Peak Oil – now for the downslope

Goodness. But you forget about peak phosphorus, peak rare earth metals. peak uranium, peak gas, and peak coal.
We’re doooooomed. Alvin Toffler was right. It’s worse than we thought!

“….but the replacement need has become urgent.”
Another planetary crisis? Sorry, no sale.

Best of luck out to Westport Innovations on development of LNG heavyweight truck engines. Though I have to wonder about upper cylinder lubrication. Even with diesel there is a need for improvement. Sure would take some of the pressures off petroleum usage.

Does China have any of these molten salt/thorium-burning reactors online?
Does anyone else have any of these new reactors online?
It would be good to see the results.

Never commented here but know a fair amount about energy markets. Clearly higher prices unlock more resource potential (Canada’s oil sands are notoriously forgotten in peak oil arguments). However new technology is changing the energy landscape. Looking no further than North American natural gas prices which are near decade lows due to over production with no end to production increases at any higher price. All the same peak arguments were applied. A host of LNG import facilities were constructed to deal with the upcoming crisis; these now sit idle and are begging the government to let them export.
Technology driving shale gas exploration is open to a generation of enterprising geoscientists; already shale oil production is causing growth in US oil production which was thought impossible by many experts just three years ago.
Shale gas and oil have global implications. Don’t worry about a shortage of those anytime soon – we are only four years into a multi-decade global resource play. I can’t say the same about many metals however.

We’ll naturally use less oil when shale gas is widely liberated. I wonder what Hubbert style analysis into Peak Stone would have shown? 😀

Well peak oil theory is about as effective at predicting the future as climate science. The primary problem being they keep finding more oil, and production continues to increase. Just recently there was a great article in the WSJ:
http://online.wsj.com/article/SB10001424053111904060604576572552998674340.html
Virtually all of Archibald’s analysis above can be interpreted as a problem of economics, not of oil.
U.S. production declined because it has been cheaper to get it elsewhere, not because we are running out of oil
Oil gets more expensive because the Fed prints more dollars.
Oil gets more expensive because cartels control the prospecting, production, refining, distribution, and the so called “market”, which itself is really just a scam where speculators (i.e. bankers and oilmen) drive up the cost while selling it back and forth to themselves…while they make more money betting on all the fake derivative products.
And speaking of the Fed creating more dollars, that’s the real problem you should be worried about: PEAK DEBT.
Our debt money system is designed to fail, and fail it will. Google “money as debt” if you don’t know what debt money is.

….and a very good post David. I appreciate the education.

Peak oil can only happen when we hit peak government… IE the government blocks any future drilling. The reality is the US has more then enough known oil supplies to last a good 100 years and thats including the current rate of growth… add in the fact that the US has not only banned drilling in something like 30-40% of the US… it has even banned LOOKING FOR OIL in 10-30% of the US and some of those bans have been around for 40+ years. I believe the CA banned that blocked both looking and drilling of oil has been around since the 1960s.
Another favorite myth is the “peak CHEAP oil” myth. This myth is basically saying sure we’ll have lots of oil but at $200 dollars a barrel… this myth is also solely based on the government adding $140-$160 of cost onto said barrel of oil.
Peak oil is a complete myth outside of the government banning oil/restricting it to the point of a ban.
One can look at any country where socialism takes hold and see production steady drop… a great case study is mexico where they’re oil production has plateaued not because they’ve run out of oil but because they refuse to reinvest in they’re oil company and thus its failing apart and not exporting for more oil.
This is much the same in the US where the government and the handful of big oil companies have both locked out all oil companies and have basically prevent small oil companies from competing with the big names.
I have no doubt that as socialism expands and gets more and more a grip on the US that oil production will drop like a rock… this until your arguments has been proven time and time again throughout history.

Governments should stop meddling with energy supply and let the free markets decide.

The U.S. has trillions of barrels in oil shale and trillions more equivalents natural gas and coal.
I thought pretty much everyone knew it was a strategic decision to drain the light sweet crude reserves of any foreign countries willing to sell it to us for as long as they’re willing to sell it to us at prices we can afford. When it’s gone guess who, with probably half the world’s known oil shale, is left holding all the marbles?
Oil shale is economical to produce well under $100/bbl which is why OPEC walks a thin line once they get up in that ballpark with light sweet crude. It would take us ten years to ramp up production of oil shale in the grossly vast deposits in Wyoming and Colorado but persistent $100+ imports would inspire it. OPEC can screw with us by letting LSC get to $140/bbl for a few months or a year but know very well we’d balk and replace them before that lasted very long at all. Hence it didn’t last very long.
Rick Perry wants to revive the US economy by unleashing fossil fuel recovery in this country putting a couple million people to work in good high paying jobs in the energy sector and simultaneously stabilizing for the forseeable future oil at $60/bbl produced domestically from oil shale.
It’s doable. Everyone knows it. Politics is all that stops it.

And don’t forget gas hydrates (http://en.wikipedia.org/wiki/Methane_clathrate). There are some technical problems related to exploiting them but so far it doesn’t seem as if chopping up bats and birds will be required. Potentially enough fuel to give us a few hundred years to transition from hydrocarbon fuels.

cementafriend
There are currently insurmountable engineering difficulties with thorium reactors. There just aren’t any known materials that can simultenously resist both embrittlement from exposure to high level of radiactivity and corrosion from molten salts. There are materials that can do one or the other but not both. Such material is required for the plumbing in LFTR (liquid flourine thorium reactor) which is what all the usual pie-in-the-sky suspects are raving about. Without suitable long lasting materials to construct pipes and valves and pumps with the replacement intervals and maintenance costs make it economically impractical for commercial use. Embrittlement alone makes operating conventional nukes at a profit a dicey affair which can be easily ruined by competition from cost improvements in natural gas or coal fired plants.

Logan in AZ BEAT ME TO IT..

Much oil in the US remains in the ground due to state laws preventing extraction. Due to this these reserves are not counted in the reserve total but remain a resource only. Same in the UK. the discovery of shale gas resources reduced fears of cold winter homes till the government stopped fracking because of earthquake fears (actually the same as a heavy lorry passing 50 ft away at 40mph- not actually earth shattering) so no gas available.
The stupidity of governments never ceases to amaze me.

People believe what they want to believe – even the most brilliant. With all of the conflicting, so called “expert” reports on peak oil, and much else besides, I don’t think it’s possible for the objective layman to know what to believe. But as Dylan said, “there’s a slow train comin'”. Reality will bring it all home to us one day. I suspect that before we’re troubled by warmist projected sea level rises we’ll be well embroiled in very nasty resource wars.

Gasguy rightly says that higher prices unlock resource potential.
As an example look at what’s happening off the Falkland Islands right now. Explored by the major oil companies around 20 years ago, they abandoned the area, despite good oil shows, as uneconomic at the contemporary oil price. Now the small exploration companies that picked up the licenses have made discoveries that suggest a whole new oil province possibly as large as the North Sea (or larger). The current oil price makes the ongoing exploration and potential extraction eminently economic.

The truth? It’s a finite resource. It will run out at some day in the future. And the years approaching that time will be some frikkin’ ugly. Then we will adapt.

Peak oil claims to be about science (geology and math). It’s actually about economics. If you use discounted cash flow analysis you would never invest in discovery of a resource you couldn’t sell for 20 years. In 1970 some bright lights discovered we only had 20 years of oil reserves. But it was because we had slowed discovery because we had enough. Today we have 40. It was just over a decade ago that oil went below $10 and was predicted to go to $5.
The great failing of the Hubbert model and its successors is that they are extrapolations of the status quo without consideration of the interactive nature of supply and demand.

Civilisation, of a sort, can continue at very high oil prices.

Should have included the current US price, to show that in fact fuel prices and civilisation are correlated.
Now to comment on the substance, is that actual and model timeseries data spliced together that I see? A neat trick. I’ve seen it before somewhere. Especially flagrant in figures 6 and 7, but figures 2 and 5 are also pretty bad. Several of these are outright lies – what is labelled as model data is only model data for the future, and is actual data for anything up to the present. The effect is very misleading. On first glance, it looks like the model has predicted perfectly up to now, and the model’s next prediction is for a ghastly decline. Terrible, right? Wrong. These plots tell you nothing at all about how effective the model has been in the past. Or perhaps they do tell you something – they tell you that the author doesn’t want to show you the model’s past performance.
Look closely at all these plots. Notice how in almost every one, production is increasing right up to today, when the model data takes over and the production forecast is declining? Again, I’ve seen this technique somewhere before. It’ll come to me in a minute.
The only exception is US production which, as others have pointed out, only fits the thesis if you ignore the past five years.
The comparison to how the IPCC treats temperature model data is just too obvious to ignore. Every time the model is proved wrong, the model is adjusted so that it fits past data exactly and then presented as a perfect model with an undeniable future prediction. Every four years the process is repeated because every four years the model is dead wrong.

Most people don’t get peak oil. It’s about net energy and rate of extraction…. just try use straw to tank your car…

IIRC the initial reason the US became importer rather than exporter was to make the dollar the international currency, it began by making a deal with the Saudis to buy their oil if they also sold elswhere in dollars and the dollar soon became the currency for practically all global trading. It was Saddam Hussein who tried to break that hold, changed his dollars into euros and would only sell in euros – a bankers war, but again, they’re all the same bankers so it’s merely a way of pushing it around among themselves to get bigger returns.

I think what everyone is missing goes back to first principles; IF all of the hydrocarbons below ground were generated from CO2 in the atmosphere, the concentration of CO2 started out in the low percentage range, and the atmospheric pressure early on was >200 atmospheres then we have not even started to scratch the surface of hydrocarbons present.
In addition, it is likely, though little evidence to date, that Tommy Gold is correct and much of the methane is primordial. That methane has been converted to petroleum deep underground at elevated the temps and pressures.

http://rankexploits.com/musings/wp-content/uploads/2011/04/Screen-shot-2011-04-06-at-6.20.18-PM.png
There. We can now end the /thread.

We stopped at a campground in Oklahoma last week that was completely full by supper time in the MIDDLE of the week in OCTOBER. Most of the sites were occupied by extended stay campers — workers in the oil and gas industry. We were told that the campground was staying open through the winter now because of the business from the oil and gas industry workers — and a few people that work in the wind energy.
On the last several days of our trip, it was obvious in parts of Oklahoma, Texas, and New Mexico that the oil and gas industry is booming right now.

@temp
This is much the same in the US where the government and the handful of big oil companies have both locked out all oil companies and have basically prevent small oil companies from competing with the big names.
I have no doubt that as socialism expands ….
++++
A handful of big oil companies block small competitiors using government to control them? That, dear sir, is the very definition of capitalism, or perhaps it is closer to call it fascism as Mussolini defined it. I am sure you have heard of the game ‘Monopoly’.
http://www.informationclearinghouse.info/article7260.htm

Once upon a time this evil oil oozed out of the ground in many places. It still does in many places.
Odd is it not that hydrocarbons seem to be prolific through out our solar system and our galaxy, no doubt also the universe.
This would suggest that it is a naturally occurring product some what like iron or sulphur.
If this is the case peak hydrocarbons will occur when the world is making it less fast than we are using it, that is once we have found and exploited all the reservoirs of oil and gas. Plus the vast treasures of methane stored at the oceans bottom. Perhaps then peak will occur but I doubt muchly for the odd hundred years or so from now we will probably have progressed a tad in technology.
Worry warts and doom sayers abound, but we are a very adaptive bunch, with an inventive bent.
The stone age ended, not for a lack of stones. The bronze age ended for iron was tougher, horses became our friends, not our beasts of burden.
Dick Tracey had his wrist radio, Maxwell Smart had his shoe phone, Now the world has iphones who would have thunk it.

If you price oil denominated in gold, what do you get? I suspect when denominated in gold, the price is flat or declining.

Hard to take this seriously when the most important factors controlling oil production, i.e. government interference, is totally ignored. Particularly questionable is accepting the estimates in North America that are known to be totally wrong while ignoring huge new natural gas finds and Oil sands and shales.

The only problem with such analysis is that it ignores the impact of Washington. They assume that the result of any decline is because we are running out of oil, when in fact it is the result of Washington making it more and more difficult to drill for new oil, or expand existing fields.
It’s no surprise that “peak oil” coincides with the establishment of the EPA.

@Lucy
U.S. (Livermore IIRC) ran an experimental thorium reactor for 5-10 years in the late 50’s and early 60’s.
Running an experiment which doesn’t have to produce a profit and turning the experiment into a profitable commercial enterprise are two different things. We put a man on the moon in the 1960’s but that didn’t translate into McDonalds and Holiday Inn locating there. First electric car was built in 1835 about 30 years before the first car with an internal combustion engine. Electric cars are still impractical for most uses 175 years later.
Just because something can be made to work doesn’t mean it can made to work well enough for any intended use. Thorium fueled reactors so far can’t be made to work well enough and no one stopped trying in the 50 years since the first experimental thorium reactor was built. The thing most nuclear power advocates don’t readily admit is there’s no shortage of uranium ( especially in the United States), the cost of the uranium fuel is just a tiny fraction of the cost of producing electricity in a nuclear power plant, and thorium reactors can’t be made (so far) that can economically compete with uranium. The motivation for thorium is entirely political with the loony left supporting it either because you can’t make nuclear bombs from thorium fuel cycle and the radioactive waste is only dangerous and difficult to store for a thousand years instead ten thousand years. For some nations like China and India they don’t have an unlimited supply of uranium but have lots of thorium so they have the additional impetus of not wanting to rely on foreign uranium 50 or 100 years from now. China is busy looking into thorium alternatives as we speak. If they figure it out then good for them but we don’t have any particular need for it anymore than we have a need for a one-child policy. China’s needs are the same as ours.
The U.S. is an energy rich nation it simply lacks the political will to exploit it due to the loony left, environmentalist whackos, and democrats pandering to them for votes. The usual ploy of the politics of guilt is used by the left which manages to sway otherwise sane adult voters who would normally vote in their own self-interest to feel guilty at not being a starving Ethiopian and voting against the things that will retain or enhance their own status as citizens of the wealthiest, most free, and most powerful nation on the planet in modern times and perhaps at any time in history. These politics of guilt are working well enough to cripple a great and proud nation and some of us are pretty pissed off about it. Pray that Rick Perry becomes POTUS. He and a republican majority in both houses of congress will end this new age bullshit and put America back to work with a vibrant domestic energy program the benefits of which will be fast and furious at righting the floundering economic ship of state. We are indeed shovel-ready, literally, to end the ginned up energy crisis and letting ourself become little bitches for OPEC to manipulate. All we have to do is remove the regulatory restraints from those ready, willing, and able to man those shovels.

“Mike C. says:
October 28, 2011 at 3:44 am
I must say, I’m rather disappointed to see this presented here with no commentary from Anthony. It’s pretty much just unjustified alarmism.
37 years in the oil business here, and counting.”
1

>>There is nobody in the whole industry who gains anything by announcing higher reserves, but all gain tremendously when playing the “we-run-out-of-oil” tune… <<
Most people miss the point about peak oil. This problem isn't about running out of oil, or coal, or gas, etc. There will still be plenty of oil around even after people have stopped using it.
The problem is about the cost of extraction, and it's not the DOLLAR cost, but the ENERGY cost that is a concern. Once it costs as much energy to extract a fuel as the fuel itself will deliver, you're done. Why? Because you might as well just sell the energy you're using to extract. Of course, the energy cost begins to show up in the dollar cost long before you reach parity between energy in/energy out.

The sum total of all the naysayers comments on here is just a blip on these predictions. We better be prepared for this. The Chicomms certainly are.

Roger Sowell says:
October 27, 2011 at 10:21 pm
And now, for the realist viewpoint.
Peak Oil is not a problem, and has never been a problem despite numerous predictions of its impending occurrence. The reason is that the model that is used to forecast peak oil is false; it is wrong. To paraphrase one of the US’s most brilliant scientists, the late Dr. Richard Feynman, when the predictions are wrong, you must get a new model. Dr. Feynman won the Nobel prize in physics for is work in QED, quantum electro-dynamics.
World oil demand is decreasing, oil supply is increasing, and there are far more options today for oil use than there were 30 years ago. .
http://sowellslawblog.blogspot.com/2011/04/speech-on-peak-oil-and-us-energy-policy.html

I say “Amen, Roger.” “Amen” seems appropriate here, as Peak Oil is another enviro-religious issue, just like overpopulation and AGW.
The “Peak Oil” arguments are fuzzy, relying upon production figures instead of recoverable supplies or known reserves.
Of course production in the USA peaked long ago. It’s nearly impossible to create a new refinery and our regulatory environment also makes it very hard to drill at new sites. There is plenty of oil in Alaska, off our three coasts and in oil shale. Further, coal can be converted into liquid as a substitute and while that’s technically not oil, there is enough coal in this country to last us for centuries.

Jay Curtis says:
October 28, 2011 at 6:16 am
“The problem is about the cost of extraction, and it’s not the DOLLAR cost, but the ENERGY cost that is a concern. Once it costs as much energy to extract a fuel as the fuel itself will deliver, you’re done. Why? Because you might as well just sell the energy you’re using to extract. Of course, the energy cost begins to show up in the dollar cost long before you reach parity between energy in/energy out.”
This is inherent in the term “economically recoverable” and I think every modestly knowledgable student of energy resources is aware of it. But we are also well aware that recovery methods constantly improve. Necessity is the mother of invention. We can routinely and cost effectively drill horizontally now, for instance, which vastly increases what’s economically recoverable. In the past it was economically possible to recover oil from a mile beneath the ocean’s surface but that’s routine now too. For peak oil to become a real threat one must assume that recovery technology will suddenly stop improving. There’s no historical basis for imagining that technologic improvements that reduce recovery costs will come to a halt.

It would be worthwhile to replot Figure 5 (World Production Oil Decline) starting from 1970 and ending in 2010 (where the data ends and the projections begin). Also plot exploration investment, or new infrastructure investment on the same graph.
What you will see is that oil production is higher in 2010 than in 1970 and that but investment has really picked up over the past few years.
Without comparing investment in new oil fields with total production it is hard to argue for peak oil.
But I thought your summary was excellent otherwise.

Smokey says:
October 28, 2011 at 6:22 am
“No wonder the price of gasoline is so high.”
The price of gasoline is so high because foreign sources (read OPEC) control the top marginal rate it and extract every penny (and then some) that the market will bear.
I mean c’mon. Crude price went from $20/bbl in 2001 to over $120/bbl in 2008. What The F Is Up With That!? What kind of moron do you have to be to believe that price increase has any relation whatsoever to production cost or known reserves? This is all political and ecnomic manipulation. Consumers are having their pockets picked clean by those controlling the cost of energy. Whatever price can be maintained just bloody short of worldwide economic collapse. Does anyone really think there isn’t a causal connection betweent the economic meltdown in 2008, which is still ongoing today, being a direct and immediate result of artificially inflated energy prices? Don’t be naive. Vote for Rick Perry and give him a cooperative Republican congress and he’ll end this nightmare. Perry knows the goose that lays the golden eggs is energy producers and he knows how to end this nonsense with artificial price inflation driven by foreign energy cartels. Let him do it. We’re *ucked if we don’t.

Re: Free Marketers:
I often hear this: “If we were to free up the market from onerous laws and regulations, we would all have plenty of oil.” However, absolute power corrupts absolutely, regardless of whether it resides in government or free market corporations.
On one side of the coin: The free market has often resulted in the highest net income producer squeezing out the marginal performers. Unfortunately, once the competition has been shut down, the consumer has been, at times, harmed by the corporation king’s carelessness (tailings flowing down mountains and entering streams, lead in paint, lax sanitation in food production, etc). So laws were made to bar corporation kings from engaging in careless practices. However, these same laws prevent start-up businesses from entering at the ground floor and placing healthy competitive pressure on the status quo.
On the other side of the same coin: An out of control growing governmental body will often meddle in the business of creating wealth by attempting to be in the economic driver’s seat, or worse, by resting complete control and ownership over businesses. This governmental grab for power prevents start-up businesses from entering at the ground floor as well. Who would want to start up a business you cannot have control over, and what government cares about the pennies a start up business will generate in the beginning?
Is there a happy middle?

Richard S Courtney
Your comment that we didn’t reach “peak flint” reminded me of a quote by Sheikh Yamani, the former Saudi Oil Minister:
“The stone age didn’t end because we ran out of stones.”
We’re now effectively in the oil age, and whilst there are different ways of producing oil such as from coal, these all cost more and currently are produced at a slower rate than conventional crude. Peak oil is not the running out of oil, or the ability to produce it, but is when the maximum rate of global production is reached.
Perhaps we can sink more wells to produce it faster or use EOR to squeeze more out, but that costs more money and the price of oil increases to match this. Peak oil will happen because the cost of producing it will exceed what people can afford to pay. An alternative will be found, but the age of oil will have ended.
I personally think it will be nuclear fusion that will take over, but my friend who works at the Joint European Torus tells me that commercial fusion reactors are about 25 years away.
I’m guessing the oil price will continue to rise until then.

ferd berple says:
October 28, 2011 at 6:38 am

By comparison, in the United States, Section 526 of the Energy Security and Independence Act of 2007 blocks the Department of Defense from using CTL fuels because the life cycle greenhouse gas (GHG) emissions from those fuels would be much larger than the GHG emissions from conventional petroleum.
There you have the real “reason” for peak oil in the USA. Thermal coal is $20 a ton in the US. This has the same energy as two barrels of oil worth $200. A ten times price difference between coal and oil. The US has the largest known coal reserves on the planet. The US could be converting coal to oil on a massive scale. Given the price difference, and the US dependence on imported oil, the question to be asked is WHY ISN’T IT?
US Law prevents the US from defending itself with secure fuel supplies because of environmental worries. No problem using depleted Uranium in the Balkans or Agent Orange in Vietnam, but heaven forbid releasing CO2.

Right on brother. It’s now or never. Evict the leftist idiots from Washington once and for all and replace them with a majority that know energy production is the key to restoring the economic success of the United States. You can fund grandiose entitlement programs with a vibrant growing economy and full employment. The only way to get there is to remove the obstacles in the way of restoring low energy prices. Energy price is a major cost component of just about everything else with tangible, real value. We have the energy sources. What we don’t have are enough self-interested guilt-free adults in federal government willing to exploit our natural advantage in being an energy-rich nation.
I’m here to tell you sh*t rolls downhill and when the U.S. is made to suffer by naive energy policy of Ivy League academics without a lick of common sense or street smarts in high public office the rest of the world ends up suffering too. This isn’t theoretical, it’s playing out before our very eyes as we speak. Send the Ivy League dipsh*ts back to the academic enclaves where they belong and put some practical minded adults who know the real world works back in charge of things. It’s the only way out of this mess.

Scottish Sceptic says:
October 28, 2011 at 6:56 am
I’ve often thought the oil companies invented global warming to hide peak oil. After all what better way to convince the world that oil isn’t running out than by getting every politician to run round like a headless chicken shouting that the biggest problem on earth is that there’s too much fossil fuel.
Of course the economics is all to pot. Oil will not so much rise in price as earnings will drop relative to oil. Or in real terms it will become cheaper to employ someone/some animal to do the work than to employ a mechanical machine.
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Ship that scotch to Canada because you’re not making sense. Oil companies are not interested in convincing the public there is too much oil. And get ready for higher oil prices. I can imagine driving a 400 HP BMW but I can’t imagine looking after 400 horses. Even at $200 a barrel oil is CHEAP. People don’t get that. and when oil hits $200 there is a whole lot of “new” oil ready to come on stream.
Peak use of oil maybe, but no to peak oil.

SteveE says:
October 28, 2011 at 6:59 am

I personally think it will be nuclear fusion that will take over, but my friend who works at the Joint European Torus tells me that commercial fusion reactors are about 25 years away.
I’m guessing the oil price will continue to rise until then.

It can’t. The past ten years has been an acid test of how much and how fast oil price can rise before worldwide economic meltdown. In 2001 it was $20/bbl which was the historic, inflation adjusted norm that reflected both actual scarcity and cost of production. In 2008, just 7 years later, it peaked at $120/bbl and economic meltdown was real and imminent. It almost immediately retreated to $35/bbl for long enough to avert a meltdown and then has been allowed to creep up to somewhere between $75-$100/bbl which the powers that be have evidently determined can be sustained without global economic collapse but instead perennial economic malaise. I’m sick of it. Vote the morons out of office who are willing to continue putting up with it. Vote for Rick Perry. He’s not a great debater but he understands that energy policy is the key to restoring the U.S. economy and he knows it isn’t green energy that’s going to save our bacon. Romney will fail every bit as much as Obama failed. Get energy prices back down, put a couple million people back to work in the energy industry, and everything else that needs fixing will get done as a consequence of that bounty.

Dave Springer says:
” For peak oil to become a real threat one must assume that recovery technology will suddenly stop improving. There’s no historical basis for imagining that technologic improvements that reduce recovery costs will come to a halt.”
That’s not true. Whilst technology has improved, that has come at a cost. A deep water well off the West coast of Africa can now cost in excess of $150 million.
Whilst 20 years ago the technology wasn’t there to drill such wells, with the oil price at $20 a bbl it made no sense to even try. Now that it’s at $100/bbl this type of exploration can take place.

If Russia is now leading production and they are drilling at 30,000 ft., and BP is drilling in the gulf at 27,000 ft. , doesn’t that support the argument for abiotic reserves? Could all this be about profits? Maybe a commodity that the population has become dependent on can be manipulated
to garner deep profits and be supported by questionable science.

When I posted on peak oil’s effect on agricultural costs and food security, some comments questioned the idea of peak oil. What follows is a summary of the subject. We will start with what is considered to be the most successful economic forecast ever made – the prediction in March 1956 by King Hubbert of the Shell Oil Company that US oil production would peak in 1970. This was in a paper entitled “Nuclear Energy and the Fossil Fuels” presented at the Spring meeting of the American Petroleum Institute in San Antonio, Texas. The paper’s title reflects Hubbert’s view that nuclear power would have to replace fossil fuels on the latter’s exhaustion. The view hasn’t changed, but the replacement need has become urgent.
I note you say “economic” forecast. Well oil production depends on a number of things outside of economics. I would call such a “prediction” blind luck since it seems terribly unrealistic to predict the environmental movement’s large opposition to offshore drilling that occurred back then. It also fails to account for advances in science that might someday make the direct manufacture of products from crude, eliminating the need for crude.
Peak Oil is not just a myth, but the idea that we can’t do without oil is *ALSO* a myth.

All those Hubbert curves were developed in a period of rather stable oil prices. Higher prices have warped them beyond recognition. Even Texas, the most mature, peaked-out place in the world is increasing production.
I torment a peak oil board on Motley Fool investments- here are some of my recent posts:
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I was reading Oil and Gas Journal(October 3rd)on all the new liquids plays coming out of the continued advances in horizontal drilling and multi-stage fracs. An interesting statistic was cited:
“Goldman Sachs economists in an Aug. 8 note forecast US oil production, which includes natural gas liquids, at 8.06 million b/d for 2011, and 10.27 for 2017”
I looked up what our historical production of crude plus NGL has been and found a nice graph from 2007 by the great French pessimist Jean Laherrere.
http://www.aspousa.org/index.php/peak-oil-reference/peak-oil…
He shows a nice steady decline from a peak of just over 11 million a day in about 1970, projecting to something around 5 million by 2017.
A sharp reversal of the decline has already occurred. Absent a major price drop, I would not be surprised to see domestic liquids production reach a new peak
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The production from horizonally drilled and fractured shale has gone from some gas wells in Texas to oil and gas worldwide.
Take Ohio. Oil was discovered in 1860, a few months after Pennsylvania. Production peaked in 1896 at 65,000 BOD. By 2009 it had declined to 14,000 BOD (so much for the symmetrical Hubbert curve).
Chesapeake just completed three Utica shale wells. The initial flow from the three wells is 3,420 bod of liquids and several mmcf of gas.
Meanwhile a thick and rich section of gas charged shale has been found in small corner of England. Estimates are 200 TCF in place, with 10-30% recoverable.
China, India, Poland, are all finding new reserves. We are looking at a total game changer.
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Gafney Cline are now reporting what has been rumored for awhile–that there are 21.2 TCM (748 TCF) of reserves in one field in Turkmenistan. So much for all the elephants being found long ago.
To put it in perspective, all of the E.U. uses about 20 TCF a year.
LOS ANGELES, Oct. 13
By Eric Watkins
Oil Diplomacy Editor
Gaffney, Cline & Associates (GCA) said Turkmenistan’s South Iolotan natural gas field is the world’s second-largest, with an estimated 21.2 trillion cu m (tcm) of gas reserves. Supergiant Iolotan field was discovered in the country’s Amu Daria basin in late-2006 (OGJ Online, Nov. 22, 2006).
In a recent presentation, Jim Gillett, GCA business development manager, said South Iolotan’s latest reserves estimate make it second only to giant South Pars gas field, shared by Turkmenistan and Qatar.
“Turkmenistan’s gas reserves are more than enough for any potential demand over the foreseeable future, whether it be from China, Russia, Iran, or Europe,” Gillett said.
However, Gillet said estimates of the central Asian nation’s reserves could increase even more, noting that in addition to South Iolotan, the country’s Yashlar field has substantial gas, too.

The problem with the peak oil models is that it fails to model human behavior into it’s calculations. The only reason the models see for a decrease in production is because there is less oil available. The reality is more complex. Oil production is in general run by a cartel of countries that regulate the production to keep the price high. They increase and decrease the amount being produced to keep the price where they want it and for the last 3 or 4 years have been decreasing production to keep the price per barrel as high as they could.
But the peak oil modelers only see the decrease in oil production and assume that finally they have peak oil not simply natural greed to keep the price up. As is usual at some point either a country not in the cartel will have a break through and flood the market with cheap oil, or a production improvement will happen or one of the cartel will want fast cash and flood the market. It has happened before.

David,
The ramp up in production per well is where your numbers are falling apart. I need to find you the N.D. list of wells that have come off of confidential status. https://www.dmr.nd.gov/oilgas/confidential.asp
There is a significant number of wells producing over 1000 barrels of oil per day after 6 months of production.
The wells with 30+ multi stage frac’s or more have changed the way that wells are developed. Smart Pads are allowing equipment to be setup once, and then to drill well after well from the same single location, but in a different horizontal direction. This allows crews to save days of labor per well.
These wells are now coming online with as much as 3000 boepd of flush production each. Unconventional oil in North Dakota is also a light sweet oil that is close to WTI. This is not stuff that needs upgrading.
When you quote the average well production, you are intentionally smoothing the 1000 per boepd of flush production into the 10 barrel per day conventional wells from 20 years ago. The ramp up in production per new well is the key data point.
Here is a link to production numbers in a PR
http://ir.bexp3d.com/releasedetail.cfm?ReleaseID=607772
“Brigham Exploration Company (NASDAQ: BEXP) announced that the Irgens 27-34 #2H Three Forks well produced approximately 2,906 barrels of oil equivalent during its early 24-hour peak flow back period, which represents a company record early production rate for a Three Forks well. The Irgens 27-34 #2H is located in Brigham’s Rough Rider project area in Williams County, North Dakota. To date, Brigham has completed 88 consecutive long lateral high frac stage wells in North Dakota with an average early 24-hour peak rate of approximately 2,797 barrels of oil equivalent.”
The drop off in these wells is high, however when you have wells that produce over 1000 boepd for the first 6-12 months or more, it a game changer. We are not drilling ten’s of thousands of wells producing 80 boepd each. That should be obvious.
In 2001, North Dakota had 15 oil rigs operating. Today it has cracked 200 active drilling rigs. http://www.willistonherald.com/articles/2011/09/03/news/doc4e59a6ad907c1288461919.txt
Best Regards,
Jack

Pamela Gray says:
October 28, 2011 at 6:52 am
Re: Free Marketers:
I often hear this: “If we were to free up the market from onerous laws and regulations, we would all have plenty of oil.” However, absolute power corrupts absolutely, regardless of whether it resides in government or free market corporations.
On one side of the coin: The free market has often resulted in the highest net income producer squeezing out the marginal performers. Unfortunately, once the competition has been shut down, the consumer has been, at times, harmed by the corporation king’s carelessness (tailings flowing down mountains and entering streams, lead in paint, lax sanitation in food production, etc). So laws were made to bar corporation kings from engaging in careless practices. However, these same laws prevent start-up businesses from entering at the ground floor and placing healthy competitive pressure on the status quo.
On the other side of the same coin: An out of control growing governmental body will often meddle in the business of creating wealth by attempting to be in the economic driver’s seat, or worse, by resting complete control and ownership over businesses. This governmental grab for power prevents start-up businesses from entering at the ground floor as well. Who would want to start up a business you cannot have control over, and what government cares about the pennies a start up business will generate in the beginning?
Is there a happy middle?

You and I have vastly different understandings of what the term free market means. Monopolies are not part of the free market, while market domination through providing a better product or service or providing either at a better price is part of the free market.
We haven’t had much of a free market in this country for quite some time, and corporatism, sometimes incorrectly called crony capitalism is currently king.
We live in an age where plenty of information is available for consumers who want to make informed choices, but we’re stuck in a regulatory model which still believes the robber barons are lurking in every board room.
We don’t have one for oil, as OPEC effectively controls world-wide supply, and therefore price.

Figure 7: Logistic growth curve for Non-Opec oil production
In this graph Nashawi shows oil peaking around 2006, which is also his last data point. Hasn’t production increased since then? Another failed prediction.

Sorry but this is madness. There is no peak oil! There is plenty of the stuff. The only thing that is killing oil and gas is TAXES and government restrictions on access to fields. The industry is highly regulated and well over a trillion a year are collected annually in taxes. The government percentage take has been steadily increasing for decades and that is why oil and gas will continue to get more and more expensive until the taxes lead to high enough prices to kill demand (don’t seem to be there yet). What is not understood is that profits from Oil and Gas are re-invested in the industry bringing new production to market (ultimately keeping supply up and prices down) in stark contrast to what is collected in taxes. The golden goose which has created so much prosperity and higher living standards is being choked and choked.

rbateman says:
October 27, 2011 at 10:27 pm
Does China have any of these molten salt/thorium-burning reactors online?
Does anyone else have any of these new reactors online?
__________________________________
That was my first thought. Thorium Nuclear. If the PAID nuclear protesters had had more morals and the US media had not spread propoganda we in the USA would have top of the line nuclear for most of our non-moble energy needs.
Access to energy = Civilization.
Energy is always the limiting factor in the advancement of civilization. Labor saving devices allow the leisure needed for advancement and the energy to fuel new inventions.

Regarding the US oil production peak in the early 1970’s, when did $1/brl (production cost) Saudi oil ramp up to significant amounts? Oh yeah, the early 1970’s…

Ken Methven says:
October 27, 2011 at 10:50 pm
Apart from China, where is the global demand curve against global production?
We can all see that price is likely to rise, give us some idea about when and how much….
…and we already knew..”its wose than we thought
———————
Here’s one:
http://www.stockopedia.co.uk/uploads/articles/user/supply_demand_nov09.png

“However, absolute power corrupts absolutely, regardless of whether it resides in government or free market corporations.”
The problem with this analysis is that free market corporations can never achieve absolute power. Without govt stepping in to close a market, there will always be competitors waiting to take advantage of any mistakes (including over charging for product) that the big companies make.

All too often, discussions about oil seem to miss the point that the only major reason we need oil
(aside from plastics, lubricating oils, etc) is to power our vehicles. We no longer use any oil to make electricity, although a fair amount is used for antique heating oil systems in New England.
battery technology is rapidly advancing, despite continued high prices for li ion batteries being used for electric cars. Toyota (and the Tokyo Institute of Technology) just last week divulged a battery development program which they claimed a battery much lighter, with a 600 plus mile driving range and a cost at an unbelievable 1/10th current battery prices, making a very cost-effective electric car. Time frame : 3 years or so before commercial production. Another design from DBM-Energy in Germany also promises similar revolutionary advances. Either battery’s availability to the world’s automakers means the immediate death of gas powered personal vehicles. With per mile energy costs of roughly 3 cents, a battery that will far outlast the vehicle, and a minimum of maintenance costs, gas powered vehicles, and out overwhelming need for oil will disappear. For these reasons, estimates of future oil production I consider basically pointless exercises. Even today, right now, or rather in 6 months time, Tesla will produce the first truly practical electric sedan – their Model S, a car better than any gas powered competitor from Mercedes or BMW, and with a 320 mile driving range and a sub 45 minute recharge time, fantastically attractive and very fast with room for 7 passengers. True, it is practical only in its elevated price level, but even if none of the new battery technologies comes to fruition (extremely unlikely) , the prices of its batteries are expected to drop 50% in the next few years.
Oil? Who needs it? Well, we do….. but not for long at the consumption rates we now enjoy.

Back of the envelope math has the source rock still containing 75% +/- of the original oil. The missing 25% having risen up through geological rock formation structure until it was trapped in a sealed location building a pool of what is now considered conventional oil. We have barely begun to unlock the planets real source of historic production.
The unlocking of the source oil for the conventional pools is going to provide a multi generational window of growing total production capacity for the US & World. Any nation with “significant” onshore shale deposits has the possibility to become a net energy exporter over the next 10-15 years as the technology is exported to known shale geological formations.
The Majors have been drilling in Europe over the could of years, and with the lessons learned in the US being transferred now going forward (all of the majors are buying up the small guys who developed the technology, including statoil buying BEXP lately), I expect that Exxon, Shell & others will see their NG/liquids/oil production increase in Europe sooner rather then later.
The Genie is out of the bottle now, the ability to export this technology to mature shale basins is going to impact global energy supplies in the near future.

theBuckWheat says:
October 28, 2011 at 6:04 am
“The truth is that we are awash in hydrocarbons that can be converted to usable fuels. The ONLY thing that matters is the price of the finished fuel product at the pump. That price reflects how much people are willing to pay for it. At today’s price, we can afford to convert many sources of hydrocarbons into the fuels we need. It just happens that for the time being, crude oil is the most economically efficient feedstock. The instant that some other source is better, we will start making our fuels from it.”
You want the truth? I’m not sure you can handle the truth.
The truth is that every alternative liquid hydrocarbon fuel can be produced more economically than using $100/bbl crude oil. The problem is that it can’t be made more economically than it can using $30/bbl crude. OPEC can make money selling crude at $20/bbl. So what happens is that OPEC can drive any company producing alternative liquid fuels straight the f*ck out of business whenever they want by lowering crude price below the alternative production cost.
This is called price fixing and it’s a federal crime in the United States under the Sherman Antitrust Act of 1890. It’s also illegal under World Trade Organization rules and there’s plenty of people who’d like to take OPEC to the carpet on price gouging like this guy:
http://www.defazio.house.gov/index.php?option=com_content&task=view&id=712&Itemid=70
but no coalition has the sack to do it. So we the price-conscious working middle class get screwed at the whim of these criminal oil exporting countries. I think economic terrorism of this scope should be considered an act of war. I mean what are these incompetent impotent OPEC countries gonna do in retaliation – fly jet planes into tall buildings? Oh wait… they’re already doing that too.

The problem with the OP is that it is a projection based on early 1900s technology.
You could do the same thing with grain production based on 1500s technology.
Both would be wrong.
As for price, there is true scarcity and price scarcity. The latter is what we have due to the rest of the world industrializing.
Two trillion barrels of oil are still in the ground in the US.
http://en.wikipedia.org/wiki/Green_River_Formation
http://nextbigfuture.com/2011/10/bakken-oil-eagle-ford-utica-shale-and.html
http://nextbigfuture.com/2011/08/progress-to-unlocking-over-800-billion.html
Not to mention what is offshore.

Dave Springer says:
October 27, 2011 at 11:37 pm
The U.S. has trillions of barrels in oil shale and trillions more equivalents natural gas and coal.
Unfortunately something else that is nowhere near peak is EPA regulatory restraints and constraints on development of oil extraction, refining and indeed on any industry.

People often bring up net energy as an argument against extraction of some unconventional and hard-to-get-at conventional oil; that it’s pointless using up more energy to extract the stuff than the oil itself would release when burned.
This founders on a couple of basic flaws.
Oil isn’t only used for energy. Almost as important to the modern world are plastics, along with a welter of other products produced from crude oil. It should be looked at as being a little more analogous to a typical mining or manufacturing process, which of course will use up more energy than it creates. Nobody suggests not mining for iron ore or bauxite because it is energy-intensive.
Also to be considered is the economics of the process. If it COSTS more to extract the oil than it can be sold for, then it won’t be extracted (as was the case for the Albertan tar sands for a long time). If it can be extracted and sold profitably, to be used for activities that others value, then somebody will find it worthwhile to do so.

The U.S. has trillions of barrels in oil shale and trillions more equivalents natural gas and coal.- No wonder that the government pay less attention regarding this matter because they have more in their backyard for the “rainy season”.

Crispin in Waterloo says:
October 28, 2011 at 4:49 am
@temp
This is much the same in the US where the government and the handful of big oil companies have both locked out all oil companies and have basically prevent small oil companies from competing with the big names.
I have no doubt that as socialism expands ….
++++
A handful of big oil companies block small competitiors using government to control them? That, dear sir, is the very definition of capitalism, or perhaps it is closer to call it fascism as Mussolini defined it. I am sure you have heard of the game ‘Monopoly’.
http://www.informationclearinghouse.info/article7260.htm

What you describe ain’t capitalism Crispin, but that’s what the collectivists want you to believe. It is very close to (economic) fascism, you got that right. But fascism isn’t capitalism, either. That’s another lie the leftists like to tell. Modern socialism is based upon fascism, in that businesses are privately owned by heavily regulated and controlled by the government. Business owners are allowed to profit as long as they play ball with the government and don’t make waves. Private-public partnership? Pure fascism, too.

“Septic Matthew says:
October 28, 2011 at 11:53 am
Logan in AZ: If it works as expected, the remarks here, and much else besides, will no longer have any relevance.
We can hope, but if that thing works I shall be amazed. Up til now, Rossi and team have used a lot of sophisticated measures to avoid direct tests of whether it puts out more than a couple of watts continuous power per unit. I am not the first person to have noticed this. They are using “complex calorimetry”, whereas all they really have to do is use the heat output to power a Stirling engine (or Peltier effect device) to move a vehicle or drive an electricity generator. It is really easy to tell whether the device puts out more electricity than it consumes, or any other kind of work.”
Wonderful! Unless I missed something, the Qdot out was measured by water flow rate and DeltaT. NOTHING could be simpler than that/
Stirling Enginer for CALORIMETRY? Shirely, you jest!
Input? I didn’t not observe the elments of that directly, but I understood it involved a standard watt meter/watt hour device.
Have you ever MADE a Peltier effect device for calorimetry? I have. Frankly it’s nonsence compared to a Seabeck effect device.(You end up with the need for a “feedback circuit” to compensate for baseling operating temperature induced drift. )But then in any case, when you are talking 1000’s of BTU’s per hour, with steam…the question would be “why bother”??

Richard S Courtney says:
October 28, 2011 at 5:26 am
Well written. As a naturally critical person, I might rewrite this or that, but it was a good post.

Jeff L,
Here is the Woods Mackenzie report on US Supply Economics 2012 – 2030.
Their conclusion is:
Wood Mackenzie’s analysis found that U.S. policies which encourage the development of new and existing resources could, by 2030, increase domestic oil and natural gas production by over 10 million boed, support an additional 1.4 million jobs, and raise over $800 billion of cumulative additional government revenue.
http://www.api.org/Newsroom/upload/API-US_Supply_Economic_Forecast.pdf
The report is 57 pages and was released in Sept 2011.

http://online.wsj.com/article/SB10001424052970204226204576602524023932438.html
Peak oil is a hoax, if oil is really running out, why do the Saudis cut supply?
http://allafrica.com/stories/200906020555.html

Dave
No offense, but I see some key problems with the analysis presented above
Background: Former oil field engineer (Halliburton Services) & chemical engineer with background: agricultural chemical production R&D (fertilizers), fertilizer economic analysis/price projections, coal gasification R&D, and electrical production (strategic planning).
Key problems with the analysis are:
1) The U.S. peak oil chart (Figure 2) fails to account for oil reserves the U.S. failed to tap due to political considerations. Had we tapped those reserves the chart would look quite different.
2) Hubbert-like charts, like the World peak chart in Figure 3, tend to underestimate the amount of untapped reserves out there. In large part because, in the 1960s, it was believed that oil was entirely fossil derived. There is considerable evidence that this is not the case. Consequently, finds are being made in places oil is not supposed to be.
3) The U.S. Department of Energy’s is very conservative in its estimates of world reserves. Private companies know that there is a lot more crude oil out there than the DOE figures suggest. When one talks to industry experts, privately, one comes away with an entirely different picture. (No criticism of the DOE. Conservatism is a good think when doing strategic planning – for say defense purposes)
4) Hubbert-like evaluations are of no value whatsoever in projecting the discovery, use, and depletion of alternate oil sources such as: coal, shale, and tar sands. And the current shale gas boom shows just how fragile the Hubbert assumption is when directed to non-crude resources in similar formations.
5) When considering sources for transportation fuels, one has to consider the break point of alternate oil sources. The break-even point for coal is about $100/barrel. This is a major reason U.S. crude oil prices don’t tend to stay high for too long. With a 400 year supply of coal, the U.S. can produce a lot of coal-derived oil. The break-even point for tar sands is much lower. Consequently, I don’t think should one should get overly exercised about crude-oil field depletion projections.
6) Contrary to popular opinion, it matters not one whit how much energy is needed to get economic value out of a transport fuel. The value of transport fuels is in the ability to facilitate transportation. (i.e. the value is not in the heat produced).
7) The analysis showing the linkage of agricultural price to crude-oil prices look wildly out of date. Specifically, the analysis operates on the long-established assumption that natural gas prices will track with the price of oil. This was a safe assuumption until recently. However, in the new age of abundant shale gas, it looks like the oil/gas linkage may well have been broken. Simply put, the price of natural gas appears to have de-linked from the price of oil. In practical terms, you can see this by the recent renaissance in U.S. ammonia production (which uses natural gas as a feedstock). Since the majority of agriculture energy usage is in fertilizer…well you can see the implications.
I appreciate your analysis, I just don’t happen to agree.
Regards,
Kforestcat

There will be a peak, but I believe the calculations are early. I believe they are for conventional oil. The shale gas boom is simply amazing. Out in gas country the land looks like a porcupine with all the rigs. The big problem is moving it, we have so much. Producers are currently cut back. NGLs are certainly limited. All those condensates and butane can easily end up in the gasoline pool. The shale oil boom is just getting started, and it is amazing. Eagle Ford is HUGE, and we all know about Bakken. Alaska hasn’t even been tapped, nor the Rockies. We also have the oil/tar sands. The big one will be Venezuela, but Chavez currently has that screwed up. And Ven also has enormous gas deposits, I mean enormous, that are not being tapped due to political risk. Colombia has huge deposits, but they are in very remote areas. Still $100/bbl will get the infrastructure built. And what about other countries? We also have the oil companies tacitly admitting that abiotic theory is correct, pulling up oil at over 30,000 feet, outside the “hydrocarbon window” in the Gulf. Now some peak oil buffs think abiotic oil is wishful thinking. However, abiotic oil will still “peak”, when we hit the natural seep rate from the mantle. Anyhow, peak oil is a ways off. I think we need a government that gets us off of oil eventually. Just opening up Yucca mountain would be a big step. From what I’ve read, liquid salt Thorium is very promising technology. But who wants to invest the money with Obama in office?

If you set that EIA Databrowser on “Crude + Condensate” (oil,) and not on “total” (which gives oil, plus Ethanol, Natural gas liquids, refinery gain, etc,) you will find that Global production has increased by 0.0068 (call it seven tenths of one percent) since 2005, while price has essentially, I guess, Tripled.
http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=50&pid=57&aid=1&cid=ww,&syid=2005&eyid=2011&freq=M&unit=TBPD
Lessee, Price has Tripled, and Production is up 0.7%.
What were you all saying about “Supply, Demand, Economics, yada, yada?”
Of course we’re at “Peak Oil.” Are you dummies out of your cotton-picking minds?
I’m, seriously, starting to doubt the “Skeptical” side of the AGW argument, now. I’ve been giving you people a lot of slack, but now I’m really starting to wonder.

Jeff L says:
October 28, 2011 at 12:19 pm
As someone who explores for oil for a living, I will be very interested in the SPECIFICS (no arm waving) of how the industry will accomplish it.
———————————————————————————————————————
As someone who also explores for oil for a living, and has found so much of it that I can sit back and watch the checks and consulting jobs roll in, I have no question that Jeff L is missing the big picture.
Liquids are always tough to find, There are many, many, Bakken and Eagle Ford type type plays available world wide. Here in the US, in some of the most peaked out, explored out places on the globe, production is soaring. Don’t compare Bakken and Eagle Ford to world wide demand without considering world wide potential, Take a look at a core of the Banuawati shale in Indonesia, or the La Luna of Venezuela for starters.
Gas is being found everywhere. For entertainment, google “peak gas”, or “Hubbert curve gas” and read some stuff a few years old. Recently 748 TRILLION cu feet were found in one field in Turkmenistan. Add that to the 40 TCF found offshore Mozambique, the western Australian gas, and all the shale gas you could ask for, Convert recently proven gas reserves to BOE and stick it on any of the figures in the article, and you see that all those curves and graphs are out of date and irrelevant. Conversion of cars to CNG (as all the buses in New Delhi already have), or electric, powered by gas fired power plants, will shift the demand from liquids to gas.
Who do you work for, Jeff L? How can a pessimist find anything?

#
#
MarkW says:
October 28, 2011 at 9:32 am
“However, absolute power corrupts absolutely, regardless of whether it resides in government or free market corporations.”
The problem with this analysis is that free market corporations can never achieve absolute power. Without govt stepping in to close a market, there will always be competitors waiting to take advantage of any mistakes (including over charging for product) that the big companies make.
_________________________________________
When you think about it, big companies are at a disadvantage. They have a few advantages.
1. The ability to BUY politicians and therefore political advantages like skewed regulations.
2. “Cheap” loans of fiat money from Fractional Reserve Banking.
3. Deep pockets – maybe
The disadvantage is a large unwieldy management system where “team playing” and “paper pushing” are valued over innovation. The need for documentation to bring order out of chaos. A need to please the “stockholders” (normally mutual fund managers) every quarter.
With smaller companies there is usually a direct line of communication between the owner and the customers and workers making a small company a lot more responsive. Since small companies are privately owned, long term plans can be made and implemented without worrying about “pleasing” the stockholders.
Here is an example of what I mean:
“Produce 13 to 14 times more patents per employee than large patenting firms. These patents are twice as likely as large firm patents to be among the one percent most cited.” http://www.smallbusinessnotes.com/small-business-resources/how-important-are-small-businesses-to-the-us-economy.html
Allowing monopolies or cartels to form is, in my opinion, a really bad idea in terms of the health of an economy.

…..Lessee, Price has Tripled, and Production is up 0.7%.
What were you all saying about “Supply, Demand, Economics, yada, yada?”
Of course we’re at “Peak Oil.” Are you dummies out of your cotton-picking minds?
I’m, seriously, starting to doubt the “Skeptical” side of the AGW argument, now. I’ve been giving you people a lot of slack, but now I’m really starting to wonder.
_____________________________
Part of “economics” is the formation of “cartels” who set prices and stomping out competition. If you do not think all these people talk to each other and cooperate then what in heck do you think OPEC, WTO and the yearly Bilderberg Conference are about???
Since this is about food, also follow IPC– the International Food and Agricultural Trade Policy Council and its handy work the World Trade Organization Agreement on Agriculture.
The world DOES NOT have “Free Trade” it has trade dominated by a few very rich corporate cartels. If you are not part of those cartels you get squashed. I watched it happen to my old company. It took me years to figure out what actually happen and why and the truth will never be know except to a very very few. (It is too long and involved to get into here.)

Jeff L,
Thanks for the reply, and while we may agree to disagree, I am enjoying our conversation. I will start off with “trading” some points made. Agree that WM is a paid consultancy with a buttered side to the bread. I also will give you that based on history the Atlantic portion is completely hypothetical. It could be significantly richer or poor then estimated at this time.
I believe that California off shore and on shore is however significantly under counted for what it is capable of producing. Specifically, the string of pearl fields untouched heading out to sea which I am sure you are aware of.
Secondly, the shale source rock for California’s production has not been tapped yet.
Yet being the key word, one of the Majors in Southern Cali is requesting the ability to drill hundreds of new wells into their shale zone. They are going to use acid treatment at this time, skipping the hydro fracking.
If my envelop math is correct, there is 1-2 MMboepd in growth cooked into the next 5 years for the US going forward. I am now bearish on CL prices (WTI) as historical basins are reevaluated for their source rock. The US will start to export crude selectively again based on refining capacity needs.
We are going to be exporting LNG around 2015, instead of importing LNG due to demand needs. I used to be a peak advocate, however, in the last few years technology has changed the whole dynamics of the game. I accept that everything I believe, has changed, when the facts changed.
The US has increased its production of NG to the point its the largest in the world again. The US is actively growing its natural gas supply’s organically. The US has grown its crude & liquids production for the last 3 years. The US is on pace to produce an additional 1 million boepd in the next 3 years and 2 million boepd over the next 5 years. When you include major tar sand projects, there is close to 3 million boepd in North America of new production arriving in the next 5 years.
A significant drop in longer term average prices in crude is going to happen. Slowly. Which will help the US economy both at the consumer level, but also at the business transportation costs and finally at the balance of payment side, keeping capital or better said liquidity in the US instead of exporting it.

I picked July because July of 2011 was the last entry. Many fields go down for maintenance at the same time every year. It seemed like a rational comparison. But, if you go Jan of 2005 to July of 2011 it doesn’t make much change.
Prices were jumping around quite a bit from 04 to 06 ( But if you want to call ’05 as $55.00 that’s okay, too. If you average Brent, Tapis, Louisiana Light, Prudhoe, Nigerian Bonny Light, Minas, etc it will come out to about $115.00, today. So that would be at minimum, a Doubling of Price with a loss of 20,000 bbl/day of global production over a Six Year Period.
I could have gone back to ’98/’99 and come up with a 1,000% Increase with, maybe, a ten or fifteen percent increase in production. The fact is: Oil Prices have been rising ballistically for a Decade, and Production stalled out Six Years Ago. And, the Huge, Smart Money Bet is that you’re only a year or two away from the beginning of the decline.

The logistic model is woefully underpowered and a realistic study is authored by me
http://TheOilConundrum.com

Mike C. says:
October 28, 2011 at 3:44 am
“I must say, I’m rather disappointed to see this presented here with no commentary from Anthony.”
Why? I think it is interesting. The post is nonsense to me, but reading the comments is lots of fun.
The funniest thing is that it seems to be some underlying urge to ask governments to do something about “it”. Like if a government was ever able to to anything to solve such a “problem”. It is like asking a government to set the price on eggs. Won’t solve a thing. Will only create another even bigger problem down the road. To many, or to few eggs. Peak egg.

Richard Courtney @ 5:26am said:
“The usage of a resource may “peak” then decline, but the usage does not peak because of exhaustion of the resource.”
This statement is mostly true and beside the point. It is devoid of worth. As you then go on to correctly point out, the ratio of Energy Returned on Energy Invested is often the deciding factor, even before complete exhaustion of the material. Whatever is not recoverable is not a resource in the economic sense of the word, which is why economists love to argue that adding more capital and technology expands the “resource” base. But the “basic economics” does not alter the basic reality. You have spent a lot of words effectively supporting my point whilst remaining under the impression that you have argued against it. It’s as though you don’t understand the meaning of Peak Oil theory. The relevant peak is the extraction rate, not total reserves. Total reserves are just a rough indication of when the peak rate will be hit. Declining extraction rate leads to declining EROEI which is the physical basis for the Hubbert logistic model and other non-Hubbert models of oil production. So your argument here is against a strawman.
But this next part was the insanely hilarious part:
“In the real world, for all practical purposes there are no “physical” limits to natural resources so every natural resource can be considered to be infinite.”
Wow.
So trees are unlimited? Tell that to the Britons of 1700, the Japanese of 1900, and the ex-inhabitants of Easter Island.
So arable land is unlimited? Tell that to the Mayans whose population exceeded their agricultural output.
So oil is an infinite resource? Tell that to the lower 48 USA states, which peaked almost exactly on the schedule predicted by Hubbert, despite no restriction on exploration and production, no lack of demand, and no better alternative resource for transport energy being available. That’s exactly the effect you say does not happen. The fact that they moved exploration outside the usual continental zones to get more oil is just changing the question and moving the goalposts. That can’t be used to argue against the validity of current Peak Oil concerns because when you hit the peak extraction rate of Earth’s total recoverable resources there is no other planet to tap into.
A critical error in your thinking is that you presume the economic and physical limits are disjoint. A physical limit of extraction rate manifests as an economic event of price comparison. Just because your economically rational actor decides it’s time for a better alternative does not deny the physical origin of the event that prompted that economic decision.
A given discovery rate, extraction technology, and consumption rate leads to a fixed date of peak extraction rate for global oil. Improving technology stretches the curve to the right, but at a higher production cost subject to diminishing returns. At this point you will likely claim that non-conventional fuels will be brought online. EROEI kicks in and if you are still using oil to power your non-conventional production and it costs 1 BBL of conventional oil to deliver 1 BBOE of alternative to market then the project will not even go ahead. But even if the EROEI is viable, if these alternatives are not ready *at scale* and *on time* when the physical limit is reached you will still get enormous economic disruption due to oil shortages. To fail to plan is to plan to fail.
The reality is that natural resources are limited physically in cumulative size (eg consumables) or supply rate (eg renewables), and practical economic supply cannot be expanded beyond what is real, regardless of price and technology. Oil is geologically limited in both size and production rate – it must be on a finite size planet. Sure, you may not reach any physical limit for 50 years… right up until the day you hit the physical limit, and at that point “basic economics” will be of no help. We don’t want to hit the physical oil limit or the price limit without a feasible alternative, but you deny there is even a limit that can be hit. The irony is that it is this same complacency about the physical limit that makes it more likely you will be hit – by not sufficiently executing a transition plan in enough time. e.g. it will take more than 8 years to convert hundreds of millions of cars to run on CNG.
If you do not have knowledge of any feasible plan to avoid the economic impact of oil shortages then you are in the same Peak Oil boat as the rest of us whether you admit it or not.
If I understand you correctly, you are saying that because we are so clever and industry is always on the lookout for a better deal, Peak Oil will not be a problem because it will only occur as we voluntarily switch to other better sources of energy (or new oil resources) when conventional oil costs exceed the new alternative. In other words, the rate peak is determined by the advent of substitutes rather than a physical peak necessitating substitutes.
What you are effectively saying then is that all these predictions of an oil decline during this decade are not necessarily doom but are just a prediction that during the next 8 years a new resource will be discovered that can adequately substitute for both the oil capacity and production rate of two Saudi Arabias and will be developed and deployed so widely that it triggers a measurable voluntary switch away from conventional oil before 2020, AND the oil business already has a plan for doing all of this, AND they are already executing it.
Richard, I hope you turn out to be correct. However, that is a high hope and hope is not a plan.
All I have heard so far from you is that because Peak Oil doomer predictions have been wrong in the past the Earth must therefore have an unending chain of recoverable resource types which started with flint and extends to infinity, which is insane. Your analogy of peak flint would have been greatly troubling to those in the neolithic flint business, and the peak flint theorist was proven right in the end. But your flint analogy is devoid of worth because recyclable reusable materials for structural purposes are not in the same league as consumable energy sources. Unlike oil production, the flint business did not use flint as its energy source. Cherry picking an example in which a physical limit was not reached does not disprove physical limits to resource usage generally. Pretending that finite resources are practically unlimited is the mentality that has got us into this problem.
Far from being “devoid of any worth”, my own assertion about the inevitability of an oil peak simply held no value to you. So it all boils down to the date. You believe the Peak Oil hype is unfounded because, deep down, you know there is a physical peak in carbohydrate production in the future but you think it is far enough away that it is worthless to begin making expensive preparatory changes to our civilisation any time this decade. I would like to know what evidence there is for this apparent optimism. There must be a carbohydrate peak date, so in your opinion what is it really? Why? What do you know about this problem that is not known to people who’ve spent the last 15 years studying the facts? If somebody else were to tell you that this whole Peak Oil issue is nonsense because we have enough oil to power transport at current demand for another 900 years, how would you know that they were talking rubbish but you aren’t?

Michael Lynch and others with relevant experience in the area of oil production estimation have shown why the Peak Oil doomsayers have been wrong time and time again. Their theories of total recoverable resources are just not accurate. They join a litany of other false eco-prophets such as The Club of Rome (Limits to Growth, 1972), Paul Ehrlich (The End of Affluence, 1976), etc. who have predicted the end of certain finite resources, only to be proven wrong – multiple times (http://www.reason.com/news/show/34758.html“>http://www.reason.com/news/show/34758.html).
http://www.masterresource.org/2011/03/lynch-power-hour-interview/
http://blog.aynrandcenter.org/power-hour-episode-2-peak-oil-with-michael-lynch/
http://www.masterresource.org/2011/02/simmons-failed-wager-iii/
http://www.masterresource.org/2011/02/end-peak-oil-theorist-simmons-i/
http://www.masterresource.org/2010/12/peak-oil-puff-on-huff/
http://sepwww.stanford.edu/sep/jon/world-oil.dir/lynch2.html
http://www.energyseer.com/NewPessimism.pdf
http://sepwww.stanford.edu/sep/jon/world-oil.dir/lynch/worldoil.html
http://www.condition.org/sm4602.htm
http://www.forbes.com/home/free_forbes/2006/0724/042.html

“Michael Lynch and others with relevant experience in the area of oil production estimation have shown why the Peak Oil doomsayers have been wrong time and time again. Their theories of total recoverable resources are just not accurate. ”
Those who dispute peak oil make the same mistakes time and time again. They look at what’s in the ground. Peak oil has NEVER been about what’s in the ground. Peak oil is about production, flow rates. Canada’s oil sands is a case in point. Yep, there is a lake of bitumen there. But because it is not easily flowing oil, it has to be mined, with only a very small percent attempting to flow the bitumen (with a very low ERoEI). This means the flow rate from that deposit will always be slow. Currently 1.5 million barrels per day (compared to Canada consumption of 3mb/d, and the US 20mb/d). Hence the flow from all these other sources will not be able to compensate for the loss of flow from other sources. Example, Cantarell was producing some 3mb/d. Less than 10 years after peak and it’s down to 0.45mb/d. That field alone fell in production more than the oil sands produces.

Richard Wakefield says:
October 29, 2011 at 7:41 am
“Those who dispute peak oil make the same mistakes time and time again. They look at what’s in the ground.”
That is even more ridiculous than the stuff posted on the oildrum. People should realize that their posts reveal more about them than they are aware. Thanks Richard.

Meanwhile , in the real world, the October 3 Oil and Gas Journal lists a few hundred projects coming on stream in the next few years:
This much is free, to read the whole article one must subscribe, something that would help inform many of the doomsdayers.
“Brazil, Canada, Iraq, Australia to have largest production increases10/03/2011
By Guntis Moritis
The projects in three countries with the highest increase in oil production are Brazil, Canada, and Iraq, while Australia has the projects with the highest increase in gas production, according to OGJ’s review of major projects listed in the accompanying table. The table lists projects in 44 countries that are in the construction or planning stages, with peak production from these projects occurring in 2011 or after. If all the projects’ peak production rates occurred in the same year, world production capacity would increase by 36.7 million b/d of liquids and 74.3 bcfd of gas. The list includes both individual fields and, in some cases, the accompanying infrastructure”

Those Malthusians who have courageously “put their money where their mouths are” give us memorable stories of what happens when you let your pet theories get in the way of understanding reality:
“Five years ago, Matthew R. Simmons and I bet $5,000. It was a wager about the future of energy supplies — a Malthusian pessimist versus a Cornucopian optimist — and now the day of reckoning is nigh: Jan. 1, 2011.
The bet was occasioned by a cover article in August 2005 in The New York Times Magazine titled “The Breaking Point.” It featured predictions of soaring oil prices from Mr. Simmons, who was a member of the Council on Foreign Relations, the head of a Houston investment bank specializing in the energy industry, and the author of “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.”
I called Mr. Simmons to discuss a bet. To his credit — and unlike some other Malthusians — he was eager to back his predictions with cash. He expected the price of oil, then about $65 a barrel, to more than triple in the next five years, even after adjusting for inflation. He offered to bet $5,000 that the average price of oil over the course of 2010 would be at least $200 a barrel in 2005 dollars.
I took him up on it, not because I knew much about Saudi oil production or the other “peak oil” arguments that global production was headed downward. I was just following a rule learned from a mentor and a friend, the economist Julian L. Simon.
…
The past year the price has rebounded, but the average for 2010 has been just under $80, which is the equivalent of about $71 in 2005 dollars — a little higher than the $65 at the time of our bet, but far below the $200 threshold set by Mr. Simmons.
…
Maybe something unexpected will change these happy trends, but for now I’d say that Julian Simon’s advice remains as good as ever. You can always make news with doomsday predictions, but you can usually make money betting against them.”
http://www.masterresource.org/2011/02/simmons-failed-wager-iii/

Hubbert’s prediction for the US isn’t the only one he produced. Leaving out the inaccurate ones gives the false impression that the model produces highly accurate predictions:
“The popularity of the approach stems partly from the fact that Hubbert’s 1956 prediction
of lower-48 oil production was extremely accurate, even to this day. However, this is
misleading, as his other three predictions were highly inaccurate. His forecast of US gas
production in 2000 was 65% too low and his world oil production forecast for 2000 was 50%
too low. Even production in Texas is now about twice the amount he forecast. Indeed, given
his estimate of URR in Texas, production should have ceased recently as the resources were
exhausted. Since Texas was a mature, heavily studied province even in 1956, this error
speaks to the fallibility of the method.
Other Hubbert models exhibit the same flaw. One group at the US Department of Energy
produced a series of Hubbert-style production profiles in the early 1980s (for example, US
Department of Energy, 1983). For non-OPEC countries, they produced a prediction for
Southeast Asia that has proven very accurate to date, but for non-OPEC South America and Egypt, their forecasts were much too low. Similarly, Root (1991) and Masters et al. (1990)
also produced forecasts with near-term peaks for regions, most if not all of which are clearly
too pessimistic.
The most egregious errors have come from C.J. Campbell, who has repeatedly predicted
a near-term peak for the world, not just non-OPEC or non-Middle East (Campbell, 1989;
Campbell, 1991; Campbell, 1997) even though most in the industry have difficulty finding
signs of near-term scarcity. His 1989 prediction that world production had already peaked
and prices would rise to the $30–50 range in the early 1990s was clearly wrong, and his 1991
book produced forecasts for non-OPEC countries that were 10 mb/day too low (net) by 1999.”
…
“There appear to be two primary errors in the design of these models. First, Hubbert-style
forecasts take URR as a static variable when it is dynamic. This is a serious error. URR refers
not to total resources, which is arguably a fixed amount, but to the proportion of the total
which is recoverable. It is logical that this should increase over time, as technological
advances raise the proportion of a field which can be recovered economically and as other
changes (additions of pipelines, for example) lower costs and thus make it economical to
produce smaller and/or deeper fields and less productive wells.”
…
“Some modelers have argued that URR can be estimated using so-called “creaming curves”
which show discovery size by companies or in a nation, such as the UK, to demonstrate the asymptote3 (Laherrere, 1999). However, this is misleading because they compare current
estimates of field size for discoveries of many different periods. This is like comparing
acorns and oak trees; naturally the latter are bigger, but that doesn’t prove that the former are
destined to always be smaller. Using a given data base of field sizes seems to always yield
an asymptote, but the asymptote moves over time.”
…
“…there is another major mis-specification. Production depends not just on discovery,
but the amount of capacity lost due to depletion effects. As a field is produced, its
productive capacity declines—all else being equal (that is, if no additional drilling is done,
or enhanced recovery put in place). Many of the pessimistic models appear to be showing a
very high rate of production decline for existing fields, and some such as Pursell (1999)
explicitly argue that depletion is now so great that offsetting it—not raising capacity—is the
major challenge to the industry.
But careful study suggests that the impact is being overstated, as either the rate of
depletion is overstated or the ability to offset it is understated. In reviewing oil production
forecasts for various nations, Lynch (1990) was able to derive the forecasters’ estimates of
production decline rates for existing fields and found nearly all showed an annual drop of
10–20%, close to the absolute maximum (that is, with no further investment). Since all but
one of the production forecasts proved to be much too low, the implication is that either
additional investment slowed the decline of production in existing fields, newer fields were
offsetting more than expected, or more probably a combination of the two.”
http://www.aspo-australia.org.au/References/Lynch-july-02.pdf

Just to clarify molten salt reactors can use thorium but they can also use uranium. They can use spent fuel and plutonium. Solid fuel thorium reactor have been built and work great. fort saint vrain being one of them. That reactor had problems with its gas cooled bearinging getting wet. But its fuel worked great.
The promise of molten salt reactors is not the cheap fuel it is they have the potential of needing less capital to build them. They run at near atmosphere and can not meltdown. You do not need a special forged pressure vessel built only overseas. nor do you need a containment vessel. A new light water reactor costs billions to build. The new light water reactors cost billions to build. The bigger the project to more conservative the investor. any advanced reactor deigns will have to be built by someone to prove that it can be done. and that they can be licensed.

RE: Resourceguy: (October 30, 2011 at 6:53 am)
“Note that in Figure 2 future discovery is appended on , citing Campbell from 2004. …”
If you look carefully, you will see that you are actually referring to Figure 3. (Enumerated below the chart.)
This is one of those cases where I believe the US Energy Information Agency may be really dropping the ball if they are not providing the public with complete and authoritative tables of current data for making charts like this.
It is also important to distinguish between cheap oil sources and those sources that can only be refined by energy intensive techniques that might force the cost of gasoline up to ten dollars per gallon in today’s dollars.

The following paper is a relatively brief review of evidence supporting Abiotic Oil Theory:
Inorganic Origin of Petroleum
Introductory paragraph: “The theory of Inorganic Origin of Petroleum (synonyms: abiogenic, abiotic, abyssal, endogenous, juvenile, mineral, primordial) holds that petroleum is formed by non-biological processes deep in the Earth crust and mantle. This contradicts the traditional view that the oil would be a “fossil fuel” produced by remnants of ancient organisms. Oil is ahydrocarbon mixture in which the primary constituent is mainly methane CH4 (a moleculecomposed of one carbon atom bonded to four hydrogen atoms). The occurrence of methane is common in Earth’s interior, with the possible formation of hydrocarbons at great depths. This hypothesis dates from the nineteenth century when the French chemist Marcellin Berthelot and the Russian chemist Dmitri Mendeleev proposed to explain the origin of oil and their theories was revived [in the Russian geo-science academy] in the decade after 1950.”
http://www.scribd.com/doc/55489859/Inorganic-Petroleum-Origin
An interesting read and thought provoking.