Guest Post by Willis Eschenbach
In oil, as in other extractive industries, you have what is called the “R/P ratio”. In the R/P ratio, “R” is reserves of whatever it is you are extracting, and “P” is the production rate, the rate at which you are extracting and using up your reserves.
Figure 1. World annual oil production in billions of barrels (blue line), and years left at that production rate (R/P ratio, red line). Right scale shows the proven oil reserves for each year, in billions of barrels (dotted green line). DATA SOURCE: BP Statistical Review of World Energy 2011, a most fascinating Excel spreadsheet. PHOTO Spindletop Hill Gusher, 1901
When you divide the amount you have in reserves by the rate at which you are extracting the resource, you get the number of years the reserves will last at that rate of extraction. Accordingly, I include the R/P ratio in Figure 1 as “Years Left”
A couple of things to point out. First, the “Years Left”, the R/P ratio, is currently more than forty years … and has been for about a quarter century. Thirty years ago, we only had 30 years of proven oil reserves left. Estimates then said we would be running out of oil about now.
Twenty-five years ago, we had about forty years left. Ten years ago we had over forty years left. Now we have over forty-five years left. I’m sure you see the pattern here.
Second, this is only what are termed “proven reserves” (Wiki). It does not include “unproven reserves”, much of which is in the form of unconventional oils such as shale oil and oil sands. Even discounting the unproven reserves, while the rate of production has increased, the proven reserves have also increased at about the same rate. So the R/P ratio, the years left at the current rate of production, has stayed over forty years for almost a quarter century..
Now, at some point this party has to slow down, nothing goes on forever … but the data shows we certainly don’t need to hurry to replace oil with solar energy or rainbow energy or wind energy in the next few decades. We have plenty of time for the market to indicate the replacement.
Don’t get me wrong. I’d love to find a better energy source than oil. In fact, the huge new sources of shale gas will substitute in many areas for things like heating oil, and will burn cleaner in the bargain. And I do think we’ll find new sources of energy, humans are endlessly inventive.
I’m just registering my protest against the meme of “OMG we’re running out of oil we must change energy sources right now tomorrow!!”. It is simply not true. We have plenty of time. We have decades. We don’t have to blow billions of dollars of our money subsidizing solar and wind and biofuels. The world has enough oil to last for a long while, plenty long enough for the market to determine whatever the next energy source might be.
w.
NOTE: Oil figures, particularly reserves, are estimates. Oil companies are notoriously close-mouthed about their finds and the extent of their holdings. The advantage of the BP figures is that they are a single coherent time series. Other data gives somewhat different results. As far as I know the increase in proven reserves despite increasing production is common to all estimates.
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If anyone thinks the decline in conventional oil we be relatively slow you might want to take a look at the world oil export market and what it has been doing. It is also important to consider and look at how well nations which have gone from oil exporting to net importers and how well they have fared. Some have done more or less ok, most have not. Oil exporting nations have rising domestic demands for oil while the top 40 or so exporters also have declining oil production. This makes the decline rate of their oil exports quite steep. Two exponential rates working together to reduce the world oil export market, a market all importers depend on. It doesn’t take long at the current trends to wipe out the available export market.
With these words, have you not acknowledged one of the key points of Willis Eschenbach’s essay?
However, knowing that predictions of the future can never be 100% accurate, it is usually (but not always) a safe bet to predict that current trends will continue.
To wit:
-> Mother Nature will continue to warm the planet until she decides, in her infinite wisdom, that she no longer wants to warm the planet. She is fickle, however, and she may change her mind at the drop of a hat.
-> The relentless march of science and technology will combine with the relentless march of human and economic progress to continue finding solutions to the world’s emerging resource constraint issues. (Such issues are always emerging, and always will be emerging.)
-> Humans will continue to adapt their behaviors, their attitudes, their economies, and their societies as necessary to deal with emerging resource constraint issues. (Such issues are always emerging, and always will be emerging.)
-> Western societies will continue to pursue a rainbow agenda of social justice goals, economic justice objectives, and environmental justice politics — doing so at the direct expense of their economic productivity, thus ceding the means of creating new wealth to economic competitors in Asia, and eventually, in Africa.
Sure, from some set of narrowly-defined perspectives, “peak oil” is coming some day, but as Willis says, “So what?”
Willis Eschenbach says:
December 16, 2011 at 10:12 am
Willis Eschenbach says:
December 16, 2011 at 10:12 am
Here’s what I don’t get about “peak oil”.
1) What is it good for?
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JRW: I guess it would depend on your worldview as to the consequences of peak oil. There is a wide array of predictions from a 98% cull in humans (due to starvation and resource wars) to business as usual using alternatives. Reality will be somewhere inbetween. There are two levels of effect. Government and personal. At the personal level passing peak (which will not happen in the world evenly, some places will start to see supply shortages sooner than others, watch the EU) will mean fuel poverty (already happening in the UK, and happened in Russia after the USSR collapsed). Fuel poverty will mean long lines for gasoline, unable to buy certain food products, price spikes in other essentials, which means people spending more on goods or paying mortgages, which means more defaults, which means runs on banks (as in Greece right now), job loses as businesses go bust, which means no money for food, which means rioting in the streets (again as in the EU, Egypt, etc). So for the individual, just a small disconnect between supply and demand caused social unrest. One only has to see how people behave when a toy is short at a store at Xmas time. People have died over trying to be first to the last of a kid’s toy!! Imagine how people will react when grosary stores start to run short, especially in winter.
This then comes to what governments can do right now. Assuming the next version of civilization is different than today, in a world were liquid fuels is so constrained that it is allocated only for absolute essentials like food production, then personal transportation will go back to the horse and buggy. To make that transition smooter, we could spend money on a massive horse and beast of burdon breeding program instead of wind turbines (which in 20 years will be rusting idol hulks). We could also transform as many homes and buildings to ground source heat pumps and off oil and gas as possible. Build more nuke plants (including LFTR) as we will need more electrical power to suppliment the loss of oil. We could also start a massive greenhouse building program for local food production in winter.
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I mean, what would you do differently if you knew peak oil had already passed? On the other hand, that difference would it make if you knew it would occur in 2014?
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JRW: I have already assumed we are in the peak period and have changed accoridingly. This includes moving out of the big city into a small town surrounded by farmland. Learning to grow as much of my own food as possible. Building a year round greenhouse. And training in firearms. Even if the effects of peak oil don’t come in my lifetime, highly unlikely given the economic climate we are in (the AU government told their banks they have one week to prepare for an EU collapse), then what I have done is passed on to my decendents.
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And that’s all assuming we could see it coming beforehand … but we’ve proven over and over that we can’t predict peak oil.
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JRW: But we can. Just look at the fields in decline. The lack of size and difficulty of new fields coming on stream. There are lots of signals that peak oil is coming, and if not now, soon.
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2) After decades of failures, why does anyone pay any attention to the incessant predictions (all with different dates) of peak oil?
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JRW: Eventually the Wolf did come to the door.
Stephen Harris says:
December 16, 2011 at 1:49 pm
@Michael Irwin.
Oil depletion will have long ranging political/military consequences as well, especially for the U.S.A. We gorge on oil, yet our own supply is fast falling. This will, I’m sure, force some sort of resource war in the future.
———
http://www.amazon.com/Blinding-White-Flash-Richard-Wakefield/dp/1935991353/ref=sr_1_1?s=books&ie=UTF8&qid=1322662258&sr=1-1
Willis “Tim, if you are going to accuse me of misquoting you, at least have the balls to indicate where I’m supposed to have done so.”
I didn’t acuse you of misquoting me. I was expecting you to attack me for being confused on your views on this topic with some sort of snide remark. I’m glad you didn’t.
Can we clear this up though? You’ve said in the main article that “the data shows we certainly don’t need to hurry to replace oil with solar energy or rainbow energy or wind energy in the next few decades.”
So do you believe that peak oil wont come for at least a few more decades?
elbatrop says:
December 16, 2011 at 10:28 am
actually you won’t have decades at all, the economic damage and change happens very quickly
———
Punctuated Equilibrium rules supreme.
To all…
I can see my opinions have been stepped on and tossed around. It’s a lively discussion. I guest that’s the unique way where each writes nearly without inhibition, without worry of getting a blackened eye or nose bleed—on account of the distance between all of us. I liken it to the effect of meds one gets before the procto doc has his way with you.
Oh, and thanks Willis for adding the graph of recent US and NA data. Certainly its kind of bumpy. But I did spend ample time. Perhaps its just a difference of opinion, even from the same data.
There is one question I want to ask: Do you regular contributors have a life outside of this thread?
TimTheToolMan says:
December 16, 2011 at 2:18 pm
Thanks for the clarification, Tim, my bad.
No. I believe that peak oil is meaningless whenever it comes. It won’t change anything. Oil prices will continue to rise, as they have done for most of my life. There will be less and less oil in reserve, as there has been for my whole life. People will fight over the oil producing areas, as they have for my whole life. How will someone proving that production has peaked change that?
We have proven already that we can’t predict peak oil. We’ve seen prediction after prediction come and go, failures every one of them. The CIA said it would be in 1989 … did that prediction help us in any way? More to the point, would it have helped us even if it came true? I sure don’t see how. We know we’re gonna be in for tight times down the line … but having people argue about peak oil doesn’t change that at all. Some folks say it’s already happened … if so, where are the effects?
So when you finally figure out that peak oil did occur, which will likely be five or ten years after it happens, please drop me an email to let me know. At that point I’ll reply … “so what?” What good will it do you to figure it out then? How will that change anything?
Oil is a finite resource. But it’s not running out fast, and it’s not running out tomorrow. The oil age won’t end because of lack of oil.
Finally, people say “but the price will rise”. First … the price is already rising. But more importantly, that price rise is what will make other forms of energy cost effective. We don’t know what that energy will be, and it is foolish to try to outguess the future.
So yes, Tim, peak oil will come … and go ….
And prices will rise, after the peak, just as they did before the peak.
But we’re not running out tomorrow. And when prices rise enough, then and only then will we change fuel sources. Trying to hasten that process with subsidies is more than dumb. It drives the price of fuel up now, depriving the poor of energy.
Because although I know that lots of people (perhaps including you) think that expensive energy is a good thing, and that we should raise the price to force people to use less … all that does is guarantee that the poor will be cold in the winter, or that they can’t afford to drive to work. That might be OK with you. Me, I think artificially increasing fuel prices is a crime against humanity.
w.
Willis, price of oil won’t continue to rise. There is a ceiling. Once it reaches a certain point that the economy cannot handle, it triggers recessions. Then the demand drops, and the price drops. Each successive cycle will not rise as high in price as the previous in a world were oil supply is falling. That’s because the economy becomes more sensitive to the price increases. This is because the economy loses too much GDP with each fall. Couple this with the debt crisis and we are in peak oil consequences now, and just beginning the downward cycle.
And because of that, there won’t be excess oil available to move to alternatives. It’s a trap. We need more FF to make the alternatives to get off FF, but using that FF to make alternatives takes FF out of the regular economy. This was well discussed in this article
http://www.theoildrum.com/node/8526
That means people do without. People who do without who are used to not doing without are unpredictable. In a way you are right, there is very little we can do about it. Collectively there is nothing we can do about it. Governments already know about it (JOE 2011). Are already planning to deal with the social consequences of peak oil. That leaves one to do what they can now on their own, before the rush starts.
jrwakefield,
I think you should get some sort of an award for the number of posts in this thread! Close to seventy so far if I’m counting right. However, you’re still fixated on “peak oil”. That phrase sounds like a sharp point that we go almost straight up to reach, and then suddenly come straight down afterward. I think it’s more like a long parabola, and we may be at the top – or we may have a long way to go before we reach the top. If you had faith in the free market, you wouldn’t be so concerned. Yes, the easy pickins’ are mostly gone, but there is still plenty of oil. The free market pricing mechanism will provide oil. It will be more expensive. Maybe $300 a barrel in a few years. But that will cause more oil to be produced. It’s there, it will just cost more to produce it.
And as you probably know, coal can be converted to oil. We have at least a couple centuries of coal. And folks everywhere were predicting running out of natural gas. Now it’s a glut on the market. Who could foresee that thirty years ago?
As I’ve noted here before, almost the entire U.S. coast including Alaska is completely off-limits to exploration and drilling. It’s illegal to even look for oil in those offshore locations. But is there any doubt that with the technological advances in deepwater drilling, that we can discover enormous new sources if given the green light? The continental shelf extends far out to sea, and 3 – 4 decades ago no one was interested in it because of the difficulty in deepwater drilling. But now that those technical problems have been solved, the government has stepped in and ruled that companies may not even explore for the oil that is certainly there. The result is very high gasoline prices; cause and effect.
The problem is government, not lack of oil. At this point it appears certain that the high cost of oil is entirely due to government restrictions on supply. Predictions of ‘peak oil’ are always faulty, because government interference completely distorts the energy markets to the point that accurate predictions simply cannot be made. Thus, as Willis points out, “Seriously, other than climate science, I can’t think of a field with as many totally failed predictions as peak oil.”
Those who control oil control power. Is it any wonder that the government wants to control the supply of oil? By ignoring government interference – the elephant in the room – you’re bound to arrive at a faulty conclusion.
Willis Eschenbach says:
December 16, 2011 at 4:41 pm
“Because although I know that lots of people (perhaps including you) think that expensive energy is a good thing, and that we should raise the price to force people to use less … all that does is guarantee that the poor will be cold in the winter, or that they can’t afford to drive to work. That might be OK with you. Me, I think artificially increasing fuel prices is a crime against humanity.
w.”
==========
Did you forget to mention, it leads the poor (and their votes) further into the Government subsidies trap.
Yes, and it’s a painful process. I’m in contact with a retiree in Maine whose heating fuel subsidy was cut 70% (general slash, not personal), and was pathetically grateful that a one-time SS payment was going to be enough to permit him to buy heating oil this winter. He’s disabled, and he and his wife subsist on ~$500/mo SS.
But there are millions of others who are drawn into the same corrall, and end up self-disabled, unemployable. etc. It’s a vicious circle with bloody, serrated, sharp teeth.
RE: jrwakefield: (December 16, 2011 at 10:04 am)
“Though none of us will be around to bicker about 2300, I’ll add my 2c. By 2300 ocean travel will be 100% wind via wooden sail boats. Land travel will be a mix, short travel by horse and buggy, long distances by steam locomotives [burning] wood. We will still have electrical power, nukes, hydro and a bit of coal.”
I see reversion to a nineteenth century population and lifestyle as a likely consequence, if Dave Springer’s fears about the impracticality of thorium nuclear power were to eventually prove true, or if the ‘Green Earth’ movement were to ban its development. Some Earth-First believers may consider the resultant population reduction to be beneficial for the environment, but social disruption likely during the population reduction period could cause long-lasting major environmental damage.
Kirk Sorensen has stated that his high-temperature liquid-state thorium reactors could be used to disassociate water into oxygen and hydrogen, and also allow the manufacture of synthetic transportation fuels that would be cheaper than petroleum. Of course, this last claim has yet to be proved; it depends on the margin of practicality. They do expect their installations to be much smaller and inherently less dangerous than equivalent old-style nuclear reactors.
I do not like the term ‘Peak Oil’ either. What is really being implied is an energy famine; potentially, a killing famine. If this condition begins with a shock, I think that would more likely be because of political factors or conflicts rather than the operation of any mathematical curve. It is regrettable that this condition has been predicted prematurely in the past as a real warning, now or in the future may be disregarded until the situation degrades into an irreversible predicament.
We do know that carbon power from the Earth is limited, and, barring the discovery of a vast underground reserve that is orders of magnitude larger than any we have ever found before, it will be gone in the not too distant future. It is quite true that man is ingenious and likely will find a new practical source of energy to replace the exhausted carbon, but that won’t happen soon, if we all just sit on the beach and wait for our ship to come in.
@smokey
“But is there any doubt that with the technological advances in deepwater drilling, that we can discover enormous new sources if given the green light?”
A quick google doesn’t seem to leave much room for optimism.
“Alaska’s untapped oil reserves estimate lowered by about 90 percent [1]
The group estimates about 896 million barrels of such oil are in the reserve, about 90 percent less than a 2002 estimate of 10.6 billion barrels.”
Looks like the onshore reserve is only 896 mln barrels, which if the US keeps it all for themselves, will last them around 47 days at current consumption.[2]
“Conditional OK for Shell’s Alaska offshore oil plan” [3] The U.S. Bureau of Ocean Energy Management on Friday conditionally approved Shell Gulf of Mexico Inc’s revised plan to drill six oil exploration wells in the Chukchi Sea offshore of Alaska next year,” …..”The conditional approval seeks to mitigate the risk of an end-of-season spill by requiring cessation of drilling 38 days before the annual onset of sea ice, typically November 1, to allow time for blowout control and cleanup in the event of an accident.”
So, seems the green light is almost shinning on Alaska, somehow I can’t see how “enormous new sources” will provide the gap filler for the 3-6% decline rate of total production [3] if they can only keep the straw in the seabed half the year. What gives you cause for optimism in Alaska, have you any references? I guess time will tell!
Anyone wondering about the implications of peak oil would do well to spend some time looking at the economic picture, I can’t think of a better primer than Chris Martensons Crash Course [4]
[1]http://articles.cnn.com/2010-10-27/us/alaska.oil.reserves_1_undiscovered-oil-national-petroleum-reserve-exploration-wells?_s=PM:US
[2]http://www.nationmaster.com/graph/ene_oil_con-energy-oil-consumption
[3]http://www.theoildrum.com/node/5395
oops [4] http://www.chrismartenson.com/crashcourse
spector, wakefield, and miko are arrogant beyond all conception. They believe they can extrapolate present technologies and economics into the dim medium and long futures. Foolishness. No one could have anticipated the last half century, and the rate of advance is accelerating as we speak.
There are energy generation and storage techs which are less than a decade out which will render their primitivization projections ludicrous. You won’t have to wait till 2100, or even 2050, to see a total (positive) transformation.
Fossil fuel will have a role, but will no longer be a choke point.
To clarify and specifically address miko: actually, there is fossil fuel (petroleum and hydrocarbons) to burn. The need for that use of them will fade and subside long before they run short.
Willis writes “So yes, Tim, peak oil will come … and go …. And prices will rise, after the peak, just as they did before the peak.”
OK, thanks for your clarification on your views. I believe quite differently because once peak oil has come and gone (and I mean peak oil here, not some blip in the landscape of production) then every day that follows (on average) will see a little less oil available for us to use. IMO it is quite a different situation to what we’re used to and not at all comparable to anything we’ve previously experienced.
I can only speculate on what that will mean but IMO it goes well beyond some abstract economics vs market forces correction concept. Its actual hardship, real hardship that will follow.
Willis write “Some folks say it’s already happened … if so, where are the effects?”
I should write to this too… surely you can see the effects of flatlining supply? the price of oil has skyrocketed over the last few years.
If this is actually peak oil, then we can expect those prices to further increase over time.
RE: Brian H: (December 17, 2011 at 3:23 am)
“spector, wakefield, and miko are arrogant beyond all conception. They believe they can extrapolate present technologies and economics into the dim medium and long futures. Foolishness. No one could have anticipated the last half century, and the rate of advance is accelerating as we speak.
“There are energy generation and storage techs which are less than a decade out which will render their primitivization projections ludicrous. You won’t have to wait till 2100, or even 2050, to see a total (positive) transformation.”
So far, only Kirk Sorensen’s liquid fluoride thorium reactor technology has impressed me as an energy generation method that might easily replace carbon power before or after it runs out.
Traditional light water uranium nuclear reactors produce dangerous transuranic wastes at a rate that may not be sustainable for long-term future use. Fusion power seems to be plagued by a strong proton-to-proton repulsion problem that has defied our best minds over the last fifty years. The so-called green wind and solar power methods seem to have been limited to the provision of about one percent of our current needs despite a very concerted effort to subsidize their development as a means to prevent catastrophic global warming.
The exhaustion of carbon power, *without* an equivalent replacement, can only be presumed to result in a forced return to a near pre-petroleum population and lifestyle.
I could not bother and just let you all find out the hard way.
Smokey says: However, you’re still fixated on “peak oil”. That phrase sounds like a sharp point that we go almost straight up to reach, and then suddenly come straight down afterward. I think it’s more like a long parabola, and we may be at the top – or we may have a long way to go before we reach the top.
RW: I didn’t coin the term, it’s not wrong just because you misinterpret the meaning. It is a bell curve skewed to the left (a long depletion time)
Smokey says: If you had faith in the free market, you wouldn’t be so concerned. Yes, the easy pickins’ are mostly gone, but there is still plenty of oil. The free market pricing mechanism will provide oil. It will be more expensive. Maybe $300 a barrel in a few years. But that will cause more oil to be produced. It’s there, it will just cost more to produce it.
RW: Guess you did not read all those posts then. I already explained all of this with links showing that markets CANNOT defy the laws of physics.
Smokey says: And as you probably know, coal can be converted to oil. We have at least a couple centuries of coal. And folks everywhere were predicting running out of natural gas. Now it’s a glut on the market. Who could foresee that thirty years ago?
RW: again, go back though my posts, I already posted a link about shale gas. Coal to oil is negative ERoEI.
Smokey says: As I’ve noted here before, almost the entire U.S. coast including Alaska is completely off-limits to exploration and drilling.
RW: In previous posts I asked if anyone uses a deposit to discredit peak oil, that they should read up on the geology and find out how much oil is in place. Have you done that? How much is there? (I already know the answer, but it looks like you don’t’)
Smokey says: The problem is government, not lack of oil. At this point it appears certain that the high cost of oil is entirely due to government restrictions on supply. Predictions of ‘peak oil’ are always faulty, because government interference completely distorts the energy markets to the point that accurate predictions simply cannot be made. Thus, as Willis points out, “Seriously, other than climate science, I can’t think of a field with as many totally failed predictions as peak oil.”
RW: Peak oil is regardless of the cause. It’s a mix of geology, technology, political, monitary, ERoEI.
Smokey says: Those who control oil control power. Is it any wonder that the government wants to control the supply of oil? By ignoring government interference – the elephant in the room – you’re bound to arrive at a faulty conclusion.
RW: 80% of the world’s supply is controled by governments, the vast majority of which are no friends to democracy. Stop thinking that peak oil is a geological cliff. It is not. As I have posted MANY TIMES soon as the demand exceeds the supply, someone does without the oil they need. That causes recessions.
Peak oil is serious enough that the military in the US and Germany have released reports: http://www.peakoil.net/files/JOE2010.pdf
TimTheToolMan says:
December 17, 2011 at 6:20 am
Thanks, Tim. Production peaked in 1979, and dropped for five years after that. People claimed during that time that we’d reached peak oil. During that time, every day that followed saw (on average) a little less oil available for us to use. Nor was this “some blip”, the 1979 production peak was not exceeded for a decade and a half.
Funny, I don’t recall any of your predicted bad outcomes occurring from that 15 years of diminished oil production …
w.
TimTheToolMan says:
December 17, 2011 at 6:25 am
2008 oil price, ~ $145 per barrel
December 16, 2011 oil price, $93.53 per barrel.
If that is “skyrocketing prices”, give me more …
Surely you must know that there are a host of factors other than supply that affect both production and price … for example, if you expect fuel production/use to go up during a global recession, you’ll likely be disappointed.
w.
jrwakefield says:
December 17, 2011 at 9:21 am
Say what? Here’s what that citation of yours says about peak oil …
This shows oil production increasing until 2030 … so I fear that according to your own cited resource, the “military in the US and Germany” don’t see a peak in oil production for decades.
In fact, far from seeing peak oil as “serious” as you claim, your document mentions peak oil exactly once in 71 pages …
Do you actually read this stuff before citing it? Because that document you cited totally opposes and demolishes your own argument.
w.