified it is Access to Energy that is one of the critical hallmark of freedoms. Without that access we are quickly reduced to short and brutal life.

    OTHER LINKS
    So why on earth are we using uranium?

    World Nuclear Assoc.: Small Nuclear Power Reactors

    U.S. Researcher Preparing Prototype Cars Powered by Heavy-Metal Thorium

    Would Thorium Powered Ships be better for the Navy?

    High Speed Bullet Trains could be self-powered with Thorium Plasma Batteries that require no recharge (This one deserves a chuckle)

    Norway Begins Four Year Test Of Thorium Nuclear Reactor

    And the UK: http://www.the-weinberg-foundation.org/

  217. Willis, Hubbard was right. Because crude flowing from the ground as crude oil which is what hubbard was discussing has peaked.

    Natural gas precipitates aren’t crude.
    Most “unconventional” sources aren’t crude flowing from the ground. (it could be argued that shale oil is crude oil however)
    Tar sands… are crude? NO.
    Methane hydrates are crude? no
    Crude made from coal flows from the ground? NO
    These are all processes that create crude. They aren’t crude. They all my be turned into motor fuel. Was that the point of your post? We have a limitless supply of motor fuel because we can make it several different ways that don’t involve the use of crude oil that flows from the ground?

    Intresting how you choose to argue. You ingore apples to apples comparisons. Buy saying oranges and apples are both fruit.

    P.S. Would hydrocarbons collected from other planets in the solar system (as a poster above suggested) also be crude flowing from the ground and thus prove hubbard wrong?

  218. Vince Causey:

    Your post at February 3, 2013 at 9:03 am asserts

    Peak oil, as I hear expressed, is that the rate of extraction of oil (or oil equivalent) will reach some peak, then decline. Willis (and others) counter argument, is that there is more uncoventional, low grade reserves that can step in and take up the slack.
    But I call this peak oil theory, the “naive” peak oil theory. The problem with more and more unconventional resources is a declining EROEI. This argument was dimissed upthread by E.M. Smith, who expects us to extract oil even when it takes more energy than is returned (EROEI less than 1).

    Nonsense!
    There are two reasons why the goal posts cannot be moved to where you are trying to shift them.

    Firstly, I spend money – not energy – when I buy the fuel to fill my car.

    As by E.M. Smith explained to you, any excess energy requirement for extracting and processing oil can be provided by another energy source (e.g. nuclear). If I and others are willing to pay the price for my vehicle fuel then suppliers will obtain it and provide it to the pump.

    Cost and profits affect whether the suppliers will provide that fuel to the pumps. EROEI is completely irrelevant.

    Secondly, if EROEI were relevant (n.b. it is not) then substitutes are available with positive EROEI (e.g. see my post at February 2, 2013 at 2:57 pm).

    Richard

  219. Gail Combs says:
    February 3, 2013 at 9:35 am

    “The ‘Peak Oil’ and ‘Anti-nuclear’ scares are all about maximizing profits.
    During the 1974-5 oil ‘scarity’ the old truckers who hauled will tell you that there was so much oil being held back that the guys at the refineries were complaining they did not know where the heck to put it. “

    Well, you can call it the desire to maximize profits (which is not a problem for society as long as there is competition); but what you describe is the normal consequence of price fixing by the government. When Chavez fixed the price of foodstuffs, milk and bread became scarce on supermarket shelves.

  220. “It should be obvious that if you put in more energy than you get out (averaged over the global extraction process), there would not be any surplus energy to drive the economy.”

    I agree that this is stupid when you are using fossil, hydro, or Nuclear energy that can be used more efficiently directly. In this case it only happens when a government or other force distorts the economics via subsidies, tax credits, or mandates like the ethanol mandates. This of course has a negative and dammaging impact on the economy and the GDP. This is considering economics alone not any percieved benefit in reducing CO2 which is virtually non existent since fossile fuels are required in the production.

    I don’t see how low EROEI matters “economically” for producing fuel as long as there are no subsidies or government mandates involved in the production of fossil fuels; i.e. private investment funds the commercial activity and the taxes are the same as other sources. Economicaly what is the impact on GDP if a large consumption of the energy is required in the producton of a useable product as long as the final price is competitive with alternatives without subsidies. The cost is included in the price for the resources consumed in production.
    Another example, assume I am making a product that requires a lot of energy. Does it matter economically as long as the price reflects the energy cost and I am not subsidized?

    This is based strictly on economics not any perceived effects of CO2 emissions etc.

  221. On the subject of early references to the whale oil – Drake connection. Chapter 5 of The Doomsday Myth (see previous comment), cites “Pennsylvania Petroleum” (Giddens, 1947) references a quote from a newspaper published in 1888 by William H. Abbott who built the first refinery in the Titusville Area (near Drake’s well).

    The first person to experiment with petroleum, and make a success at refining it, was Samuel Kier, of Pittsburgh. He procured his supply from the … wells at Tarentum. When refined he called it carbon oil. I purchased from him, paying $1.25 a gallon by the barrel. This was far superior to the oil made at that time in Canfield, Ohio, from the fine channel coal; or to whale oil which cost from $1.75 to $2.25 a gallon. It was a fortunate circumstance that on the decline of the whale fisheries, and particularly, after the destruction of our whaling fleet by the Rebels, during the last year of the war, there should be at hand so cheap and abundant a substitute; thereby preventing the public generally from suffering any inconvenience from the loss of whale oil.

    As a short summary from “Doomsday” (p. 66-67):
    Early 1800’s few experiments with petroleum as a lubricant or illuminant because whale oil was so cheap. But when the machine age began the demand for lighting increased and whales became scarcer. Consequently, the price of whale oil rose and people began to search for a suitable subsititute. Crude petroleum [from seeps] was seen by some persons to have possibilities as a solution to the whale oil crisis as early as 1853. The rock oil had a tendency to stink when burned lamps. So whale oil was a premium product.

    1853 George Bissell formed Pennsylvania Oil Company selling “rock oil” from seeps at $1.50/gal. In 1857 Bissell wanted to drill, so he reorganized into the Seneca Oil company, hired Drake who had no experience with drilling technology. As funds were drying up, Drake hired William Smith, an experienced water driller. Drake’s well came in on Aug. 27, 1859.

    Less than one year after Drake’s well hit, oil was selling for $10/bbl ( $0.25/gal). At the end of 1861 it was selling for $0.10/bbl at a production rate of 5000 bopd. Rising demand brought the price to $4.00 bbl by the end of 1862.

    The whaling fleet was destroyed by the Civil War, tried to rebuild itself to 257 ships, but was finished by 1870. Whaling peaked in tonnage and ships before the first oil well came in.

  222. jrwakefield, You absolutely have no idea what you’re talking about. As an old field declines, new ones are discovered. If you do some real research you’ll find that current extraction techniques will supply our fossil fuel needs for thousands of years. That’s no bull—- my boy.

  223. Sorry WIllis but the Peak Oil theory is alive and well. Conventional oil has already peaked and the new unconventional sources cannot come on line quickly enough to offset the depletion from all existing sources. I think that you are confused by the fact that oil demand has declined in the developed world due to a contraction in the real economy. All of that money printing allowed the shale players who dominate the unconventional space to get plenty of cheap loans to produce oil and gas. And they have certainly taken those loans and financed drilling activity that has increased unconventional production.

    But there is a huge problem with all this. The shale players are not making money and have very few projects that are self financing. While there are small core areas that can be very profitable most of the shale formations are marginal plays where the return on the energy invested is negative. This means that oil production can increase for a while but only as long as the lenders and investors are willing to sell shale oil and gas for less than the cost of production. I suggest that will not continue for very long and that you look to plays like the Bakken for clues about the future of shale production. Some time in the next 12-18 months you should see a very noticeable decline in gas and oil production. When that is apparent you will see the promoters move the discussion to the Eagle Ford or even to the California shale but that will not change reality. Unconventional production is the bottom of the barrel (no pun intended) and is no solution to the decline of the grand old fields that have produced most of our oil for the past century.

  224. “As long as the sun shines, we will never, if truly needed, run out of anything.”

    Never is a long time.

    Regardless of ingenuity, there are ultimate limits that we may eventually hit. The solar system contains a limited amount of resources (though many times larger than the amount available on Earth) and interstellar travel is unlikely to ever make sense for bulk resources; no-one’s likely to be shipping iron ore from Sirius because we’ve used up all the iron in the solar system. But we’re unlikely to have to worry about those limits for at least a few thousand years.

    Though, before then, we may well have had to dismantle the sun to use its materials and stop it throwing all that energy wastefully into space.

  225. In 1976, as an employee of Canada’s equivalent of the US Bureau of Mines, I was invited (the only non-American) to a US Geological Survey strategic conference in Denver on lithium’s future as an energy commodity (lithium batteries – fairly new tech, and fuel for fusion energy, expected around 2000 or so). This conference was motivated by the “Peak Oil” concern – I believe it was due in 1976. In attendance was King Hubbert himself, the hero of the day. He was a short portly, courtly, seemingly shy fellow in his 70s, dressed in a black suit and sporting a black cane and, I seem to recall, smoking a professorial black pipe – no storm-the-Bastille- and-take-no-prisoners activist type was he, like we have today. At the mixer, I asked him how he viewed the future with declining oil and he said, in what was an American trademark in those days, that there would be nothing to worry about. Humankind, he opined (I confess he used the term ‘mankind’ when we used to say “man embraces woman” – oh the scurrilousness of it all!) that human ingenuity had not failed us in the past and he expected we would resolve such problems without serious glitches. Lord, we have become such wimps – I think TV’s “bad news” hours and lefty educators have made us fear our shadows.

  226. Gail Combs says:
    February 3, 2013 at 5:53 am

    “The fracturing technology was developed about forty years ago, and has been used ever since, mostly for secondary recovery. And for all those decades the oil coming from the fractured rocks has been “conventional oil”.”

    Actually “fracking” was invented just after the Civil War.

    Great find, Gail. I hadn’t realized it was that old, the first method for fracking was patented in 1865, or that the company that used it stayed in business until 1990. Amazing.

    w.

  227. I intended to add that on Jan 29th 31st, 2013, I just attended a lithium conference in Las Vegas – where it’s all about lithium battery-powered electric and hybrid vehicles, energy storage, etc.

  228. Willis.Excelent post.Worked on a team developing horizontal drilling way back in the 70’s. [Broke] many a mandrel and a ton of pipe,until somebody clicked in that,hey just turn your mind from vertical to [horizontal].I always remember the joke he told.
    Two engineers,having no ladder or tape measure,where trying to figure out how to measure the height of a flagpole.A janitor came by,handed them a tape measure,and said, “just lower it to the ground and there ya go”. Janitor wanders off,the engineers look at each,and say,”stupid janitor.We want the height,not the length!””

  229. David L. Hagen says:
    February 3, 2013 at 5:58 am

    … Note that the International Energy Agency 2012 now shows crude oil production peaked in 2005.

    David, this thread is rich in ironic examples of just the kinds of beliefs I am referring to. Let me show you what I mean. This is from your citation:

    Now, I look at that, and I say that since we cannot tell oil from say “processing gains” from oil that comes from from the ground, and since we can’t tell “tight” oil from loose oil, and since we can’t distinguish “other uncoventional oil” from any other kind of oil, that all of those are oil. Call me crazy, but if it walks like oil, and and quacks like oil, I call it oil. What do you call it?

    As a result, your claims go into the “true and totally meaningless” pile. So what? So what if some major or minor subdivision of oil has or hasn’t peaked? … None of that matters because as long as the amount of oil hitting the market keeps going up, we haven’t yet seen peak oil. That’s all that counts. That’s all that matters. How much oil is on the market each year. People could care less if they are burning gasoline from “processing gains” or not. All that matters is how much oil there is for people to buy.

    And as the post you cited clearly shows, not only has the total amount of oil hitting the market kept rising year after year for decades and decades, they expect the total oil produced to continue to keep rising. By 2035 they forecast about 33% more oil hitting the market each and every year than is produced and marketed today.

    That’s why I say we haven’t come anywhere near peak oil yet, and the IEA agrees with me.

    w.

    • Willis writes:

      vangelv, I’m getting dizzy with the moving of the goalposts. First the peak was supposed to be peak oil. Then it was peak conventional oil. Now, you are talking about peak light sweet crude. Plus you want to make the judgement on what should be included in the peaks based on how much of the heavier and how much of the lighter grades you get out of it … really?

      It is not my fault that you have posted on a subject that you have not really studied well enough. Hubbert’s idea is not very difficult to understand and is extremely sound. You take a field and plot its production. If you do a plot of the annual production divided by the cumulative production versus the cumulative production you get a line that extends towards the ultimate recovery from that field. If you add up all of the production within a country or region you get the ultimate recovery from that country or region.

      If you keep your data clean, which is very difficult when you have the EIA and IEA as the gatekeepers, you can plot the peak for each type of hydrocarbon that you are producing. Obviously, as you add more types of products you should move the aggregate peak out a little. All that the unconventional production can do is push off the peak by a little bit but it cannot change the fact that annual production will peak. Part of the problem with the whole exercise is the data integrity. The earlier data does not include biofuels and NGLs even when they were produced. The current data does include them. And much of the field by field production data is not available. As the late Mat Simmons pointed out, predicting the date of the peak within a year or two would be very easy if geologists were given the field data for all producing countries. Since that data is not available the predicted date has a much larger uncertainty associated with it. And as I pointed out, the production rate from unconventional sources is sufficiently low that it will not make much of a difference to the eventual peak date.

      And as many of the critics of Peak Oil you get a bit confused about the differences between various grades. Since what ultimately matters are the products that are created by the crude that is produced the mixture of oil does matter. Many of the refineries are old. Some of them have cores that could have been built decades ago. They cannot just stop using sweet and switch to sour because they would fall apart due to corrosion. And even if they could find a heavier sweet as input and make all of the necessary adjustments to maximize output the refineries would still find that each barrel of the new oil does not produce as much of the high value fuels as the lighter feed stock used to.

      I suggest that you take a look at some great books on this subject. Oil 101 was an excellent recommendation. But you also might want to consider two short books by Kenneth Deffeyes, Hubbert’s Peak: The Impending World Oil Shortage, and Beyond Oil: The View from Hubbert’s Peak as a good starting point. Deffeyes provides a clear yet simple explanation that should let readers understand what the debate is really about.

  230. MarkG says:
    February 3, 2013 at 11:33 am

    ““As long as the sun shines, we will never, if truly needed, run out of anything.”

    Never is a long time.””

    Mark, you rightly note that we don’t have an imminent problem with shortage of resources. However, let me explain why the quote about the sun shining is correct as is.

    1) Nearly all the metals and non-fuel non-metals we have mined are still available for reuse and we have made great strides in recycling more and more of these. Moreover, we are using less and less per unit of finished product.

    2) With changing tech and current prices, we are mining what were ore grades well below the margin in days gone by (how’s 1gram of gold per tonne – i.e. 1 ppm)

    3) This is the one that most people do not consider: the demand is for an end product, not a specific metal. You can make a radio with a piece of quartz, a coil of wire and a few other items. Zinc’s main use has been in making a non-corrosive surface for iron for barn rooves, culverts, etc. – we could do without zinc for this purpose and indeed we are making these things out of plastic with cheap non metallic mineral fillers. Same thing will copper wires for electricity – aluminum largely replaced it and common clay and granite are about 15% aluminum and there is graphite, etc.

  231. Vince Causey says:
    February 3, 2013 at 9:03 am

    Peak oil, as I hear expressed, is that the rate of extraction of oil (or oil equivalent) will reach some peak, then decline. Willis (and others) counter argument, is that there is more uncoventional, low grade reserves that can step in and take up the slack…..
    >>>>>>>>>>>>>>>>>>>>>>>>
    If what you are saying is true, AND we have governments that are interested in the wellbeing of our country and not in orchestrating its demise, then there would be an all out push for the replacement of coal and oil with hydropower, the best nuclear plants we can design and a second push for Micro Nuclear Reactors that can be used to power trains, ships and possibly aircraft.

    Since the buffoons in office are instead funding low density intermittent “solutions” like solar and wind that put tax payer $$$ into bankrupting boondoggles, while making sure dams are removed from our Wild and Scenic Rivers. and in the USA government has been blocking development of nuclear since the 1970’s, so I will let you figure out which is occurring:
    1. We have a bunch of selfish traitors in office who are fiddling while the USA and the EU ‘burn’
    2. There is no peak oil.
    3. Free, independent and thinking individuals are viewed as dangerous by the Regulating Class and by curtailing our ‘Access to Energy’ they hope to control us.

  232. Stanb999 says:
    February 3, 2013 at 9:42 am

    … Intresting how you choose to argue. You ingore apples to apples comparisons. By saying oranges and apples are both fruit.

    The difference is, you and I can tell apples from oranges.

    But oil from “conventional” sources and oil from say “processing gains” (see the chart above) and oil from fracking all burn exactly the same in your engine. No difference. When you pull up to the pump, you don’t say “just give me gas from ‘conventional’ sources please”. Your car can’t distinguish between oil from Saudi Arabia and Alberta tar sands oil and oil from fracking shale. It’s all just oil.

    And that is why, when we are talking about “peak oil”, we’re not talking about peak apples. Because to your car, to your wallet, to the world market, it’s all just oil … and the production of oil is a long way from peaking. See the chart immediately above.

    w.

    • “But oil from “conventional” sources and oil from say “processing gains” (see the chart above) and oil from fracking all burn exactly the same in your engine.”

      This is not exactly true because a barrel of light sweet does not make the same products as a barrel of heavier sour crude. Light sweet produces more higher value products like gasoline and jet fuel while the heavier crude produces more asphalt and bunker oil. And let us not forget that the agencies today try to include all of the NGLs and refinery gains in the aggregate production figures. A few years ago they were not as careful to account for everything because there was no talk of peak oil.

  233. Gary Pearse says:
    February 3, 2013 at 11:36 am

    In 1976, as an employee of Canada’s equivalent of the US Bureau of Mines, I was invited (the only non-American) to a US Geological Survey strategic conference in Denver on lithium’s future as an energy commodity (lithium batteries – fairly new tech, and fuel for fusion energy, expected around 2000 or so). This conference was motivated by the “Peak Oil” concern – I believe it was due in 1976. In attendance was King Hubbert himself, the hero of the day. He was a short portly, courtly, seemingly shy fellow in his 70s, dressed in a black suit and sporting a black cane and, I seem to recall, smoking a professorial black pipe – no storm-the-Bastille- and-take-no-prisoners activist type was he, like we have today. At the mixer, I asked him how he viewed the future with declining oil and he said, in what was an American trademark in those days, that there would be nothing to worry about. Humankind, he opined (I confess he used the term ‘mankind’ when we used to say “man embraces woman” – oh the scurrilousness of it all!) that human ingenuity had not failed us in the past and he expected we would resolve such problems without serious glitches. Lord, we have become such wimps – I think TV’s “bad news” hours and lefty educators have made us fear our shadows.

    Lovely anecdote, Gary, and to the point. He didn’t buy into the hype …

    w.

  234. MC says:
    February 3, 2013 at 10:45 am
    jrwakefield, You absolutely have no idea what you’re talking about. As an old field declines, new ones are discovered. If you do some real research you’ll find that current extraction techniques will supply our fossil fuel needs for thousands of years. That’s no bull—- my boy.

    ——

    Have a look at a graph of discoveries. It’s been steadily dropping for 50 years. Google is and see for yourself. http://watd.wuthering-heights.co.uk/chartimages/d/d1oildiscavproj.gif There hasnt been a Ghawar size field discovered since, because there isnt any We are consuming 5 barrels for every 2 we find. And yes, I have been reading about this for some time.

    Thousands of years? ROTFL. 30 Billion barrels in a year. That’s 30,000 billion barrels in one thousand years. That’s TEN TIMES all known fields of petroleum of all kinds. That does not include increasing demand. The rate of consumption of FF is about 3% per year, that’s a doubling every 25 years. Thats 40 doubling periods. That means in the last 25 years of those 1000 we would be consuming 15 TRILLION barrels per year.

    Ironically, however, you are right. Oil will last us for thousands more years. Just not with this population, and this high energy demanding civilization.

  235. DirkH says:
    February 3, 2013 at 10:15 am

    Well, you can call it the desire to maximize profits….
    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
    You are correct. It is powerful cartels with huge influence on government causing price fixing. Top Senate Democrat: bankers “own” the U.S. Congress

    These guys pin pointed what many folks are missing.

    Ignoring Elites, Historians Are Missing a Major Factor in Politics and History
    Steve Fraser, Gary Gerstel (2005)

    Over the last quarter-century, historians have by and large ceased writing about the role of ruling elites in the country’s evolution. Or if they have taken up the subject, they have done so to argue against its salience for grasping the essentials of American political history. Yet there is something peculiar about this recent intellectual aversion, even if we accept as true the beliefs that democracy, social mobility, and economic dynamism have long inhibited the congealing of a ruling stratum. This aversion has coincided, after all, with one of the largest and fastest-growing disparities in the division of income and wealth in American history….Neglecting the powerful had not been characteristic of historical work before World War II.…. http://hnn.us/blogs/entries/11068.html

  236. Mr. E. You are right on point, as usual. But there is a point about “peak oil” I feel you have missed.

    (Full disclosure: I am in the o & g biz, have been for 34 years, been through the peak oil and gas several times.)

    You are right in one way, but I suggest that Hubbard was also right, just in a different way. Hubbard, I propose, was (unconsciously) referring to not to oil per se, but to oil produced at a certain technical ease, i.e. cost. Now “cost” can be either in dollars, which is subject to inflation or deflation, so difficult to determine what the “real” change is, that is, relative to the amount of time some arbitrary worker has to put in to afford a drop or two. That worker’s wage also fluctuates as the global source of workforce changes. “Cost” can also be considered as a product of the product itself in the case of oil and gas, though, as you have to sell the product in order to go and and get the product.

    This is where “peak oil” has some reality.

    Back in ’79, when I arrived in the heart of the Canadian petroleum business, there was a government mandated oil production rate for pools (an MRL), both for oil and gas. The idea was to extend the life of the pool for national interest purposes and avoid overproduction rates which prematurely kill wells through induced water production. Still, it was economic to dill a 1000 m, find perhaps 50,000 bbls (50 mstb) of oil over its life, and produce it at 35 barrels per day (bopd). Gas, you’d want 500,000 cubic feet per day,(500 mcfd), and produce perhaps a third of a billion cubic feet (0.3 bcf). Can’t do that any more. You would be out of business (unless you are so small that looking after the oilfields was part of your income).

    Which is unfortunate for two reasons. The first is that the technology to do so is fabulous now, and it would be a dream to be working on those old plays with the new toys. The second is that it ain’t there any more of these small, easily produced, 1000m oil pools out here any more.

    The “easy” oil and gas is gone. The easy stuff has been gone in the continental US for even longer. Back in the ’90s I recall the average producing Canadian well was doing 30 bopd, while the American was 15 bopd. Both are worse now The big pools in the mid-east deserts have been found, though the stratigraphically bound oil and gas has not been much exploited – because the amount of drilling per barrel is much lower than the original, structurally bound plays that were discovered initially. Same world over: as time has gone on the amount of effort required to get the replacement barrel has become more difficult and therefore, more expensive.

    Do not be fooled by the claim that the new technology becomes cheaper as time goes by in a practical sense. It does not: as the technology has improved, the resource being exploited has become less happy about being exploited. There is no, I repeat, no trend to decreasing real costs. What you hear about decreasing costs is a mirage, it is based on infill drilling of already discovered and developed resources in which infrastructure, pipelines, tankage, compressors, roads and the like, are already in place.

    Oil becomes cheaper to produce with time the same way your living costs decrease with time as you no longer need to buy furniture, pay your mortgage etc. If you were forced to start a house anew, or go out and find and drill-to-discover a new oilfield, you will find it more difficult, more expensive than before.

    The only time commodities become cheaper with time is when untapped, original resources are accessed with the knowledge gained earlier, elsewhere.

    Consider the North Dakota Bakken oil. I’m not a skeptic of the claims for the pools there because I am suspicious that ALL the ballyhoo came from several Continental Oil press releases back in late 2011, a claim that has 5X as much recoverable oil as the USGS allow, or that Continental Oil says that EVERY well will have a 500mstb recoverable with an initial rate of 430 bopd. That is, not just the core, but the outliers, the marginal area, with pressure reduction happening as we go forward. I’m not a skeptic that Continental Oil will be, by 2016, bigger than Devon Oil, or that by 2020 the Bakken will be producing 1.2 mmstb/day (it is now doing about 680 mstb/day). I’m an unbeliever.

    I’m an unbeliever because the difficulty in getting oil out increases with time in the simplest of ways. The Bakken wells cost, according to various press releases, about $10.2 million/well. (Since that would be drilling costs, a full-cost number would be in excess of $11 million/well, but this is not material to the discussion at hand.) In order to pay for this well, if on-going costs are $30/bbl, not an unusual cost (you have to include admin, office and the president’s salary and bonuses), the netback is $60/bbl right now. (Press releases claim the pools are exploitable at about $60/bbl, probably underestimated for shareholder purposes, so the numbers are reasonable.) That means that you have to have found almost 200,000 barrels just to cover the costs of finding the oil.

    This is what the public doesn’t understand. The first 200,000 simply covers the process of finding the reserve. In terms of energy – human and mechanical – 200 mstb is the break even point. If that pool does not have in it more than 200 mstb/well, you won’t even try to get it out. It is not sustainable.

    Specifically with respect to the North Dakota Bakken, the chances of getting 200,000 per well is strictly determined by its initial production rate. Declines are very high, in excess of 20%/annum after the first 3 years (public data, easily determined). If you start out at 200 bopd, not 430, you won’t get there. If you look to the current 680 mstb/day at a 20% per year exponential decline, you’ll see that to get to 1.2 mmstb/day by 2020 means you have to drill faster and faster AND suffer no pressure-related decline/well (or reservoir related). The field is now in the 8-well/square mile infill stage; the recovery rate per well WILL decline as unicorns, fairies and oil fields that don’t suffer with age exist only in the minds of children and stockbrokers.

    The North Dakota Bakken is expensive and its return in terms of beyond-cost volumes, much, much lower than how it used to be. The glut of oil coming out of the Bakken is misleading: it takes so much “oil” to get oil out, you have to be very careful (and worried) that you don’t overextend yourself.

    Consider the above when you look to the claims of “peak oil” being a sham. In the physical sense, Hubbard was wrong, and will continue to be wrong. In the other sense, of oil-in vs oil-out, Hubbard was right.

    As we have gone forward, the ease of finding fossil fuel energy has ended. The “resource” exists but what a piece of misinformation! Molecules in the ground is what a resource is, but molecules in the pipeline is what we use. And if it takes 2 molecules of effort to get one for use now, guess what is happening in the future …. more effort for less results. Prices rise and those who can’t pay today, sure as hell can’t pay tomorrow.

    N|ow there are other “unconventionals”, other hydrocarbons to replace conventional oil and gas. Gas hydrates is a good example of such a “resource”. Like gold dissolved in sea water, gas hydrates are ubiquitous. 2D seismic lines along the continental shelf show the hydrates clearly as disturbed beds near the surface, several hundred meters thick in places. In the Arctic, hydrates cause drilling problems, though not the catastrophic drilling problems people first thought. Why? Because the concentration is sufficiently low, and the density of its matix also so low that the iimmediate gas around the drillbit disappears into your drilling mud as you drill into it and the “reservoir” compacts fast enough around the drillbit that you don’t get a runaway effect. You WOULD if the gas were concentrated enough. Somewhere hydrates are sufficiently concentrated to be producible, but not everywhere, just as gold is everywhere but only minable in some places.

    Resource does not mean reserve. Reserve – producible at some reasonable price – does not mean producible at today’s prices.

    The BS in Britain right now about shale gas, and the “oil” in central Australia are two, additional and current examples. The political-company excitement disrespect the consuming public (and shareholders). The amount of oil and gas that must be produced to break even on the simple effort to get out the resource creates a hamster wheel of activity. Not just a treadmill. If this is to be the future, the future economy will devolve to one based around getting oil out of the ground. For the initial investments come from the rest of the economy. And if the return is not sufficient, then the rest of the economy in effect subsidizes the industrial need for oil. The net effect: farmers work hard to generate income to pay for the oil they need to … work as farmers to pay for the oil they need to …

    As I have said other times, the future is not dark, but it is expensive.

    The more we continue to rely on fossil fuels to drive our world, the more of our effort will be spent on generating the wealth necessary to drive our fossil fueled world. We work harder and faster to bring in “profit”, by which I do not mean a personal grasp of wealth, but the excess effort a society has have to create art, spaceships and coffee-house lattes.

    And it is the art, spaceships and lattes that are the heart of all societies. The rest is background.

    Drilling for more and more expensive oil is no different economically from funding interminal wars: the money/social effort goes to no further end than survival for the next day’s effort.

    Coal can, and has been, made into liquids or gas on a large scale since before the Second World War. You can even turn the methane gas from garbage dumps into gasoline with the right catalysts and “reactors”. The technical feasibility is not the issue, but the amount of energy, i.e. effort these take in a world in which effort is limited by 24-hour days. If it takes you a half day to produce one day’s worth of food, you get fat. If it takes you a day and a half to produce one day’s worth of food, starvation is in your future. We aren’t at that stage yet, but WITH RESPECT TO OIL AND GAS AS THE PRINCIPAL ENERGY SOURCE, we are headed inexorably in that direction.

    But if peak oil/gas is not real, why are energy costs in the US one-half of those in Europe? Price vs Cost: prices right now are less than the go-forward cost of production.

    Fossil fuel in the US – natural gas specifically – is cheap right now due to over-production and under-consumption, not low costs of production. This seems paradoxical, but oil and gas aren’t like other commodities like toothpaste. Once you can produce it, you more-or-less have to.

    The problem is there is less being used, because of:
    1) economic shrinkage more than use efficiency,
    2) once brought on-stream, is not a commodity either easily stored, or
    3) due to cashflow demands, easily turned off, or
    4) coming as a byproduct of liquid production, avoided,
    5) those who produce liquids with gas can use their profits from the liquids to offset their “losses” from gas, i.e. the oil consumers subsidize the gas consumers.

    As even Bishop Hill has noted, a cost of $6/mcf is a go-forward, shale-gas break even cost. Twice the current market price. The future is >$6/mcf in a real sense as the current gas bubble goes away, i.e. the conventional or subsidized volumes decline. (This has happened several times in my career, though principally due to under availability of take-away, pipeline capacity. Oil prices for heavy crude are similarly depressed right now, which is why Canada wants the XL pipeline.)

    Costs above price has an unavoidable result: new product volume goes down and price goes up. It has to, or everyone, including the government dependent on taxes, goes broke.

    Think of this: China is not building coal fired power generators at the rate of 1 per month because oil and gas is cheap to find, produce and bring to market. At the same time, the oilsands of northeast are looking for the alternative, to go to Japan and Indonesia via the Gateway pipeline and tankers out of a British Columbia deep port, if the XL pipeline doesn’t go through (which it will: Texas refineries need to be fed) not because the Canadian heavy crude is cheap to produce. Not at all: the oilsands are so capital intensive, and break even price so high, that hardly anyone can afford the game. The western Pacific wants it because it doesn’t have access to less expensive oil any more. The Athabasca deposits are what is now AVAILABLE.

    Japan went to war with the world when its supplies of oil (plus rubber and other critical materials) was cut off or threatened by the British and American empires. That is how critical energy supplies are to nations. (According to many, the four Iraq wars were/are waged for security of oil supplies, though I think hegemony counts for the first two, and keeping potential rivals weak, for the last two. But oil security even at $100/bbl may be in the mix.)

    Again, the future is not dark but it is expensive.

    Moving to a non-fossil fuel based – other than simple coal – is a necessary and coming move based on the declining amount of EASILY recovered supplies. We cannot have a thriving civilization if we spend most of our effort providing for the heating, cooling, lighting and moving that underlies our civilized way of life, any more than a spending all your effort keeping predators at bay could allow the rise of ancient cultures. It is said that energy costs are already creating a “fuel poverty’ in the pensioner of England and Scotland, where God knows you want your place adequately heated. (Same goes for Russia and the Ukraine.) If the eco-greens get their anti-oil into its anti-human endgame, this fuel poverty is the way of things to come, but, really, it is not viable. Still, what the eco-green is trying to do from ideology will happen if we continue to believe that oil and gas are simply there for the taking with more technology and iPhones.

    Peak Oil is a reality. It doesn’t look the way that we thought it was when Hubbard made his claims. It is not a “running out of it”, where the machine winds down because its fuel tanks are empty. It is a “deciding whether you have food on your table or a tank of gasoline in your car, or a heated house in the middle of winter”. IF, and I stress “if”, IF that you are determined to be dependent on gasoline for driving, and oil and gas for surviving the January deep freeze.

    Peak Oil is real. While there is a lot of it around. A lot of expensive oil, that is.

    PS. Nuclear will be our future. Not fusion, so far, I’m afraid. And gasification of coal. Oil and gas coming out of the ground as a primary source of a civilization’s energy is going to be seen as a transition fuel. Effort, i.e. energy-in vs energy-out, will make this happen. You can bank on it, or watch your bank account disappear, if you are determined.

  237. Willis, per that chart.

    First, “yet to be found”. That’s a pure load of hopeful guesswork. How can they possibly know what will be found until they drill???? They cant. Second, yet to be developed is also guess work as to yearly output. Until output is actually flowing they cannot know what that will be 30 years out.

  238. “By 2035 they forecast about 33% more oil hitting the market each and every year than is produced and marketed today.”

    Any you believe that? 33% EVERY YEAR!!!! Really? Think about that carefully. You’re good enough with spreadsheets, go try it.

  239. “EROEI is completely irrelevant.”

    ERoEI is the law of thermodynamics. Quite relevant. Look up the Energy Trap. Yes, you can build a nuke plant to help extract oil such that you’re losing more energy than you get out of it. That is, you lose more uranium energy than you get back in oil energy. We likely will do that. But does that make sense? Maybe to some.

    It’s kinda like borrowing money to spend money. You end up spending even more money on those items because you have to pay interest on the money you borrow. You can do that for a time, until you run out of means to pay for the interest.

    Same with energy. Sure, build a nuke plant to extract oil at a loss. But that nuke power cannot be used to run other aspects of society. Eventually you get to the point where you have to keep building more energy plants just to get energy. It will catch up with us, just like debt financing does.

  240. thingadonta says:
    February 2, 2013 at 10:46 pm

    I think in 100 years we will still be using oil, as well as the usual other minerals and energy resources, and the whole current AGW thing and various other green ideological fantasies will have gone the way of Christianity-largely extinct and customary.

    Peak Christianity is as delusional as Peak Oil.

  241. I am reminded of “Peak Agriculture” arguments as well. Prior to Enclosure, almost all ag in the EU was of the subsistence kind. The invention of property rights and market economies in the Netherlands during the 16th century led to double and triple cropping and the transfer of control of farmland to those who could actually farm. Ag productivity increased ten fold in the Protestant nations of Norther and the British Isles. This basket of new technologies did away with famine.

    Peak Oil was predicated on technology remaining the same. Any geologist back then could tell you that most of the oil even in old wells was still in the ground. A new set of technologies would get it if there was a need to go get it. But why go get it with a more expensive set of techniques if it was cheaper to just turn the spigots on the old wells? Horizontal drilling and cracking were invented in the 50s. But there was no push to develop it as a technique until the last few years.

  242. Back when I first heard of peak oil, it didn’t take me very long to start wondering if it wasn’t just a ploy to just keep the price of oil rising. After all, isn’t the price of diamonds kept high by claiming they are “rare”? And back in the 70’s when the first oil crisis arose, didn’t it just turn out to be a ploy to raise prices? At least back then, they lowered the speed limit on the interstate highways to force people to use less gas. This go round, it has all seemed so bogus because big SUVs and trucks are as popular as ever, and the so-called new “fuel-efficient” vehicles only get around 30 miles per gallon (heck! my 22 year old Buick gets 28-29 on the highway!), and it’s paid for.

    I found myself wondering if the idea of abiotic oil wasn’t closer to reality, and that if it became known that oil could become as plentiful as water, then its price would decline to intolerable (for investors) levels.

  243. richardscourtney says:
    February 3, 2013 at 9:46 am
    “Nonsense!
    There are two reasons why the goal posts cannot be moved to where you are trying to shift them.”

    Thank you for replying to my post. I am not trying to move goalposts Richard, merely fill in a gap missing from Willis article. Willis maintains that “peak oil” cannot exist because there exists an abundance of low grade resources that can fill the gap. Everyone agrees that this is so. I am merely saying Yes, but you haven’t mentioned EROEI, so let’s see where that leads.

    You then say:
    “Firstly, I spend money – not energy – when I buy the fuel to fill my car.”

    But money is merely the claim that you have on goods and services in society. When you spend money, therefore, you are exchanging your claim on a certain amount of goods for some other goods. Goods, of course, are the result of processing raw materials with that surplus energy. So I would say that when you spend money to fill your car, you are indeed spending energy.

    You then pointed out: “As by E.M. Smith explained to you, any excess energy requirement for extracting and processing oil can be provided by another energy source (e.g. nuclear).”

    Yes, I agree. If nuclear power is available in sufficient quantities, then it would change the outcome. However, as I mentioned in my post, I referred to “globally averaged EROEI.” If nuclear makes up more of the mix, then EROEI on a global level, would be higher than otherwise.

    You then say: “Cost and profits affect whether the suppliers will provide that fuel to the pumps. EROEI is completely irrelevant.”

    But EROEI determines costs. An EROEI of 4:1 say, means that 1 unit of energy is input to obtain 4 units of energy. Energy input in this equation comprises not only energy supplied to do work at the extraction site, but transportation, energy in manufacture of capital equipment, and even energy required to feed, house and cloth the individuals operating these processes. It means high costs.

    Economic output is fundamentally an energy equation. Energy is used to massively leverage the output of society. When I talk about low EROEIs, I should stress that I’m not referring to individual operations having low ratios. We do extract oil from tar sands and gas from shale, which individually have low EROEIs, but it doesn’t negatively impact the economy because the global average EROEI is 20:1 or even 25:1. This is a robust ratio, and means that only about 4% of economic output is needed to be input back into the energy extraction process.

    The problem occurs when ALL the energy we have consists ONLY of tar sands or shale gas having very low EROEIs, so that the globally averaged ratio is 5:1. That would require 16.7% of all economic output being consumed to provide societies energy needs. Again, when the USSR directed 10 or 12% of economic output to the military, it bankrupted them.

    I would love nuclear power to step in and raise the EROEI equation, but the politcs seems to be moving the other way. Germany has turned its back on nuclear, and environmental activists are still very powerful. Nevertheless, when needs must, the politics will probably change. And maybe polywell fusion will prove viable or even ITER. Thorium fission is potentially a game changer. The trouble with these technologies though, is they could be decades away.

    Regards
    vc

  244. jrwakefield says:
    February 3, 2013 at 8:25 am

    Willis, first lets be clear what peak oil means. It is not about what’s in the ground, never has been. Peak oil is about flow rates meeting demand. Conventional or unconventional (geological terms BTW) doesnt matter. Usually, unconventional extraction is slower than conventional extraction. This plays into the problem of flow rates.

    OK, sounds like you’d agree that we have not yet seen peak oil.

    It is a geological fact that oil deposits deplete and follow a flow rate bell curve.

    Ummm … kinda true at a constant price, not at all true at a highly variable price like we’ve seen in the last couple decades.

    Every major supergiant field on the planet is in terminal decline. That is, their output has peaked, and now dropping. Pick any field you want in the super giant class, and you will see they are all on the downward slope of their output curve.

    Mmmm … not so. To give just a couple of counterexamples, the Sugar Loaf Field in Brazil and the Lula field in Brazil are in the top ten fields, and neither one is even developed to any serious extent.

    Then we have the heavy oil deposits. These are mainly concentrated in two areas, the Orinoco deposit in Venezuela and the tar sands of Canada. Together they are estimated to contain 2/3 of the world’s total oil … and although production is currently going on in both locations, at present two thirds of the world’s oil is basically untouched. How much of that is going to be economically recoverable depends on how clever we are, but you can hardly say those giant going concerns are in “terminal decline”, they have barely gotten started.

    Then of course we have the recent shale oil discovery in Australia, estimated to contain 233 billion barrels, which is about three times the size of the Gwahar field in Saudi Arabia. Even if only 10% is economically recoverable that’s still a huge untapped resource.

    So your claim that all of the huge oil fields are in “terminal decline” is simply not true.

    Another important aspect of oil extraction is Energy Returned on Energy Invested. Soon as it takes more energy to get the oil out than you get out of the well, the deposit is spent regardless how much is still in the ground.

    Again, this reflects the same misunderstanding. The EROEI, like the size of the reserves, is a function of human imaginuity. So although a deposit may have a horrendous EROEI today, it may have a very favorable one a decade later. Thus, your claim that “the deposit is spent regardless how much is still in the ground” is absolutely untrue. The deposit is merely unavailable at the moment, tomorrow someone invents the equivalent of horizontal fracking and suddenly the EROEI looks very, very nice …

    w.

    • Then we have the heavy oil deposits. These are mainly concentrated in two areas, the Orinoco deposit in Venezuela and the tar sands of Canada.

      None of this really matters for the Peak Oil argument because the daily production for the heavy oil deposits is very limited. The massive infrastructure that is required to develop the tar sands requires that it is depreciated over a thirty year or so period. That requirement makes it difficult to increase production to high enough levels to offset the depletion from conventional fields and the much higher depletion from shale and other unconventional sources. When we look at the numbers it looks as if the Bakken formation should peak within two years. Once that happens it will be clear to all of the deniers that global production of crude will peak and that higher prices will be required to ration the available supply.

  245. MarkG says:
    February 3, 2013 at 11:33 am
    “Though, before then, we may well have had to dismantle the sun to use its materials and stop it throwing all that energy wastefully into space.”

    Freeman Dyson has though about that and proposed what is now called a Dyson sphere; think of it as very efficient solar cells forming a complete sphere around a star. No need to dismantle the sun. But of course, dismantling the sun is an entertaining concept as well.

  246. “It is a geological fact that oil deposits deplete and follow a flow rate bell curve.”

    But are we certain that the geological processes involved in creating oil have stopped?

  247. jrwakefield says:
    February 3, 2013 at 12:38 pm

    “By 2035 they forecast about 33% more oil hitting the market each and every year than is produced and marketed today.”

    Any you believe that? 33% EVERY YEAR!!!! Really? Think about that carefully. You’re good enough with spreadsheets, go try it.

    My apologies for the lack of clarity, jr. When you find yourself incredulous about my beliefs, your very first thought should be “maybe I misunderstood him”.

    My meaning was in 2035, there would be about a third more oil hitting the market annually than is produced and marketed annually today. Nor with this be a fluke, it would be the same in 2036 and 2037, every year would be a third more than it is today.

    I did not mean that in 2035 the production would be increasing by 33% each year. The confusion seems to be that I said, and I quote, “33% more oil … than is produced and marketed today”, and you thought I meant 33% more oil than each previous year. I neither said nor meant that.

    Again I say, if you find yourself incredulous at what I said, please include “maybe that’s not what he meant” in the mix of differential diagnosis. I can be wrong but I’m not a fool.

    Thanks for your contributions, they are always interesting.

    w.

  248. Bill_W – everything you say in your comment http://wattsupwiththat.com/2013/02/02/conventional-wisdom-unconventional-oil/#comment-1215453 is correct, or reasonably so.

    … It may be possible with changes in price and technology, for a curve to have more than one peak … governments do affect the price of oil and regulate where it can be drilled … You need to consider all these things at once: price, technology, gov’t policy … there are substitutes and things in competition … solar, nuclear, wind come into play if fossil fuel prices go too high …“. All correct.

    But there is one thing that you have missed:

    “Peak Oil” and “catastrophe” are different things. Your argument – everyone’s argument – should be with those who seek to portray peak oil as a catastrophe, not with those who deal with the issue of whether the rate of oil production will rise in future. In w’s latest post, he even points out that Hubbert nimself said “there would be nothing to worry about. … that human ingenuity had not failed us in the past and he expected we would resolve such problems without serious glitches“.

    Willis (and everyone) – let’s look at Hubbert again:

    Hubbert estimated the world’s recoverable oil reserves at 1,250bn barrels “crude oil and natural-gas liquids”, 3,000bn barrels “oil shales”, 1,300bn barrels “tar sands”. BP puts total world oil and liquids production 1965-2011 at a tad under 2,000bn barrels (156 USA), with remaining proved reserves at 1,653bn barrels (30.9 USA) plus 389bn barrels (Canadian oil sands and Venezuela Orinoco Belt).

    Hubbert’s “peak” related only to “crude oil” so ignore the other data for a moment: Hubbert’s crude oil estimates were way below actual, as you have pointed out. Yet his US peak oil production date of 1970 was spot on. Hubbert himself pointed out that his estimates could be way out, but that increased reserves tend not to push back the peak date by much.

    Hubbert’s US crude oil estimate was too low, reality today is 50% higher. Yet it made no difference to the US Peak Oil date as it stands today. What it did do was to give the graph a longer fatter tail (ie, there was much slower decline after the peak). Hubbert’s world crude oil estimate was too low, reality today is 192% higher. Hubbert’s predicted world Peak Oil date was 2000, and we are 13 years past that. But how many more years of increasing production rate will that “192%” actually give us? My guess is very few, but that we will get a nice long fat tail.

    So, Yes we are at or near Peak Oil and No it is not a catastrophe.

    I’ll leave you with the last sobering thought from Hubbert, Figure 30 Fossil Fuels vs Nuclear: http://members.westnet.com.au/jonas1/Hubbert1956GraphFossilVsNuclear.JPG

    Does that make everyone feel a bit better?

  249. jrwakefield says:
    February 3, 2013 at 12:35 pm

    Willis, per that chart.

    First, “yet to be found”. That’s a pure load of hopeful guesswork. How can they possibly know what will be found until they drill???? They cant. Second, yet to be developed is also guess work as to yearly output. Until output is actually flowing they cannot know what that will be 30 years out.

    First, I know that any prediction of the future is never more than an educated guess That’s why we call it the future. Please let go of the idea that I am unaware of the nature and uncertainty of predictions, forecasts, and scenarios.

    Next, I didn’t choose the chart. A peak oiler claimed it showed peak oil happened in 2005. So I was just using his own data to illustrate and falsify his argument by pointing out to him that his own preferred reference showed increasing oil not only in the past but into the future, so how could we have seen the peak?

    Please allow me a few suggestions, jr. Please stop jumping on irrelevancies. Assume I know my way around this subject. Put as much effort into reading what I’m trying to explain as I put into writing it. Reconsider the kneejerk reactions. You’ll get more traction.

    w.

  250. During WWII the allies bombed the German synthetic oil plants, that was, what, 60 years ago, and they had synethetic oil way back then? If you have enough power, you can make synthetic oil out of practically anything, coal, gas, plant and animal matter (soylent green brand oil), even carbon bearing asteroids (there is carbon out there, lots of it). Ways to get that power, nuclear, tons of cheap power, thorium, megatons of cheap power, space based solar power satellites, litterally unlimed power forever. You now have enough power that you can even make gasolene out of air, if you want to (the Germans, once again, did that decades ago).

    BTW, some notes on nuclear. http://www.forbes.com/sites/jamesconca/2013/01/11/like-weve-been-saying-radiation-is-not-a-big-deal/?ss=business%3Aenergy
    “A very big report came out last month with very little fanfare. It concluded what we in nuclear science have been saying for decades – radiation doses less than about 10 rem (0.1 Sv) are no big deal. The linear no-threshold dose hypothesis (LNT) does not apply to doses less than 10 rem (0.1 Sv), which is the region encompassing background levels around the world, and is the region of most importance to nuclear energy, most medical procedures and most areas affected by accidents like Fukushima.”
    “The United Nations Scientific Committee on the Effects of Atomic Radiation”
    “UNSCEAR is an independent body of international experts that has met regularly since 1955 and helped establish radiation as the best understood, though weakest, carcinogenic agent in the world through its studies of atomic bomb survivors, the effects of the Chernobyl accident, industrial radiological accidents, and medical radiation treatment.”
    “UNSCEAR also found no observable health effects from last year’s nuclear accident in Fukushima. No effects.”
    “To recap LNT, the Linear No-Threshold Dose hypothesis is a supposition that all radiation is deadly and there is no dose below which harmful effects will not occur. Double the dose, double the cancers. First put forward after WWII by Hermann Muller, and adopted by the world body, including UNSCEAR, its primary use was as a Cold War bargaining chip to force cessation of nuclear weapons testing. The fear of radiation that took over the worldview was a side-effect”
    “Of course, doubling the dose doesn’t double the cancers below 10 rem/yr (0.1 Sv/yr). It has no effect at all. The millions of nuclear workers that have been monitored closely for 50 years have no higher cancer mortality than the general population but have had several to ten times the average dose. People living in New Mexico and Wyoming have twice the annual dose as those in Los Angeles, but have lower cancer rates. These cannot occur if LNT were true, because LNT states this could not occur.”

    The problem, “UNSCEAR is an independent body”, well, we can’t have that, now can we?

  251. Name one example of an important natural commodity that has become scarce, rather than being on a price decline curve (followed by its replacement by some new techology).

    Then consider how the real truth about oil and gas exploration is that new technology does not reduce risk per se, rather it allows the exploitation of new reserves at the same level of risk.
    And such is the basis on which oil companies have invested and seen good returns on investment for so long.

    Peak oil? Nonsense. One day we’ll just stop producing the stuff becuase some other energy source will be more cost effective. And no, it won’t be windmills….

  252. Willis Eschenbach says:
    This leads to a very profound truth—the size of a resource is a function of humans, not a function of the world. In reality there is no “size” of a given resource, all there is is how much of it we can access … and that is a function of humans, not the resource.

    “Not a function of the world”, how true that is, and far truer than even you realise.
    Go outside on a clear night, and look up, 90% of our resources are out there. All we have to do is go and get them, a ‘function of humans’. Minerals, power, you name it, it is out there. And, these resources are actually easier to get at and process than you realise, all that is needed is cheap access to near earth orbit. Then, you haul up mirors, find asteroids, use mirrors, melt asteroids into more mirrors, then use em all to start the serious mining of minierals (including carbon), and building of space based solar power stations for literally unlimited power.

    Excluded Middle (False Dichotomy, Faulty Dilemma, Bifurcation):
    assuming there are only two alternatives when in fact there are more. For example, assuming Atheism is the only alternative to Fundamentalism, or being a traitor is the only alternative to being a loud patriot.

    Or assuming that the options are only what resources are on this planet alone or nothing.

  253. “Peak oil? Nonsense. One day we’ll just stop producing the stuff becuase some other energy source will be more cost effective. And no, it won’t be windmills….”

    I keep seeing that posted, some other source, yet no one will tell us what that source is. Fusion? Never. Thorium has some potential to replace some oil consumption. But very likely not enough. to stave off peak oil.

  254. Doug Proctor says:
    February 3, 2013 at 12:35 pm
    “But if peak oil/gas is not real, why are energy costs in the US one-half of those in Europe? Price vs Cost: prices right now are less than the go-forward cost of production.”

    About 70% of the price of gasoline at the pump are taxes in Germany (and in France, and in Italy etc.)
    Welfare states with a huge bureaucracy headcount need MASSIVE tax income.

  255. TimTheToolMan says:
    February 3, 2013 at 4:15 am

    I do think we’ll diversify our energy sources as we go along but I dont think its all going to be about oil. My gut says that once we do hit peak oil (of the conventional variety plus whatever non-conventional stuff exists) then oil’s days will be numbered and we’ll be increasingly transitioning away from it. I think human ingenuity extends beyond maintaining oil production.

    Ultimately my imagination extends to other technologies entirely not to a pond filled with algae.

    I think the problem with some of the discussion here is when the phrase “peak oil” is used most people take that to mean we’re running out and either we will have to pay a lot more for oil or get used to having less of it. Discussions about “peak oil” are often used to support claims we are sliding toward the world of “Soylent Green” and a time of global deprivation and general misery.

    But as may have pointed out, history is full of examples where human ingenuity has found ways around resource limitations, and most likely we will continue to do so.

    So if by “peak oil” you mean there will come a time when we can’t extract, convert or otherwise produce more oil, I have to disagree. The distinction between “conventional” and “unconventional” oil is meaningless to a consumer if both can be used for all the same purposes. If instead you mean there will come a time when we don’t need to produce more oil, then we are in complete accord. At some point better (cheaper, more abundant) resources will be found for all the purposes we now use oil. I won’t even venture to suggest when that might be, but unless civilization is destroyed by asteroids, general nuclear war, alien invasion op a plague of lawyers, that day will certainly come. And it will come without the need of a single government department to foster, shepherd or mandate it; economic fundamentals will bring it about when the time is right.

    The world’s iron production from Roman times was constrained by “peak charcoal”: It took about half an acre of 25 year old trees to produce a ton of iron (See here .) That means you have to devote 12.5 acres of managed forest to sustain the production of one ton of iron annually. Then in the 18th century England began using coal to produce coke and iron production took off (the Chinese were using it for that purpose much earlier). Iron became more plentiful and cheaper and the forests were left alone. “Peak charcoal” came and passed and aside from woodcutters nobody suffered. Instead abundant and affordable iron enabled the industrial revolution and everyone benefited.

    In the mid 19th century we reached “peak whales”. Our ability to hunt whales exceeded their reproduction rate and they were headed for extinction. People were doomed to darkness (no whale oil) and ladies were doomed to shapelessness (no whalebone for corsets). Petroleum products replaced whale oil at a lower cost and other materials were used for corsets, before ladies stopped wearing them altogether. Civilization did not suffer; while it was a disaster for the whaling industry, the whales got to survive, people got more fuel for lamps and stoves, and ladies got to breathe more, which most people account as progress.

    So TTTM you are technically correct: at some point oil production will decline. But I don’t believe civilization as a whole will suffer as a result but rather whatever replaces oil will most likely confer benefits on everyone.

  256. “If you have enough power, you can make synthetic oil out of practically anything, coal, gas, plant and animal matter (soylent green brand oil), even carbon bearing asteroids (there is carbon out there, lots of it). ”

    Yes, you can. But 1) is negative ERoEI and 2) you cant make it fast enough to meet demand in the volumes required.

    Here’s an example of ERoEI misappropriations. Corn based ethanol to add to gasoline. It’s taking food away from people, and drives up the price of food.

  257. “I did not mean that in 2035 the production would be increasing by 33% each year. The confusion seems to be that I said, and I quote, “33% more oil … than is produced and marketed today”, and you thought I meant 33% more oil than each previous year. I neither said nor meant that.”

    I was not clear at all. So lets evaluate what you did mean. 33% more than today in 30 years. That is based on past increases. Does not mean future increases will continue. That 33% includes those huge unknowns of yet to find. Overly optimistic.

    I have done a lot of reading on this myself. I see things much different, almost opposite to you. Peak oil wont be a world wide cliff. It wont affect all countries the same. Quite the contrary. High indebted countries who import oil will be hit the hardest (The US loses some billion dollars per day of wealth to import oil). There just wont be the wealth needed to buy on the open market, compete with China or India. Too much government money goes to interest payments, and because of that, too much taxation will curb people’s ability to buy fuel. The EU is an excellent example of this already happening, especially Greece (heating fuel is so expensive people are chopping down all the trees they can to keep warm).

    Other countries who have reached peak production, and require that income, will also be in serious trouble. Egypt’s unrest can be directly linked to their peaking of oil production. That money was used to buy food and keep food prices down. Food prices there are increasing, and to top it off, Egypt will soon be importing oil. Not only do they not have oil revenue to buy food, soon they have to buy oil on the open market.

    Mexico will be in the same boat soon. Indonesia too.

    So don’t expect peak oil to be some kind of cliff. It wont. Watch what happens in oil producing countries that are now in terminal decline. Prices for energy and food will increase, civil unrest will escalate. It’s already happening. And will have world wide ramifications.

    • So don’t expect peak oil to be some kind of cliff. It wont. Watch what happens in oil producing countries that are now in terminal decline. Prices for energy and food will increase, civil unrest will escalate. It’s already happening. And will have world wide ramifications.

      Nobody on the Peak Oil side of the argument is calling for a cliff. All that they are saying is that once a certain point is reached the total amount of oil produced will start to go down each year. Now there are some complicating issues because we do not really mean oil but the products that the oil produces and those are impacted by the type of oil that is produced. (Contrary to what was said above, not all barrels are created equal because different grades produce different amounts of transport fuels and other end products.) The fact is that the data is still on the side of those that argue for Peal Oil. As Matthew Simmons pointed out a few years back, the date of the peak would be easy to see if all of the field by field data were made available. But because there is no transparency the estimates have to be changed every time new data is released. Sadly, that means that we will only see the Peak once it is in the rear view mirror.

  258. Alan Watt, CD (Certified Denialist), Level 7 says:
    February 3, 2013 at 3:46 pm

    … So if by “peak oil” you mean there will come a time when we can’t extract, convert or otherwise produce more oil, I have to disagree.

    Huh? I don’t mean that, I don’t think anyone does.

    Peak oil production means just what it says. It refers to the year when the maximum amount of oil hits the market.

    w.

  259. “The distinction between “conventional” and “unconventional” oil is meaningless to a consumer if both can be used for all the same purposes. ”

    Not when the price at the pump is high because unconventional oil costs more to extract. For example, the Alberta oil sands costs at least $80 per barrel to extract. Compare that to convention sources which are less than $20 (few of them around today). Even the Bakken requires nearly $80 per barrel to extract.

    The higher the price for energy as a percent of people’s disposable income, and that leaves less money for other things, which means fewer people buying fewer goods in stores. That means recession. It’s no co-incidence that the 2008 crash coincided with $148 oil.

  260. “But are we certain that the geological processes involved in creating oil have stopped?”

    Yes, as far as we are concerned. We dont have millions of years we can wait for new deposits to form. The notion of abiogenic oil was debunked years ago. It doesnt happen.

  261. TimTheToolMan says:
    February 3, 2013 at 4:15 am

    Willis writes

    “and I’m supposed to ignore all that because you don’t have imagination?”

    I do think we’ll diversify our energy sources as we go along but I dont think its all going to be about oil.

    Couldn’t agree more, Tim. My guess is some variant of artificial photosynthesis, but there’s lots of contenders.

    My gut says that once we do hit peak oil (of the conventional variety plus whatever non-conventional stuff exists) then oil’s days will be numbered and we’ll be increasingly transitioning away from it. I think human ingenuity extends beyond maintaining oil production.

    Agreed.

    Ultimately my imagination extends to other technologies entirely not to a pond filled with algae.

    Two points about that. First, I brought up algae simply to show that oil production is only limited by human imagination. I’m not touting it.

    Second, Exxon has kicked in up to $660 million dollars in a joint venture with Craig Ventner, who basically invented modern gene sequencing. Their aim is genetically altered algae that are able to produce oil at economical costs. So while you may not be thinking of ponds of algae … Exxon is betting big money that it may work. Time will tell, I couldn’t say, but we can’t dismiss it at this point.

    My regards to you,

    w.

  262. Colin Campbell in 1996 wrote in Scientific American an article titled “The End of Cheap Oil” At the time the marginal cost of a barrel of oil was around $10. Now it’s close to $90. He called it right. Now we must drill thousands of feet deep under water or use “fracking” all of which are very expensive. Since the easy oil is gone ,since we’re searching in unlikely places for hard to get expensive oil, and since the depletion rate of present fields is around 5%/year (= a new Saudi Arabia needed every few years, ) I should say peak oil is definitely getting closer. Peak oil is a reasonable scenario.

  263. Willis: “It is a geological fact that oil deposits deplete and follow a flow rate bell curve.

    Ummm … kinda true at a constant price, not at all true at a highly variable price like we’ve seen in the last couple decades.”

    Really. How come these then:

    Norway:

    Hibernia:

    Mexico:

    Egypt:

    US we all understand peaked in the 1970’s. I could post more if you like.

    So I’d like to know how a higher price for oil will make an oil field produce more? Higher price hasnt booted those fields above.

  264. Fracing refers to “hydraulic” fracing, not Torpedoes. The first hydraulic fracing took place in 1947, not 1865. Torpedoes were just nitro explosives that were detonated across the production zone. They were effective because as a result of the detonation, some of the near wellbore damage was bypassed. These Torpedoes were never referred to as fracing until the greens decided to confuse the issue.

    Some of the first hydraulic fracture programs used oil as the carrying medium and walnut hulls as the proppant. As the depths got deeper the proppant got harder. Fresh water is now the preferred carrying medium.

  265. jrwakefield:

    At February 3, 2013 at 3:47 pm you assert

    If you have enough power, you can make synthetic oil out of practically anything, coal, gas, plant and animal matter (soylent green brand oil), even carbon bearing asteroids (there is carbon out there, lots of it).

    Yes, you can. But 1) is negative ERoEI and 2) you cant make it fast enough to meet demand in the volumes required.

    NO!
    I have lost count of the times I have refuted that nonsense in this thread.
    Read my post at February 2, 2013 at 2:57 pm.

    Richard

  266. OIl men have been “fracking” for more than a hundred years. They drop a stick of boom down the hole when the well runs dry and they get more oil. Its nearly as old as drilling.

  267. “Second, Exxon has kicked in up to $660 billion dollars in a joint venture with Craig Ventner, who basically invented modern gene sequencing. Their aim is genetically altered algae that are able to produce oil at economical costs. ”

    You dont do this unless you are desperate for more oil. I dont see these as signs of encouragement, I see them as signs of panic. When your starving for food, you’ll eat just about anything.

    As the saying goes, I’ll believe it when I see it full scale production serving our energy demand.

  268. Sugar Loaf Field Brazil: 12bb. The world consumes 30B per year. So it’s puny.

    http://www.economist.com/node/13348824

    Lula field Brazil 8BB, even punier

    http://en.wikipedia.org/wiki/Lula_oil_field

    Brazil consumes a billion barrels per year. Do the math. Those two fields MIGHT supply Brazil for 20 years. No exporting. That’s assuming they can be extracted fast enough. Which is a huge no. Small fields have small output.

    If those are top 10 super fields, we are in serious trouble.

  269. Willis: “Second, Exxon has kicked in up to $660 billion dollars in a joint venture with Craig Ventner, who basically invented modern gene sequencing.”

    Source please…only reference I found was for $600 MILLION (up to). Quite a difference…

    Exxon’s typical “Investments” in a year are around $22B, so “up to” $600M, over some period of time longer than a single year, is really not so big in Exxon terms.

    [Thanks, fixed. No, they’re not spending two thirds of a trillion … -w.]

  270. Willis: “So your claim that all of the huge oil fields are in “terminal decline” is simply not true.”

    It is true. Those deposits are not oil. Most certainly the Alberta field isnt. It’s bitumen. Has to be cooked and injected with natural gas to make oil. All the CONVENTIONAL oil fields are in terminal decline, the graph you posted shows that clearly.

    Unconventional sources will be constrained by price (every time a country goes into recession, the price of oil drops below the economic threshold). High oil prices send countries into recession.

    ERoEI causes the Energy Trap to take foothold.

    Shale deposits (oil and NG) suffer from the Red Queen Phenomenon. Because depletion rates are so fast (wells follow a decay curve, not a bell curve) then you have to dill ever more wells faster and faster just to keep production flat. At current market prices for NG not one fracking company is making money.

    Again, you are claiming peak oil doesnt exist because we have X amount still in the ground. As you have noted, it’s about flow rates. Do these deposits have the ability to make up the flow rate loss from dying fields? The answer is likely a no.

    As soon as supply drops below demand, someone does without the oil they need, regardless of what’s in the ground. And even if you do extract it fast enough, can an unstable economy, top heavy with ever increasing government and personal debt, be able to afford to buy it?

  271. Re Synthetic oil: “NO!
    I have lost count of the times I have refuted that nonsense in this thread.
    Read my post at February 2, 2013 at 2:57 pm.”

    South Africa is doing it. Making oil from coal and NG. They produce 160,000 bpd. The country consumes 553,000. If it was so viable an option I would have thought they would be able to supply all their demand from synthetic. Something is limiting them.

    It turns out to be classic Energy Trap. Coal and NG are vital to other energy needs of the country.
    http://www.eia.gov/cabs/South_Africa/pdf.pdf Hence they cannot allocate more coal to make synthetic oil because that would take coal away from other needed requirements — The Energy Trap.

  272. Sure are anti-human people around,and suckers.

    Walter Shawlee the junior is very sharp technically, and ran a successful aircraft electronics business for years.

    But he wrote a long article on peak oil, that Avionics News magazine published

  273. I was here and I read most of these comments. Thanks. I laughed, I cried, I
    spat crumbs on my keyboard.

  274. Vince Causey says:
    February 3, 2013 at 12:52 pm

    richardscourtney says:
    Thank you for replying to my post. I am not trying to move goalposts Richard, merely fill in a gap missing from Willis article. Willis maintains that “peak oil” cannot exist because there exists an abundance of low grade resources that can fill the gap. Everyone agrees that this is so. I am merely saying Yes, but you haven’t mentioned EROEI, so let’s see where that leads.

    Thanks, Vince. Let me add two important caveats.

    1. In the real world, dollars input per dollar value of energy recovered is the important measurement, not energy input per unit of energy recovered. If the first works, if it makes money to extract the energy resource, the EROEI doesn’t matter … and if the first doesn’t work, if it doesn’t make money, nobody cares about the lovely ERoEI. As a result, the EROEI is mostly of academic interest.

    In addition, the two of them (eroei and money returned) are usually closely aligned, because typically you have to purchase the energy you are inputting to get the energy out. Finally, it is much easier and more accurate to measure dollars in/out rather than energy in/out, which is a more nebulous number. For all those reasons, the real question is “is it economical”, not what the energy balance might be.

    2. In any case, EROEI is a fundamentally a function of human ingenuity, not a function of the world.

    You constantly say things like X has an EROEI of so much, Y has an EROEI of so much. The missing word in that is “currently”.

    Currently, it’s not economical to extract uranium from seawater. You’ve got to filter far too much water, the energy to run the pumps alone is way larger than the energy you get from the uranium. The EROEI is negative, and quite badly negative. (Usually we don’t measure it that way, instead we say it’s not economical. That’s easier to measure, which is partly why it is used.)

    However, the Japanese have been doing experiments using genetically altered marine sponges, which filter huge quantities of seawater, to extract uranium from seawater … if that can be done economically, what does that do to the uranium resource?

    More to the current point, consider the EROEI of marine sponges filtering uranium. Suppose it takes a year for the sponge to gather a microgram of uranium, with energy content X. In the effort of filtering the uranium from the water, the sponge may well expend energy equal to 10X or even 100X … so in fact the EROEI is wildly negative.

    Would that negative EROEI mean that the process should be abandoned? By no means. We’re not paying the sponges to expend all of that energy, so why should we care how much energy they expend in filtering uranium? All we care is, does the process make money? If so, who cares that we’re not paying the sponges minimum wage?

    This illustrates my second point. What is the EROEI of extracting uranium from seawater? Depends on how you go about it … which means that EROEI is fundamentally a function of humans and not of the world.

    This is why EROEI doesn’t get much traction in the real world. Its close cousin, whether the process is economical, is much more important. I’m not saying EROEI isn’t a valid measure for certain analyses, just that for practical purposes economics is more important.

    My regards to you.

    w.

  275. Willis writes “Their aim is genetically altered algae that are able to produce oil at economical costs.”

    Algae doesnt pass my viable sniff test. Making a few assumptions, lets say it takes an olympic pool sized pool to create a barrel of oil from the algae and it takes a week to get there. Thats about 50 barrels per year per olympic sized pool.

    To get to say 1M barrels or about 300M barrels per year which is only about 1% of our current usage would take 300M/50*(50m*25m) m2 = 7500 sq kms. Alter the figures as you like but I doubt its viable in any meaningful way.

    The Australian government gave the coal industry $100M to research carbon capture and storage. Australia loves its coal…that doesn’t mean its viable but many people will think it must be because of the size of the investment. That one will probably end up as a massive PR exercise more than producing anything earth changing with respect to CCS and it’ll probably be worth it given the amount of coal export we make.

  276. jrwakefield says:
    February 3, 2013 at 4:15 pm

    “I did not mean that in 2035 the production would be increasing by 33% each year. The confusion seems to be that I said, and I quote, “33% more oil … than is produced and marketed today”, and you thought I meant 33% more oil than each previous year. I neither said nor meant that.”

    I was not clear at all. So lets evaluate what you did mean. 33% more than today in 30 years. That is based on past increases. Does not mean future increases will continue. That 33% includes those huge unknowns of yet to find. Overly optimistic.

    So go register your complaints about the numbers to the IEA, it’s not my graph. I told you why I posted it, I didn’t make it up, it’s their numbers.

    All I said was that according to the chart the peak oiler cited we haven’t reached peak even by 2030. You can take that for what it’s worth, IEA made the chart, the peak oiler cited it. You can claim it’s optimistic, pessimistic, I don’t care. Nothing to do with me.

    w.

  277. Curt Lampkin says:
    February 3, 2013 at 4:38 pm

    Colin Campbell in 1996 wrote in Scientific American an article titled “The End of Cheap Oil” At the time the marginal cost of a barrel of oil was around $10. Now it’s close to $90.

    If by “marginal cost of a barrel” you mean the extraction cost, it’s nowhere near $90/bbl. If not, what cost are you referring to?

    w.

  278. Japan is moving from Uranium to Thorium reactors, it will just take a few decades.

    Next, you posted “In the real world, dollars input per dollar value of energy recovered is the important measurement, not energy input per unit of energy recovered. ”

    Yes, that is true. But two aspects of the monetary side dont make a good case for unconventional sources surviving. One is in a lethargic economy there is less investment available to fund expensive projects. Second, the decrease in ERoEI means dollar input costs go up disproportionally. That is, your monetary rate of return is lower as ERoEI drops. It costs more and more money to develop lower and lower ERoEI deposits.

    The Alberta oil sands can produce oil at $80 per barrel now because of low NG prices. Double NG prices and their break even increases to $100.

    Think of this too. Soon as energy costs go up, the rate of inflation goes up. Central Bankers dont like that. They increase interest rates in an effort to, literally, throttle back people spending. But if inflation is driven by energy costs, and are required expenses, then people are forced to cut back on other things. Recession again.

    That’s what I see for North America’s future. Little to no economic growth punctuated with economic collapses and recessions. Or an out right permanent depression.

    I’m quite willing, and wanting, to be shown wrong.

  279. Curt Lampkin says:
    February 3, 2013 at 4:38 pm

    Colin Campbell in 1996 wrote in Scientific American an article titled “The End of Cheap Oil” At the time the marginal cost of a barrel of oil was around $10. Now it’s close to $90.

    Another comment on your citation, Curt. The article says that there will be a peak of all oil, not just conventionaloil . It claims that (from our perspective) that peak has already well passed, and the terrible decline has already begun … as they say,

    But a more permanent decline [than the 1970 “peak”] is less than 10 years away …

    Now, they have been more daring than most peak oilers, because they said that the peak would be for ALL oil, conventional and un.

    Unfortunately, their daring has not been rewarded. The total oil production has not been in decline since 2006 as they claimed, it hasn’t been in decline at all. We’re seven years past when they claimed we should see the start of the “more permanent decline” … and despite their very scientific graphs and equations, despite the articles strong warnings of disaster, despite their twenty seven eight-by-ten colour glossy pictures with circles and arrows and a paragraph on the back of each one, despite all of that, oil production is still rising. Go figure.

    How is this anything other than another badly failed peak oil prediction?

    The fact it was published in “UsedToBeScientific American” should have been the tipoff …

    w.

  280. jrwakefield says:
    “If you have enough power, you can make synthetic oil out of practically anything, coal, gas, plant and animal matter (soylent green brand oil), even carbon bearing asteroids (there is carbon out there, lots of it). ”
    Yes, you can. But 1) is negative ERoEI and 2) you cant make it fast enough to meet demand in the volumes required.
    Here’s an example of ERoEI misappropriations. Corn based ethanol to add to gasoline. It’s taking food away from people, and drives up the price of food.

    First, spell out ERoEI please, inquiring minds wanta know.
    Second, I don’t think you understand what can be done if you have large enough quantities of cheap power. Plain old nuclear can produce that with the technologies we have now, and thorium can do it even better, once again, with technologies we have now plus those in development (a thorium reactor is producing now). This is nothing compared to space based solar, which can produce literally unlimited amounts of power.

    With that amount of power, you can produce oil from any hydrocarbon, such as atmospheric CO2 (which is supposed to be bad, and we want to reduce it, right?). Now, make your corn, then, dare I say it, eat it, produce the oil from the leftover cornstalks. That is done far quicker than corn based ethanol, since, with that amount of cheap power, you are not worried about whether the process is wasteful of power, there is plenty more where that came from, all you want is to turn that electric power into gasolene your car can use, portable power. All you are doing is what the earth did but far faster. And with that amount of power, volumes are not a problem.

    Once you are not worried about power efficiency, it’s easy. For that matter, so are a lot of things.

    And corn based ethanol will be obsolete and forgotten. The only reason it exists is because we do NOT have the cheap and abundant power we can easily produce now (with the amount of money we spent invading Iraq, the US could have built 100 to 200 nuclear power plants).

  281. We need to get our definition of “Peak Oil” clear. A lot of the arguments here are at cross-purposes because “Peak Oil” is being interpreted differently by different people.

    Willis states it very clearly: “Peak oil production means just what it says. It refers to the year when the maximum amount of oil hits the market.“. And this is equivalent to the definition that I have been using.

    Alan Watt explains further: “If [by “Peak Oil”] you mean there will come a time when we don’t need to produce more oil, then we are in complete accord. At some point better (cheaper, more abundant) resources will be found for all the purposes we now use oil.“.

    So arguments such as “Peak oil? Nonsense. One day we’ll just stop producing the stuff because some other energy source will be more cost effective.” make sense with the catastrophic versions of “Peak Oil”, but make no sense with Willis’ definition above. With that definition, Peak Oil is the day we stop increasing production of the stuff because some other energy source is more cost effective. In other words, increasing availability of cost-effective alternatives doesn’t make Peak Oil “nonsense”, the exact opposite applies: it causes Peak Oil.

    I think we are at or near Peak Oil. Willis thinks we aren’t. Either way, the world has no problem, and if alternatives get used because they’re much cheaper (that rules out wind and ethanol) then Peak Oil is highly beneficial!!. Surely the best and most sensible thing we can all do is to remove the idea that “Peak Oil” is some kind of disaster.

  282. “All I said was that according to the chart the peak oiler cited we haven’t reached peak even by 2030. You can take that for what it’s worth, IEA made the chart, the peak oiler cited it. ”

    Yes, nothing to do with you. Not trying to shoot the messenger. First, the IEA has consistently been over optimistic with every new issue. They have to be. They cant send panic into the market place. Second, the graph itself does in no way make any claim we reach peak after 2030. It says IFF and that is a huge IFF everything goes as they hoped it would, peak should come not before 2030. Even if that is true, that’s only 20 years away. Then what? A new form of energy (say electrical power) and converting society over to it, will take longer than that and be horrendously expensive. The economy likely couldnt afford it. Hell, governments today cant even spend money to fix decaying infrastructure.

    Just as a comparison, if the US government stopped borrowing today, and started to pay off the loans completely, including State governments, it would take more than 40 years. And there is no sign the government is even going to slow the growth of debt, let alone stop it.

    High energy costs and huge indebtedness is a recipe for economic collapse. No one has any idea how that will pan out, it’s never happened at this scale before.

    We wont reach flow rate peak oil here, our economy is likely to collapse before then. China will take up the slack of consumption.

    BTW, people are already altering behaviour because of high energy costs. Miles driven in the US is down some 10% since 2008. Public transit is seeing the largest increase ever. Rail traffic is also seeing a huge increase in volume. Buffet bought Burlington Northern, gee wonder why…

  283. jrwakefield says:
    February 3, 2013 at 4:39 pm

    Willis:

    “It is a geological fact that oil deposits deplete and follow a flow rate bell curve.

    Ummm … kinda true at a constant price, not at all true at a highly variable price like we’ve seen in the last couple decades.”

    Really. How come these then:

    US we all understand peaked in the 1970′s. I could post more if you like.
    So I’d like to know how a higher price for oil will make an oil field produce more? Higher price hasnt booted those fields above.

    Thanks, jr. I understand that the bell curve is the preferred shape, there’s no need for you to post more. Let me post a few instead:

    Bell curves? I don’t think so …

    w.

  284. Willis makes the claim that world oil production has increased since 2005. Willis, you are correct, BUT. Let’s see by how much.

    http://www.indexmundi.com/energy.aspx?product=oil&graph=production

    2005 71,980.94 2.02 %
    2006 71,846.10 -0.19 %
    2007 71,354.19 -0.68 %
    2008 72,151.61 1.12 %
    2009 70,808.59 -1.86 %
    2010 72,631.37 2.57 %
    2011 72,888.60 0.35 %

    It’s an increase of just 1.2% over 6 years. China’s economy is growing at 8% per year. In that period of time their oil consumption increased 4% to 10% per year. India’s increase is also about 4% per year.

    Where did that oil for them come from? How did they manage to keep that high increase? Because the Western World is consuming less oil, due to oil prices and economic issues. Hard to imagine us recovering from this.

    So yes, oil production did “increase”, a puny 1.2% over 6 years. That’s not an increase, that’s a plateau.

  285. A few years back I did a company directors course with a BP executive, and I asked, him about peak oil. If there as anyone that was in the know it was him, he completely confirmed what I though was going to happen, not peak oil but peak demand. See what’s going to happen is as oil gets more expensive other alternatives come on stream, renewables, ect… that puts a ceiling to energy prices in the long term. All these harder to get at reserves will simply not be developed as it’ll just be to uneconomical to do so.

    Solar has dropped in price so much over the past few years that it already pass the cross over with nuclear, see here

    http://cleantechnica.com/2011/05/29/ge-solar-power-cheaper-than-fossil-fuels-in-5-years/

    Import prices for solar panels are now at near 50c/watt, and they are only going down in the future with further developments in technology, while oil extraction is only going one way… i mean it doesn’t take a genius to see where we are headed.

    Peak oil won’t de a disaster, cheap alternatives will simply replace ever more expensive extraction.

  286. jrwakefield says:
    February 3, 2013 at 5:06 pm

    Willis:

    “So your claim that all of the huge oil fields are in “terminal decline” is simply not true.”

    It is true. Those deposits are not oil.

    Why do you think they are called “heavy oil” if they are not oil? What is it that you think is flowing from the Canadian oil sands, milk?

    This is the exact nonsense that is the subject of the post, this jive division into conventional and unconventional oil purely to rescue failed predictions.

    Oil is oil is oil. You can’t arbitrarily re-classify 2/3 of the global oil reserve as “not oil” because it’s heavy oil and then claim the earth is running out of oil. That’s like the guy who murdered his parents and then throws himself on the mercy of the court because he’s an orphan …

    w.

    • Willis writes:

      “Why do you think they are called “heavy oil” if they are not oil? What is it that you think is flowing from the Canadian oil sands, milk?”

      It is oil but not all barrels of oil are the same. A barrel of light sweet crude produces far more high value products like gasoline and kerosine than a barrel of heavy oil that needs further upgrading before it can even be used to produce the lower amounts of product that is sold to the final consumer. The simple fact is that the production of light sweet, which is the best oil to use if you want the greatest amount of high value product, has already peaked. The barrels of heavy oil that are coming out of some of the unconventional sources are not equivalent unless you are very interested in higher bunker oil or asphalt production. By counting them as equivalent you are making an error that cannot be justified rationally. We do not put oil in our vehicles to make them go; we use gasoline. And on that front there is a difference that we cannot ignore.

      Sorry Willis but I believe that you need to do some more reading on this topic. While you are a very smart man I do not believe that you have all the facts necessary to draw the right conclusions.

  287. Come on Willis. Really. Countries have fields come on line while others die off. Hence the roller coaster graph. Look at individual fields for the bell curves.

    Now what do I see in those graphs? Kuwait production is down. Iraq production is trying to recover. Venezuela production is down. Only Nigeria appears to be increasing.

    Now other countries. US production is still well below peak. Mexico production is declining. North Sea production is declining (The UK now must import oil). Canadian conventional plays are declining. Indonesia was kicked out of OPEC because its now an importer of oil. China’s oil production peaked. Iran has peaked. Very likely Saudi Arabia has (but their books are as transparent as the oil they produce).

    New fields today are puny. In fact, I had to laugh. A new find off Newfoundland was announced last month with great fan-fair. The MSM here hyped it all up as being the biggest find in decades. They were right, yet it was a mere 300 MILLION barrels in place. Talk about puny.

  288. vangelv says:
    February 3, 2013 at 5:12 pm

    “But oil from “conventional” sources and oil from say “processing gains” (see the chart above) and oil from fracking all burn exactly the same in your engine.”

    This is not exactly true because a barrel of light sweet does not make the same products as a barrel of heavier sour crude.

    Oh, please, talk about picking tiny nits, and yours aren’t even real nits. Yes, what I said is indeed “exactly true”. READ WHAT I SAID.

    I said the gasoline/diesel from those fuels burn the same in your engine, not that the source fuels had identical chemical compositions. I picked those words very carefully because they were exactly what I meant—it makes no difference in the everyday world you and I live in, it makes no difference to the engines of our cars.

    Please up your game and read my words with the care that I put into writing them. That way you can answer what I actually said.

    w.

    • Willis wrote:

      I said the gasoline/diesel from those fuels burn the same in your engine, not that the source fuels had identical chemical compositions.

      Yes you did. But a barrel of heavy oil produces much less high value gasoline and jet fuel than a barrel of light sweet. You treat every barrel as if were the same but it isn’t. And this is not nitpicking. The refineries are built to use specific grades of oil and require massive amounts of new investment in money and energy to be rebuilt to handle the lower quality grades of crude that will replace light sweet. That matters far more than you seem to think.

  289. TimTheToolMan says:
    February 3, 2013 at 5:35 pm

    Willis writes

    “Their aim is genetically altered algae that are able to produce oil at economical costs.”

    Algae doesnt pass my viable sniff test.

    Thanks, Tim, that’s great to know. Since Exxon is investing up to half a billion dollars on it, obviously they care as much about your opinion as folks here do …

    w.

  290. “Why do you think they are called “heavy oil” if they are not oil? What is it that you think is flowing from the Canadian oil sands, milk?”

    Bitumen isnt oil, not even heavy oil. It’s bitumen. It’s not oil. It has to be converted to oil/fuels.

    “this jive division into conventional and unconventional oil purely to rescue failed predictions.”

    No, the difference is a geological and petroleum industry term. Peak oil people didnt invent those words. They have specific geological definitions. Look it up.

    “Oil is oil is oil. You can’t arbitrarily re-classify 2/3 of the global oil reserve as “not oil” because it’s heavy oil and then claim the earth is running out of oil. ”

    No, oil isnt oil. There are many classifications of oil (I recommend reading Oil 101, good book). Refineries are designed to take specific types of oil. Many cant handle heavy oils. Different compounds that have to be removed change the behavior of oil. Not just sulphur, but heavy metals that must be removed. The chemical composition of each oil field is unique.

    An oil field in SA had to be completely shut in and permanently sealed because it contained too much H2S.

    What you get as “oil” for your car has had to go through a lot of processing. You dont care where the oil comes from, but the refineries definitely do.

  291. “Since Exxon is investing up to half a billion dollars on it, obviously they care as much about your opinion as folks here do …”

    That’s because they know all about peak oil and are desperate to keep themselves going. It’s a grasping at straws. We’ll see a lot of that.

  292. Its a shame that once again, the concept of peak oil is (deliberately?) misunderstood and misrepresented.

    Peak oil simply means the point at which global oil production peaks,. It has nothing at all to do with how much is still there. It has everything to do with its cost, especially its energy cost, of extraction.

    What peak oil means is the days of $40 a barrel oil have gone forever. Maybe the days of $100 a barrel oil have already past. At some point if the oil takes more energy to extract than it gives on burning, its no longer a viable fuel. Though its still a useful chemical feedstock.

    At some point the cost of oil/gas starts to become greater than the alternatives: In most places its already more expensive than coal, but not yet as expensive as – say synthetic gasoline made from nuclear power.

    THAT is peak oil. When it is so expensive that people simply use alternatives that are cheaper. And so demand starts to fall.

    AGW may be a busted flush, but peak oil is not. A glance at the spot prices and production volumes will reveal that oil production is no longer increasing exponentially – the second time derivative is now negative. Just as the same effect in the temperature data tends to refute runaway climate warming, the same effect in oil production show peak oil is near.

    For the USA, there is maybe 20-30 years of ECONOMICALLY EXTRACTABLE unconventional oil and gas left. For other parts of the world, more, or less.

    This is in fact a far more serious issue than climate change. Especially for the USA. Whilst electricity generation can easily switch to coal or nuclear (or both) transport cannot. And biofuel or synthetic fuel is several times more expensive and has other implications. ships can run on nuclear power. Trains can run (after a massive upgrade to electrify them) on electricity, but no really suitable alternative in terms of safety and energy density exists for cars trucks and aircraft.

    And those are the core infrastructure that keeps city populations alive.

    Just because someone is crying WOLF doesn’t mean that occasionally there isn’t one.

    Those interested further should check http://ourfiniteworld.com/ for some interesting data and discussions.

  293. Willis writes “Since Exxon is investing up to half a billion dollars on it, obviously they care as much about your opinion as folks here do …”

    That “massive” investment represents about 5-6 days worth of profit Willis. Profit, not expendature and thats profit in a depressed economy too.

    http://thinkprogress.org/climate/2012/04/26/471469/exxon-takes-104-million-profits-per-day-so-far-in-2012-while-americans-are-stuck-with-a-higher-gas-bill/

    I think you should read Doug Proctor’s post in some detail Willis.

  294. Wakefield is banging a drum not using brain

    quote

    The cost of production has fallen: a few years ago most firms thought the break-even price was $75 per barrel, but now companies such as Shell say new developments are economical at $50. The provincial and federal governments are unsurprisingly supportive.

    http://www.economist.com/node/17959688

    unquote

    Thats for public consumption, perhaps near USD 35 or less is real figure but as i said above, two trains recently constructed, cost a lot of money but that total cost was recovered in 66 days. factor that in, capital cost recovered and what is the remaining operating cost? And how much is there, more than all of Saudi.

    His silly energy in / energy out. Fundamental law, energy can neither be created nor destroyed only transformed. Willis and his Japanese sponges nailed that one.

  295. Wakefield
    Oil is oil. It is Alberta Oil sands not bitumen. Even bitumen is oil. The business is global and integrated. Old fixed run refineries not use blends to maintain balance. Hydrocrackers and other advanced tech make oils to order. Read up on shells gas to liquids program.

    Matters not a single jot where your standard API spec diesel comes from, Its standard spec means you use it with confidence. Matters not who made it or what refinery or what process. You fill with Shell petrol ,you think Shell made it. Think again.

    Its action that makes the world go round, not semantics and splitting hairs.

  296. Grey Lensman please answer. All super giant conventional fields are in terminal decline? Yes or no. We are consuming more oil than we find (including unconventional)? Yes or No. Is the Energy Trap real or just a con invented by peak oilers? Yes or no?

  297. vangelv says:
    February 3, 2013 at 7:49 pm

    Willis writes:

    “Why do you think they are called “heavy oil” if they are not oil? What is it that you think is flowing from the Canadian oil sands, milk?”

    It is oil but not all barrels of oil are the same. A barrel of light sweet crude produces far more high value products like gasoline and kerosine than a barrel of heavy oil that needs further upgrading before it can even be used to produce the lower amounts of product that is sold to the final consumer.

    vangelv, I’m getting dizzy with the moving of the goalposts. First the peak was supposed to be peak oil. Then it was peak conventional oil. Now, you are talking about peak light sweet crude. Plus you want to make the judgement on what should be included in the peaks based on how much of the heavier and how much of the lighter grades you get out of it … really?

    This evasive goal-shifting behavior of yours is exactly the subject of the post. You will claim anything to avoid noticing that despite all of your screaming, OIL PRODUCTION CONTINUES TO INCREASE.

    So make your claims, vangelv. The oil production has continued to increase. Tell me about heavy versus light. Oil production has continued to increase. Explain about light sweet crude as though I never heard of it. Oil production has continued to increase.

    You can interpret the facts however you wish, but you don’t get your own facts. As long as oil production continues to increase, we’re not at the peak, no matter what you claim.

    w.

    PS—You close by saying “Sorry Willis but I believe that you need to do some more reading on this topic. While you are a very smart man I do not believe that you have all the facts necessary to draw the right conclusions.”

    My friend, I spent three years as the Chief Financial Officer of the largest fuel importer in the Solomon Islands, overseeing $40 million worth of business annually. During that time, I did nothing but monitor and research the oil industry during my working hours, that was what I was paid to do, to understand the financial aspects of the oil business. I’ve negotiated multi-million dollar oil contracts, and been involved in all aspects of the fuel distribution network. Of course, as you might imagine given my mania for studying subjects, I have spent hundreds and hundreds of hours considering all of the issues surrounding oil, from the field to the final customer. As a result, perhaps I may not have drawn the right conclusions, but if so it’s not from lack of facts or study …

    Since you haven’t falsified anything that I’ve said in the head post, and since you have been unsuccessful in establishing and supporting your own claims, let me suggest that you might consider taking your own advice and doing some more reading on this topic yourself.

    • My friend, I spent three years as the Chief Financial Officer of the largest fuel importer in the Solomon Islands, overseeing $40 million worth of business annually. During that time, I did nothing but monitor and research the oil industry during my working hours, that was what I was paid to do, to understand the financial aspects of the oil business. I’ve negotiated multi-million dollar oil contracts, and been involved in all aspects of the fuel distribution network. Of course, as you might imagine given my mania for studying subjects, I have spent hundreds and hundreds of hours considering all of the issues surrounding oil, from the field to the final customer. As a result, perhaps I may not have drawn the right conclusions, but I’m definitely not short of facts as you assert …

      Then how is it that you have missed the shale bubble? Why is it that you have failed to notice that shale projects are not self financing outside of a few core areas? The facts are not what we wish them to be but what they are. Go to EDGAR and pull up the 10-Ks for the shale producing companies. Take a look at the cash flow statements and the debts on the balance sheets and tell me they show a healthy and sustainable business model.

      Now you can tell me that you have looked at many of the studies coming from industry ‘experts’, academic institutions, and the IEA/EAI type of agencies. But when you did, were you paying attention to the assumptions being made and if those assumptions made sense. I have looked at studies that assumed that shale wells had 15% decline rates when the actual production data shows that 75% – 80% is more likely. I have seen studies that assume hyperbolic decline rates that are not supported by the actual production data. But most of all I have seen the price explosion drive hundreds of billions of new investment into all kinds of unconventional plays only to see crude production stay flat. The simple fact that the energy companies are financing such low return activities should tell you what is really going on. Shale and tar sands are the bottom of the barrel. The easy oil has already been pulled out of the ground and we are probably looking at Hubbert’s Peak through the rear view mirror already. You can’t see it because the data is not very good and contains a great deal of noise. But as I pointed out, give the Bakken another year or two and you will see what I am talking about. At that point I think that you will find new sources of information that are a bit more helpful to clarify this debate.

    • Willis wrote

      Since you haven’t falsified anything that I’ve said in the head post, and since you have been unsuccessful in establishing and supporting your own claims, let me suggest that you might consider taking your own advice and doing some more reading on this topic yourself.

      Since you have not really made a very clear point it is hard to falsify it. You are supposed to know exactly what Hubbert said before you argue that his theory is wrong. But you are still not clear about it and tend to create a general straw-man position that you try to knock down. Frankly, I am not interested in that because what is material is a bit more subtle and complex.

      Hubbert’s methodology is pretty simple and very useful. Take any field and you can plot a production profile that identifies a peak. Can new technology change it? Of course, but not by enough to really matter because the energy sector has been relying on technological advancement for more than a century and the effects are minor. (Yes, that includes shale.) To get an idea at how much oil is to be extracted all you do is plot the data (see Deffeyes) and extend your trend until you see the answer quite clearly. The method works as long as you have all of the data on a field by field basis. If you don’t, you simply make a few adjustments as new data becomes available. Given where we are no new data is likely to have a big effect on the Peak.

      Now you can bring in new sources, which is where you have concentrated your argument. But you fail to look at the logic. Those new sources are only even looked at because the easy oil is mostly gone. They might give you a bit more oil that you can recover but will not change the peak date by very much. Have you noticed that the hundreds of billions in new investment have not moved the production needle since 2005? If you need that much capital just to stay level how can you say that the peak is not here already? And let us not look at a change of less than half a percent and try to make an argument given the quality of the data that we are using. The bottom line is that all of that capital destruction in shale has not given us much more oil. The SEC filings already show that increased production is driven by capital destruction. That is not sustainable.

      I think that you are grasping at straws here. And by the way, the Hubbert methodology is quite useful at looking at the production of other commodities. If you use it things are not exactly as bright as you might argue from the supply perspective. For the record, I am not worried that the peak has to be very destructive and harmful because we can adjust if the markets are allowed to work properly. The problem is that the markets aren’t permitted to solve some of our problems because governments get in the way. All of the money printing and all those subsidies have distorted the picture and created an environment where malinvestments are not punished as quickly as they should be. Eventually reality will intervene and you will see that you did not really understand the subject as well as you thought. To get a better idea of what the supporters of the Peak Oil theory are saying you might try reading their books and papers. Until you do you only have part of the picture.

  298. Willis
    Re: “long as the amount of oil hitting the market keeps going up, we haven’t yet seen peak oil.”

    Each crude oil field peaks, each State’s crude oil production peaks, each nation’s crude oil production peaks, and consequently, global crude oil production peaks.

    Now we have the challenge of replacing declining crude oil with other hydrocarbons.

    See Robert L. Hirsch, The Impending World Energy Mess

    All hydrocarbons are not equal. It will take $1 trillion to convert 10 million bbl/day of bitumen to crude oil, plus provide the pipelines. Obama preventing pipelines from being brought from Canada will directly increase US scarcity. etc.

  299. willis wrote:

    Please up your game and read my words with the care that I put into writing them. That way you can answer what I actually said.

    This is ironic because it is very clear that you have not read carefully about the Peak Oil issue. You seem not to be aware that the amount of final products that come from a barrel of conventional oil tends to differ in amount from the final products that come from a barrel of unconventional oil. That matters no matter how much you want to play it down. And if you look at the data you find that the amount of oil produced in 2011 was not materially different than production in 2005. But when you account for the difference in mix and look at the higher proportion of heavy oil you see that the amount of final product like gasoline and kerosene has declined. That also matters.

    I suggest that you take your own advice and read very carefully about the subject before you make claims that expose just how unprepared you are to deal with the debate. As others have pointed out, the terms have real meaning in the industry and are not simply used by the Peak Oil crowd to divert attention from any predictions. In fact, I imagine that the Peak Oil crowd is very pleased with the predictions because all of the data actually lends support to their position rather than to yours. While this may not be clear to you yet all you have to do is wait a year or two and things should be far easier to see then. Algae, coal to oil, hydrates, shale oil, etc., are all signs that the easy oil is gone and that we are on the back end of Hubbert’s curve. While we should find viable alternatives some time in the future there are too many people ignorant of the facts who divert attention from what must be done that prevent the efforts that are required to get us there. If this stupidity persists I suggest that you take advantage and buy coal companies for your investment portfolio. And as the effects of this crisis hits the economy you better have a lot invested in gold and silver and little in the way of exposure to certificates of confiscation that pay you in fiat money that will be created out of thin air.

  300. Leo Smith – “ships can run on nuclear power. Trains can run (after a massive upgrade to electrify them) on electricity, but no really suitable alternative in terms of safety and energy density exists for cars trucks and aircraft.“.

    That’s true now, but they’re working on it. For cars and trucks that is. http://www.gizmag.com/drawing-power-from-the-road/12874/ [“IAV is confident that its electromagnetic induction technology will be developed to production-ready status in the next few years. A 1/28 scale model of the system is already “functioning perfectly” the company says, and construction of a demonstration section of “charging road,” and a full-scale test track, are in the planning stages in the German state of Lower Saxony.“] They might even get it up and running in time for the fuel to be coal, but longer term I would expect them to be using nuclear power. Then the (eventually) dwindling oil supply can keep planes flying for a few hundred years while they find a solution for them.

  301. vangelv says:
    February 3, 2013 at 8:32 pm

    You seem not to be aware that the amount of final products that come from a barrel of conventional oil tends to differ in amount from the final products that come from a barrel of unconventional oil. That matters no matter how much you want to play it down.

    valgelv, i am very aware of that difference. As I said, I made my living running the numbers on the oil industry. You mistake me for some kind of newbie or person unaware of the issues in the field. I am nothing of the sort.

    While I am aware of the differences you discuss, I am also aware that the claim was not “peak of just oil that gives certain percentages of kerosene and gasoline and diesel”. The claim was not “peak of just oil that has an API gravity greater than 20″.

    The claim was “peak oil”, period. Not peak heavy oil, or peak light oil, or peak oil except for oil from production gains. The claim was that we would see peak oil production. It is those claims that I have been discussing.

    And despite all your objections, the peak hasn’t happened. Oil production continues to rise no matter how you twist and turn, and until it stops rising, we have no peak.

    Yes, there are a host of side issues, as you say … so what? I’m discussing the peak oil claims, not the hundreds of other interesting and even critical issues about oil. If you want to discuss the peak in production of “Oil With API Gravity Greater Than 20″, go for it … but that’s not what I’m talking about.

    w.

  302. Jeff L says:
    February 2, 2013 at 1:38 pm

    It is a question of whether developing oil at $90-110/bbl is still cheaper and more economically productive (especially from an energy density standpoint) than developing other sources of energy. The reason we have found more oil, regardless of whether someone calls it “conventional” or “unconventional” is precisely because oil represents a cheaper source of direct, instant, and powerful energy in our cars and other products based upon petroleum. Where there is demand, and still money to be made, people will look for oil. It remains simply the best source of energy we have. Perhaps someday there will be no more oil to find, period. But we are not close to that day, I believe, based upon what I have seen on the subject.

    Great piece, Willis.

    • Larry writes:

      It is a question of whether developing oil at $90-110/bbl is still cheaper and more economically productive (especially from an energy density standpoint) than developing other sources of energy.

      There are two problems. The first is that the marginal unconventional well will not be profitable at $110/bbl. The second is that most of the profitable unconventional plays are too small or peak too quickly to matter.

  303. vangelv says:
    February 3, 2013 at 8:06 pm

    Willis wrote:

    I said the gasoline/diesel from those fuels burn the same in your engine, not that the source fuels had identical chemical compositions.

    Yes you did. But a barrel of heavy oil produces much less high value gasoline and jet fuel than a barrel of light sweet. You treat every barrel as if were the same but it isn’t. And this is not nitpicking.

    I don’t treat every barrel in any manner at all. The people making the peak oil claims were the ones that treat every barrel as if it were the same. They’re the ones that made the claim about “peak oil”. They did not make the claim about “peak of just some oil, the oil that makes lots of gasoline”. I am merely investigating their claims, and since their claims were about “peak oil”, not “peak light sweet crude”, that’s what I’m discussing.

    The refineries are built to use specific grades of oil and require massive amounts of new investment in money and energy to be rebuilt to handle the lower quality grades of crude that will replace light sweet. That matters far more than you seem to think.

    Somewhere I have a picture of me and the SK guys who were giving me the guided tour of the SK refinery in Ulsan, South Korea, the second largest refinery on the planet … yes, vangelv, I am aware of refineries, and what they can and can’t handle. I’ve been the man negotiating directly with the refineries to buy their products, I’ve been through the Shell refinery in Singapore. I’ve had them explain the reasons for the various prices, I’ve seen them up close and personal. I know things about the processes that most folks are unaware of.

    For instance, while you discuss upgrading the refineries, the other option you didn’t discuss is to upgrade the heavy oil in situ, so that you can avoid the upgrading of the refineries. This option is getting more play because the energy to do the upgrading is available where the heavy oil is produced. See here for a discussion of how this process affects the economics of the Alberta oil sands.

    Now, I didn’t discuss that either … but not because I haven’t looked at it or am unaware of it. I didn’t discuss it because it is immaterial to the peak oil claims that are the subject of the thread.

    So please, good sir, stop acting like I’m your student, or I’m someone who is unaware of the subject we are discussing. I may be wrong, but I am very knowledgeable, and I’ve considered these matters at great length. I say again, I made my living running the numbers on the oil industry, and made a very good profit for the company doing it—this is far, far from my first rodeo.

    w.

    • I don’t treat every barrel in any manner at all. The people making the peak oil claims were the ones that treat every barrel as if it were the same. They’re the ones that made the claim about “peak oil”. They did not make the claim about “peak of just some oil, the oil that makes lots of gasoline”. I am merely investigating their claims, and since their claims were about “peak oil”, not “peak light sweet crude”, that’s what I’m discussing.

      But it is not true that the people who make the peak oil claims treat every barrel in the same way. Most of what I wrote could have come from the pen of Simmons or Deffeyes. They merely claim that while there is a difference it really will not matter by very much. Do we really care if the peak comes at 73 mbpd or at 72 mbpd? Yes the mixture might mean that there were more high value end products created at 72 mbpd than at 73 mbpd but we don’t really care because the numbers are close enough.

      What the people who make the peak oil claims tell you, if you want to listen, is that when you need a trillion dollars in new investment just to keep production flat you are pretty much at a peak. And that is what we have seen. You know Willis, depletion really does matter. Take a look at one of your examples, shale and tell me how you can keep growing production by enough to offset the depletion of conventional oil when you have $10 million wells that are losing 75% of their production in the first year and are at stripper level within 5 years. You might do it if you converted a huge portion of your economy to feed the drilling supply chain but only if the wells were self financing. I hate to break this to you but outside of a few core areas shale wells are not self financing. The shale companies have relied on an explosion of debt to stay afloat. Eventually the financing gaps will not be closed and most of the players will wind up bankrupt. You saw the graph showing how much you have to drill just to keep the well productivity from falling. You are smart enough to know that the graph would not look as it does if you were right about shale. Shale is a bubble and a great way to misallocate capital. If you want energy you are better off looking a coal or nuclear.

      We have reached a period in which the aggregate data is showing a plateau. That profile was purchased by hundreds of billions in new investment in all kinds of conventional and unconventional production. Instead of ignoring the conclusion of what that means and pretending that everything is all right we need to understand what it means.

      For instance, while you discuss upgrading the refinery, the other option you didn’t discuss is to upgrade the heavy oil in situ, so that you can avoid the upgrading of the refineries. This option is getting more play because the energy to do the upgrading is available where the heavy oil is produced. See here for a discussion of how this process affects the economics of the Alberta oil sands.

      I have followed those developments for some time. But as I pointed out, the increase in Alberta tar sand production will not offset the decline in one of the major conventional fields. It is too small to matter and in this debate size does matter.

      So please, good sir, stop acting like I’m your student, or I’m someone who is unaware of the subject we are discussing. I may be wrong, but I am very knowledgeable, and I’ve considered these matters at great length. I say again, I made my living running the numbers on the oil industry, and made a very good profit for the company doing it—this is far, far from my first rodeo.

      You are still missing my point. Much of what you know is simply wrong. And I do not try to treat you as a student because I am very aware of my own limitations. But as my grandfather used to tell me, all you need to do to be the smartest man in a room is to remember that most of the things that you know are wrong. I am only trying to hold up a mirror to suggest that your information is no better than the information that all of the ‘knowledgeable’ people who defend the AGW theory use in the arguments that I have with them. The biggest danger that you face is not a lack of intellectual horsepower or a lack of effort when doing research. It is simply that what you think you know is not so.

      You are a smart guy so I will give you the one thing that you need to see that your shale argument is totally wrong. This (http://tinyurl.com/cefyc6f) graph is all that you need. Each well costs around $6-$10 million depending on the formation. (Most are closer to $10 million.) Think of the number of wells that you will need to drill every year to offset the depletion of around 5 mbpd that comes from conventional sources plus the 75% depletion from the wells drilled the previous year.

      You see the problem? The math does not work. Shale production peaks very rapidly and is incapable of producing the positive cash flows that are required for sustained drilling activity. That’s all we need. If you need to borrow money to produce oil that costs more than the price that you get for it you don’t have a sustainable business model. Shale oil is profitable in small core areas but those are immaterial when you look at the big picture. The only way to argue that shale works is to project the results from the few profitable wells on the entire industry. But that is a fool’s game and I do not believe that you want to go there.

  304. jrwakefield says:
    February 3, 2013 at 7:47 pm

    Grey Lensman please answer. All super giant conventional fields are in terminal decline? Yes or no.

    The question is unanswerable as posed, since we don’t know how many barrels of oil a field has to hold to be on your “super giant” list …

    Also, please specify which reference we are to use to look up the size of the field, as these estimates can vary by a factor of five depending on the source …

    Once we know that, we can answer your question.

    Thanks,

    w.

  305. TimTheToolMan says:
    February 3, 2013 at 7:19 pm

    Willis writes

    “Since Exxon is investing up to half a billion dollars on it, obviously they care as much about your opinion as folks here do …”

    That “massive” investment represents about 5-6 days worth of profit Willis. Profit, not expendature and thats profit in a depressed economy too.

    It appears you are implying that Exxon doesn’t care if they waste a half billion because it’s only a small part of their annual profit?

    I assure you that they are deadly serious about that kind of money, and that if they didn’t believe there was a good chance it would bear fruit they wouldn’t invest it. The money for their algae project is six hundred times what they spent on political contributions, it’s ten times what they spent on lobbying.

    Clearly, they don’t care in the slightest that you think algae doesn’t pass the smell test, Tim. I can see that that galls you, so you want to minimize their half billion dollar investment, try to figure some way to make light of it … but that’s a tough row, it’s hard to make light of a half billion dollar investment, no matter how big the company is. Exxon got as big as they are by being careful with their money.

    w.

  306. I think we need to kill the ERoI fallacy before this discussion goes much further.

    There is no law of economics that says that there needs to be a positive return at that level. It is just one input into the final product that the consumer (whether individual or commercial) buys.

    It is the aggregate cost of the final product that matters, and whether consumers are prepared to pay it. As I said way above, even if the real cost of the stuff that we put in cars has gone up, what matters is our willingness and ability to pay it. In a competitive market, others in the same business or alternative products will all be jostling for our dollar.

    “Oil” does not equal “energy”, so faux equations based on it are nonsense, as E.M. Smith has eloquently demonstrated.

  307. Willis writes “it’s hard to make light of a half billion dollar investment, no matter how big the company is.”

    You use sniff tests all the time. How about addressing the actual calculation instead of arguing that if they’re doing it then it must by worthwhile? I can think of several reasons why Exxon might invest money in alternative forms of energy that dont require an actual viable result. Tax breaks and goodwill being two of the more obvious ones.

  308. The nonsense hair splitting continues as does the ignoring of facts.

    Every oil field has different characteristics, different cuts: in distillation. In the old days, not only was building a refinery expensive it was constrained by technology. Thus they built it to process a specific crude t5ype. the output thus was known and controlled. some produced more kerosene, some more gas oil etc.

    Not any more

    Either crudes can be blended to give the correct feedstock or hitech processes such as hydrocrackers and other similar technologies produce “cut” to order. An example being shells gas to liquid technology.

    Thus running a heavy oil can result in virtual 100% petrol finished product. the feedstock matters not. but of course it does in an older unmodified refinery.

    What matters is that cars, ships, planes, trains need to have fuel. The problem has been resolved by adding fuels to the mix, i.e. look at cars before diesel or petrol. Now look at what you can use from ethanol to cng to high octane petrol’s. Plus the same has been done to all the various sources, they can all be virtually mixed and matched from Alberta oil sands to the lightest condensate fields and gas fields.

  309. TimTheToolMan says:
    February 3, 2013 at 10:26 pm

    Willis writes “it’s hard to make light of a half billion dollar investment, no matter how big the company is.”

    You use sniff tests all the time. How about addressing the actual calculation instead of arguing that if they’re doing it then it must by worthwhile?

    That’s not my argument, Tim. My argument is not that it must be worthwhile, it is that Exxon thinks it is worth doing, enough so to put half a billion in. Doesn’t mean it must be worthwhile, just means that they think it is worth a half billion dollar gamble

    I can think of several reasons why Exxon might invest money in alternative forms of energy that dont require an actual viable result. Tax breaks and goodwill being two of the more obvious ones.

    A company that spends fifty million on lobbyists isn’t going to spend six hundred million on “goodwill”, Exxon didn’t get rich by that kind of foolishness. Nor did it get rich by spending money to get “tax breaks”, I’ve worked as a tax accountant, that nonsense doesn’t fly.

    Tim, I don’t understand what you think you are proving here. Algal oil is possible. It is not guaranteed. You think it doesn’t pass the sniff test. Exxon begs to differ, to the tune of half a billion. I know whose judgement about oil I’ll take, and even if I didn’t I’ll trust the man with the most skin in the game, which isn’t you … but what’s left to dispute? What’s left to discuss?

    Like I said … what is it you’re out to prove w.r.t. algae? It seems you want me to take a position regarding algae, but I’ve already done that—I think it’s possible, particularly with Ventner in the equation, he tends to pick winners, but that doesn’t mean algae is the fuel of the future. I take no position on what that might be, I suspect it’ll be artificial photosynthesis, but I don’t know …

    w.

    • GL writes:

      Either crudes can be blended to give the correct feedstock or hitech processes such as hydrocrackers and other similar technologies produce “cut” to order. An example being shells gas to liquid technology.

      This is not free. If you are using energy to improve an inferior grade so that it can behave as the better grade of crude you still need to account for the energy that you spent on upgrading.

  310. The Alberta Oil sands is just one new suoerfield, it is bigger than all the old ones put together. Live with it.

    It is being developed and operated now

  311. Willis writes “Like I said … what is it you’re out to prove w.r.t. algae? It seems you want me to take a position regarding algae, but I’ve already done that”

    You are certainly taking a strong position on an energy source that is only around 20% efficient in an internal combustion engine.

  312. Johanna wrote,

    “There is no law of economics that says that there needs to be a positive return at that level. It is just one input into the final product that the consumer (whether individual or commercial) buys.”

    It depends at what level. Of course, you can have an individual field able to profitably produce with a low, or even < 1 EROEI. It is quite possible that an oil company in Canada can profitably extract the lowest grade of shale oil using cheap US gas. EROEI only becomes important on the global scale.

    Today, global EROEI is around 20 or 25:1, which is pretty good, as it means that civilization only has to reinvest 4% of its economic output into the energy process, and it allows fields with very low EROEIs to be brought into production.

    On a purely theoretical level, it would be nonsense to suggest that the world on average does not need to make a positive return in energy invested. Some people talk about adding nuclear to power oil extraction. That would be fine. You invest a certain amount of energy to run the nuclear, and at the other end of the chain you get the oil. The nuclear "lift" has made the return positive and increased EROEI.

    Now, I am quite willing to entertain the idea that human ingenuity can allow economic energy extraction – eg Willis's sea water filtering sponges. I am quite willing to entertain the idea than nuclear can play a great role in "lifting" EROEI. But I am dubious when people claim that you can have EROEI continuing to fall and it makes no difference. Even the sponges don't alter the EROEI equation because if the sponges give us uranium then that uranium is available for use and will increase the EROEI overall, just as would be the case if the uranium were unexpectedly found in a cave in Utah.

    What you absolutely can't have, is nothing but shales and tar sands, with no extra nukes, because the EROEI of the entire world would be so low that vast amounts of economic resources would be required to obtain this energy, leaving so little for normal consumption that life would become "not as we know it." So nukes, sponges, human ingenuity, yes, but let us at least acknowledge that these work by lifting EROEI overall.

  313. TimTheToolMan – I don’t know if ‘Joule Unlimited’ are anything to do with Exxon, but it appears that their algae (like others’ I have heard of) are being used as a form of solar energy.

    http://thetechjournal.com/science/genetically-modified-algae-could-produce-the-fuel-of-the-future.xhtml

    I suspect that Exxon’s would be similar.

    One possible reason for Exxon’s investment could be governments’ insane pursuit of “carbon” capture and storage (CCS). But it would only be worth Exxon’s while if there’s going to be a lot of government subsidy:
    Joule Unlimited hopes to eventually put its operation near a coal or natural gas power plant, so that it can use the carbon dioxide captured by said plant. The company has already raised $30 million in second-round financing, and predicts that it could create 25,000 gallons of ethanol per acre each year — much higher than production from other biomass sources.“. That’s 1.63 barrels per acre per day.

    Another possible motive for the research is the thought that the algae might be able to do a lot more than just convert energy, for example they might be able to play a part in clearing up oil spillages.

    A third possible reason is that Exxon recognise that oil supply is plateauing and a few billion on research into other energies may help Exxon to remain energy leaders in future.

    Maybe the best suggested reason so far is it makes them look green.

  314. Mike writes “That’s 1.63 barrels per acre per day.”

    Yep, so “only” 613,000 acres per 1% of oil substituted.

    Mike then goes on to suggest “Maybe the best suggested reason so far is it makes them look green.”

    …and I concur.

  315. “The Alberta Oil sands is just one new superfield, it is bigger than all the old ones put together. Live with it.”

    It’s not new. It’s been known about for more than 100 years.

  316. Willis: “The question is unanswerable as posed, since we don’t know how many barrels of oil a field has to hold to be on your “super giant” list …

    Also, please specify which reference we are to use to look up the size of the field, as these estimates can vary by a factor of five depending on the source …

    Once we know that, we can answer your question.”

    Google exists to look this up.

    http://www.aspo-australia.org.au/References/Aleklett/GOF_decline_Aleklett.pdf

  317. A new book has just been published on the ERoEI of photovoltaics in Spain.

    Spain’s Photovoltaic Revolution: The Energy Return on Investment

    The Energy Return on Energy Invested (EROI or EROEI) is the amount of energy acquired from a particular energy source divided by the energy expended, or invested, in obtaining that energy. EROI is an essential and seemingly simple measure of the usable energy or “energy profit” from the exploitation of an energy source, but it is not so easy to determine all of the energy expenditures that should be included in the calculation. Because EROI values are generally low for renewable energy sources, differences in these estimates can lead to sharply divergent conclusions about the viability of these energy technologies. This book presents the first complete energy analysis of a large-scale, real-world deployment of photovoltaic (PV) collection systems representing 3.5 GW of installed, grid-connected solar plants in Spain. The analysis includes all of the factors that limit and adjust the real electricity output through one full-year cycle, and all of the fossil fuel inputs required to achieve these results. The authors’ comprehensive analysis of energy inputs, which assigns energy cost estimates to all financial expenditures, yields EROI values that are less than half of those claimed by other investigators and by the solar industry. Sensitivity analysis is used to test various assumptions in deriving these EROI estimates. The results imply that the EROI of current, large-scale PV systems may be too low to seamlessly support an energy and economic transition away from fossil fuels. Given the pervasiveness of fossil fuel subsidies in the modern economy, a key conclusion is that all components of the system that brings solar power to the consumer, from manufacturing to product maintenance and life cycle, must be improved in terms of energy efficiency. The materials science of solar conversion efficiency is only one such component. Sunny Spain represented an ideal case study as the country had the highest penetration of solar PV energy at 2.3 percent of total national demand as well as state-of-the-art expertise in solar power including grid management of intermittent, modern renewable systems. This book, written by a uniquely qualified author team consisting of the chief engineer for several major photovoltaic projects in Spain and the world’s leading expert on the concept and application of EROI, provides a comprehensive understanding of the net energy available to society from energy sources in general and from functioning PV installations under real-world conditions in particular. The authors provide critical insight into the capacity of renewable energy sources to fill the foreseeable gap between world energy demand and depletion rates for fossil fuels. · Presents the first comprehensive study of the EROI of large-scale solar PV systems in a developed country · Uses real-world operational data rather than laboratory approximations and extrapolations · Describes the dependence of one alternative energy source on the goods and services of a fossil-fueled economy · Has global implications for the potential of renewable energy sources to replace dwindling reserves of fossil fuels · Written with the first-hand knowledge of the chief, on-site engineer for many solar installations in Spain together with the leader in the development and application of the concept of EROI

  318. Great post – just a couple of additions. The first oil well was drilled by Edwin Drake in Titusville, PA in 1859. Prior to the use of conventional and horizontal fracking, oil wells were “shot” for nearly 100 years using a torpedo shaped device filled with nitro-glycerine that was lowered to the bottom of the well and then detonated, which enlarged the chamber and fractured the surrounding rock face.

  319. This evasive goal-shifting behavior of yours is exactly the subject of the post. You will claim anything to avoid noticing that despite all of your screaming, OIL PRODUCTION CONTINUES TO INCREASE.

    But does it continue to increase? Just how much more oil do you think we are producing today then we did in 2005? How much capital did that increase require? Is that capital creating wealth or being destroyed because the new projects that allow us to produce more oil are not self financing? You know Willis, I have been fighting with the shale gas promoters for nearly a decade now. For years they were talking up shale, pointing to rising production and telling me to look at the producers stock.

    The funny thing is that the more I looked to where the promoters pointed the more it became obvious that shale gas was a scam. The 10-Ks were very clear. The investments were not self financing and new production was purchased through capital destruction. The debts on the balance sheets were growing rapidly but there was no positive cash flows generated from the wells that were being drilled. When we looked into the details we found that companies were reporting some profits because they made assumptions about decline rates that were not justified by the production data. The analysts who pointed this out were pushed aside by the industry ‘experts’ and government bureaucrats who issued their own analysis. But now we see that the skeptics were right. There was no shale gas miracle. Yes, production did go up and yes, it was stimulative to consumers of gas. But the stimulus came at a cost–the destruction of capital.

    Now we see those same promoters talking up shale liquids. They tell us that Peak Oil is Peak Stupidity because shale and tar will ride in and save the day. What they miss is the huge depletion rate in shale and the very material depletion rate for conventional fields. If anything new technology has made things worse. When Hubbert was working producers did not use enhance recovery techniques to borrow production from the future. They did not have horizontal wells with a water drive that was pushing the oil towards them. That meant that fields that had peaked were well behaved and had a nice hyperbolic decline rate that ensured that the lower production rate would continue falling for years. That is no longer the case. In an era of water drives once the water gets to the horizontal pipes the output from those pipes collapses immediately. You go from a 5% water cut to a 95% water cut in a matter of days or weeks. And the field has a stepwise reduction.

    That was for conventional fields, which are much better than the unconventional sources. Those don’t need much help from enhanced recovery techniques to cause production to fall off a cliff because their natural decline rates is all that is needed. You have $10 million wells that start off at 300-600 bpd, lose almost half of that IP in the first month, and are down to 20% of IP by the time 12-18 months have passed and down to stripper conditions by the end of five years. And that is the good wells in the sweet spots of the core of the better formations. Such wells cannot replace their own production three to five years after the field has begun operations let alone replace the nearly 5 mpbd of conventional production that is lost to depletion.

    If you look at this very simple chart (http://tinyurl.com/cefyc6f) you find exactly what the problem really is. All of that drilling has been unable to improve well productivity. That means that you need to keep drilling thousands of new $6-$10 million dollar wells (depending on where you are in the formation) just to keep production from falling. But the math tells us that we cannot keep production from falling. When I was arguing about shale gas some of my critics would point me to the Elm Coulee field in Montana and argue that the same miracle could happen with oil. The funny thing is that they soon stopped mentioning that field. Here (http://tinyurl.com/cv3eyfv) is the reason why.

    Now you are a smart guy and is more than capable of understanding the very simple math that is involved in this argument. I suggest that you hold the views because you really have no idea what the debate is about and about the various factors that will settle it. I am confident in my position because I already see the peak in the rear view mirror. The EIA and IEA along with CERA and a few other consulting groups were already shown to have underestimated the real decline rates. They did as you have done and assumed that if the demand was there the supply would follow. But that does not have to be the case. Before we get from A to B we could have the market ration falling demand through the price system. I suggest that is what we will see. Economic growth will remain low as the supply of crude continues to stagnate. Once the financial institutions stop lending money to shale producers who cannot sell their product at more than cost you are likely to see the panic begin. All kinds of pipelines that bring stranded oil and gas to the market will happen. I suspect that the national oil companies in the Middle East will finally get their act together and drill deep enough to find the natural gas that has to be found in deeper reservoirs. I suspect that a new economy will develop around converting some of these reserves into liquid fuels. There should also be a lot more interest in nuclear, hydrates, and other sources. But that will not change the fact that petroleum production has peaked.

    Do yourself a favour and read a book or two on the subject. Try picking up the books that actually deal with the logic and the data and make up your own mind by following where the math leads you. I suspect that you will be very surprised.

  320. MorningGuy says:
    Solar has dropped in price so much over the past few years that it already pass the cross over with nuclear, see here

    http://cleantechnica.com/2011/05/29/ge-solar-power-cheaper-than-fossil-fuels-in-5-years/

    Problems:
    The site is called Clean Technica, clearly, they are biased, you can see that just from the name. They are likely to select sources for their information that support the idea that ‘clean’ power is good and ignore those that show it’s flaws.

    “Solar power may be cheaper than electricity generated by fossil fuels and nuclear reactors within three to five years because of innovations, the word here is MAY. A site called cleantechnica will assume MAY means WILL because they are paid to say so. Look at their ending sentence Expect more good news along these lines soon., yes, I’m absolutely sure we can expect more good news, and nothing but good news. Well, perhaps the word ‘news’ is stretching things a bit.

    They are, however, right that solar panel price is dropping. See, the subsidies have dried up (debt, lots of debt, and the choice of bureaucrats supporting their own pensions or this, easy choice), and with subsidies gone, there is now a glut of solar panels, and the manufacturers are dumping them. If solar power was so cheap, the manufacturers would use solar power to sun the factory to make solar panels, instead, China is currently choked with the coal power used to actually manufacture them.

    Also, the reason nuclear is expensive, and other power generation is outstripping it is not because it really is expensive, but because of peoples irrational, artificially manufactured fear of small amounts of radioactivity, and governments taking advantage of that to load the cost with tons of bureaucratic red tape. Maybe someday people will notice that the UN has stated that small amounts of radioactivity has been proven to be completely harmless.

    I expect mankind can develope cheap power, however, the way things are now it will probably be banned , like nuclear is basically banned.

  321. Given this field has consumed my life for well over thirty years now and one of my doctoral supervisors worked with King Hubbert at the Shell Research centre and offered considerable insite on a number of Hubberts theories (this being a couple of decades before the topic became popular) I’m in a bit of a unique situation to comment on some of what I see as being misconceptions. At least one poster Geo noted some of this as well.

    First the Concept of Peak Oil is only tangentially related to ultimate reserves, it is about the peak of oil production. That peak is influenced by a plethora of issues including, price/economics of discovery and extraction concerns and to a lesser extent political issues. Because so much of current production rates still hinges on OPEC and especially Saudi Arabia and those fields are getting to a point where they are likely past the halfway mark of EUR it doesn’t take much slow down in discovery and bringing such discoveries on stream for peak production to appear. It needs to be understood that discovery rate isn’t as important as is the speed by which production can be achieved. In the case of offshore discoveries in West Africa it has taken on average 10 years from first discovery to first production which definitely impacts assumptions regarding peak. The difference will be in the way that the peak looks. In the Hubbert Gaussian models it appears as a distinct pinnacle but was not influenced by external factors (i.e. the assumption was that fields were brought on stream and produced with no influence from economic factors). When you consider economic and political pressures the peak will more than likely look like a bit of a roller coaster, a long flat plateau with a lot of ups and downs.

    It only takes a minute or so after someone posts a new discussion about peak oil for someone to bring up the idea of abiotic oil and Gold or some of the other Russian scientists. This theory has been proven to be incorrect many, many, many times. On the PEAK OIL website I gave up a long time ago explaining to people why the science doesn’t support abiotic oil and the significant number of scientific arguments in support of organic origins (I have an academic background in organic geochemistry). About 20 years ago there was a special conference of the AAPG held to allow a number of the Russian scientists to argue their points with other organic geochemists from around the world, the abiotic theory was a clear loser. I could list all of the reasons supporting an organic origin and point to all of the arguments that the abiotic crowd make and why they iare ncorrect but it would take up too much space. This sort of discussion has been handled on a number of discussion websites such as the oil drum or peakoil and that would be a good place to look for the appropriate arguments. The fact of the matter is oil and gas are non-renewable commodities in any time frame that is of importance to man.

    The idea of conventional vs unconventional is a bit misused by many. A number of years ago the term conventional oil and gas was used to describe any hydrocarbons that sat in pore spaces with interconnected pore space creating permeability such that simply drilling a well into a reservoir and creating a pressure drop across the sandface would result in production. Unconventional hydrocarbon reservoirs 20 years ago (before we really understood much about shale reservoirs) included fractured carbonates and sands which had little in the way of porosity, volcanic reservoirs such as the tuffs which produce in Utah and heavy oil reservoirs. The concept of shale as a reservoir has been around for sometime but only came to forefront due to a combination of technological change, higher commodity prices and the recognition that costs needed to be properly managed through appropriate planning. What makes it special is that you do not have to seek out a trap or closure that has all of the risk associated with migration and preservation but rather the entire deposit (within a certain range of burial depth) is the reservoir…it just needs a lot more horizontal wells and a lot more fracs. So the term conventional or unconventional was more to do with the effort of extraction rather than the type of hydrocarbon. In the case of heavy oils the two were somewhat entwined simply because the 4000 cp viscosity of mineable oil sands in Canada required extraction methods that were not the same as applied in typical oil fields and the resultant product wasn’t the same either. That isn’t the case for all heavy oils, as an example in Colombia many of the oils that have low gravities (10 – 15 API) also have low viscosity and are hence thought of as being conventional reservoirs.

    The thought that the fraccing we did twenty some years ago is anything at all like the type of fracs that happen on a daily basis now is incorrect. In the old days a frac might be created simply to get past reservoir damage created near the borehole due to invasion of muds used during drilling. In this case the water column pressure simply needs to be raised above the lithostatic pressure of the formation (or close to it in the case of pre-existing fractures) and a fracture is created through the damaged zone to the undamaged reservoir which allows for production and eventual cleanup. The newer fracs are often conducted in wells with as much as several kilometres of horizontal section at depth of several km. The fracs are created in stages with seven stages being common, each requiring increasing hydrostatic pressure to the point at which rock failure occurs. The science and technology involved is considerably more advanced and continues to evolve. In the old days a frac might cost a few hundred thousand in a well that cost 5 – 10 million, nowadays the drilling costs have been managed down but fraccing costs remain high such that often it costs as much to frac a well as drill it.

    Although I understand the rationale the EIA has for reporting all liquids produced as being the same I think it is wrong to think of them all as being completely fungible. There are certainly some heavy oils that could not be used for much other than asphalt without some form of cracking, much of the NGL’s produced could be fuels but practically aren’t simply because vehicles aren’t set up to run on them. As a consequence all of the ethane and propane produced is somewhat meaningless when we are worried about how much oil will be available to refineries to create gasoline. So when arguing that we will have lots of liquids available to us in the future one also has to consider what those liquids could be used for and how important they are to us (eg. is having fuel for your car as important as having fake creamer for your coffee?).

    Finally the main issue I think is that because oil and gas are not infinite resources and are becoming harder and harder to find and costs for discovery and extraction continue to increase there is continued upward pressure on commodity price. A number of economists have blamed the 2008 economic crash at least in part due to the period where oil prices (both WTI and Brent) were well over $100. If global economies can’t support $100 oil (and I believe it is safe to say that economies aren’t improving much currently) but supply/demand issues determine the price needs to be there then I think we need to consider we are in trouble.

  322. Last year, for the last three months compared to the same period a year earlier (EIA STEO data), US oil production was up 780 kbpd; Canada was up 270 kbpd. This increase was all from shales or oil sands. Global oil production was up 940 kbpd. Thus, all other global production ex-Canada and ex-US was in decline. Global upstream investment was approximately $640 bn, twice what it had been in 2005.

    Now, a million barrels of productive capacity costs aboutn $100 bn. So of that $640 bn, perhaps $400 bn had to go just to offset declines (a portion went to various gas projects).

    This is not a pretty story.

  323. Vangelv, May i make a small suggestion? Read wills posts, and then prepare your deepest and most abject apology. You will need it.

    • Vangelv, May i make a small suggestion? Read wills posts, and then prepare your deepest and most abject apology. You will need it.

      Perhaps I might owe him an apology for something. But that does not change the fact what what he thins he knows isn’t correct. Many people here have been very kind to Willis and have given him plenty of information that would allow him to see exactly why his conclusions are wrong. It is up to him to pay attention to the arguments, look at the facts, and draw his own conclusions. I may not be as intelligent as Willis but on this issue I am right and he is wrong. While intellectuals can be very clever at times that does not mean that they always know what they are talking about or that their information is correct.

      It is ironic that people see this when the AGW promoters tell us things that are clearly wrong but tend to gloss over it when someone who they respect and likes makes a similar error or when they themselves cannot support their own positions with facts as they are. I am sad to conclude that we now tend to live in a politicised post-truth world. When people who are obviously intelligent refuse to look at all of the facts and draw clear conclusions that are supported by those facts what hope is that the less intelligent or less knowledgeable among us will draw the proper conclusions?

  324. Kopits, you too need to learn to read. My early posts here, a brand new Saudi Super field, fully documented by the BBC. Building to two million barrels per day, cost of production, now USD 1.00 per barrel. In case you cannot read the number ONE DOLLAR

    Stop talking patent rubbish.

  325. Wakefield

    Quote

    In mid-2006, the National Energy Board of Canada estimated the operating cost of a new mining operation in the Athabasca oil sands to be C$9 to C$12 per barrel, while the cost of an in-situ SAGD operation (using dual horizontal wells) would be C$10 to C$14 per barrel.[94] This compares to operating costs for conventional oil wells which can range from less than one dollar per barrel in Iraq and Saudi Arabia to over six in the United States and Canada’s conventional oil reserves.
    The capital cost of the equipment required to mine the sands and haul it to processing is a major consideration in starting production. The NEB estimates that capital costs raise the total cost of production to C$18 to C$20 per barrel for a new mining operation and C$18 to C$22 per barrel for a SAGD operation. This does not include the cost of upgrading the crude bitumen to synthetic crude oil, which makes the final costs C$36 to C$40 per barrel for a new mining operation.

    http://en.wikipedia.org/wiki/Athabasca_oil_sands#Estimated_oil_reserves

    Unquote

    If you read the rest of the report you will find, the three fields total reserves is approximately equal to the rest of the world combined. They base recoverable estimates on 10% recovery but 60% has been achieved.

    Note unlike conventional oil, processing includes partial refining, thus processing cost is actually less than that stated, to use your expression, comparing apples with apples.

    • Grey Lensman wrote:

      If you read the rest of the report you will find, the three fields total reserves is approximately equal to the rest of the world combined. They base recoverable estimates on 10% recovery but 60% has been achieved.

      But if you also read about the tar sands you will find that production is estimated to peak at around 5 mbpd. That little fact matters in a discussion about peak oil.

    • jrwakefield writes

      vangelv excellent post explaining depletion rates from shale deposits.

      Please explain to me how a guy who is smarter than I am (Willis) is not willing to deal with the depletion issue. How is it possible to argue about the effect of rising shale production when you can’t even figure out that shale fields are not economic and that they peak far too quickly to effect the peak oil arguments?

  326. “Kopits, you too need to learn to read. My early posts here, a brand new Saudi Super field, fully documented by the BBC. Building to two million barrels per day, cost of production, now USD 1.00 per barrel. ”

    I cant find a link to this. I follow this stuff pretty closely, any new deposits in SA tend to be very small. Most wells sunk in SA produce nothing. Most of the deposits are clustered around the east seaboard. http://www.eia.gov/cabs/saudi_arabia/images/Oil%20Gas%20Fields%20Map.gif

  327. The Alberta Oil sands is just one new suoerfield, it is bigger than all the old ones put together. Live with it.

    It is being developed and operated now

    But the tar sands will never produce more oil than Saudi Arabia are producing today. And we are losing a Saudi Arabia worth of production every year through depletion. How will you replace that production next year? And the one after that?

    The super-fields being talked about are Ghawar, Cantarell, Daqing, Burgan, Rumaila with Oseberg, Kirkuk, and a few smaller fields around the periphery. I believe that the attempt was made to inform you that all of these fields have peaked. New production from unconventional sources cannot offset the depletion from these fields as well as the much higher depletion of those unconventional sources. As such there is not much of an effect on the peak oil date.

  328. Grey Lensman see:

    http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/crude-glut-price-plunge-put-oil-sands-projects-at-risk/article4230759/

    “New oil sands mines, for example, require prices of around $80 (U.S.) a barrel to break even, Wood Mackenzie found. Add an upgrader, the “pre-refinery” that transforms heavy oil into a lighter crude that can be further refined into diesel and gasoline, and the needed break-even rises to above $100. So-called “in situ” projects, which use wells and underground steam injection to extract oil sands crude, are less vulnerable, with a break even of about $60.”

  329. “The Alberta Oil sands is just one new suoerfield, it is bigger than all the old ones put together. Live with it.”

    That deposit is currently producing about 1.5mb/d. To do that they consume ONE THIRD of all natural gas used in Canada. More than is used to heat every home in the country. Plans are to get the oil sands to 3mb/d in 20 years. So that means 2/3s of all NG consumed will be at that deposit. The Energy Trap.

    • That deposit is currently producing about 1.5mb/d. To do that they consume ONE THIRD of all natural gas used in Canada. More than is used to heat every home in the country. Plans are to get the oil sands to 3mb/d in 20 years. So that means 2/3s of all NG consumed will be at that deposit. The Energy Trap.

      You are correct but there may be a solution that makes the tar sands viable even if it is not the solutions that the peak oil critics think it is. There is a lot of gas in the Mackenzie River Delta. Some of that gas can be used in the tar sands as a low cost fuel because it would not have to travel all that far. There is also the possibility of building a large coal or a nuclear plant to help make the process more economic.

  330. Jeff L says:
    February 2, 2013 at 1:19 pm

    What is fair to say is we are running out of barrels that we can develop economically at $20/bbl. If that weren’t the case, oil would still be $20/bbl.

    Jeff, I’m not sure I agree with this, the prices started increasing when the turmoil of the Mideast rattled the financial markets, and the commodity traders added a “lack of stability” cost into a barrel, that has had only a minor impact on the cost of production. I’ll also note about 5 years ago, the variable rate for a MCF of Nat gas was ~$15, it’s now under $5, and only that high because they’re starting to slow the pumping of all of the wells they’ve drilled. The era of cheap Nat gas, will drive down the cost of transportation fuels (whether we see a big uptick in Nat gas vehicles, or syn fuels) they will put downward pressure on oil.

  331. I am not sure why this is such a big deal. Firstly we have been told that peak oil will arrive and then enter a decline leading to our ruin, which is obviously not true as this has been predicted for over half a century now. All that does happen is that the price of our liquid hydrocarbons has risen somewhat in constant dollars, but not in any significant way. However should the price rise beyond the price of other technologies leading to liquid hydrocarbons or alternative fuel types then a transition will take place.

    Talk of companies going bust trying to exploit shale oil or other technologically difficult and costly sources also leads to a “so what” moment. They are big boys and they are acting in what they perceive as their own best interests. If they go bust, well that happens in business.

    What is it we are supposed to do with the peak oil theory? Are we to stop using oil right away because it will run out sometime. Are we supposed to invent new ways of fueling our engines and plastic factories with something else right away? Surely there are any number of business enterprises doing that every day in the hopes of hitting the jackpot but so far they bump up against the actual unavoidable fact that liquid hydrocarbons are still a better option.

    They are a better option because the oil boys are constantly upping their game because even though oil is a mature industry it still has plenty of room for improvement as we see almost every day. Willis points out this quite effectively in his article. Those of you decrying him are probably very accurate in all that you say but the irony is the continuing and increasing supply of oil.

    All the points about production are well made, however you can’t store a lot of oil or refined products around the world and so output must be quite closely coupled to demand. I know that the producers, particularly OPEC, manipulates output to a minor extent in the margin so as to achieve optimum prices for themselves. Sometimes the manipulation takes on a political dimension, particularly when you know that the majority of oil extraction is done by state or quasi state companies. As demand rises so will output, at a price, and those who make the most effective use of the fuel will do well. Others not so much.

    The refining story is another red herring as technology is easily put to work handling different qualities of crude. Likewise the power in vs power out story. It is an irrelevance because the liquid hydrocarbons are basically a store of energy, electricity in this case, and that can’t be stored in another way.

    Like I said at the top, why should we, the great unwashed, care about peak oil when it absolutely will not affect us in any measurable way. We will still have to work the same amount of time, relatively, to buy a gallon of gas.

  332. Wakefield

    Stop

    Look at facts not your delusions. Look at them using their own fuel, why buy natural gas. They have a multitude of ways to go, they choose. They have paid for one million barrels of production train. Most probably all the current capital costs. If they use natural gas, it because its cheap, handy and available. All oil refineries use oil/gas to run process, heat and generate electricity, big deal

    But as they process on site, a multitude of costs can be hidden or double counted.

    I gave you the actual figures above which confirmed my top estimate of USD 35. Compare that with your USD 90 and rising. Same with the nut going on About trillion per million barrels.

    Are you guys incapable of reading, learning, of understanding that oil production technology has advanced since 1960. Is that concept so difficult to understand?

  333. We have plenty of oil. Here in the USA, we’ve made a political decision to not use many of our natural resources. Where does that fit into the Peak Oil theory?

    No matter how you try to fudge it, we have more oil in the world than anybody ever dreamed. Every year, we discover more. Every year, technology advances and more and more of it profitably recoverable.

    So much for Hubbard. Unfortunately, Hubbard must have a (postmortem) position advising Obama and the Energy Department, because the facts just aren’t getting through.

  334. “We have plenty of oil. Here in the USA, we’ve made a political decision to not use many of our natural resources. Where does that fit into the Peak Oil theory?”

    Care to list those deposits? No the US doesnt have plenty of oil. Those “reserves” you mentioned arnt extractable at any price. What is discovered are small pockets that will have low flow rates and short lives.

    Please understand that we are not talking about geological peak oil. We are talking about flow rate peaking and not meeting demand.

  335. “If they use natural gas, it because its cheap, handy and available. All oil refineries use oil/gas to run process, heat and generate electricity, big deal.”

    You clearly do not understand the process of turning bitumen into synthetic crude.

    Natural gas, injected at high pressure and high temperature, is required to crack the long carbon chains and attach hydrogen at the ends. They can’t use anything else but NG for that process. That’s were the bulk of NG is consumed, in the cracking chemical reaction.

  336. “Firstly we have been told that peak oil will arrive and then enter a decline leading to our ruin, which is obviously not true ”

    Tell that to Egypt, Indonesia, and other countries who used to export oil, but due to their own peaking of production now have to import. They have higher food prices because of that, causing rioting in the streets. Egypt will be bankrupt within a few years.

  337. jrwakefield says:

    “Care to list those deposits?”

    Under this Administration it is illegal to even look for oil. So how can we possibly know what deposits we have?

    This map shows the areas where oil exploration is illegal. Every ‘peak oil’ prediction has turned out to be wrong. Every one of them. Why should we believe the latest peak oil prediction?

  338. “Please explain to me how a guy who is smarter than I am (Willis) is not willing to deal with the depletion issue. How is it possible to argue about the effect of rising shale production when you can’t even figure out that shale fields are not economic and that they peak far too quickly to effect the peak oil arguments?”

    I wish I knew. Believe me, when I first started to read up about peak oil I was not a happy person. I happen to very much like our modern civilization as it is, and want it to continue advancing.

    I guess they look at the petroleum industry and think they have the answers and the market place will solve all our problems. True that has been the case (which is why they always bring up the whale oil argument). The problem is we do not have a viable replacement for oil. They also seem to think that there is no economic consequences when energy costs go up. It’s not the absolute costs that’s the problem, it’s the relative cost increasing that’s the problem. Soon as the price of energy reaches a threshold of GDP, it throttles the economy, people cut back spending to pay for the increase in energy, and we slide into a recession. That in turn drops the price of energy because of reduced demand, and funding for expensive sources dries up.

    Peak oil and peak natural gas isnt just about the energy. It’s a complex interaction of energy and economics.

    Personally, my bet is on LFTR. I’m hoping that technology, which will make every wind turbine and solar panel obsolete, will stave off some effects of lost oil production. Then we can move to things like electric trains, and get trucks off the road. Heat homes with geoexhange instead of natural gas. (I converted a few years ago. BTW, I don’t regret that because of shale gas as I know it wont last.)

    One other new advancement is going to be a game changer even for energy consumption. And that’s 3D printing. Manufacturing will return to the US from China. Transportation costs will be the one driving factor.

    Get the popcorn out, the future is going to be one helova ride.

  339. “This map shows the areas where oil exploration is illegal. Every ‘peak oil’ prediction has turned out to be wrong. Every one of them. Why should we believe the latest peak oil prediction?”

    The USGS knows where every deposit is, those were discovered decades ago. (if they havent been found, how do YOU know what there is?) You do realize there is a long list of countries who are now in terminal decline? Egypt, Norway, the UK, Argentina, Mexico, Indonesia, Iran. Even China consumes more oil than they produce.

  340. jrwakefieldsays:

    “The USGS knows where every deposit is…”

    Not really.

    There is ample fossil fuel energy waiting to be found. The only thing keeping it from being located and used is government. If the market is allowed to properly function, the market and new technology will take care of the problem. It always has in the past, why should it be any different this time?

    Don’t be such a pessimist.

  341. richardscourtney: The Liquid Solvent Extraction (LSE) process has been capable of producing synthetic crude oil (i.e. syncrude) from coal at competitive cost (n.b. cost and not price) with crude oil since 1994.

    We proved the technical and economic abilities of the LSE process with a demonstration plant at Point Of Ayr in North Wales.

    However, prior to LSE it was always more costly to mine, transport and convert coal to syncrude than to drill and transport crude. LSE has reversed those relative costs.

    I googled “Liquid Solvent Extraction” and “Point of Ayr” and didn’t find anything on the economics of making syncrude from coal. I got 204,000 and 200,000 search results each, so perhaps I did not page far enough. Could you provide a reference? I would appreciate it.

  342. IF money is thrown at production more is produced. This is the main thrust of the arguments presented. Did that work for whales? Oil is a finite resource, like water, stone, air. It is all finite. The earth isn’t growing.

    Can you produce Dinosaur meat to feed us a single dinner? If you threw enough money at the issue? If not why not? How about albino bangle tiger meat for everyone? These items have already crossed the threshold of wide availability. Oil will be the same in time. Such is the nature of a finite system. Money is but one side of the equation.

  343. rockdoc says:
    February 4, 2013 at 6:39 am

    You (and others) speak well from experience. it is interesting that the voice of economic and physical practicality seems to be restricted to Canadian geologists; the American geologists involved in the Bakken, or the Brits/Autralians in the shale basins seem very quiet.

    There has been a paper by a brokerage house that seems to say that, in real dollars, oil has stayed flat (except for spikes like ’73) since discovery in the late 1800s. That being the case (which I dispute), you cannot say that the costs have stayed flat since then. So, using my previous analysis here, if we look at how many barrels of oil it takes to justify getting any out of the ground, the “cost” has definitely increased, or, one could equally say, the return of oil volume vs oil consumption to get that volume, has come down.

    We are in a time of “peak” oil in a practical way.

    The future is expensive.

  344. Don’t forget the Fischer-Tropes process. Even if all of the fossil fuels evaporate completely, we still have the ability to convert any carbon mass into synDiesel.

    We aren’t about to run out of liquid fuels.

  345. johanna says:
    February 3, 2013 at 9:55 pm
    “…even if the real cost of the stuff that we put in cars has gone up, what matters is our willingness and ability to pay it. ”

    That is true only in a limited sense. Both individuals and societies have a limited amount of disposable capital. But neither individuals nor socieites are vibrant when most of their disposable capital is spent on either survival or the business of making capital. Which is why socieites do no develop until after wars (though technology develops during wars).

    It is the art galleries, bookshops, cinemas and lattes that create a vibrant society and civilization. When you defer monies for those to monies for driving around or heating/cooling your house, you are starving the purpose of life (other than making money, which even rich people recognize when they buy mansions and powerboats).

    We need cheap energy to do all the things we really want to do. We could be spacefaring peoples already if it weren’t for expensive energy: getting to the moon is about energy, not so much the technology of an airtight tin can.

    • It is the art galleries, bookshops, cinemas and lattes that create a vibrant society and civilization. When you defer monies for those to monies for driving around or heating/cooling your house, you are starving the purpose of life (other than making money, which even rich people recognize when they buy mansions and powerboats).

      Culture is always funded out of surplus production. Even cave men painted on walls when food was not scarce and time and resources could be diverted towards other activities.

      On this note I would like to recommend something that I found both surprising and fascinating. If you have an i-Tunes account you might want to look at the free iTunes University Collection, Commerce and Culture, by Paul A. Cantor. As an engineer I found Cantor’s approach fascinating. My wife, who is a musician, and many of her friends, found it even more fascinating and kept asking why it was that they were never exposed to these concepts during their art school days. Cantor’s books are very high on my list and (getting back to this topic), his essay Hyperreality and Hyperinflation, is must reading given the times that we live in.

  346. vangelv says:
    February 4, 2013 at 5:41 am

    Willis writes:

    vangelv, I’m getting dizzy with the moving of the goalposts. First the peak was supposed to be peak oil. Then it was peak conventional oil. Now, you are talking about peak light sweet crude. Plus you want to make the judgement on what should be included in the peaks based on how much of the heavier and how much of the lighter grades you get out of it … really?

    It is not my fault that you have posted on a subject that you have not really studied well enough.

    Vangelv, my great-grandfather used to say, “If you need to hang your diploma on your living room wall, there’s something wrong with your education”.

    You claim that somehow your superior knowledge enables you to tell that despite my working in the fossil fuel field, despite my spending thousands and thousands of hours studying the subject, that I “have not studied enough”.

    Sorry, vangelv, but all that kind of “diploma-hanging” does is turn my stomach. I won’t discuss things with a man who offers that kind of nonsensical and unpleasant claims.

    But please, continue with your vapid, contentless meanderings, don’t let me disturb you. Just don’t be surprised when I no longer answer. There’s lots of pleasant folks out their who either know something they can teach me or are willing to learn something. I like to interact with them.

    Since you are none of the three—not pleasant, unwilling to learn anything, and far too grating and socially inept to successfully teach anyone—I’ll leave you to prattle to anyone foolish enough to continue to waste time on your lack of capability and your shifty shifty evasions.

    Me, I’m outta here …

    w.

  347. jrwakefield says:
    February 4, 2013 at 5:25 am

    Willis:

    “The question is unanswerable as posed, since we don’t know how many barrels of oil a field has to hold to be on your “super giant” list …

    Also, please specify which reference we are to use to look up the size of the field, as these estimates can vary by a factor of five depending on the source …

    Once we know that, we can answer your question.”

    Google exists to look this up.

    http://www.aspo-australia.org.au/References/Aleklett/GOF_decline_Aleklett.pdf

    Climb down off your high horse, you look stupid up there. I asked how many barrels of oil a field has to have to be on YOUR list.

    Only you know the answer to that one, jr. Google doesn’t have a clue what goes on inside your head or what is eligible for your “super giant” list, and I have neither the time nor the patience for your dickish insults this morning.

    Google it yourself. I have no interest in playing your bullshit games, go play with yourself if that is your attitude. When I ask a question I expect an answer, not an insult.

    w.

    PS—Your cited reference doesn’t agree with you that every giant oil field is in “terminal decline”. They are mostly declining (although they describe a couple of them as on a “plateau”), and the rate of decline is increasing, but we knew that. Far from your dramatic accusation that they are “terminal”, the citation says:

    … the average decline rate of the giant oil fields have been increasing with time, reflecting the fact that more and more fields enter the decline phase and fewer and fewer new giant fields are being found.

    In other words, BAU. Somehow, they missed out on your hysteria about the decline. In fact we don’t even have your personal idiosyncratic mystery definition that separates declines into regular declines and “terminal” declines.

    But no worries, I’m sure you are able to unpleasantly tell us to go Google that ourselves …

  348. vangelv – “The super-fields being talked about are Ghawar, Cantarell, Daqing, Burgan, Rumaila with Oseberg, Kirkuk, and a few smaller fields around the periphery.“.
    Another that doesn’t get mentioned much is Abu Dhabi’s Upper Zakum, and it’s not in decline yet.

    http://www.ogj.com/articles/2010/11/artificial-islands.html

    http://zadco.ae/en/Media/News/Pages/NewsDetails.aspx?NewsID=39

    It’s a 50bn bbl field, and it is costing well over $10bn to increase production by less than 250k bpd to 750k bpd. That’s economically viable at today’s oil price, but not by a large margin. This illustrates how oil is getting much more expensive and difficult to produce. [By comparison, Cantarell production rate has fallen by about 1.3m bpd since 2004].

    Keitho – “I am not sure why this is such a big deal. Firstly we have been told that peak oil will arrive and then enter a decline leading to our ruin“.

    Peak Oil means that the oil production rate will reach a peak and subsequently decline. No more than that.

    Keitho – “why should we, the great unwashed, care about peak oil when it absolutely will not affect us in any measurable way“.

    You shouldn’t. It almost certainly won’t.

  349. Willis,

    Abraham Lincoln is quoted as saying “Most people are about as happy as they make up their minds to be.”

    Corollary #1 — Some people just aren’t happy unless they’re miserable. If they don’t have a good reason, they will make one up.

    Corollary #2 — And they won’t be happy until you’re as miserable as they are.

  350. Testy arn’t we. It’s not my list as I always go with what the science says. So I have no idea why you would consider this MY list. It isn’t.

    “Far from your dramatic accusation that they are “terminal”,”

    Again, this is a geological and oil industry term for deposits that are in accelerating decline. It’s terminal as it will not recover and eventually be spent. Again, this isnt MY terminology, its the industry’s term. Google: terminal decline oil deposits around the world

  351. “You are correct but there may be a solution that makes the tar sands viable even if it is not the solutions that the peak oil critics think it is. There is a lot of gas in the Mackenzie River Delta. Some of that gas can be used in the tar sands as a low cost fuel because it would not have to travel all that far. There is also the possibility of building a large coal or a nuclear plant to help make the process more economic.”

    Know about those. Problem is politics is getting in the way of the Mackenzie River NG. That’s been in the works for almost 20 years. I also saw about the nuke plants. Those likely wont happen, again politics. Thorium is the route to go.

  352. ““The USGS knows where every deposit is…”

    Not really.

    There is ample fossil fuel energy waiting to be found. The only thing keeping it from being located and used is government. ”

    Ample means you must know something about these as yet discovered fields than the petroleum industry does. Nothing is known until it’s found, drilled, and tested. Then we find out. Claiming there is more oil than we need waiting to be found is just total fantasy. The only place on the planet than hasnt been well explored is the Arctic. There is likely scant little oil up there because of tectonic reasons. NG, maybe some, but not likely much oil.

    All that counts is what is know, not what one hopes will be found.

  353. jrwakefield says:

    “It’s terminal as it will not recover and eventually be spent.”

    That is exactly what they said about natural gas fields. Then fracking took off, and now the ‘spent’ fields are producing more than ever.

    The free market and human ingenuity always provides a better answer. All that is needed is for the government to get out of the way.

    • D.B. Stealey

      That is exactly what they said about natural gas fields. Then fracking took off, and now the ‘spent’ fields are producing more than ever.

      Conventional gas fields are behaving exactly as was predicted. You are talking about shale gas field production but that has been a loser and a destroyer of capital. It is easy to produce a lot of gas if you are wiling to spend more to produce it than you can sell it for. But that is not a sustainable business model. Which is why shale gas drilling has fallen and once the frack backlog for drilled wells is cleared you will see a material decline.

      The free market and human ingenuity always provides a better answer. All that is needed is for the government to get out of the way.

      A free market would not fund losers like shale gas. The only reason why the shale companies were able to get funding for their money losing projects is because the central banks are flooding the market with liquidity. We certainly are about as far from free market conditions as can be in the monetary sphere.

  354. jrwakefield says:
    February 4, 2013 at 2:05 pm

    Testy arn’t we. It’s not my list as I always go with what the science says. So I have no idea why you would consider this MY list. It isn’t.

    If the science spoke with one mind that would not be a problem. But even your own citation says that’s not the case. It opens with this:

    There are two ways to define a giant oil field. One is based on ultimately recoverable resources (URR), and the second is based on maximum oil production level.

    How does your puerile “I always go with what the science says” help us there in determining what you personally are referring to as a giant oil field.

    In addition, you said you were talking about “super-giant” fields, and the citation you supplied uses that term exactly once:

    “… OPEC “super giants”, such as Ghawar or Safaniyah …”

    So your “go with the science” is nonsense, and your citation is useless, it doesn’t even discuss super-giants. So whatever list of super-giants you have in your head, yes, it is your own personal list, no, we STILL don’t know what fields are on it, yes, I am testy, and yes, stop acting like a jerkwagon and telling me to go to google to find what exists only in your own mind. We still don’t know which oil fields you are counting as “super-giants” and the citation you provided is useless in that regard.

    “Far from your dramatic accusation that they are “terminal”,”

    Again, this is a geological and oil industry term for deposits that are in accelerating decline. It’s terminal as it will not recover and eventually be spent. Again, this isnt MY terminology, its the industry’s term. Google: terminal decline oil deposits around the world

    Ah. It seems that by “terminal decline” you mean “past the production peak”, in which case your statement at least has meaning, but still doesn’t make sense. In addition, “terminal decline” is not the oil industry’s term as you claim. It is a peak oiler’s term for “past the production peak”.

    There is a much larger problem, however. Neither “terminal” nor “terminal decline” can be found in your citation, so from your own citation we can’t determine:

    • which “super-giant” fields you are talking about, or
    • of those unknown fields, which of them are in whatever you are referring to as “terminal decline”, and which are just declining.

    For example, the reference provided says that a giant field is over half a billion barrels. The Lula field is 8 billion barrels … but you dissed that when I mentioned it. So … just which fields are you talking about? Because it is not the giant fields referred to in your citation.

    Instead of being concerned with my level of testiness, perhaps you should spell out which super-giants you are mumbling about, and what you are calling “terminal decline”.

    Finally, people have already given you examples of very large oil fields that are not in decline at all. You’d rather discuss how I feel … and if I’d made the unsupportable claims you’ve made, I’d rather discuss that too …

    w.

  355. Vince Causey says:
    February 4, 2013 at 1:31 am

    Johanna wrote,

    “There is no law of economics that says that there needs to be a positive return at that level. It is just one input into the final product that the consumer (whether individual or commercial) buys.”

    It depends at what level. Of course, you can have an individual field able to profitably produce with a low, or even < 1 EROEI. It is quite possible that an oil company in Canada can profitably extract the lowest grade of shale oil using cheap US gas. EROEI only becomes important on the global scale.
    —————————————————-
    Quite right, Vince. My point was that EROEI is worthless as a micro-measure. It depends on what the energy required to produce a particular energy source is used for in the final product. For example, it is very likely that the EROEI of the fuel used for certain racecars is not enticing. The fuel is very expensive. But, the final product is worth it because it is an integral part of a much larger, value-adding, industry.

    Any economic model that looks at EROEI at just that level is missing the point. It is like saying that the people who cleaned the venue of the Superbowl before the game were uneconomic. The point is, the final product was the Superbowl, and the elements that contributed to it do not individually have to make a profit.

    Of course, in the big picture, 'energy' has to cost less to produce than to use. No doubt about that. But, when we are talking about specific examples, the truth is more complex.

    Oh, and to whoever has been moderating this thread – how about toughening up on threadbombing? Large parts of it have been colonised by trolls who shall remain nameless. I, for one, have learned a lot from reading the comments (and Willis' responses) but scrolling through dozens of irrelevant posts has made it a chore.

  356. List of countries in oil production decline:

    United States 11297 7337 -35% 1970
    Venezuela 3754 2566 -32% 1970
    Libya 3357 1846 -45% 1970
    Other Middle East 79 33 -58% 1970
    Kuwait 3339 2784 -17% 1972
    Iran 6060 4325 -29% 1974
    Indonesia 1685 1004 -41% 1977
    Romania 313 99 -68% 1977
    Trinidad & Tobago 230 149 -35% 1978
    Iraq 3489 2423 -31% 1979
    Brunei 261 175 -33% 1979
    Tunisia 118 89 -25% 1980
    Peru 196 120 -39% 1982
    Cameroon 181 84 -54% 1985
    Other Europe & Eurasia 762 427 -44% 1986
    Russian Federation 11484 9886 -14% 1987*
    Egypt 941 722 -23% 1993
    Other Asia Pacific 276 237 -14% 1993
    India 774 766 -1% 1995*
    Syria 596 398 -33% 1995
    Gabon 365 235 -36% 1996
    Argentina 890 682 -23% 1998
    Colombia 838 618 -26% 1999
    United Kingdom 2909 1544 -47% 1999
    Rep. of Congo (Brazzaville) 266 249 -6% 1999*
    Uzbekistan 191 111 -42% 1999
    Australia 809 556 -31% 2000
    Norway 3418 2455 -28% 2001
    Oman 961 728 -24% 2001
    Yemen 457 305 -33% 2002
    Other S. & Cent. America 153 138 -10% 2003*
    Mexico 3824 3157 -17% 2004
    Malaysia 793 754 -5% 2004*
    Vietnam 427 317 -26% 2004
    Denmark 390 287 -26% 2004
    Other Africa 75 54 -28% 2004*
    Nigeria 2580 2170 -16% 2005*
    Chad 173 127 -27% 2005*
    Italy 127 108 -15% 2005*
    Ecuador 545 514 -6% 2006*
    Saudi Arabia 11114 10846 -2% 2005 / Growing
    Canada 3320 3238 -2% 2007 / Growing
    Algeria 2016 1993 -1% 2007 / Growing
    Equatorial Guinea 368 361 -2% 2007 / Growing
    China 3795 3795 – Growing
    United Arab Emirates 2980 2980 – Growing
    Brazil 1899 1899 – Growing
    Angola 1875 1875 – Growing
    Kazakhstan 1554 1554 – Growing
    Qatar 1378 1378 – Growing
    Azerbaijan 914 914 – Growing
    Sudan 480 480 – Growing
    Thailand 325 325 – Growing
    Turkmenistan 205 205 – Growing
    Peaked / Flat Countries Total – 49597 – 60.6% of world oil production
    Growing Countries Total – 32223 – 39.4% of world oil production

    http://www.theoildrum.com/node/5576

  357. “That is exactly what they said about natural gas fields. Then fracking took off, and now the ‘spent’ fields are producing more than ever.”

    First, fracking isnt coming from once producing fields thought to be spent. Conventional gas fields in North America continue their 8% decline rates peaking around 1995. Shale NG is new tapped formations. For reasons already stated, it wont last because the companies arnt making money off the NG.

  358. Some actual data.
    In todays, mondays, paper, an article about a huge shale oil deposite in California, holding 2/3 of the shale oil in the whole USA (that is known, anyway), completly undeveloped. Considering it is in California, the home of the greens, it may never be developed. There is so much of it that it seeps out of the ground, just like Willises picture above, only bigger (they had a picture of that in the newspaper to).
    Not listed as a giant field probably simply because it is undeveloped. I suspect there are a lot of such feilds not listed because of having not been developed yet.

  359. This is generally an interesting discussion, but I am surprised at Willis suddenly getting so flustered. The points raised by those who insist the easy oil, the oil we’ve been depending on until now, is definitely declining should be addressed by means other than insistence on semantic strictures about the phrase “peak oil” and demands for precise definitions and dividing lines about the word “conventional.” It’s true that many peak-oilers are catastrophists by nature, but not all of them by any means. Reasons for concern are valid until it can be shown that we can actually shift to some other main source of energy to fuel the world economy. There is an enormous gap between drilling holes in Saudi Arabia and proceed to pump nice high quality oil with gusto for many decades, and extracting oil from sands. Those who say that ERoEI doesn’t matter leave me perplexed. It might not matter if the main purpose of oil extraction were to make chemicals, plastics etc. But as long as the main purpose of oil extraction is to use the stuff as the main source of fuel (energy) for our societies, then the energy spent in doing so would seem highly relevant, in fact the most relevant way to measure the effectiveness of the process. I’ve never heard of a farmer who would sow his fields expecting a 1:1 yield on the grain he used. Invoking the future marvels of human ingenuity is okay, but it provides little comfort as long as those marvels remain in the potential or wishful state. That the wheels are spinning faster and faster (or drilling faster and faster) just to maintain a fraction of former speed appears clear. The fact that the vehicle is still somewhat moving forward is no cause for excitement. A measure of the predicament can often be gauged by reading exalted news about the discovery of new reservoirs, when a quick check reveals that the much touted new discovery is supposed to contain oil to meet world consumption for… a few days or weeks. Any sniff of new oil anywhere mobilizes armies to seize whole countries. Why is that? Why is that, if the future is so rosy? Is it or is it not a fact that world oil production per capita is in decline? Some people here seem to believe that energy can be printed just like dollars, that it doesn’t matter how much energy it takes to get energy, you just throw more money at it and you will get it delivered at your door. Well, sure, some will still get it delivered. You could make a car that runs on super-specialized fuel at $50 a gallon, and *some* people would still buy the car and the fuel. And those very same people will keep telling you that everything is okay and that human ingenuity will carry the day. But so what? What does this have to do with the fact that the easy oil of the big oilfield kind is clearly moribund? And what does it have to do with the fact that world oil production per capita is in decline? Or to do with the fact that a viable replacement for oil as a main source of energy has not yet been found. Or to do with the fact that the defenceless oil-rich countries that are seized have their infrastructure thoroughly destroyed, if they had any (except for the oil infrastructure, of course) so that the society as a whole goes back to pre-industrial austerity modes? These are not totally idle questions. They deserve examination. They don’t deserve tantrums based on semantic quibbles.

    • This is generally an interesting discussion, but I am surprised at Willis suddenly getting so flustered. The points raised by those who insist the easy oil, the oil we’ve been depending on until now, is definitely declining should be addressed by means other than insistence on semantic strictures about the phrase “peak oil” and demands for precise definitions and dividing lines about the word “conventional.”

      That is my problem with Willis as well. It is pretty easy to see that if we step back and look at the big picture we find that many of the points that Willis seems to be so concerned are not material to this discussion. The Peak Oil argument is not about running out of oil or a sudden collapse in production. It is simply about the fact that oil production will peak and decline from that point. I think that there are few people on either side of the argument who deny this point. The main argument is about when the peak occurs.

      On that front some of us argue that we are either at the Peak now or that we saw it a few years ago. While it is clear that massive new investment has helped prevent a significant decline in production it is not at all clear that the investment has been able to increase the production of gasoline, jet fuel, and other high value distillates. If it has, it has not been enough to really matter, particularly when we note that every year we have to replace the equivalent of a Saudi Arabia that comes from depletion with new production and add more production to increase the overall levels.

      Now Willis points to shale as saviour but the data that we have provided shows a serious problem with depletion that is not easy to deal with. The higher the proportion of oil that comes from shale the more drilling that we have to do just to keep production from falling.

      It’s true that many peak-oilers are catastrophists by nature, but not all of them by any means.

      I am not sure that this statement is true. Since we are mortal we are all catastrophists in some way but there is nothing to suggest that a preference on reliance on data to draw one’s own conclusions is a characteristic of a catastrophist. In fact, if you look at the major voices that argue for Peak Oil you will find that most of the individuals are looking at ways to help society transition to the next source of energy.

      A measure of the predicament can often be gauged by reading exalted news about the discovery of new reservoirs, when a quick check reveals that the much touted new discovery is supposed to contain oil to meet world consumption for… a few days or weeks.

      Actually, it gets worse than that. You get the excitement of discovery being hyped up in the media but do not hear anything when the reserve estimates are downgraded by 75%. When the Peak Oil supporters bring it up they are accused of being catastrophists.

  360. rockdoc, February 4, 2013 at 6:39 am
    It only takes a minute or so after someone posts a new discussion about peak oil for someone to bring up the idea of abiotic oil and Gold or some of the other Russian scientists. This theory has been proven to be incorrect many, many, many times.

    Petroleum and natural gas are (as the solar system adequately demonstrates), geological products, not biological. William Astley provided the argument and links to the peer-reviewed equations demonstrating that the biological explanation violates 2nd law of thermodynamics. Perhaps you ignored those posts, not because “it would take too much space” to overcome thermodynamic constraints, but because you are not equipped to do so.
    NOAA refers to geological hydrocarbon production at the Lost City hydrothermal vents, and along the ocean ridges on Earth. NASA and ESA point to geological hydrocarbon production on Titan. Abiotic petroleum has been produced in at least 3 laboratory experiments, using only carbonate rock, water, and a metal catalyst (iron). Here’s David Attenborough explaining how methane–and hydrogen sulfide (think “sour”)–in the Gulf of Mexico are produced:

  361. Wakefield

    I see no reference to natural Gas here

    http://www.cdnoilsands.com/operations/ProductionProcess/default.aspx

    Let alone one third of Canadian production.

    Thats by a major producer themselves

    Naphtha or LDF is a condensate and used as a solvent but is ultimately recovered in the process.

    Hydro treatment actually increases output volume by ten percent over input of feedstock.

    I see no correction from you regarding your quoted production costs, despite e providing two references to the contrary.

    I see that you continue to ignore total oil equivalent figures.

    I see no correction or clarification on your list of Super Oilfields

    Your list of declining countries is impressive, most are already looking at halting that decline with new technology.

    • Seems that your goose is totally cooked. Technology and innovation and human ingenuity trumps your negativity, yet again.

      Penn State ( do we need to treat source with caution) has discovered a cheap simple process to extract oil from oil sands, needing no heat, no energy and 100% effective.

      I hope that this discovery is a solution because I have tar sands investments in my portfolio. But some of the problems still remain. You first have to get the sand. That requires massive steam shovels that have teeth that are eroded to nothing in a very short period of time. You need to load up the sand on massive trucks and bring it to the separation facility. And I don’t know what Penn State considers room temperature but you can bet that it is very different from the ambient temperature in Wood Buffalo for most of the year. Add to that other costs and you still find that my hope for $20-$40 per barrel production cost will not be reached in my lifetime.

      What are they waiting for ( Money!!!!!)

      Why would that be a problem if the process worked? The producers want a viable system because many of them are worried about insolvency. The last thing that they would avoid is funding a process that would help them cut their energy and water costs.

  362. “Petroleum and natural gas are (as the solar system adequately demonstrates), geological products, not biological.”

    No, oil can only form within the oil window, that is a geological fact. Every oil field can be traced to their organic source rock, every one. Petroleum deposits like the Green River formation show clear signs of lipids which can ONLY come from biological sources. Fact is, oil deposits can be found in only specific sedimentary sequences of specific periods of geological time. There is no oil in precambrian origin.

    “William Astley provided the argument and links to the peer-reviewed equations demonstrating that the biological explanation violates 2nd law of thermodynamics.”

    Cant find anything about this on line. Post a link. But right off I can say his understanding is wrong. As long as the sun gives us more energy than the planet can consume, there is no limit to how much complexity can be formed.

    ” Perhaps you ignored those posts, not because “it would take too much space” to overcome thermodynamic constraints, but because you are not equipped to do so.
    NOAA refers to geological hydrocarbon production at the Lost City hydrothermal vents, and along the ocean ridges on Earth.”

    Those are rich sources of organisms. It’s also the very spot where life began. Doesnt mean the vents themselves are making oil.

    “NASA and ESA point to geological hydrocarbon production on Titan.”

    There is an enormous jump from methane on Titan to huge bitumen chains here on earth.

  363. PPugliano says:
    February 4, 2013 at 5:45 am

    Thank you for your valued input, missed by most, I fear.

    Great reading, no wonder why solar is such a failure. Actual chief engineer of largest solar plant from actual operating data can only “imply” nor defines, state, delineate, just “imply” From the detailed analysis we should have no implication but rock solid answers.

    Does the book cover the energy consumed in the manufacture of the panel.?

    Does it cover the maintenance, how they avoid sand from blasting the glass covers?

    Is it implied, so that they can get some more grants to clarify their results.

  364. “Your list of declining countries is impressive, most are already looking at halting that decline with new technology.”

    Like who? Mexico has already gone through tertiary recovery, and now in permanent decline. There is only so much oil in a deposit. Trying to extract more oil at the end of the deposits life is usually expensive, and just a trickle. But please, post a list of those countries getting MORE from there fields thought to be declining.

  365. Wakefield, sorry you just blew it, big time.

    Quote
    “The processing of bitumen into synthetic crude requires energy, which is currently being generated by burning natural gas. In 2007, the oil sands used around 1 billion cubic feet (28,000,000 m3) of natural gas per day, around 40% of Alberta’s total usage.”

    Unquote

    But you said they use the NG to process the oil, as opposed to my energy, heating scenario. As I said, once they get processing they can use their own oil “waste” for heating, energy, electricity generation. Big deal. Oil has always required energy to process it and as technology and usage changes, how that energy is obtained changes.

    Now you say it accounts for 40% of Alberta NG usage, whereas before you stated it was 30% of Canadian usage. Which is it.

    Now perhaps, seeing how simple it is to process into both crude and added value products, in situ, how continuing at least the equivalent of the worlds proven conventional reserves, Alberta three fields do not count as Super Fields.

  366. Sigh

    Vangelv said

    Quote

    I hope that this discovery is a solution because I have tar sands investments in my portfolio. But some of the problems still remain. You first have to get the sand. That requires massive steam shovels that have teeth that are eroded to nothing in a very short period of time. You need to load up the sand on massive trucks and bring it to the separation facility. And I don’t know what Penn State considers room temperature but you can bet that it is very different from the ambient temperature in Wood Buffalo for most of the year. Add to that other costs and you still find that my hope for $20-$40 per barrel production cost will not be reached in my lifetime.

    Unquote

    Shame you dont read my posts fully. Costs already around USD 20.

    Do you not know the difference between heating from say minus 35 to say 15 degrees requires a bit less energy than heating from 15 to 400 degrees.

    Regarding the digging and shifting, I wonder just how they have managed that for the last ten years or more. Perhaps they are managed by Spanish solar farm managers that with real data can only imply results. So their successful digging for ten years implies they cannot do it.

    Also digging is only 20% of production, the rest is in situ.

  367. @Grey Lensman says:
    February 4, 2013 at 7:15 pm
    I don’t know what exactly they took into account, because I have not read the book, but it’s a safe bet they took into account the things you ask about, and probably a lot more. I came accross references to this book in other sites and just posted the link to the Amazon description, and the description itself under it. From what I understand, both authors are very critical of most ERoEI estimates (not just for solar, but wind, nuclear etc) because they think these estimates systematically fail to take into account a lot of things, and they come out too optimistic. I believe they worked on this quite independently, and the conclusions (or implications) they arrive at seem to be bad news for the industry.

  368. PPugliano

    Thanks for your reply. I think that you are correct on the whole, they are saying solar is not as good as it is made out to be. However, I was pointing out that they are not very precise on this when they should be.

  369. “Now you say it accounts for 40% of Alberta NG usage, whereas before you stated it was 30% of Canadian usage. Which is it.”

    It was 40% in 2006-2007, now the consumption of NG there has almost doubled and close to 30% of all Canadian consumption. Doubling production to 3mb/d would consume most NG in used in Canada.

    With conventional gas wells in Alberta dropping precipitously, and shale gas soon to be in decline, the oil sands will be starved of energy needed to produce their product. The Energy Trap at work.

  370. Wakefield, make up your mind, I was checking your wild claims and found 4% was the figure and the economics justified. As i was just surfing, i did not note the location.

    Vangelv, facts are facts, here is another price/cost confirmation.

    quote

    Since Great Canadian Oil Sands (now Suncor) started operation of its mine in 1967, bitumen has been extracted on a commercial scale from the Athabasca Oil Sands by surface mining. In the Athabasca sands there are very large amounts of bitumen covered by little overburden, making surface mining the most efficient method of extracting it. The overburden consists of water-laden muskeg (peat bog) over top of clay and barren sand. The oil sands themselves are typically 40 to 60 metres (130 to 200 ft) deep, sitting on top of flat limestone rock. Originally, the sands were mined with draglines and bucket-wheel excavators and moved to the processing plants by conveyor belts. In recent years, companies such as Syncrude and Suncor have switched to much cheaper shovel-and-truck operations using the biggest power shovels (100 or more tons) and dump trucks (400 tons) in the world.[25] This has held production costs to around $27 per barrel of synthetic crude oil despite rising energy and labour costs.[26]

    http://en.wikipedia.org/wiki/Oil_sands

    unquote

    • Grey writes:

      Vangelv, facts are facts, here is another price/cost confirmation.

      quote

      Since Great Canadian Oil Sands (now Suncor) started operation of its mine in 1967, bitumen has been extracted on a commercial scale from the Athabasca Oil Sands by surface mining….This has held production costs to around $27 per barrel of synthetic crude oil despite rising energy and labour costs.[26]

      As an owner of Suncor I know that the reported CASH costs are around $35. Once you add the full costs you are looking at a much bigger number. And let us note that Suncor has written down much of its early investment during periods of low prices. As such it does not have the type of depreciation costs that other players would have. If you were to start up a new operation you are looking at costs between $75/$80 a barrel, which is why there is so little activity in the tar sands even though prices are as high as they are.

  371. Wakefield, I found it

    Quote

    The standard extraction process requires huge amounts of natural gas. As of 2007, the oil sands industry used about 4% of the Western Canada Sedimentary Basin natural gas production. By 2015, this may increase 2.5 fold.[62]

    According to the National Energy Board, it requires about 1,200 cubic feet (34 m3) of natural gas to produce one barrel of bitumen from in situ projects and about 700 cubic feet (20 m3) for integrated projects.[63] Since a barrel of oil equivalent is about 6,000 cubic feet (170 m3) of gas, this represents a large gain in energy. That being the case, it is likely that Alberta regulators will reduce exports of natural gas to the United States in order to provide fuel to the oil sands plants. As gas reserves are exhausted, however, oil upgraders will probably turn to bitumen gasification to generate their own fuel. In much the same way as bitumen can be converted into synthetic crude oil, it can also be converted into synthetic natural gas.

    http://en.wikipedia.org/wiki/Athabasca_oil_sands

    Unquote

    4% and only of a part of Canada.

  372. Re; Ed_B Feb 2, 2013 at 2:31 pm

    First, I will come out and congratulate you. You are one incredibly lucky man. But it had absolutely nothing to do with peak oil.

    You’ve simply been visited by serendipity. Why you aren’t aware of that fact I will leave up to you.

    I had typed in a whole long message, detailing through WTI prices and volume why you were lucky with your market timing but unrewarded by peak oil and probably made a mistake in ’04 that cost you a very significant additional return. If you’d held for just another 44 months, or reinvested the proceeds of your ’04 futures in June ’08’s, you’d have made out like a bandit. But I decided to cut out all the detail in favor of brevity.

    Your comment is unsupported by the facts.

  373. Vanglev says

    Quote

    Once you add the full costs you are looking at a much bigger number.

    Unquote

    So, there is the simple actual reported cost as per international global convention. Then there is the unknown Vanglev cost. Say no more.

    The guys , most of the current players, have recovered in full all their capital costs, can and will expand as and when it suits them.

    • Gray writes:

      So, there is the simple actual reported cost as per international global convention. Then there is the unknown Vanglev cost. Say no more.

      Actually, the cash costs are not per GAAP standards. If you look at the releases you will find that to be true. And as I said, once you write down the cost of all of those facilities and equipment, as Suncor did during the lean times, it is easy to claim that your costs are low. But that does not mean that anyone else can get the same costs because they would have to depreciate those costs over time.

      The guys , most of the current players, have recovered in full all their capital costs, can and will expand as and when it suits them.

      There is little doubt that the big tar sands players will be successful once the shale oil bubble is burst but the companies know that it will be a long slog and are reluctant to invest now because of the low prices. This does not mean that there is no investment because the capital budgets are quite large. But there is clearly a lot less being invested than could be.

  374. ” Bob Kutz says… Your comment is unsupported by the facts.”

    I kept on investing in oil, right up to now, where I have several MM invested. It has been a 10 fold increase since 2004, that is why I am smiling when people dismiss peak oil. There have been ups and downs for sure, but it was not luck, it was Hubbbert.

  375. Things holding back Oil sands developments, Lack of pipeline capacity and lack of export terminal. Both due to politics not economics or technology or willpower.

    As I said re costs etc, splitting hairs is not business, its sour grapes and or disinformation

    • Things holding back Oil sands developments, Lack of pipeline capacity and lack of export terminal. Both due to politics not economics or technology or willpower.

      As I said re costs etc, splitting hairs is not business, its sour grapes and or disinformation

      It is not splitting hairs. It is a fact that cash accounting is not used unless you are a fisherman, trapper, or a government trying to hide unfunded liabilities. Note that the shale industry loves to quote the cash costs of production as it ignores the cost of leasing, overhead, exploration, seismic services, etc., etc., etc. That is why we have to look at the cash flows in the sector and keep a close eye on the balance sheets.

  376. Vangelv, What part exactly of my statement “As I said re costs etc” do you not understand. Please point out where is says “cash”.

    Sorry but Alberta is a Super Field and economic and destined to grow. Stupid claims such a USD90 per barrel production costs, shot down along with false claims of trillion dollars per million barrels to develop.

    The latest Saudi Super Field, to come on stream, Wow, USD one per barrel, OK slice it dice,it, choose a nasty discount rate, bung in a daft IRR and call it USD 1.27 then call me out for being wrong.

    Stupid is stupid does.

    Willis points that out nicely.

    • Grey Lensman

      Vangelv, What part exactly of my statement “As I said re costs etc” do you not understand. Please point out where is says “cash”.

      It says cash in the information that the company releases. Wiki is not exactly the most detailed and comprehensive source.

      “Oil Sands cash operating costs (excluding Syncrude) per barrel were $40.20 per barrel in 2011 compared to $38.65 per barrel in 2010. The increase in cash costs reflects the impacts of the ramp up of production from the Firebag 3 expansion, as well as reduced volumes and higher costs from planned and unplanned maintenance.
      from: http://sustainability.suncor.com/2012/en/economic/economic-performance.aspx

      Of course, you can’t just look at non GAAP cash cost reports to see what is going on. You also have to look at all of write-downs that are typical in the industry. Just a few hours ago Suncor announced that it is writing down nearly $1.5 billion for its Voyageur upgrader. Note that this project could still wind up set aside and that Suncor is simply writing off cost overruns. If the project is shelved there are more write-downs to come. The shale companies are masters of this as they slowly depreciate wells that are no longer economically useful to keep stated earnings higher than they should be. But Suncor’s tar sands projects should still have a profitable future. Most of the shale plays will not.

      http://tinyurl.com/bzqqe2a

      You see my friend, it is important to do the research yourself by going as deep into the sources as you can. Reading superficial articles that are puff pieces short of the necessary details only lead you down the wrong path. As I said, if there were some magic way to perform the processing cheaply the shares would already have responded and the industry magazines would be full or articles about the implementation of ionic polymer separation. They aren’t. Neither Alberta Oil Magazine nor Oilsands Review, both of which typically run such articles regularly each time there is some new claim of promising technology, have anything about it. Stop pretending that you know a lot more than you do just because you read some article in Wikki and start doing some thinking about what it is that you are writing about. As I said, the SEC filings are on my side of this debate. Shale companies have very few self financing wells and those are limited to the core areas of certain formations. But for shale to be a solution the average shale well will have to be self financing and provide an adequate return to reward investors for the risks taken. If you bothered looking at the actual data you would find that is not the case.

    • Grey writes:

      Sorry but Alberta is a Super Field and economic and destined to grow. Stupid claims such a USD90 per barrel production costs, shot down along with false claims of trillion dollars per million barrels to develop.

      There is no doubt that the tar sands deposits near Wood Buffalo have a large amount of tar in them. That is not the question and has never been in question. The real questions are about production costs and production rates. The cost is much higher than for a typical conventional deposit of the type that is now in decline. The production rate is quite low and nobody has ever claimed that peak production will exceed the peak that we saw in Ghawar which, thanks to the Late Jurassic Arab D Formation, is a super field that has cheap-to-extract high quality crude.

      That is the problem for your side of the debate. Even the most optimistic claims fall short of what is needed to keep post peak production from falling. Not just that but your economic logic is also very poor. As more and more resources are diverted to the production of each new low-EROEI barrel of oil there is less capital for other activities and energy costs have to rise. As the rise demand is squeezed and the production levels fall. Even with a lot of oil still in the ground you are still on the back end of Hubbert’s Peak because people cannot afford to use as much oil as they used to.

      You may not like this but that is the way the real world works. The only hope is transitioning to some other source. Ironically, people like you and Willis make that very difficult because you are continually diverting attention from the problems that are facing as you help the promoters and charlatans who are hoping to get rich as they transfer wealth from ordinary people looking to score in the markets to themselves. Because of that the transition will not be as rapid as it should have been and most people will find life going forward tougher until the transition is made.

    • The latest Saudi Super Field, to come on stream, Wow, USD one per barrel, OK slice it dice,it, choose a nasty discount rate, bung in a daft IRR and call it USD 1.27 then call me out for being wrong.

      I have friends who work on the cost accounting side in the Middle East. They have never mentioned any new Saudi field that has a $1 per barrel cost and ask why it is that the Saudis are spending hundreds of billions on expensive water flood and other enhanced recovery techniques if they had a large field that had such cheap oil. Please show your sources and I would be more than happy to show you why you are wrong. The overhead for the Saudis is more than $1 per barrel. That means unless there is gold or silver being brought up with the oil your figure has to be wrong. Of course, a person who cannot understand why cash accounting is not an accurate measure of true cost is probably easy to fool.

  377. vangelv, Grey Lensman – I don’t wish to take a position over whether tar sands companies are profitable, but all the listed ones have to publish their results. It might be worth your respective whiles to check those results and see how they are doing. Summaries are available on Yahoo, eg. for Athabasca Oil Corp (ATH.TO) see http://finance.yahoo.com/q/ks?s=ATH.TO+Key+Statistics

    Profit Margin (ttm): 1,200.10% – looks very very good
    Operating Margin (ttm): -659.27% – looks very very bad

    It seems than more than a cursory scan of the data is needed.

  378. vangelv says:

    Thanks for the info. I always wondered about the Baaken shale formations. Looks like production is flattening out, just as you advised. I prefer Albertas sandstone horizontals, as they flow more and are subject to water floods to squeeze more out.

    • Everything is there for us to see clearly. The problem is that many of us let our emotions get in the way and go with what we want to believe rather than believe what the data tells us. What gets to me is how people who see the process being used by the AGW believers don’t see how they do the same thing at times. I would love to be proven wrong. But to do that we need actual data that supports the position that Willis holds. Frankly, I don’t see it anywhere and I have been looking for a very long time.

  379. More support for peak oil:

    Record crude prices still can’t fuel oil giants’ profits
    Christopher Swann The Globe and Mail
    Thursday, January 31, 2013

    Record crude prices are no longer enough to keep oil producers’ profit going up. ConocoPhillips and Occidental Petroleum, the top two U.S. exploration and production companies, both reported 2012 core profit down more than 15 per cent from 2011 while oil prices went up. The main reason – high production costs – is a worry for investors and suggests the floor under oil prices is rising.

    It doesn’t help that prices for natural gas and associated products fell. But in a year when Brent crude hit a record average price of $112 (U.S.) a barrel and both companies sold their oil for more than in 2011, that is far from a sufficient explanation. The fact is, oil is getting harder to find and more expensive to extract.

    A $1.2-billion dip in ConocoPhillips’ annual profit to $6.7-billion – after stripping out its spun-off refineries and some one-off items – was largely due to rising expenses. Outlays on production climbed by almost $400-million, while exploration spending surged even more. Occidental is battling similar pressures. Its adjusted earnings from oil and gas fell to $8.8-billion in 2012, down $1.5-billion from the year before.

    Occidental CEO Stephen Chazen is hoping to trim U.S. drilling costs by 15 per cent in 2013 by using fewer contractors and eliminating unnecessary maintenance. These economies even started to take effect in the fourth quarter. Yet cost cutting can only go so far before it hits output. Capital spending at Oxy still rose 35 per cent. Increasingly, all the big oil groups are resorting to pricey techniques to extract oil from aging wells, shale or the deep sea. That puts pressure on the bottom line.

    Higher costs also mean oil companies require more expensive crude to justify new projects. A sharp fall in prices would see plenty of them mothballed – ultimately reducing supply and curtailing any likelihood of sustained low prices. For the companies involved, as for some of the governments that depend on oil revenue, relatively high prices have become more of a necessity than a luxury. For consumers, that could mean getting used to them – and consigning the sub-$40 prices last seen at the height of the financial crisis to history.

  380. Interesting article from Christof Rühl, Group Chief Economist of BP, in today’s International Herald Tribune (from NYT). He argues that the renaissance of Oil & Gas in N. America is the result of open markts and sound policies (and not just dumb luck).

    Excerpts:

    “Three years ago, pundits [agreed] we had reached peak oil, … that the industry would suffer price shocks in the transition to a post-fossil fuel economy.”
    “We now estimate that tight oil will account for almost half of the 16 million barrel per day increase in the world’s oil output by 2030. Almost 2/3 of the new oil will come from the Americas (mainly U.S. tight oil and oil sands from Canada).”
    “Non-OPEC production will dominate global supply growth over the coming decade.”
    “Without a clear signal that carbon has a price, European utilities will be charmed by the cheapness of coal, increasingly available thanks to America’s embrace of shale gas.”

    Kurt in Switzerland

  381. BUT, the chief economist also says in the same article:(forcasts of its potential differ widely… LOL!

    “A surge in shale gas and tight-oil production is transforming our energy landscape. Forecasts of its potential differ widely. What is certain, however, is that our energy future is not wholly at the mercy of geology. The speed at which we can bring this useful resource to market will depend to a great extent on issues that will be decided by our governments, in our parliaments and in our town halls”

    • Just read the BBC report posted early on by me. All the figures you need are there.

      I assume that you are talking about this.

      http://news.bbc.co.uk/2/hi/business/7487070.stm

      If that is the case the numbers are there. In fact, the history is not there. This is not a new field but an old field that failed to produce at a low enough price before and was shut down. Mat Simmons actually spoke and wrote about Khurais several years ago. He pointed out that the poor results in the 1960s caused Saudi Aramco to mothball the field. It was not just costs that were the issue but the quality of the oil as well.

      But let us forget history for a while and look at a few of the things in the article that should set off the alarm bells going. Did you get the part about a sea-water treatment plant that will supply an extra two million barrels a day of water? And do you know why the Saudi’s are doing this? Well, had you read the SPE papers that Simmons based his conclusions on you would be aware of the very poor quality of the reservoir. Unlike Uthmaniyah, which did not experience a major pressure drop once injection began in the 1980s, Khurais failed to maintain the pressure increases and production collapsed. If memory serves me right this will be the third time that Saudi Aramco will try to build up the pressure to a reasonable level and use some of its injection capacity to offset the lack of support of the underlying aquifer.

      This tells us a lot of things. For one, costs are much higher than $1 per barrel. Most likely they will actually challenge the worst and most expensive of current Saudi production. But it gets even worse that that. What this means is that the Saudi Aramco managers are desperate. They are finally worried enough about the water cut in Ghawar that they will take a chance on a long-shot that has already destroyed a great deal of capital without offering any positive returns to the company. Saudi Arabia has peaked and all the PR will not change the fact that the technical problems are too large to overcome.

      I think that you need to stop looking at puff pieces full of speculation and start looking at what the engineers who are working on the ground tell us when they publish the production and test data.

      http://www.onepetro.org/mslib/servlet/onepetropreview?id=00077743

      http://www.onepetro.org/mslib/servlet/onepetropreview?id=00011447

  382. Ed_B: LOL?

    FYI, not everyone is arguing with you here. (I posted something which I read in the IHT which happened to be pertinent — I wasn’t disagreeing with anyone’s opinion per se).

    So forecasts of “potential” differ wildly. What else is new? Just like forecasts of the potential for solar and wind power differ wildly. Or the economic growth in China. Or the population growth in Africa and Asia. Or the weather next week. Or the climate next year or next decade, next century or next millennium.

    BP’s Chief Economist is giving his best guesstimate for the coming 20 y. It does differ considerably from the doomsday “peak oil” scenarios put forth by many.

    Does anyone seriously question that the potential to exploit resources in the future will NOT be a function of government policy (among other things)?

    Kurt in Switzerland

  383. KKurt says:
    “BP’s Chief Economist is giving his best guesstimate for the coming 20 y. It does differ considerably from the doomsday “peak oil” scenarios put forth by many”

    Thats the part I don’t get. BP is shrinking, along with other super majors. That is fact. Is that a puff piece by him to try and placate nervous shareholders? The first stage of human reaction to an adverse event is denial. Is that going on? The thought of ever declining profits due to a rising capex treadmill must be truly scary.

  384. Ed_B says:
    February 7, 2013 at 11:48 am

    KKurt says:

    “BP’s Chief Economist is giving his best guesstimate for the coming 20 y. It does differ considerably from the doomsday “peak oil” scenarios put forth by many”

    Thats the part I don’t get. BP is shrinking, along with other super majors. That is fact. Is that a puff piece by him to try and placate nervous shareholders? The first stage of human reaction to an adverse event is denial. Is that going on? The thought of ever declining profits due to a rising capex treadmill must be truly scary.

    Since the “capex treadmill” has obviously been going on for at least a decade, and has intensified over the last 5 years with the introduction of ever-increasing quantities of “tight oil” and Canadian heavy oil, IF your theory about ” ever declining profits due to a rising capex treadmill” are correct, of course we will see that in the profits of the companies in question:

    BP took a huge hit in the Gulf disaster, but despite that its profits are flat … as they have been for some time. The other majors are also either flat or slightly increasing. Get back to me when their profits actually start dropping, not just when you claim they are dropping …

    w.

  385. Van said

    quote

    This tells us a lot of things. For one, costs are much higher than $1 per barrel. Most likely they will actually challenge the worst and

    Unquote

    Just because you say so, dont make it so. Check number of barrels per day multiply6 by price of oil at the time. Simple arithmetic. Pay back about 46 days.

    Next look at capital expenditure, and multiply number of barrel per day by 365 times 25.

    Look at operations costs, virtual nil, no pumps, gas separation is automatic, a bit of maintenance nd some watch guys, yes oodles of cost there.

    net conservative result less than one usd per barrel.

    bad oil, shucks, bet that hurts.

    so how does 1 usd or even 4 usd (two fields I built and operated, expensive, offshore, ground breaking ones) challenge 80 or 90 dollars or for gods sake one trillion per million barrels.

    Wake up dont follow wakefield, he is stuck in the mud.

    • Grey writes:

      Just because you say so, dont make it so. Check number of barrels per day multiply6 by price of oil at the time. Simple arithmetic. Pay back about 46 days.

      Thank your for showing exactly why ignorant investors lose money so easily. There isn’t enough information in your BBC article to tell you anything about the cost because important things like injection costs are not included. Do you really think that you can inject that extra 2 mpbd of seawater into the aquifer at 2500 psi for less than $1 per barrel? Do you think it is costless to transport that much water hundreds of miles through a pipe that has to be protected from the elements in one of the worst environments possible and inject it under that much pressure? And do you think that the separation facilities are costless to run?

      You need a better education on this issue. The Saudi financed videos below are a good place to start. Use the stop buttons and look up the terms and the implications as far as costs are concerned.

      Now let me tell you what an engineer sees in all the data. The bottom line is that Ghawar, the Saudi’s greatest field, and the greatest producing oil field in the history of this planet, is dying. The Saudis are spending billions to inject water to keep production from falling at a massive cost in both capital AND oil left behind the rising flood. That loss could be anywhere from 5% to 40% of the oil in place. The BBC article shows desperation and huge cost increases. Somehow you have misinterpreted what it shows and drawn conclusions that could not be further from the truth.

      Among many of your errors there are two that I want to point out. First, you reference a puff piece that talks about a future event without showing that what was predicted actually happened. Second, you are missing the fact that all of the stories that we get are talking about specifications that may or may not be met by the projects. What matters more for our purposes is what actually happens. In the case of the field in question, it finally opened up last year in late August and the kinks were probably mostly worked out by the forth quarter. But even though prices were high the Saudi output did not increase by the 1.2 mbpd capacity being thrown around. Had the costs been what you claim you could bet on an increase that was greater than 1.2 mpbd. All of this is just noise. What we really need to know comes from applying Hubbert’s methodology and seeing where the data leads us. If we look at the logistic decline plot we find that the total ultimate recoverable reserves for Saudi Arabia are approximately 275 billion barrels, which means that the kingdom has extracted about half of what it can. The problem is that once you get between the 45-55% point the job of extracting oil is much more difficult and much more costly. That is when national oil companies look at their inventory of old fields that were shut down due to pressure drops and other factors and are ‘rehabilitated’ by throwing a lot of money at them. When that happens you should be scared about the cost and about future production, not make up stories about how cheap new production is going to be. From what I can see in your postings yours is a very superficial and faith-based approach that needs to change if you really want to see things as they are rather as you want them to be. Start educating yourself and begin to understand.

Comments are closed.