Conventional Wisdom, Unconventional Oil

Guest Post by Willis Eschenbach

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

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

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

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

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

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

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

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

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

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

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

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

oil will peak in 2012

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

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

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

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

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

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

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

methane hydrates

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

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

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

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

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


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

rock and the hard place

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

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

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

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

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

Sports and gallantries, the stage, the arts, the antics of dancers,

The exuberant voices of music,

Have charm for children but lack nobility; it is bitter earnestness

That makes beauty; the mind

Knows, grown adult.

A sudden fog-drift muffled the ocean,

A throbbing of engines moved in it,

At length, a stone’s throw out, between the rocks and the vapor,

One by one moved shadows

Out of the mystery, shadows, fishing-boats, trailing each other

Following the cliff for guidance,

Holding a difficult path between the peril of the sea-fog

And the foam on the shore granite.

One by one, trailing their leader, six crept by me,

Out of the vapor and into it,

The throb of their engines subdued by the fog, patient and


Coasting all round the peninsula

Back to the buoys in Monterey harbor. A flight of pelicans

Is nothing lovelier to look at;

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

Against the essential reality

Of creatures going about their business among the equally

Earnest elements of nature.

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

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

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February 2, 2013 1:12 pm

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

Jeff L
February 2, 2013 1:19 pm

I think a key part of this discussion or any other resource discussion is “price”.
In Peak Oil theory there is a somewhat implied but not stated assumption of constant price – ie , the curve is for a particular price point & what can be produced economically at that price point. If you change the price point, you essentially “re-set the curve” as the resources that are then economic at the new price point changes.
So recall that in 2000, the price of oil was +/- $20/bbl, not the $90-110/bbl we are seeing today. Price has re-set the curve…. and will continue to re-set the curve as long as price changes. What is fair to say is we are running out of barrels that we can develop economically at $20/bbl. If that weren’t the case, oil would still be $20/bbl.
So the good news is , as long as price keeps rising, there will be resources for us to develop economically (for the foreseable future). Of course , at some point, the price becomes increasingly prohibitive for the consumer & we naturally rotate into cheaper sources of energy. We will never “run out ” of oil simply because at some point it will become too expensive & we will use other energy sources long before that point.
Again , the key point being that this discussion with out price considerations is irrelevant.

February 2, 2013 1:26 pm

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

February 2, 2013 1:29 pm

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

Kurt in Switzerland
February 2, 2013 1:30 pm

Thank you, Willis!
A welcome burst of sanity, adventure and poetry.
Ah, the majesty (and smell) of sea creatures…
Kurt in Switzerland

February 2, 2013 1:31 pm

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

February 2, 2013 1:32 pm

Doesn’t matter. The Export Land Model handles all your arguments, right or wrong. It is the thing at the moment in POLand. Buy some.

February 2, 2013 1:33 pm

Willis, I would love to hear your thoughts on Tommy Gold and his theory of oil produced from methane escaping from deep in the mantle,

John West
February 2, 2013 1:37 pm

We hit peak oil in the mid-1800’s, sperm oil that is. Call me Ishmael alarmed.
Yep, there are plenty of fossil fuels and when there isn’t any more centuries from now there will be the next thing, perhaps extraterrestrial hydrocarbons.

Jeff L
February 2, 2013 1:38 pm

In my last post , I should have said this more explicitly. An underlying assumption of Peak Oil theory is that all resources can be developed with a similar cost structure. Back Hubbert’s time when he developed the theory, that actually was a reasonable assumption, given the type of resources that were being developed. He didn’t probably even consider this at the time, but it is absolutely built into the theory by the way it is constructed.
Constant price is clearly not a reasonable assumption now and thus, the theory breaks down. It’s really pretty simple from that standpoint. The fact that there is all this hub-bub on both sides of the argument suggests to me few on either side really understand it. For Hubbert’s theory to be useful, you must qualify the resources specifically by their economic price limit – ie – we are running out of oil we can develop at $20 / bbl and we have even less we can develop at $8/bbl (which we used to have in abundance in the past but have very little of today).
The other implication of course is that you can not apply Hubbert’s theory to estimate a total / ultimate resource recovery (worldwide, ultimate recovery) in a changing (especially rising) price environment.

February 2, 2013 1:42 pm

Your writing is inspiring in many ways!

February 2, 2013 1:49 pm

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

Philip Bradley
February 2, 2013 1:49 pm

Agree completely. All forms of fossil fuel, by whatever means of extraction, are fungible, at some cost, including an energy cost.
You are also correct about rapid changes in mining technology. Here in Western Australia, a mine recently opened with no underground workers (the Argyle diamond mine). All machinery is operated remotely. Iron ore trains in the Pilbara are driven by office workers in Perth.
Steps along the road to autonomous robotic mining operations, and then the sky is literally the limit.

February 2, 2013 1:50 pm

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

Peter Pond
February 2, 2013 1:52 pm

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

February 2, 2013 1:57 pm

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

Roger Tolson
February 2, 2013 2:02 pm

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

Gary Hladik
February 2, 2013 2:02 pm

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

February 2, 2013 2:04 pm

“To him who in the love of Nature holds, she speaks a various language”
For some, Nature’s love is embodied in the language of the sea. Others, the sky or horizon’s to be reached.
For me, the crux, a small boat, sailed on a dark sea by the light of the Milky Way. Rocks and shoals outlined as well as heard by the splash of waves. Past the starboard harbor light, into the swells from yesterday’s storm, mainsheet held tight, heeling to lee, the luff barely aflutter.
I’ve encountered no whales on the Great Lakes. It must be a moving experience!

February 2, 2013 2:08 pm

Willis–Great points about peak oil. And, as always, love the sea stories.
I haven’t exactly had a life of “couch potato”, but your experiences make me feel like I have….

Bob Shapiro
February 2, 2013 2:12 pm

I generally enjoy your writing, Willis, but this one seems to me to be an unnecessary cheap shot.
Hubbart did his work in the 50s. His experience was with drilling down, plus some technological innovation. He made some projections based on what he knew, and he was right about US production reaching a peak once half the oil had been brought to the surface.
That he underestimated what technology was capable of in the long run is a common theme throughout history. (Didn’t the Patent Office Director request that his office be shut down 100 years ago, because just about everything already has been invented?)
I recall a National Geographic article almost 50 years ago discussing shale oil which acknowledged that it would be economically feasible only with a significantly higher price per barrel (very correct it turns out).
Maybe the higher breakeven point could help define conventional vs unconventional – or maybe not. But so what? For his time, given his knowledge base, he was very right. His disciples, later talking about Peak Oil worldwide, also were very right – up until a decade or so ago. In a way, their projections of Peak Oil and the then coming rise in oil prices fueled the innovation which, at the current higher price, has given us the new, huge supply.
Again, my point is that it wasn’t necessary to paint Hubbart and his followers as stupid Malthusians (and CAGW Alarmists by your tone) for their identification of a problem which then allowed for a solution from which we benefit today.

February 2, 2013 2:13 pm

Before Beth corrects my improvisation on Bryant’s poetry:
Quotation by William Cullen Bryant
To him who, in the love of Nature, holds
Communion with her visible forms, she speaks
A various language:

February 2, 2013 2:15 pm

I suppose Green River shale oil could be considered unconventional. Kerogen has to be reprocessed to make it into something similar to conventional oil.
Nice that you were able to view that whale. Has anyone ever thought to thank oil companies for saving the whale? It was only after the discovery of oil at Oil Creek that Kerosene began to be substituted for whale oil. It destroyed the whaling fleets though. All those jobs lost. Maybe we can get BP to pay for that too….sarc off.

February 2, 2013 2:17 pm

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

February 2, 2013 2:17 pm

Willis, I don’t think you express the general peak oil arguments that well. I think Wikipedia gives a pretty good description of them –
I think one of the overriding factors of ‘peak’ is that it will have economic repercussions due to price effects.

Rupert Bravery
February 2, 2013 2:19 pm

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

Ian W
February 2, 2013 2:26 pm

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

February 2, 2013 2:30 pm

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

February 2, 2013 2:31 pm

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

February 2, 2013 2:31 pm

Peter Pond,
It would be nice, but alas peak alarmism is just as mythical as peak oil.

February 2, 2013 2:45 pm

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

February 2, 2013 2:45 pm

In my career as a geologist looking for oil worldwide over the last 25 yrs, I can tell you that oil is a limited resouce. There is one simple overriding fact we can all ponder when debating this issue and that is many of the great oil basins and countries of the world hit their peak production long ago. If this has happened to many of these great basins, then it is simple logic to assume that it will happen worldwide at some point in the future. One thing I totally agree with, is that I have NO idea when this will occur. New technologies and higher oil prices could delay this for a very long time.
Another very important point is that peak oil is a measurement of the rate of production and not the quantity of hydrocarbons. One may have a very large quantity of reserves in the ground but one may not necessarily be able to extract them at high rates.

February 2, 2013 2:53 pm

William Stanley Jevons (1835–1882)

Gary Hladik
February 2, 2013 2:54 pm

Peter Pond says (February 2, 2013 at 1:52 pm): “I wonder if there will ever come a time of peak alarmism? (oil / climate change / ice age / food/ …, whatever)”
“Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.” –Albert Einstein

February 2, 2013 2:55 pm

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

February 2, 2013 2:57 pm

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

Willis, I don’t think you express the general peak oil arguments that well. I think Wikipedia gives a pretty good description of them –
I think one of the overriding factors of ‘peak’ is that it will have economic repercussions due to price effects.

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

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

The Liquid Solvent Extraction (LSE) process has been capable of producing synthetic crude oil (i.e. syncrude) from coal at competitive cost (n.b. cost and not price) with crude oil since 1994.
We proved the technical and economic abilities of the LSE process with a demonstration plant at Point Of Ayr in North Wales.
Syncrude has been made from coal whenever the supply of crude has been constrained. The Germans did it during WW2 (which is why we bombed the Ruhr valley) and apartheid South Africa used Sasol which was a development of that German process.
However, prior to LSE it was always more costly to mine, transport and convert coal to syncrude than to drill and transport crude. LSE has reversed those relative costs.
The surprising economics of LSE derive from two facts.
LSE consumes sulphur-rich bottoms which have disposal cost for oil refineries.
LSE can be ‘tuned’ to provide hydrocarbons which reduce need for blending.
An oil refinery separates the components of crude oil by distilling the crude. The separated components are products which must match market demand; e.g. producing the required amount of benzene must not result in producing too much or too little petroleum. This match of products to market demand is obtained by blending (i.e. mixing) different crude oils for distillation: crudes from different places contain different proportions of hydrocarbons.
Blending is expensive. It requires a variety of crudes to be transported and stored then mixed in controlled ratios.
This need for blending is why Brent Crude is so valuable. Saudi crude is the cheapest crude, and blending Saudi and Brent crudes in a ratio of about 2:1 provides a blend that nearly matches market demand for its distillates.
The LSE process can be ‘tuned’ such that it outputs a syncrude which can provide distillates which match market demand and, thus, removes the need for expensive blending. This is achieved as follows.
An LSE plant dissolves coal in a solvent in an ebulating bed at controlled temperature and pressure.
The resulting solution is converted to hydrocarbons by exposure to hydrogen gas (produced by coal using a water-gas shift) in the presence of catalysts and at variable temperature and pressure. Adjusting the temperature and pressure determines the resulting proportions of hydrocarbons.
Changing the temperature and pressure causes the hydrocarbons to come out of solution and the solvent is separated then reused in the process.
The remaining solids (mostly ash minerals) are removed by filtration as a cake.
Conversion efficiency is greater than 98%. And the not-converted residue can be burned as a fuel.
The UK’s Coal Research Establishment (CRE) invented, developed and demonstrated the LSE process. CRE was owned by British Coal which was owned by UK government. Ownership of the LSE Process remained with the government when British Coal was closed in 1995.
The LSE Process is owned by UK Government. Patents on the process were taken out but details of the process are a UK State Secret. Adoption of the LSE Process would collapse the value of Brent Crude, and the sale of Brent Crude is important income for the UK.
However, the existence of the LSE Process constrains the true price of crude oil. If that price were to rise sufficiently then it would pay the UK to adopt the LSE Process or to license it to other countries for production of syncrude. Hence, the existence of the LSE process has a strategic value as a result of its constraint on the true oil price.
And the UK may adopt the LSE Process when Brent Crude is exhausted.
However, frack-gas may remove need to adopt the LSE Process for use although its strategic constraint on oil price will remain.

Joe Public
February 2, 2013 2:58 pm

As Jeff L @ 1:19 explains:
The oil companies just love it when peak-oil scaremongering occurs.
It conditions the punters to willingly accept higher prices.
Then, there’s the ‘Price of Discovery’, (or rather, the Price of Announcement of Discovery). All those (unannounced) proven reserves they’re sitting on, just waiting for the price to rise high enough to make extraction (more) profitable.

David Walker
February 2, 2013 2:58 pm

I’ve lived through much of the whole peak oil deal, which near as I can tell has turned into a half-century-long goat roping contest.
Oh, much longer than that, Willis.
How many people are aware that once upon a time, starting around 1851 in fact, Scotland was the World’s leading petroleum export country – and it was exporting shale oil?
And guess what – it wasn’t long before the ‘peak oilers’ of their day were prophesying that it was going to run out, well before the end of the 19th century.
There’s nothing new under the Sun.
One thing I feel I can prophecy quite safely though, we will never reach peak BS!

lurker, passing through laughing
February 2, 2013 2:59 pm

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

February 2, 2013 3:00 pm

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

February 2, 2013 3:09 pm

MattS says:
February 2, 2013 at 2:30 pm
Even if that price point is held static, the amount of oil that can be economically produced at that price point increases over time because technology isn’t static.
I’m old enough to remember 29 cent/gallon gasoline. The only question as to ‘peak oil’ is at what price will either a substitute be cheaper or people will stop using it because of price.
I used to own a car that got 6 MPG.
I can no longer afford to drive such a wonderfully comfortable vehicle.
As far as my personal consumption of oil…’peak’ occurred when the price was around 40 cents/gallon.

Jeff L
February 2, 2013 3:09 pm

MattS says:
February 2, 2013 at 2:30 pm
“Even if that price point is held static, the amount of oil that can be economically produced at that price point increases over time because technology isn’t static. ”
Agreed – again, at the end of the day it is a question of economics, but the implied assumption of Hubbert was constant economics – I pointed out the price side & you point out the cost side, but we would be both more correct together & say “constant economics assumption – no change in price & no change in technology” – if you change either, you re-set the curve of what’s an economically extractable resource.
I will still stick with the fact that there is a whole lot less oil that can be economically produced today at $20/bbl than there was 50 years ago – thus there was a peak of the resource with that particular economic thresh hold. What Hubbert didn’t take into account is that the economic thresh hold of his day would change, both due to increase in price & an increase in technology, and thus continually re-set the curve.

February 2, 2013 3:22 pm

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

February 2, 2013 3:23 pm

I’ve always liked this graph:

Jeff Alberts
February 2, 2013 3:29 pm

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

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

William H
February 2, 2013 3:33 pm

Jeff L: A $20 barrel of oil in 1970, using normal inflation figures, is equivalent to approx $125 today. Brent is currently at $116, so even ‘peak cheap oil’ is not a reality, never mind peak oil.
Wonderful piece again, Willis. Even though I have lived a similar life to yours, I certainly cannot write about it as you do yours. Would you be my ‘ghost writer’ (for a fee, of course)?

February 2, 2013 3:49 pm

I enjoyed reading the article. I think Jeff raised the point about price – which I think is the crux of the issue.
One of the thing the “peak oilers” don’t say is that the argument comes with the implicit caveat that with “given technology, proven reserves and current price then…”.
As you say the world is awash with oil but of course some of it would cost too much to extract – at current prices and technologies. Furthermore, exploration takes a long time to get started in a new – venture – region. We know that there are other big finds out there but the paper work needs to be done first and with political instability in some regions, companies are playing a “wait and see” game.
Your point about conventionals and unconventionals is a good one. But again this is largely a result of economics. In general terms, both have been exploited historically with conventionals winning through due to ease of extraction – why would a company go for the higher fruits first?
And as you say directional drilling has been revelation to both conventional and unconventional reservoirs; improving recovery rates. Other things 3D/4D seismic, microseismic, more stimulation options etc. In short the “peak oilers”, ignore the caveats.
Finally, as demand increases prices go up, if prices go up then marginal fields become economic. Oil companies (particularly private firms) then develop these fields all the while improving the engineering and driving down price.

David L
February 2, 2013 3:54 pm

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

February 2, 2013 3:55 pm

It really is nice to know that the head of the IPCC, Dr. Rajendra Kumar Pachauri , helped us to prolong our use of dirty, co2 emitting OIL. He set up Glori Oil, now Glori Energy, which is a residual oil extraction technology company. He was its scientific advisor while being head of the IPCC. Al Gore and Pachauri are seeped in oil and are both utter hypocrites of the highest order.
Oil will never run out. This is because by the time reserves get to dangerously low levels we humans would have moved on, like we have always done. There are alternatives which we can’t be bothered with too much at the moment such as Algae fuel.
Further reading:
George Monbiot – Guardian – 2012
We were wrong on peak oil. There’s enough to fry us all
A boom in oil production has made a mockery of our predictions.”
Business Week
Everything You Know About Peak Oil Is Wrong

February 2, 2013 4:00 pm

We’re supposed to have hit ‘peak gold’ too, but I am not buying it.
But I don’t suppose if the temperature levels off, we will get have ‘peak climate’, because that would put alot of alarmists out of work.

February 2, 2013 4:02 pm

Peak oil is a myth.
The average production price of a liter of oil has not risen much.
The cost of producing 1 barrel of oil (about 159 liters) is between US$2.00 and US$15.
While new extraction methods or technology will be more expensive to start off with, they will drop when adopted whole scale.
The price of petrol is a political construct…..
The price of crude oil is not determined by the market but determined by a cartel (OPEC) which sets the bottom price. Price fluctuations are above this bottom price.
The price of petrol for the end user is also determined by politics.
Governments are heavily dependent on the tax on petrol to fund their election bribes.
Taxes on petrol are also used to subsidize public transport projects. The price needs to be high enough for public transport to ‘compete’.
They are also pressured to keep the price artificially high to appease the ‘environmental’ activists who want to phase out fossil fuels.
For example, some 60 per cent of the pump price in Britain is down to tax and duties.
Petrol is a cash cow.
On top of that, some are wondering if the cost of oil has actually risen at all….
Due to inflation it is very hard to gauge whether oil prices themselves are rising or falling.
Measured in gold, the price seems pretty stable and is currently below average.
Measured in gold, the oil price today is only 82% of its average over the past 41+ years.

February 2, 2013 4:04 pm

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

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

Vrooom, vroooom. Problem solved.

February 2, 2013 4:07 pm

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

February 2, 2013 4:09 pm

“Knowledge and experience mean nothing to the ocean. After a life at sea, if I put one foot wrong, I get just as wet as the landlubber falling off the dock”
But after a life at sea, you are surely a lot less likely to put a foot wrong than a landlubber is.

February 2, 2013 4:09 pm

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

anarchist hate machine
February 2, 2013 4:10 pm

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

February 2, 2013 4:19 pm

Oil produced from vertical wells is defined as “conventional oil”, but oil produced by rotating the drill 90 degrees (horizontal wells) is something other than conventional oil. Engineers have a term for a 90 degree rotation, which is multiplying by the square root of negative one. Now mathematicians refer to this as “imaginary” components, but engineers prefer the term “complex” component. It looks like any petroleum product gathered from horizontal drilling is either “imaginary” or “complex”. If this is the case, imaginary petroleum when burned makes imaginary CO2 and leads to imaginary global warming. Or if the petroleum is “complex” it leads to complex global warming.
It is fairly easy to postulate that the environmentalists will never be a party to “imaginary” global warming. Noting that the warmists explanations of the mechanism for global warming are so complex no human can understand them now, they will not promote any further addition of complex terms. So the Global Climate Change Alarmists will simply call all petroleum products “dirty oil”.

Claude Harvey
February 2, 2013 4:21 pm

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

D D Leone
February 2, 2013 4:23 pm

So there’s life around an oil puddle after all…

F. Ross
February 2, 2013 4:23 pm

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

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

February 2, 2013 4:27 pm

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

February 2, 2013 4:32 pm

Willis writes “I actually look at the data before making my claims.”
And what do you see there Willis? Are you splitting hairs about whether peak is actually 96 million barrels or 97 million barrels per day?
Peak oil is not about and has never been about reserves or technology. Its about peak production and so if you look at the larger picture, the 60s and 70s saw massive growth in the West supported by huge increases in oil usage. The last 20 years has seen massive growth in the East unsupported by the same oil production increases. And what has happened? Prices are increasing faster now and oil usage efficiencies are increasing to compensate both from a “forced” reduced usage per increase in growth and increased production cost points of view.
We may not be precisely at peak oil and we may even flatline or even slightly increase for a while but we’re not going to get large increases like we did in the 60s and 70s and instead we’re going to be doing all we can to keep our heads above water as the conventional sources continue to slow their production rates.
And yes, the data does support that at the moment.

Craig Moore
February 2, 2013 4:32 pm
February 2, 2013 4:36 pm

Wasn’t the first fracked well in the USA in 1947 or some such? I make that about 66 years…
If you allow for using explosives instead of hydraulics, I think it goes back to about the Civil War…
Oh,and on Hubbert being “right” in N. America: It is worth pointing out that it is largely due to putting off limits giant tracks of land on all 4 coasts ( Pacific, Arctic, Atlantic, Gulf) and a giant chunk of oil land in Alaska ( the “Naval Reserve”).
Then there is that well in the Gulf of Mexico that keep filling back up from somewhere lower down… and the one where Standard Oil found oil at depths that were theoretically too deep and too hot. Yet the oil is there.
@Ted W:
We can make oil. Take CO2, add Hydrogen (often from water) and heat. You can reduce the heat needed with various catalysts (some are Iron based, others us Nickle or Chrome or various mixes; there are even rock based types – Zeolyte) You get various mixes of gasoline, kerosene, Diesel, heavy oils.
Now picture subducting sea floor (say, off California) taking a load of sea bottom mud (with water) and loads of carbonate rock to great depths (magma heated depths). We know what chemical reactions can happen. We admit that in the extreme case it releases the CO2 (why do you think volcanoes behind subduction zones get CO2 vents?) It all “works”.
Yet we staunchly assert that the oil and gas found in the California fields in front of the volcanoes are due to dead critters and not a product of the subducting goo prior to getting fully vaporized.
Now look where lots of oil is found. Tends to be near subduction zones or old plate impact zones. No, not all cases; just a lot of them…
IMHO oil comes from two places. Fermented algae (such as North Sea oil deposits) and subjection / collision of plates (such as California / Saudi). Otherwise California oil doesn’t make much sense. Much of California was only lifted out of the sea recently in geologic terms. It was ‘ocean bottom scrapings’ and not a lot of time for sediment trapping and kerogen breakdown…
So ‘conventional’ theory says dead stuff gets hauled down under rocks and slowly baked to make kerogene then cooked some more to make oil. Too far down it is destroyed, to far up it doesn’t become oil and stays “bitumen sands”. This ignores that wet carbonate rock sucked down to heat and pressure ought to cook out oil…. And when we look around the solar system we find complex hydrocarbons all over the place. No dead animals there….
IMHO the “dead animals” theory only accounts for a minor part of the oil.
Oh, it is also worth a mention that oil was recently found on the ocean bottom near mid ocean ridges. Loads of it. The stuff is everywhere…
Oh, and on the “Energy return for energy invested” argument (that inevitably comes up):
One can use very cheap nuclear electricity to raise oil due to the FORM being worth more. We want liquid fuels. If the oil source is cheap than making synthetic from scratch, we will still pump the oil and refine it. (So, for example, if it took 60 kW-hrs to make a unit of synthetic oil but I could raise that oil with 50 kW-hrs it would still be pumped. Even if the energy in that final product were only 40 kW-hr (presuming that 10 kW-hrs is lost in trying to charge / discharge e-car batteries or that I want plastics…) The end result would just be building more nukes so I could put that energy in my gas tank in a convenient form. (This is happening today with the use of Natural Gas to create ‘unconventional oil’ from tar sands. The oil form is worth more than the gas form.)
We can already turn coal and nuclear process heat into ‘oil’ if desired. Make synthesis gas from coal (or trash or chicken feathers) and use nuclear heat to F-T process it into oils and gasoline.
So we will never run out of oil. We will just get it from ever more interesting places. Including our own garbage. (Being done today, BTW.)

February 2, 2013 4:37 pm

Here is something on the history of conventional / unconventional [delete as necessary] small / big oil.
Bitumen and Petroleum in Antiquity
Brill Archive, 1955 – 194 pages

Greg House
February 2, 2013 4:47 pm

Guest Post by Willis Eschenbach: “Few people want to hear that tomorrow will be OK, that things will work out. Instead, most folks want to hear some terrible story about what tomorrow holds, whether it’s peak oil or climate meltdown or the coming ice age.”
Willis, how do you know that about “most folks”? Any scientific evidence?
Is is not that some people invent lies and spread them around as scientific facts and others simply believe the “experts”?

February 2, 2013 4:48 pm

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

February 2, 2013 4:53 pm

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

February 2, 2013 4:53 pm

This is a wierd post. Chief stirrer Willis, while delightfully eloquent as always, is chucking in a few straw men and red herrings to make his point : Peak Oil is a “terrible story”, oil is “running out”, peak oil folks think Hubbert was totally correct, “Peak Oil” relies on “unconventional” oil being different to “conventional” oil, huge/massive amounts of coal, gas and methane hydrates prove we’re not at peak oil, etc.
Peak Oil means Peak Oil. That is, the point at which annual oil production, for whatever reason, ceases to increase. When you get to Peak Oil, you haven’t run out of oil. You still have lots of oil. All it means is that you can’t or won’t produce oil at a faster rate than before.
If energy demand keeps increasing – and I certainly hope that in the free world at least it does – and if oil gets more costly and/or difficult to produce (which it is), then other forms of energy will become more competitive. If lots of energy is available from other sources (which it is) then increasing energy demand will at some point all be satisfied from energy sources other than oil. If the changes are smooth, it’s a non-event. But it’s still Peak Oil.
IMHO, we have reached or are about to reach that point. Have we run out of oil? No. Are we on the brink of disaster? No. The USA hit its own Peak Oil in 1970, one of the two dates predicted by Hubbert. Now Hubbert seriously underestimated the amount of oil that would be found in the US, he seriously overestimated the rate of decline following the peak, but by luck or judgement he got the date right. Did the US run out of oil? No. Was it a disaster? No. What happened was that the US satisfied its rising energy demands from other sources. Those other sources, then, included non-US oil. But it was still the US’s Peak Oil.
OK, maybe it isn’t the US’s Peak Oil yet. Maybe all the new oil finds will allow US oil production to exceed the 1970 figure. To do that, US annual oil production has to rise 44% from the 2011 level. You see, even though Hubbert got his supply figures badly wrong, US annual oil production has fallen quite a long way since 1970. Will it go up 45% and stay up there for a few years? Maybe, but I wouldn’t bet on it. My guess is that to achieve that figure the oil price would have to rise so that the increased oil production is economic, and it would have to fall so that oil remains competitive with alternatives.
I would be happy to be proved wrong, but it looks to me like 1970 was the US’s Peak Oil, and the world’s Peak Oil might not be all that far away.

View from the Solent
February 2, 2013 4:57 pm

It is rare to find a practising scientist who is proficient, let alone poetic, in their expression. Perhaps it is a function of age. But then I am an old curmudgeon become mathist who was fortunate to have been educated (in England) when my science subject teachers would criticise the writing as well as the technical content of my work. Reading your articles is always a joy. Thank you.
Back to the subject in hand. I only properly understood the fallacy of peak [insert current doom here] when I read (ignore scary warning). Written by a horny-handed* mining engineer. Simple and easy to understand. I’ve yet to see a better description.
* I hope this doesn’t mis-translate in Amerenglish. On the right side of the water there is an expression ‘horny-handed son of the soil’, meaning someone whose hands are hardened and calloused from a lifetime of working the land. I believe that horny might be misinterpreted beyond ~70 degreesW

February 2, 2013 4:58 pm

Willis, Hemingway I say. Only better.

February 2, 2013 4:59 pm

It isn’t a ‘peak’ until the production curve is lower on the right side than to the left. So far the right side is still higher.
BTW, whenever that day comes, there are a dozen good ways to make “oil products” without oil. Rentech RTK is doing it today commercially as is Sasol in South Africa. Sasol is using coal, but Rentech is using trash. I don’t think we are in danger of running out of trash any time soon.
One could also use wood ( we can produce it at about 25 dry ton / acre – Eucalyptus in Florida have done that as IIRC has Hybrid Poplar) and other carbon sinks; but first we have to use up Old Trash Mountain….
Even if we had declining production of oil starting today, there would not be a crisis. We would just need to start building synfuels plants.
Those are not the only two companies, BTW, there’s a dozen or so others. Just waiting for the day oil prices stay high for a while. ( The real problem is that OPEC crashes price and puts folks out of business whenever someone starts producing in quantity. You will know “peak oil” really arrived when they can no longer do that and synthetic oil is a growing commodity.)

February 2, 2013 5:01 pm

Willis writes “Tim, are you seriously looking at that chart and claiming that oil production peaked in 2004 like Ed_B claims?”
No. I’m saying production has levelled out. Especially when you take continued growth, especially in the East into account. The actual peak obviously wasn’t 2004. Why would you suggest I would think that? Are you making another strawman argument from another poster’s comment and applying it to my post?

February 2, 2013 5:02 pm

Peak oil is not about and has never been about reserves or technology. Its about peak production and so if you look at the larger picture, the 60s and 70s saw massive growth in the West supported by huge increases in oil usage….The last 20 years has seen massive growth in the East unsupported by the same oil production increases. And what has happened?
Production is determined by price and demand as well as capacity (both upstream and downstream). OPEC have a duty to themselves and their customers. They cannot change capacity Willy-Nilly else they destabilise their own economies. Therefore, there will be times that demand exceeds output, while others when demand does not. This is reflected in the oil price and there’s typically a lag between both when prices generally plateau. Remember prior to the 1970s crisis the West basically determined capacity. Post 1970 that changed. So it is hardly surprising that OPEC acts in self-interest if they don’t up supply they can cause a global recession (demand drops and they lose trade) they increase supply to quickly they do themselves out of pocket. They play balancing game. Essentially your point is wrong.

February 2, 2013 5:04 pm

E.M.Smith says:
“IMHO oil comes from two places. Fermented algae (such as North Sea oil deposits) and subjection / collision of plates (such as California / Saudi). Otherwise California oil doesn’t make much sense. Much of California was only lifted out of the sea recently in geologic terms. It was ‘ocean bottom scrapings’ and not a lot of time for sediment trapping and kerogen breakdown…”
I knew it would not take long for the abiotic crowd to clog up this fine post. All this horizontal fractured shale is proving once more that oil comes from organic rich source rocks. If California oil makes no sense to you you might google “source rocks California”, and start by reading this:
The Monterey has long been recognized as a rich source rock, and a fair bit of work is going into producing directly from it.

William Astley
February 2, 2013 5:05 pm

Conventional wisdom is scientifically incorrect. I have researched this subject in depth and can continue to provide additional information and logic, until ever one acknowledges conventional wisdom is incorrect. For example I found, a very interesting set of papers published in the 1970’s by the API (American Petroleum Institute) on the formation of oil. (A better title of the collection of papers would be “the unexplained problems with the conventional formation of oil from plants and marine animals”, rather than “the formation of oil”). An example of the unanswered problems in the collection is how to explain the finding of massive oil reserves at the continental shelf. What is the source of the hydrocarbons? Marine environments are very efficient. There is very little plant or animal residue that is deposited on the ocean’s surface. A second primary issue is pressure does not convert long chain plant or animal hydrocarbons to short chain light oil molecules.
The solution proposed in the API paper has the word “time” in quotations, however chemical reactions from a lower to a higher state do not proceed as water does not flow uphill regardless of the amount of time that passes. A chemical reaction that does not take place is at the conditions where the oil is found is a show stopper for the biological source hypothesis.
A third is why are there heavy elements in the oil? Think of the competing hypothesis for the formation of oil where the hydrocarbon comes from deep in the earth and hence picks up the sulfur and heavy metals as it migrates through the crust. The deep earth hypothesis and migrations explains why unconnected oil fields across vast geological regions have similar amounts of heavy metals and sulfur.
Raise the question to a higher level. What is source of hydrocarbons on this planet’s surface? Roughly 70% of the earth’s surface is covered by water. Where and when did that water come from? As almost no one is aware the solar wind strips water from the atmosphere. If there was no new source of hydrogen this planet would be dry and lifeless.
There are a number of commercial changes concerning the amount of oil and gas in recent years.
For those who have not noticed, for example, Canada is now constructing a LNG (Liquefied natural gas) export terminal at its West Coast to export natural gas. A few years ago Canada was planning to construct a port at the same location on its West coast to import LNG. What has changed? The discovery of massive reserves of deep earth CH4. North America suddenly has a massive surplus of “natural gas”. Why? Russian natural gas reserves are now the largest in the world. Why? The Russians have perfected deep earth drillin techniques. Why? What is the standard theory for the formation of “natural gas” CH4 and oil in Russia and the old east block countries?
Saudi Arabia has 25% of the planet’s oil reserves half of which is contained in only eight fields. Half of Saudi Arabia production comes from a single field the Ghawar. Again why?
As most are aware a large mars sized object struck the earth roughly 500 million years after the formation of the solar system. The impact formed the moon and stripped the planet’s mantel of most of the volatile lighter elements. As 70% of the planet’s surface is covered by water a natural question to ask is: Where did the water come from, as the earth’s mantle contains almost no water or hydro carbon?
There are two theories to explain how water and hydrocarbons came onto the earth: the late veneer theory and the deep CH4 theory. The late veneer theory hypothesis: Comets struck the early earth after the big splat event covering the very hot earth with hydrocarbons. The late veneer hypothesis requires that the earth had a Venus like atmosphere (atmospheric pressure of say 60 atmospheres) for the early earth, except with methane.
There are multiple problems with that hypothesis (See Thomas Gold’s Book Deep Hot Biosphere for details. One of the key problems is the observation that the percentage of heavy gaseous elements in the earth’s current atmosphere does not match that of comets (Comets are residues of the early solar systems. The comet elemental composition does match that of the sun). The late veneer theory’s explanation for the miss match of isotopes in the earth’s atmosphere to that of comets is that the early solar system had a close encounter with another solar system which temporary provided a limited source of comets to cover the earth but not significantly change the element composition of the sun.
The second hypothesis is the deep earth hydrocarbon theory. This theory hypothesizes that massive amounts of hydrocarbons (5% of the total core mass) are located in the earth’s core. As the core cools these hydrocarbon (CH4) are released. At very high pressures the CH4 forms longer chain molecules.
The release of CH4 is still occurring as the upper surface of the ocean is saturated with CH4 which indicates that CH4 is being released from some source.
See Carnegie Institute of Sciences Deep Carbon Workshop presentations if you interested in this subject.

February 2, 2013 5:09 pm

Those who seek to justify the peak oil meme in terms of rising oil prices are missing the point. Firstly, the real cost of oil on world markets has not risen in the same way as US prices have. The steady weakening of the purchasing power of the $US over a long period has made imported oil more expensive for Americans, but less expensive for some other countries. Further, changes in the world oil price have little to do with availability, and a great deal to do with political instability in all sorts of places – the Middle East, Venezuela and Iran/Iraq for example.
For an excellent potted history of world oil prices and their effect on the US, see:
As the article points out, US oil exploration for anything but the easiest fields was discouraged until 1971, when domestic price controls were lifted. Previously, US companies had to supply the domestic market at below world prices. It was unlucky timing for the oil industry too – just as they gained incentives to look beyond the easiest pickings, the environmental movement took off.
Another consideration is that we in the West are far wealthier than people were in the days of very cheap oil, and drive much more fuel efficient cars. So, even though the graphs of rising prices look dramatic, most people can afford the same or a better lifestyle without making sacrifices. Indeed, not only are our cars more efficient, they have dozens of features which only limousines might have had 50 years ago, if they existed at all. Nor is there any evidence that rises in the cost of petrochemicals have had any appreciable impact on us, for similar reasons.
As others have pointed out, peak oil is a chimera designed to scare us into subsidising certain people’s pet projects, and is in any event irrelevant as the planet is awash with other kinds of hydrocarbons.
Oh, and nice Kipling reference, Willis.

February 2, 2013 5:11 pm

I sometimes wonder if a certain crowd of Big-and-Powerful people planned on “Peak Oil” happening, thinking it was a reality, and decided to use up the rest of the world’s oil first, thus eventually putting the USA in a position of great power, “The One Nation With Oil Left.” In order to achieve this end they needed to manipulate data and make it unprofitable to produce domestic oil. Now, after all that work, they are very old (or dead,) and discover the Peak Oil premise was incorrect in the first place. Oops.
An interesting tidbit of history to look at is the history of the Suez Crisis in 1956. It was a sort of make-or-break moment for the Brittish Empire, and the USA messed up their plans by stating we wouldn’t export any more oil to England if they didn’t calm down. (We were an exporter at that time.) Yet England’s involvement in the Middle East was all about oil, and energy. (It was originally energy in the form of coal, (and knowing how to use it,) that helped make England a world power in the first place.)
Energy is important to the bigwigs who think they, and not the Power that made and rules the sea, are boss.

February 2, 2013 5:12 pm

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

Peter Crawford
February 2, 2013 5:13 pm

I must go down to the sea again
To the lonely sea and the sky
I left some socks and panties there
I wonder if they’re dry.
William Shakespeare (or maybe not).

February 2, 2013 5:22 pm

cd writes “if they don’t up supply they can cause a global recession (demand drops and they lose trade) they increase supply to quickly they do themselves out of pocket.”
Perhaps you haven’t been keeping up with current events because we’ve just gone (going) through a global recession and they haven’t increased supply to decrease prices to help get the economies back into gear and consequently sell more oil and increase profits.
You make it sound like OPEC is willingly letting the world economies wither with the high prices they’re setting for their own benefit. Thats a pretty negative view of them.
A much simpler view and one supported by peak oil theory is that their ability to increase production has diminished and the market forces have driven the prices up. That and the fact that non-conventional oil is simply more expensive to produce.

Jeff L
February 2, 2013 5:23 pm

William H says:
February 2, 2013 at 3:33 pm
” A $20 barrel of oil in 1970, using normal inflation figures, is equivalent to approx $125 today. Brent is currently at $116, so even ‘peak cheap oil’ is not a reality, never mind peak oil.”
Look at the following link :
The prices of the 70’s were an anomaly driven by politics (you might recall the Middle East Oil embargoes; yet another variable not contemplated by Hubbert). Other than than that, inflation adjusted oil hovered in the $20-30/bbl range from the 40’s to the end of the 90s – for over 50 years. These were Hubbert’s years, but not out years – our real price now is much more expensive than than that 50 year period. And that is the economic incentive that was needed to move off & “re-set ” the curve. I’ll stick with my original premise that Hubbert implicitly assumed constant prices & technology, which was basically true during his time, but not true for our time, thus the theory fails today.

February 2, 2013 5:29 pm

Willis wrote “We have produced more oil than we did in 2004 every single year since then except 2009”
In response to my post which said “We may not be precisely at peak oil and we may even flatline or even slightly increase for a while but we’re not going to get large increases like we did in the 60s and 70s and instead we’re going to be doing all we can to keep our heads above water as the conventional sources continue to slow their production rates.”
I’m beginning to see a pattern with Willis’ replies. He doesn’t even read the post he’s replying to.

Jeff L
February 2, 2013 5:34 pm

greymouser70 says:
February 2, 2013 at 4:53 pm
“Willis: I realize you are probably using the terms “conventional oil” and “unconventional oil” facetiously but to a geologist those terms have very specific meanings.”
This is an important point for the non-geoscientist to understand.
Peak Oil alarmists DID NOT invent these terms – conventional & unconventional – they stole & politicized these terms from geoscientists & engineers who were trying to describe what they were doing – for the benefit of management, investors, etc. You have understand that the very rocks we are now considering to be reservoirs used to be considered seal rock – and completely unproductive …. and un-economic :)) A new vocabulary had to be developed so decision makers could understand what their technical teams were proposing to do, thus the terms conventional & unconventional.

February 2, 2013 5:36 pm

Gee… Didn’t know I constituted a “crowd”.
As per “clogging”: There is much evidence for SOME abiotic oil. Please note I am not saying ALL oil. As pretty much every primitive body in the solar system as “abiotic oil” on it, I find it completely untenable that the Earth would be the only exception.
So yes, I think there is abiotic oil. I also know there is biotic oil. BOTH exist. Arguing over how much of each might be interesting. Listening to someone snap their mind tight shut and toss invective is far less so.
As talking with folks who are mind-blind and mind-deaf is hard, I’ll not bother pointing out the various things wrong with the biotic theory of oil origination for ALL oil. (And there are many loose ends…) But I would suggest just looking at some places where oil is found, yet can hardly be explained by biological traps.
Then there is that well in the Gulf of Mexico that keep refilling from further down, and with oil with far fewer biological markers…
Oh, and do tell where the oil on Triton comes from?
Tholin [after the ancient Greek word θολός (tholós) meaning “not clear”] is a heteropolymer molecule formed by solar ultraviolet irradiation of simple organic compounds such as methane or ethane. Tholins do not form naturally on modern-day Earth, but are found in great abundance on the surface of icy bodies in the outer solar system. They usually have a reddish-brown appearance.
Tholins have also been detected in the stellar system of an eight-million-year-old star known as HR 4796A using the Near-Infrared Camera and Multi-Object Spectrometer (NICMOS) aboard the Hubble Space Telescope. HR 4796A is 220 light years from Earth.
“Triton tholin” and “Titan tholin” are nitrogen-rich organic substances produced by the irradiation of gaseous mixtures of nitrogen and methane such as that found in those moons’ atmospheres; Triton’s atmosphere is 99.9% nitrogen and 0.1% methane and Titan’s atmosphere is 98.4% nitrogen and the remaining 1.6% composed of methane and trace amounts of other gases. These atmospherically derived substances are distinct from “ice tholin”, which is formed by irradiation of clathrates of water and organic compounds such as methane or ethane. The plutino Ixion is also high in this compound.

Since our oxygen rich air is relatively new in geological terms, we had a very long time with a reducing atmosphere where just such things ought to have happened.
And loads of carbonate rich wet suducting goo to cook into hydrocarbons too.
Somehow all the Peak Oilers seem to think carbon chemistry stopped with the advent of life.

February 2, 2013 5:39 pm

Peter Crawford, close, but no cigar.
I must go down to the sea again
To the lonely sea and the sky
I left my vest and socks there;
I wonder if they’re dry?
– Spike Milligan
He hated Masefield’s poem, which every schoolchild of his generation had to learn by heart.

Gary Murphy
February 2, 2013 5:39 pm

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

February 2, 2013 5:40 pm

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

February 2, 2013 5:46 pm

E.M Smith writes “It isn’t a ‘peak’ until the production curve is lower on the right side than to the left. So far the right side is still higher.”
I have never said we’re at peak although we might be getting close. Certainly the data supports that hypothesis with the recent flattening of production in spite of continued growth in the East. The Hubbert curve has a slowing before the actual peak. That slowing will have its own set of impacts and will involve rising prices.
At the end of the day I’d love to be wrong and will be more than happy if production can be maintained and increased and the price at the pump remains affordable.

Paul Watkinson
February 2, 2013 5:54 pm

Willis, great post as usual thanks.
Unimportant typo where you ask the question “so why isn’t their unconventional coal?”. Should read “so why isn’t there unconventional coal?”
Regards Paul Watkinson.
[Thanks, fixed, perfect is good enough … -w.]

February 2, 2013 5:57 pm

“If you disagree with something I said, quote it and tell me why I’m wrong.”
I didn’t say you were wrong just that you don’t present peak oil arguments well. They don’t go around shouting about an impending apocalypse, they say that we won’t produce any more ‘conventional’ oil than we do now. As you point out all this means is that people move to alternative energy sources (or unconventional oil as you describe it.) You just group all the different energy sources together, and there is no problem with that.
It’s easiest just to think as ‘Peak Oil’ as only conventional oil though as you point out different sources of energy can be converted to the same thing or equivalent.

February 2, 2013 6:06 pm

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

Zombies. And vampires. And aliens from space. At least according to Hollywood.
In the good old days, the future was going to be wonderful. I guess that didn’t work out.
The real question is which comes first: collapse of our civilization or we run out of oil. I’m guessing we’ve passed peak civility. There may be another higher peak later, but right now we are on a slide.

February 2, 2013 6:08 pm

greymouser70 had it about right about conventional/unconventional oil. There needs to be another thing noted about it. The primary value of crude oil lies in its use as a transportation fuel. It is a common practice, but highly misleading, to add natural gas liquids to the “oil production” numbers. Ordinary crude oil and condensates are transportation fuels. Natural gas liquids are not. With that distinction, world crude plus condensate production was stuck at about 74 million barrels per day 2005-2011 while prices doubled. It is now up to about 76 million barrels per day, due primarily to recent increases in Iraq, Russia and the U.S. Production should continue to increase in the U.S. for another three or four years, but that does not necessarily mean that the world oil production rate will increase because production from older conventional fields is generally declining. All of the pie in the sky baloney about the U.S. becoming self sufficient in transportation fuels is just that – baloney. Expectations of lower prices are also baloney. Prices are set by the marginal barrels on the market. Those come from unconventional sources that are uneconomical to produce at lower prices. We may or may not be on the verge of peak oil, but we have probably passed “peak cheap oil”.
One last item of interest is that production from wells in the Bakken, Eagle Ford and other shales and from “tight” formations tends to decline very rapidly. If the drilling of new wells ever slows down, there will be an immediately felt decrease in overall production rate. This is very different from the circumstances at the time the world’s old giant oil fields were developed. Call it a “Red Queen Effect”, where you have to run as fast as you can to stay in the same place.

February 2, 2013 6:13 pm

Meh… Whatever. I busy raising my BAC so I can survive another trip to the wonderful KSA.

February 2, 2013 6:15 pm

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

‘Peak oil’ doomsayers fall silent as reserves grow ever larger | 11/04/07 | NEIL REYNOLDS
[Original URL:
OTTAWA — You will have noticed the marked decline these days in the number of “peak oil” people making cataclysmic pronouncements. Global oil production set records throughout 2006 — for all-time highest production day, month, quarter and year. For the single-year record, production reached 31.3 Gb (billion barrels), an average of 85.2 million barrels a day. Affirming the trend, production set a new global single-day record before the end of January, 2007.
Along with record-setting production came record-setting increases in reserves — moving “peak oil” deeper into the century and ultimately beyond.
The “peak oil” hypothesis, relentlessly propounded for decades, holds that the world has passed (or will momentarily pass) the highest point it can ever reach in oil production — at the halfway mark in the depletion of global oil resources. It holds that this imminent peak necessarily marks the start of an irreversible decline in production. It holds, in other words, that the end of oil is nigh. The principal problem is that the hypothesis is demonstrably wrong — and is vigorously proven wrong year after year.
In 1979, the “life-index” of global oil reserves was calculated as 35 years — suggesting, superficially, that known oil reserves could support the current level of production only through 2007. In 2003, after decades of accelerated production, this index had risen to 40 years. It has now risen further to 45 years — moving us safely through mid-century. Indeed, the record-setting oil production last year marked the umpteenth consecutive year that “peak oil” theorists have found it necessary once again to run the numbers and once again to postpone the end time of oil.
It was in 1989 that Colin Campbell, the prominent Irish champion of “peak oil,” proclaimed that the global peak had already occurred — a declaration he found it expedient, almost immediately, to amend; “peak oil,” he said, would instead occur in 1995. He now opts for 2010. Yet global oil production, since 1989, has risen by 20 per cent (13.8 million barrels a day), global oil supply by 28 per cent (18.9 million barrels a day).
The production records set last year were significant for a number of other “peak oil” prophets, including Marion King Hubbert himself, the American geophysicist who devised “peak oil” analysis in the mid- fifties and who accurately predicted that U.S. oil production would peak in 1979. In 1956, he determined that global oil would peak “in about 50 years” — in other words, 2006. At the pinnacle, he said, the world would consume 12 Gb of oil a year.
In 2004, Mr. Campbell increased this number, almost doubling it, to 23 Gb. For his part, Texas oilman T. Boone Pickens has held that oil would peak at 30 Gb — a level exceeded last year.
Yet the world’s most comprehensive measure of oil resources keeps right on growing — higher, yes, but at a faster pace as well. TrendLines, the Canadian statistical research company, confirms this assertion in its February report on URR — “ultimate recoverable reserves.” In an analysis of optimum reserves, TrendLines concludes that the world’s URR is now increasing, depending on the period you select for comparison, at twice or thrice its historical pace. From 1957 through 2006, it says, URR grew at an average annual rate of 2.4 per cent.
From 1979, it grew at an average annual rate of 4.2 per cent. From 2000, it grew at an average annual rate of 6 per cent. “Peak oil” prophet Mr. Campbell, TrendLines says, has underestimated the actual rise in URR by tenfold.

In 2000, the U.S. Geological Service (USGS) calculated that global URR would increase by 2.4 per cent a year for the foreseeable future — rising from 1,669 billion barrels in 1995 to 3,345 billion barrels in 2025. (A billion barrels — one Gb — is roughly the amount of oil that the U.S. keeps in its Strategic Petroleum Reserve.) “Peak oil” proponents dismissed the USGS analysis as impossibly optimistic. As with all apocalyptic manifestations, peaks must necessarily be imminent. Yet the forecast has proven significantly understated.
Driven by smart technology, global URR now increases each year at unprecedented rates. It has now (December, 2006) reached 3,288 Gb, not far off the USGS calculation for 2025. It increased last year by 114 Gb, compared with a historical annual average increase of 47 Gb. Sustained at this rate for another 20 years, the world’s ultimately recoverable oil could increase by another two-thirds to 5,568 Gb, or three times the resource when “peak oil” proclamations began. Assuming consumption of 30 Gb a year, this URR could sustain production for something approaching 200 years. Once again, the end is not nigh.

February 2, 2013 6:15 pm

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

February 2, 2013 6:16 pm

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

February 2, 2013 6:17 pm

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

February 2, 2013 6:27 pm

Is the fact that oil might be abiotic verboten on this thread?
NPR interview with Dr. J.F. Kenney:
The Earth and Atmospheric Sciences Dept. University of Alberta (Edmonton) October, 2012
“Organic Carbon on Mar is Abiotic”

February 2, 2013 6:32 pm

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

February 2, 2013 6:43 pm

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

February 2, 2013 6:44 pm

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

February 2, 2013 6:45 pm

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

John F. Hultquist
February 2, 2013 6:55 pm

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

February 2, 2013 7:00 pm

Willis – re your reply to me
You say “you think that saying that peak oil is a “terrible story” is somehow a straw man.
Peak oil has been beaten to death by the environmental movement in order to try to raise the price of oil and discourage people from using it. That is not a straw man, it is the environmentalists pushing a tale of future gloom and doom to advance their own interests.
So, it’s not a part of the sane scientific “Peak Oil” discussion, it’s a beat-up by environmentalists trying to turn a sober subject into a scare-mongering campaign. That makes it a straw man in the sane scientific “Peak Oil” discussion.
You say “And I assure you that I do [know what peak oil is] [it means] peak production rate“. And you say “If you have a substantial point in there, Mike, I’m sorry but I couldn’t find it. Maybe if you boil it down to the essence and try again.“.
OK. I didn’t think it was all that hard to find in what I said:
Peak Oil is the point at which annual oil production, for whatever reason, ceases to increase.
1970 was the US’s Peak Oil. US oil production peaked in 1970 at a level 44% above the 2011 level.
Peak Oil occurs when energy demand increases are all satisfied from energy sources other than oil. [NB. Wording change. My original wording was poor.]
The world’s Peak Oil might not be all that far away, because rising oil prices are making alternatives to oil (coal, gas, etc) more competitive. [That wasn’t stated in those exact words but it was stated, as in “IMHO, we have reached or are about to reach that point” where “that point” obviously referred to the previous sentence.]
In other words:
We are at or near the world’s Peak Oil.
It should be a non-event. But it’s still Peak Oil.

February 2, 2013 7:03 pm

It was obvious to me that peak oil meant higher prices. That is how I made my investments work. I simply bought cheap oil and waited. The biggest risk that I feared was that the USA was going to put in place a giant fuel tax to slow demand growth. In those years(1999 to 2004) I used to watch in amazement as 19 year old kids would go get a hamburger in a giant 4 X 4 , leave the windows open, AC on,and munch away. Life was too good. Oil was being wasted. I projected that the USA would have to reduce consumption to 15 million bbls a day by 2015 for the world to be adequately supplied. Adequately means at a price that was affordable. I figured that price was under $200 a bbl. It turns out I was wrong. The economy ran out of gas at $150 a bbl. The 15 million per day is being gradually approached though, as we dropped from 21 mm down to 19 or so. Fuel switching is growing quickly though, so when more trucks are using NG we will get to 15 mm per day.
The Hubbert curve is working. We have had a long plateau of conventional production at about 73 million bbls a day. Yes, we have NG liquids and unconventional boosting it to 90 mm, but that does not undermine Hubbert. My proof is that Shell just reported spending 25 % more and conventional production is shrinking slightly. To me that spells big trouble. They are spending more and getting less. Hubbert pointed out that the conventional elephant plays were disappearing.
Willis, i really like your work on your thermostat hypothesis though. That to me rates right up there with Hubberts work, different field for sure.

February 2, 2013 7:04 pm

Mosher writes “I find it funny when some people demand to be quoted exactly, but they turn around and refuse to offer the same to others. just weird.”
Thanks Steve. I think Willis has it in for me following some of our heated discussions on other topics. On the whole, I love his work but he is a difficult man to debate with objectively.

February 2, 2013 7:33 pm

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

I can’t believe you made me read that whole post, only to finish up with this:
“It should be a non-event. But it’s still Peak Oil.”
Take you pick, non-event/peak.
You can’t call it both ways, ask any bookie.

February 2, 2013 7:56 pm

Kipling is not much read these days, and almost never outside the UK and former colonies. So, for the benefit of readers, the reference I mentioned was from his famous poem “If”:
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
[Thanks, Johanna. Ah, yes, I remember now, I did toss that into the post, you were good to pick it up … -w.]

February 2, 2013 7:58 pm

Willis writes “So what are you doing stepping in in favor of Ed’s claim that the peak was in 2004?”
Where did I step in to support Ed’s claim of peak oil happening in 2004? Please quote me to support that accusation.
I posted in response to the graph you posted and very explicitly stated that we production may increase slowly for a while yet. Hubbert’s graph has a rapidly increasing part (we’ve seen that) and a flattening (the data shows production flattening despite drivers that ought to have shown more increase IMO) followed by a downwards part.

Grey Lensman
February 2, 2013 7:59 pm

Possibly the greatest post ever by Willis.
Nails peak Oil, Catastrophic Man Made Globull Warming and Mass Bed wetting in one single clean shot.
For about the last 60 years, we have suffered peak Oil every passing day.. Its a global business that depends upon balancing demand and supply, and the folks that do it are pretty smart. Its a natural state, bit like sun rise.
The bed wetters wail about the PRICE, ignoring that it is fake, produced in a fake non deliverable, fake market. Then cooked with taxes ( LOL subsidies for Watermelons) and political actions.
Fact is as time progresses, we find more and more ways not to find oil but to mix it blend it, alter it. Just look at the transport liquids mix available now. Gasoline, Ethanol, LPG, CNG, Methane and GTL fuels.
I believe, the Chinese started producing oil by drilling about 2,000 years ago.
As they explore more, they find areas of sea floor covered in oil, and also covered in stuff feeding on it. A vital part of the global food chain.

Grey Lensman
February 2, 2013 8:08 pm

The above report states ” All this comes with a hefty price tag – $10bn (£5bn)”
Crunch the numbers.
Cost of production about USD 1.00 per barrel, yes USD 1.00
Now at the price of oil, when this field was launched, the development cost was recovered in full in 46 days, yes 46 days. Work out what that does to the real cost of production
Peak Oil

February 2, 2013 8:08 pm

Wow. It’s interesting how Willis posts graphs of the data and certain people completely miss those graphs. It is a big thread though. Still, there is no peak oil at the moment, and production is not flattening out. The rate of change is pretty much steady, if one takes an ordinary differential.
None the less, peak oil is a ridiculous, short sighted topic for the most part. Mostly due to the fact that oil production is driven by oil -demand-, just as with any other commodity. The real question to ask is when will we hit peak oil -demand-, as only then will we hit peak oil production as companies scale back rates to keep track with a lowered demand.
That’s what drives production, that’s what drives the system; demand.
So, start looking at those rates and asking those questions. We aren’t going to hit peak oil due to a peak in our ability to pull from reserves, or our reserves running out, or anything like that any time in the rational future. But we may well hit peak oil -demand- within a reasonable amount of time.
And that is really what the discussion is about, as that is really the limiting factor.

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

International acceptance of “Unconventional Oil”
What is the point of disagreeing with international terminology in the oil industry?
The International Energy Agency (IEA) 2012 distinguishes “tight oil” and “other unconventional oil” from “crude oil”.
International recognition of Peak Oil
The International Energy Agency (IEA) 2012 now admits historical global oil production facts and geological constraints by showing that global crude oil peaked in 2005 and will continue declining in the forseeable future.
Multi-Hubbert modeling provides the best way to understand oil production.
See my further comments.
Your climate posts are interesting. Recommend you concentrate on those.

February 2, 2013 8:16 pm

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

February 2, 2013 8:16 pm

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

February 2, 2013 8:17 pm

I think one of the deals with nonconventional oil is to calculate the amt of energy you spend to produce it total, from the ground to the pump. Wilis, I bet you could make that graph for us, it would be be useful in this discussion. For example, I could imagine that there might be a time when that value becomes negative, in which case oil “peaks” wont make much sense anymore…except for airplanes and motor trips to the South pole.
The other trouble with oil peaks is that they are small in comparison to the coming “cars” peak as Indians and Chinese increase their use of autos to a double digit percentage of what we do in the states. Once there are several cars for every vatara, they will use more oil than we do.
Luckily, I bike to work most of the year…I not have oil people getting rich because of me.

Grey Lensman
February 2, 2013 8:23 pm

David, your semantics mean nothing, zero. Crude oil, Natural gas or kerogen, makes no difference .
The Only issue is
1. Is it a viable fuel
2. Is it a viable feedstock
Taking that on board we learn that it is expected that the USA will become self sufficient in Oil or oil related products shortly.
So much for Peak Oil.
End of story

February 2, 2013 8:27 pm

I like to ask peak oil greenies what the predicted production limits are on the rare earths that dope those PV cells, and make those awesome batteries and generators. They had better hope that the same unrelenting phenomenon of human ingenuity that has kept oil production up and fed a growing world finds new sources of their favorite elements. They need a Borlaug.
And, to keep them from being rank hypocrites, that our ingenuity finds better ways of harvesting those elements then brutal Chinese slave labor camps strip mining them under the guns of the PLA.

February 2, 2013 8:29 pm

Willis writes “Now, to any reasonable man, that means that he disagrees with my interpretation that 2004 is not the peak, claiming it is mere “hair splitting” … and that means he is supporting Ed’s argument about 2004.”
Well FYI, I wasn’t supporting Ed’s argument and was putting my own argument forth that the data shows we are approaching peak oil. I explicitly stated we might increase production so I would say that to any reasonable man that meant I was not supporting Ed’s argument of peak in 2004.

February 2, 2013 8:40 pm

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

February 2, 2013 8:42 pm

As of 2004, according to website, in America we used 140 BILLION gallons of gasoline.
Thanks to the EPA, environmentalists and lawyers we cannot get relatively cheap oil from the oceans, gulf, Alaska and many other locations. It adds likely more then $2.00 per gallon to the cost of gasoline.
That means about $280 BILLION are being transfer from consumers to energy companies and to a lesser extent the people who have mineral rights for the land they use. $280 BILLION !
Thanks eco-freaks.

February 2, 2013 8:46 pm

E.M.Smith says:
February 2, 2013 at 4:36 pm
“… We can already turn coal and nuclear process heat into ‘oil’ if desired. …”
Actually in some places of the world it is possible to use naturally occuring
nuclear process heat ( a.k.a Geothermal ) to do the job.
First fully loaded tankship from a new plant in Iceland has just left harbour, a day or two ago bound for Rotterdam, Holland.
It was built right next to a geothermal power plant, that taps into a large pool
of superheated saltwater to generate electricity and heat fresh water for that
is then pumped to 3 or 4 nearby towns for heating buildings and other uses we normally
use hotwater for. The steam contains some carbon dioxide when it comes out of the
ground ( 2-3% I think, not sure though) and was previously just vented off into the open through a chimney butnow it is seperated out of the flue gas and together with some
residual heath, waste lukewarm water and aided by some electricial energy from the plant, is reformed into methanol. More info here.
I have been told that the process is acceptably profitable to the company at the price 30-40 $/bbl oil equivalent, and I have seen claims from the firm that they can procecss the alchol further to make some type diesel engine fuel and deliver it profitably at shipside for less than 60$ @ barrel oil equvalent.
Seems to me if this really lives up to promise and f.ex. the LFTR nuke work and is able to provide electricity at dirt cheap rates, the setup would be to place one pice of each type on the premises of the coal plants in use to day and generatae our transport fuel from the their carbon dioxide emissions. /sarc on/ Would certainly to make warmists and the oil peekers very miserable indeed, while they drifted off in searh of or to invent new imaginary man caused catasthropes to cheer themselves up again with. /sarc-off/

February 2, 2013 8:50 pm

Willis writes “When you are foolish enough to step into the middle of two people’s disagreement and you say one side is wrong, what do you expect people to assume?”
I expect you to read and understand the post before making any assumptions. Especially if you’re going to reply to it.
So moving on, do you agree the data is in support of peak oil approaching? And if not, why not?

February 2, 2013 8:53 pm

Peak Oil is a misnomer. Peak Oil infers a “rate” of oil production. The real issue has always been reserves. Not all reserves of oil, or material that can be turned into oil, only economic oil. If the energy needed to extract is less than the energy extracted, then the oil is recoverable. Horizontal drilling and fracing (yes, this is the correct way to spell fracing), has made shale oil economic. But not in all areas. Green River shale oil may never be economic. The value of the energy to extract exceeds the value of the energy extracted.
The rate of oil production may decline as the price of oil increases but this increase in the price of oil will increase the amount of practical recoverable reserves. Since oil reserves are so Price driven, in an economic sense, we have an infinite amount of oil reserves. What I mean by this is that unless you have an infinite amount of money to recovery the remaining oil, some oil will always remain unrecovered.
The real question is at what point (price of oil) do we transition from oil to nuclear or hydrogen energy.
I do not believe the current suite of sustainable options are in our future. The cost of the energy to manufacture and maintain these sustainable options are greater than the value of the energy extracted. Subsidies aside.

February 2, 2013 9:02 pm

Someday we will be at peak. But we are not now. (That rising right problem…)
Using price trends now to figure out where we are is a useless method. OPEC manages price and prices are highly volatile anyway. Adding a giant new demand in China also skews prices.
Basically, there are enough counfounders that the only thing you can really trust is historical production. That’s still ‘rising right’.
Now I could speculate when I hypothesize a peak might happen. I’d guess in about a decade, maybe two. Then again, it’s been ‘a couple of decades’ for about 40 years now…
That guess, BTW, I base largely on the limited rate at which we can build ‘unconventional oil’ facilities. It is my best guess that oil consumption is rising fast enough and conventional oil is dropping fast enough that we will hit a limit on how fast we can build the mega trucks and haulers for mining tar sands.
On the other side, we might just go to a lot more in-situ extraction and keep on ramping the rate of production up. We’ve got a Trillion Barrels or so just in the USA, so lots of opportunities to make my guess quite wrong. (Which is why I say we will only know it is peak when ‘rising right’ turns into consistent falling even with increasing economic demand.)
Nothing at all prevents using any of the light hydrocarbons as motor fuels. There are many CNG vehicles on the road today and many more being added. Using a zeolite catalyst you can turn methane (or other light molecules) directly into gasoline.
Oh, and there were many cars and trucks running on propane / LPG even back when I was a kid.
Essentially, any hydrocarbon from methane up to about c14 can run in a spark engine. Compression engines can run on a range up to about C24 (or more with some heating and injectors designed for it – heavy bunker fuel oil in ships is pretty thick stuff).
While we usually put C5 – C12 in gasoline and C12 – C16 in kerosene and C14 – C22 in Diesel; it isn’t mandatory to use the fuels that way. (Ranges approximate. Cyclical vs straight vs branched changes the ranges some. Volatility and viscosity matter. Etc. Etc.)
I’ve personally run a Diesel on Propane (C3) as a ‘co-fuel’ and on methanol. (Valve it in the air intake of a modest compression engine and use the Diesel injection as a ‘spark’ to ignite it. Avoid stoch. mix ranges. Will not work with ‘modern’ computer monitored engines unless designed for it.) There is a Masters Thesis on file at U.C. Berkeley per using methane fumigated into the air intake of stationary Diesel engines.)
In short: Just because traditionally we have designed engines to use a particular fuel, doesn’t mean that they can’t use others. Just about any alcohol, ether, or alkane (and related including aromatics) up to ‘motor oil’ weight can be used as transportation fuel.
You continue to insist on an “A NOT B” paradigm, despite my regularly saying “A AND B”.
So no, not going to play footsy on that basis.
Per Titan: During early earth formation, our chemistry ought to have been very similar, so there ought to be some significant content of abiotic oil produced then. It is not a big leap from there to “some of it was sequestered in deep rocks”. To prove if there is any truth in that thesis would require drilling to below where we find life, to where that primitive oil might still be pristine. Unfortunately, we have not yet found a hard limit to life underground. (It must exist, since eventually you reach magma, we just don’t know where yet). Encouraging, though, is that the deepest oils often have lower biomarkers than upper oils. Not enough pattern yet to say anything with certainty, but enough to be suggestive.
Per California: You ignored the part about subduction. The OTHER abiotic method. We’ve got a big old slab of subducted rock with wet organic rich sediments on it. At some point it melts enough that we get volcanoes with lots of CO2 venting. At some point between ‘cold and wet’ and ‘melted and decomposed to CO2’ their ought to be conditions suited to F-T synthesis of hydrocabons. We find hydrocarbons above the subduction zones in front of the volcanic arc. Is it ‘proof’? Nope, not yet. Just highly suggestive. Just like we pump oil from Bakersfield but not elsewhere in the Central Valley. (If it were just ‘bury and age’ there ought to be oil in other parts. The geology is fairly uniform as was the sedimentation. Instead we find it closer to the volcanic area down at that end. Not at the other ‘rising shallows’ up near Oroville / Chico where one would expect oil to migrate as well.)
None of that is in conflict with ‘conventional theory’. I’m quite happy to accept that there is a load of oil made that way too, even in California. (Part of the problem is trying to find a way to disambiguate the two. Life will move into abiotic oil and mark it with ‘life markers’. At the same time, lots of algae will have ended up in those sediments being subducted. So do they “age to kerogen, then make oil’? Or do they “subduct until the carbonates get cooked to oil”? I’d expect some of each. Conventional at the newer, cooler locations, F-T at the point in the subduction where the heat / pressure / wet / carbonate intersection is suitable (provided the native rock type / Fe content is a suitable catalyst).
A combined thesis also helps with Saudi. Otherwise one awful lot of algae had to die, sink, and be buried in one little spot. A small ocean of it… With some subduction / cooking going on, the volume is much more easily explained.
Now you lay the problem on me of showing how abiotic is better as an explanation and I’m saying “there is room for both”. Two very different things. So no, not going to shift to your problem. I like my opinion better…

February 2, 2013 9:05 pm

The irony of having this post on this website is that the Climate Change debate is a function of Peak Oil, whether you know it or not.
Our high-tech, Western society has evolved with cheap-carry-in-a-can fuel. This organism survives on oil. It’s ‘biology’ can’t support other meals, nor will it be able to live on other foods. The American Lion survived on Mammoths and other large beasts and couldn’t survive without those meals. So, it died out with it’s prey. Likewise, what we have built over the past 100 years depends on oil. It can’t run on anything less, not nuclear, not wind, not gas. It will be a dieing beast as soon as production starts declining. From the charts, we seem close if not there.
But those who run the governments and the bank are not burly enough to say to their people, “It’s running out,” because when the markets (i.e. the people) get a whiff of that downer, they will change how they play their cards and the game will shift rapidly and shift to the favor of the people and the banks and elite will be out of favor. The game will change and the banks will lose. So, the people keep quiet while the governments find ways to prolong the lie. During the 2000s we used the “secure oil in Middle East” method to kick the can. That’s not vogue anymore, so now we’re implementing the “Scare the people to use less carbon” method, which involves the “Global Warming” threat. The oil companies like that method because then they just expand their fingers into the alternative fuel markets. They are already in place and can do so easily.
But neither method will work, neither: (a) secure more oil or (b) use less oil. It will run out and the beast we have built that runs on hydrocarbons will die. What comes after? Well, people are very resilient. Hopefully, we finally learn how to love.

Grey Lensman
February 2, 2013 9:07 pm

Trafamadore says
I think one of the deals with nonconventional oil is to calculate the amt of energy you spend to produce it total, from the ground to the pump. Wilis, I bet you could make that graph for us, it would be be useful in this discussion. For example, I could imagine that there might be a time when that value becomes negative, in which case oil “peaks” wont make much sense anymore…except for airplanes and motor trips to the South pole.
Every single viable business on the planet depends upon a simple formula for its viability and that is that total costs are less then total receipts. Large corporations with a variable cost base can shut down expensive costs until such time as price makes them viable again. This happens a lot in the oil business.
In terms of Peak Oil, price is a red herring. Think about that. A standard 1,000 barrel contract is just a piece of monopoly paper, not real oil. But it returns real money thus those above boasting about their profits, but not from oil by by playing casino.

February 2, 2013 9:22 pm

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

February 2, 2013 9:26 pm

Well there is a lot of irony in there Willis.
You see this is WUWT where people scream, gnash their teeth and claim the imminent collapse of civilization if there is the slightest hint of the teensiest increase in gas pump prices.
The solution you are propounding involves more advanced technologies for extraction and conversion of hydrocarbons into the gas we all love.
You see light oil is not the same as heavy oil and is not the same as coal of whatever kind.
These interconversion processes all cost money and make the end product more expensive. This is probably the reason we do not use coal to oil processes even though coal is very cheap and the technology is ancient and well proven.
The whole peak oil thing is in fact about this very issue. Oil does not run out it simply gets more expensive.

McComber Boy
February 2, 2013 9:28 pm

Great post as usual. It seems like it was only two or three days ago that someone suggested you look into peak oil and ‘hey presto’! Another great post.
I did some research on this a couple of years ago. Bill Kovarik has done a good job of aggregating the available information and some of the geopolitical reasons for why oil reserves are discussed as they are. See
Some things are a bit dated because it doesn’t appear to be an obsession with him as it seems to be with some of the disciples of Hubbert who keep rambling on. Shades of the Harold Camping oil bust, errr, end of the world predictions of recent times.
All the best,

Big Griz
February 2, 2013 9:28 pm

I remember when I was in high school and Paul Erlich’s rantings started scaring people. I mentioned to my father that we were running out of oil and civilization would collapse. He almost fell out of his chair laughing! He told me that he people have been screaming about how the world was going to run out of oil since he was a boy. I thought he was crazy at the time. Now I realize he just recognized that every generation has its paranoid scaremongers.
Life is good. Weather will be what it will. Humanity is resourceful. Optimism is healthy, not naive!

Grey Lensman
February 2, 2013 9:37 pm

Bjorn, Thank you and well done Iceland. Simply brilliant. Can you report on the progress being made on exporting geothermal electricity to the UK.
Hawaii need to read your report. They have the most expensive power and fuel in the USA. Using this they could kill two birds with one stone and regain some independence.
Dont forget, every watt of geothermal reduces both oil and coal demand.
Demand is a key in both Peak Oil (lol) and price of oil, even if said price is fake.

February 2, 2013 9:38 pm

E.M Smith writes Now I could speculate when I hypothesize a peak might happen. I’d guess in about a decade, maybe two. Then again, it’s been ‘a couple of decades’ for about 40 years now…”
I believe Hubbert predicted 2006. And Gwahar probably wasn’t discovered at that time so that had an impact. Anyway its not the date that is important with Hubberts prediction, its the inevitability of a peak with a finite resource and he gave us the associated production curve we can expect.
My main beef with Willis on this is that he flatly refuses to believe that there is any chance that production will drop by assuming “human ingenuity” will prevail irrespective of any reality of increasing scarcity of the resource and production cost associated with maintaining that production rate.
Willis wants to paint a rosy energy future and it may well be ok in the end with alternate sources but on the way to that future we will experience peak oil and there will be economic consequences involving increasing energy costs. There are already.

February 2, 2013 9:57 pm

Very good, thanks.

February 2, 2013 10:00 pm

Nice! Generally I’d rather use the electricity as electricity, then again, if you have excess due to it being massively geothermal there, might as well use it to make methanol! There is a zeolite catalyst ( m-5 IIRC from Mobil) that can covert it to gasoline directly. An interesting paper on zeolites here:
It all comes down to process heat. If you have it, most any carbon source plus water give you a fuel (from methanol on up to Diesel) by several pathways. We can get all the process heat we want from nuclear. Didn’t realize that geothermal was hot enough (or perhaps they use the electricity to move heat the last steps…).
Still, very elegant use of ‘what you have to get what you want’.
BTW, don’t need LFTR, can use HTGR. Either one. ( Or MSR or…)
“So moving on, do you agree the data is in support of peak oil approaching? And if not, why not?”
No, the data do not support it, as production continues ‘rising right’. We’ve been in an economic funk and folks don’t increase production to excess then (as demand stays relatively soft). Price is unsupportive as we’ve been higher in the past and OPEC is price managing.
That is “absence of evidence”. (It is not “evidence of everything fine” either. It’s just an orthogonal axis.)
There will be evidence of “peak oil” when production is not longer rising to the right over several years and the global economy is growing.
Ah, the old EROEI argument.
We will even pump oil when it takes more energy to pump it out than is in the oil. It will no longer be a net energy source, but it will still be valuable.
We will use nuclear electricity to lift the oil. That lets us turn nuclear power into motor fuels and plastics and chemicals. As long as that product is made more cheaply from oil than from other sources, we will lift the oil.
An existence proof of sorts is right now with tar sands. We have excess natural gas and want oil; so we use natural gas to extract oil. In terms of thermal efficiency, we ought to use that natural gas directly in vehicles. But it is cheaper / easier to use it to extract oil.
(The oil wells in California often have electric motors on the pumps, so to some extent we already use nuclear / hydro electric to produce oil…)

February 2, 2013 10:03 pm

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

Actually, I think it’s quite an important message. It’s a bit like saying “CO2 is a greenhouse gas, humans have increased atmospheric CO2, but there won’t be a catastrophe.”
The greenies and other alarmists and catastrophists pick on anything they can to spread fear and dismay among the populace. They do it with CAGW and it is taking a long time to counter them. They do it with Peak Oil and that needs to be countered too. The climate point isn’t that there is no greenhouse effect (there is), the point is that it isn’t dangerous. The oil point isn’t that we aren’t anywhere near Peak Oil (we probably are), the point is that it isn’t going to be a disaster.
[Sorry about the double negatives]
Take you pick, non-event/peak. You can’t call it both ways, ask any bookie.
It’s both, they aren’t mutually exclusive.

Grey Lensman
February 2, 2013 10:04 pm

Tim says
My main beef with Willis on this is that he flatly refuses to believe that there is any chance that production will drop by assuming “human ingenuity” will prevail irrespective of any reality of increasing scarcity of the resource and production cost associated with maintaining that production rate.
Tim hello, you awake? Willis does not believe that, he reports the facts. Soon the USA will be a net exporter. Facts. Substance.
Read the posts and links, the mix gets better every day and the costs balance.

February 2, 2013 10:14 pm

E.M Smith writes “No, the data do not support it, as production continues ‘rising right’. We’ve been in an economic funk and folks don’t increase production to excess then (as demand stays relatively soft). Price is unsupportive as we’ve been higher in the past and OPEC is price managing.”
I asked whether the data supported peak oil approaching, not whether it was here. When demand drops (due to economic funk) then prices should ease, not increase. As far as I can see the only argument against peak oil approaching is one of both supply and price manipulation which are speculative rather than supported by data.

John West
February 2, 2013 10:29 pm

According to the DOE, coal to diesel is economical viable @ crude being $86/barrel without CO2 taxes/controls requirements:
”This diesel fuel is compatible with our current fuel distribution infrastructure, can be used directly in existing diesel vehicles, and would be economically competitive with petroleum-derived diesel when the crude oil price (COP) is equal to or above $86 per barrel (bbl), based on a twenty percent rate of return, January 2008 costs, and a GHG emissions value of zero.”
Of course the price above the threshold would have to be substantially assured before anyone would expend the capital. I suspect oil producers realize this and work to keep the crude oil price hovering around this threshold, at least close enough where the “threat” of a drop is enough to discourage risking the large up front costs of a coal to diesel facility.

February 2, 2013 10:31 pm

RE: SMS 2:15pm and Willis 3:40 pm.
I was thinking about whale oil, too and how Drake’s well in Pennsylvania was the unconventional oil of the time.
Willis, if you want to give attribution to the “whale oil – Drake” idea, I’d give priority to Texas A&M professors Charles Maurice and Charles Smithson who wrote The Doomsday Myth: 10,000 Years of Economic Crisis Hoover Press, 1985. I wrote a short summary in “No Cornucopia of Gas”.
Specifically, one of their ten “Doomsday” scenarios was the shortage of whales that was a alleviated by, then unconventional, petroleum discovered in Pennsylvania. What is most ironic, the Pennsylvania stratigraphic play was very soon suplanted by the unconventional oil found in anticlines. Then more oil unconventionally found salt domes.
As you point out, water flood of secondary recovery was unconventional when first tried. So was tertiary recovery steam flooding unconventional once upon a time. Kern River, one of many steam floods has a most unusual Hubbert Linearization chart. If you could not foresee the benefits of steam flooding and higher oil prices, the Hubbert linearization cumulative production would have been less than 500 mmbo. With steam flooding, it is 2500 mmbo.
The lesson is that yesterday’s uneconomic resource is today’s unconventional oil and tomorrows conventional energy. What is tomorrow’s unconventional liquid energy resource? Horizontal Steam-flooding? Horizontal bio-cracking?
“Where oil is first found, in the final analysis, is in the minds of men” (Pratt, AAPG 1952 v36 #12).

Latimer Alder
February 2, 2013 10:35 pm


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

Lost me there, sport. The ‘conventional’ or ‘unconventional’ term applies to the means of picking, not to the apples themselves. The apple doesn’t care whether it was picked conventionally or unconventionally … nor does the apple pie it goes into.
In the case of oil – if I don’t have to modify a car engine to use ‘conventional’ or ‘unconventional; ‘ oil, why does it matter at all how it is produced?
A semantic distinction without a real difference.

February 2, 2013 10:42 pm

“Likewise, what we have built over the past 100 years depends on oil. It can’t run on anything less, not nuclear, not wind, not gas.”
Absolutely false. Demonstrably so.
Sasol in South Africa has been turning coal in to motor fuels (gasoline, Diesel, Jet etc.) since the ’70s and they are doing fine. Germany ran their W.W.II war machine on F-T fuels and we can do it much cheaper now. LNG (gas) easily runs cars, trucks, buses (many in my town right now)
In the ’80s Mobil Oil used an M-5 (IIRC) catalyst to turn nat gas into gasoline in New Zealand.
Heck, I’ve run a Diesel directly and unconverted on methanol (Volvo Penta marine Diesel) and propane ( I-H Scout) just by valving it in the air intake. Modern “Bi-Fuel” designs use computer management but work fine.
Rentech makes Diesel and Jet-A from trash via a kind of F-T process.
Syntroleum turns chicken guts into motor fuels.
Algae farms can turn sunshine into Diesel (it is working at small scale, only a minor price rise needed or a bit of technical cost reduction).
HTGCR process heat can make methanol at about $2.50 / gallon of gasoline equivalent from coal or old trash.
And so much more.
The only “problem” is cheap oil. Once it is absolutely clear that OPEC can’t crush with a price cut, the alternatives will be built.
(And that is without even getting into the odder choices like DME and ‘wood gasogens”…)
Depending on who “We” is, “we” do turn coal into oil. South Africa. Now. In the USA we don’t do it as we were more willing to accept Arabs and others jerking the price and supply around.
The added “cost” to make fuels from coal is about the same as $80 / bbl oil. Until recently, that was not “economical” in the USA. As long as there is a risk of “below $80” folks don’t build the facilities (as the Arabs / OPEC have crashed prices in the past to put folks out of business).
All it would take to have “energy independence” today is a tariff on OPEC oil such that “whatever the price was, it became $100/ bbl minimum on landing”. (No cost impact if oil is already above that price, but prevents prices from dropping lower.)
Valero oil company made it’s bones from putting in the crackers to turn heavy oil into gasoline before the other guys. They use a LOT of Mexican and other heavy oil. Heavy oil from Venezuela is being sold here today. There just isn’t any barrier to using heavy oil to make gasoline and Diesel. We’re already doing it.
Similarly anyone getting Canadian gasoline / Diesel is running on those same unconventional “tar” oils. Don’t know the exact production figures now, but it’s quite high and growing fast. Last I looked the “price point” was between $30 and $50 / bbl. So well below present prices.
The idea that it “costs more to do it” is just not relevant any more for tar sands or heavy oils. That price point was passed a few decades back.
One other thing to keep in mind:
AT Hubbert’s Peak, things are more or less symmetrical. It takes about as long to ‘ramp down’ the backside as it took to ‘ramp up’ the front. So we’re about 150 years in from Drake’s first well. That means we will still be pumping oil in 2163 or so even if right now IS peak (and now isn’t peak- yet.)
Along the way there is plenty of time to slowly swap to other fuels and machines. LOTS of time.
With Sasol as “existence proof”, we could power all our present engines on coal fuels if we wished with all of about a 15 year effort to build facilities.
There just isn’t any real reason to care about Hubbert’s peak, even if we are at it.

February 2, 2013 10:45 pm

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

February 2, 2013 10:45 pm

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

February 2, 2013 10:46 pm

Willis writes “Not only that, but we have done it without running out of resources, despite the fact that our population more than doubled in the last 50 years ”
And yet there are other examples of people who had finite resources, didn’t manage them and died out. The inhabitants of Easter Island for example couldn’t use their human ingenuity to overcome their predicament on resource usage and they all died out.
I’m not saying that will necessarily happen to us but there is a strong chance we’ll go through increasing pain.
Hubbert’s prediction (ie the curve) already factors in political decisions and especially price. Once the cost of oil increases beyond a certain point (due to the increased cost of production) then oil usage will naturally decline as we swap out to other sources of energy.

February 2, 2013 10:46 pm

I think in 100 years we will still be using oil, as well as the usual other minerals and energy resources, and the whole current AGW thing and various other green ideological fantasies will have gone the way of Christianity-largely extinct and customary. It usually takes a few decades, and up to a few thousand years, for societies to develop a resistance from these kinds of mass ideologies, perhaps less so these days with mass communication and technology-as was the case with communism.
Mass ideologies like Christianity follow a remarkably similar pattern to a virus-people and societies are largley unresistant to them at first, and they may become pandemics, but after a time societies develop various resistances and they go the way of being largely a childhood phenomenon. For example, Christianity no longer has any teeth amongst the law and politics of developed nations, it used to a few hundred years ago, but now it largely only affects children in Sunday schools, the same way childhood diseases such as measles and chicken pox do, which were also once far more severe amongst grown adults and throughout societies. Children are the ones that now get affected, but they usually grow out of it. Societies at large are now also largely resistant to Christianity, but in this case it was a particularly pervasive and effective disease/meme complex that took over a thousand years to get on top of.
People will inherit a few good things out of the whole green thing, the same way I think the west did with Christianity, such as the value of the individual, and a dislike of violence; from the greens it may be a respect for nature’s processes and it’s all-encompassing influences, as well as the earth’s ability to change. (There wasn’t alot of these 2 from Christianity).
Just as we won’t run out of earth resources, (because they are fundamentally too large), we wont run out of people’s tendancy to mass ideology, but it will take some other form to the current AGW one; something else will always be invented to fool some of the people some of the time.

Eric Anderson
February 2, 2013 10:50 pm

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

Latimer Alder
February 2, 2013 10:52 pm

‘The Needles’ are a formation of appropriately named rocks off the western tip of the Isle of Wight, which itself is located on the southern coast of England, protecting Southampton and Portsmouth.
Great sailing, complex waters and tides to contend with. And porpoises and Cowes week. Come over and join us!

February 2, 2013 10:53 pm

I thought roger tolson’s ladder was a valid analogy. The agricultural yield per acre is a function of effort per acre. Likewise, hydrocarbon yield per acre foot is a function of the technology and effort per acre and per acre-ft.
In the case of oil – if I don’t have to modify a car engine to use ‘conventional’ or ‘unconventional; ‘ oil, why does it matter at all how it is produced?
It might make a difference to the refinery. In the case of steam-flood heavy oil, which was unconventioinal in 1980’s, it did make a difference to the refinery. Canadian “tar sand” bitumen will make a difference to the refineries, too.

February 2, 2013 10:54 pm

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

Grey Lensman
February 2, 2013 11:12 pm

E.M. Smith (Bravo) said
Similarly anyone getting Canadian gasoline / Diesel is running on those same unconventional “tar” oils. Don’t know the exact production figures now, but it’s quite high and growing fast. Last I looked the “price point” was between $30 and $50 / bbl. So well below present prices.
Recently the building and installation of two, 500,000 barrel per day oil sands trains, was fully documented. These plants included hydrocrackers. The fully installed cost of each train was about eight billion dollars.
At the time, the price of oil peaked and thus these paid for themselves in about 66 days.
Thus being fully paid up, the actual production cost. is much lower than the published figure in reality, really depending upon book keeping and not engineering.
The investment decisions depend upon careful price forecasts and long term planning. when they match, stuff gets built.
Simple analysis, yes but gets the core issue settled

February 2, 2013 11:12 pm

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

Methusalah Bone
February 2, 2013 11:16 pm

Yes but when do we hit peak stupid?

February 2, 2013 11:28 pm

Willis writes “FINALLY, the rate of production is a function of how much is accessible at a given price. As the price goes up, the amount increases.”
As the price goes up, other alternatives (assuming there are some) look better and the amount goes down.

Alex the sketic
February 2, 2013 11:28 pm

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

February 2, 2013 11:32 pm

Greece Shows Us How Poverty Degrades the Environment
Smog has been a particular problem this year in major cities such as Athens and Thessaloniki. But high smog levels have been reported all over Greece — including the Peloponnese and Attica. Yet this isn’t the sort of smog we worry about in American cities. It’s an older, cruder, almost forgotten form here, reminiscent of the days of London’s pea-soupers. The Greek smog is a result of the increased burning of wood as household fuel, and it has massively increased levels of pollutants.
Not only is the smog destructive of the atmosphere, it is destructive of forests. Greeks have been forced by the high prices of home heating oil — of which a large proportion is government-imposed taxes — to use wood for fuel, and much of that wood is gathered illegally. The Greek environment ministry estimates more than 13,000 tons of wood was harvested illegally in 2012.
What we are seeing is Greece retreating back up the slope of what is known as the Environmental Kuznets curve. This model theorizes that, as a civilization starts to use natural resources, it increases its impact on the environment until it reaches a stage where it becomes more efficient to reduce its impact, This is why the richest societies generally also are the cleanest. Wealthier is healthier for the environment. That’s exactly what we saw in the decreases in smog levels in the west over the last century.
Greece is regressing. As it becomes poorer, its environment suffers more. The Greek financial crisis has been a disaster in many more ways than first thought. Two particular factors have combined here. The massive overspending by the Greek state could not be corrected by devaluation as Greece is part of the Eurozone. This has led to a massive wealth contraction within Greece, which has meant people do not have as much to spend on fuel. Secondly, the Greek government, as part of its austerity program, has relied heavily on raising taxes on energy — home heating fuel and electricity especially. The result has been the increased reliance on wood and the looming environmental disaster.

February 2, 2013 11:36 pm

Willis Eschenbach says:
February 2, 2013 at 10:15 pm
“Instead, I am saying that the size of the resource itself is a function of human ingenuity … and as a result, to speak of “peak magnesium” or “peak oil” misses the mark completely.”
Thanks, Willis. That summarizes it. And it applies to AGW as well, by the way. Even if we were to assume that the high IPCC scenarios for 2100 were correct, it still comes down to human ingenuity in dealing with it. And we have only a tenuous idea, if any, of what the limits of human ingenuity will be in 2100. What we can say with some confidence is that there will be technology available that we can’t even imagine today.
It’s so tempting to think that we can predict the future from what we know, when what we don’t know will be vastly more important.

Latimer Alder
February 2, 2013 11:37 pm

@stephen rasey
I don’t doubt that the different mechanisms of procuring the oil require some technical changes behind the scenes to accommodate them. Nor that some ways of extracting the oil are more energy efficient than others. Nor that some bright guys are working very hard to make it all happen.
But if the end product is the same – to the point where I can fill a car with either ‘conventional’ or ‘unconventional’ oil, or a mixture and not notice any difference – then while the split between ‘conventional’ and ‘unconventional’ may be a useful term for oil tekkies, it is misapplied to the wider world of those who ultimately buy and use the stuff.
And – as ever – there is a strong suspicion that the technical use of the term ‘unconventional’ has been conveniently hijacked by those who wish to alarm the public.
My old Mum would be worried stupid if told she needed to run her car on ‘unconventional’ oil. Or that her favourite seascape was being ‘acidified’, not ‘neutralised’. These are emotive terms and, I submit, not chosen lightly.

February 2, 2013 11:51 pm

Peak anything is nonsense really. However in the debate about oil I would have thought that even with rising dollar prices it is better to think in terms of how many hours work it takes each of us to buy a gallon of gas rather than the absolute cost.
You then see how much wealthier we have all become relative to the costs of fuel or power or food. That is because of the enriching quality of energy.
We have all watched and participated in reducing our gas consumption as price at the pump rises, only to fall back into our old ways as we shuggle ( old Scottish word ) about our budget allocations . Take away all the taxes and it is obvious that gas, as a proportion of all our expenses, hasn’t become more expensive at all. Unconventional oil not withstanding.
We have become wealthier thanks in large part to energy.

February 2, 2013 11:52 pm

Willis says:
” Was the division between “conventional” and “unconventional” oil devised to cover up the failure of the peak oilers? No way. The distinction is useful in a variety of ways for analyzing the world of oil sources. I think that the concept was simply appropriated by the peak oilers because it was very useful to them, since it totally obscured the failure of their peak oil predictions.
However, I wasn’t using the terms facetiously. I was explaining how they are misused by the peak oil folks to excuse the failure of their predictions.”
Willis: From a geologist’s perspective, “Peak Oil” as M. King Hubbert defined it is the point at which new discoveries of oil sources fails to match the extraction and production of oil and the overall production declines.The truth is: we will NEVER completely run out of oil.The real question is how much are we willing to pay for it. As has been pointed out before.
“All the easy oil and gas in the world has pretty much been found. Now comes the harder work in finding and producing oil from more challenging environments and work areas. ”
— William J. Cummings, Exxon-Mobil company spokesman, December 2005[5

February 2, 2013 11:55 pm

Willi, if you think the price of extraction is not at all an issue of some of these “unconventional” reserves you better read this
and methane hydrates !?? have you any idea how costly it would be to extract diffuse frozen gas from deep sea rock formations ??? If it was cost effective don’t you think it would have been done long ago?

February 3, 2013 12:00 am

Willis – you say “… at present, people are better fed, housed, clothed, and doctored than at any time in the past thousand years … we have done it without running out of resources, despite the fact that our population more than doubled … we’re damn good at human ingenuity …No guarantee that that will continue given fools like Obama and Chu … but so far, so good.“.
I agree with all of that. Wrt a lot of the good things – housing, clothing, etc – oil has played a very important part. With our human ingenuity we can make more good things happen for more people. For that we need more energy, and we have coal, gas, uranium, thorium, geothermal energy, and sunshine, all in abundance, and I’ve probably left a few out. If oil gets more expensive, we will work out how to use more of the others, cheapest or most readily available first.
On this we are in agreement?
Without the world’s insane politicians (you name just two of many) we could achieve it more easily. They and their ilk are misusing “Climate Change” to scare people into expensive inefficient ineffective low-volume hare-brained schemes like windfarms and ethanol.
On this maybe we are still in agreement?
I happen to think that world oil production rates will stop increasing soon, for reasons that I have attempted to explain. It’s not so much that we physically can’t produce faster, more that we won’t. On that we disagree, it seems. But either way, the fact is that unless human ingenuity is itself blocked, the world will continue to generate increasing amounts of energy as needed. All we need is politicians smart enough to let it happen.

February 3, 2013 12:07 am

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

February 3, 2013 12:10 am


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

The data do not support either. There are two dominant data items.
Production. Price.
Production is directly managed by OPEC to stabilize prices at relatively high levels (but low enough to discourage too much substitution / conservation / competition). Production can only tell you what OPEC decided to produce.
Price can say nothing about Hubbert’s Peak as price is managed. All price can tell you is what OPEC wants.
Both data items tell you only “What does OPEC want the value to be?”.

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

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

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

Speculative? OPEC is speculative?

Indeed, the biggest challenge facing global oil markets in 2013 is uncertainty surrounding the global economy, with the fragility of the Euro-zone remaining a major concern. The Conference further noted that, although world oil demand is forecast to increase slightly during the year 2013, this is likely to be more than offset by the projected increase in non-OPEC supply and that projected demand for OPEC crude in 2013 is expected to contract to 29.7 mb/d.
Given the demand uncertainties, the Conference decided to maintain the current production level of 30.0 mb/d. The Conference also agreed that Member Countries would, if necessary, take steps to ensure market balance and reasonable price levels for producers and consumers. In taking this decision, Member Countries confirmed that they will swiftly respond to developments that might have a detrimental impact on an orderly oil market.
Since it is vital to remain vigilant in the face of the uncertainty surrounding the outlook for the world’s major economies, as well as the implications of the enduring weaknesses in the international financial system that are expected to continue to pose downside risks for both the global economy and the oil market, the Conference directed the Secretariat to maintain its close monitoring of developments in supply and demand, as well as non-fundamental factors, such as macroeconomic sentiment and speculative activity, keeping Member Countries abreast of developments at all times.

Got that? They are watching global demand and other suppliers and adjusting their output to manage total supply and hold prices high. That is their job. It is the whole reason for a Cartel.
That’s about the same as the last time I looked.
Guess why OPEC manages for occasional drops to about $80 / bbl…
@Stephen Rasey:
For Tar Sands it is ‘upgraded’ at the mine / well / production point to a crude oil that does not need refinery changes. (So ‘yes and no’. The overall refining process has to change to deal with it; but the produces of the ‘crude’ do it, not the refinery.)
@Grey Lensman:
Wow! That’s some fast payback!
The basic costs have been steadily driven down over the years. It started out about $80/bbl hurdle rate when oil was about $20. Then costs were dropping while OPEC was jacking… Both hit about $50 at about the same time. Then “in-situ” started and the cost point was headed for $26 / bbl while oil prices were headed for about $70. That was when things really took off 😉
The cost point continues to drop and the sands production continues to rise. We’ve now got OPEC at just below 30 M bpd and I don’t think they can cut back much from that (and stay economically afloat). The Paranoid Fantasy part of the mind wants to wonder if it was just a coincidence that about that time Iraq got knocked out of production and that lately Libya took a hit… Now folks talking embargo of Iranian oil?
As the fracking (yes, I know it is supposed to be spelled the silly looking way 😉 revolution continues to spread, OPEC is going to have more “issues”… Thus their heavy funding of AGW causes… Last thing they want is more coal fuels…

Larry Wirth
February 3, 2013 12:12 am

William H, Another Andy, and others upthread have made an important point: if you don’t factor in inflation, your “cost of” comments mean nothing. As far as I can tell, the ‘real’ cost of gasoline hasn’t risen in my lifetime.
Willis, your writing reminds me most of Jack London’s “Adventures of Captain David Grief.” Keep doing it!

Ill Tempered Klavier
February 3, 2013 12:15 am

As far as the inflation part of the price discussion goes, I will note:
When I first started (abt. forty years ago) the job I eventually retired from, an hour’s wages would buy about seven or eight gallons of gasoline. Comparing the ups and downs of gasoline prices where I live for the past year to the wage I retired at, I get from about seven and a quarter to eight and three quarters gallons. Eight gallons of gasoline are still worth about an hour of an operating engineers time.
This is like Heinlein’s quick test for estimating the standard of living in a place: “How long does it take a journeyman carpenter to earn a one kilo loaf of the standard local bread?”
No matter how you hang numbers on the prices of things, if it takes a skilled worker the same amount of time to earn them,they haven’t changed.

anarchist hate machine
February 3, 2013 12:41 am

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

February 3, 2013 12:48 am

E M Smith writes “They are watching global demand and other suppliers and adjusting their output to manage total supply and hold prices high.”
That, as I said is the speculative view and not supported by the hard data which shows flat lining supply and increasing price. OPEC aren’t the only suppliers out there. Dont you think other non-OPEC suppliers would increase their supply if they could to reap the benefits of the current high prices? That’s what the free market is and how it works at its heart.
As I said, if there were a global conspiracy to keep prices high by limiting supply at a time where the world’s economies were really suffering then that’s a pretty dim view to take of the world.
From the other point of view, do you think OPEC would have said “Production levels are close to their maximum. Therefore we cant substantially increase production at the moment”. No. not in a million years would they say that in any official report.
Neither of us have any real information on those points of view. All we have is flat-lining production and increasing prices.

February 3, 2013 12:49 am

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

February 3, 2013 12:50 am

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

Willis writes “FINALLY, the rate of production is a function of how much is accessible at a given price. As the price goes up, the amount increases.”
As the price goes up, other alternatives (assuming there are some) look better and the amount goes down.

Are you just trying to be obtuse?
Willis is talking about production. When price rises, so does production.
You are talking about consumption. When price rises, consumption drops.
These meet at an equilibrium point. BOTH can move at the same time.

Alex the sketic says:
February 2, 2013 at 11:28 pm
What’s the percentage of the planet’s surface area explored for energy deposits? Just a wild guess: 0.1%?

Well, about 70% is in the “not” category as it is “ocean beyond the shelf”. The rest depends on “to what degree?”. Most all of it has someone who has looked at a map. Large parts of it have been seismically measured. Much of it had holes drilled to some depth.
Yet many depths have not been drilled, so if you want ‘deepest knowledge’, the answer is ‘nearly none’. If you want “likely oil” the answer is “more than 1/2” (of land) with poor resolution.
Methane Clathrate is typically not in ‘hard rock’. It usually is in soft mud. The hardest part of getting it out is doing that without having it destabilize and all bubble out of the muck. It can be removed with gentle heat, or even shaking…
Mostly marine algae (aka “Pond Scum”) and not dinosaurs…

February 3, 2013 12:51 am

E M Smith writes “Willis is talking about production. When price rises, so does production.”
Not according to the data.

February 3, 2013 1:05 am

OK, you are just trying to be obtuse. Got it. Thanks. No need to pay attention any more…

February 3, 2013 1:09 am

Willis writes “Can’t see much peak in that …”
Oil is a fossil fuel but “fossil fuels” includes coal and gas.
It goes on to say “their use is expected to grow in absolute terms over the next 20–30 years in the absence of policies to promote low-carbon emission sources.”
And this is accurate. China is building coal fired power stations like nobody’s business. Use of gas is on the increase too. Neither are oil and neither come out of your petrol pump. Nobody is building significant infrastructure to convert them to petrol yet either. If they do, they’ll be considerably more expensive than oil is now.
I suspect some of that will be done to stave off the decline when the time comes.

February 3, 2013 1:12 am

E M Smith write “OK, you are just trying to be obtuse.”
I wrote “As the price goes up, other alternatives (assuming there are some) look better and the amount goes down.”
Demand reducing is implicit in the “other alternatives” …or so I thought you’d note. When demand reduces the amount reduces.

February 3, 2013 1:22 am

@The rest of the folks:
TTTM is confounding a price managed production managed real set of data with production and consumption functions. Willis is talking about generic economics and how normal commodities respond to price signals.
Willis is absolutely correct in how typical energy commodities respond over time to prices signals. Raise the price, more total production comes into existence.
We can actually see that on a dynamic basis in Canada. When oil prices were below about $45 / bbl there was effectively no production of tar sands (other than some ‘learning projects). Now with price over double that, they are busy building productive capacity by the Million bbl chunk. Higher price, more production.
In response to those market forces, OPEC is trying to hold prices up (with reduced production if need be). This is what Cartels do. They are trying to run the price / volume curves backwards to hold prices up.
I probably ought to also add that oil is often price inelastic in supply and demand. Neither side changes volume much on price signals. This can cause prices to take wide swings without much change in volume of production in the short run. Yet longer term, price elasticities do have time to work. Raise oil price a lot, now, and I still buy gas to get to work. Over the next year, I may swap to a cheaper car, or get a job nearer to home…. So ‘how long’ matters.

February 3, 2013 1:33 am

anarchist hate machine says:
February 3, 2013 at 12:41 am
“I’m surprised no one has brought up the issue of refinery capacity and it’s effects on price. From my understanding no new refineries have been allowed to be built in the United States in 30 years except one …”
Why are new refineries not being built in ND? You would think that’s a no-brainer

Liberal Skeptic
February 3, 2013 1:36 am

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

February 3, 2013 1:39 am

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

The solution you are propounding involves more advanced technologies for extraction and conversion of hydrocarbons into the gas we all love.
You see light oil is not the same as heavy oil and is not the same as coal of whatever kind.
These interconversion processes all cost money and make the end product more expensive. This is probably the reason we do not use coal to oil processes even though coal is very cheap and the technology is ancient and well proven.

That is wrong on all counts.
You are thinking of the German Fischer-Tropsch conversion process which is a century-old and was developed into the South African Sasol process.
A method to convert coal to synthetic crude oil which hast competitive cost (n.b. cost and not price) with natural crude has existed since 1994 when demonstration of the LSE process at commercial scale was completed.
My post at February 2, 2013 at 2:57 pm explains how and why the Liquid Solvent Extraction (LSE) process can produce synthetic crude oil at competitive cost. The fact of LSE has strategic value because it constrains the medium and long-term prices of crude oil.
There is sufficient coal for at least 300 years supply (probably 1000 years). Nobody can know what fuels will be needed in 300 years time, but they are unlikely to include oil.

William Astley
February 3, 2013 1:50 am

The amount of estimated “natural” gas is orders of magnitude smaller than the amount of commercially recoverable CH4. It is interesting to note the lag in the update of the world’s natural gas reserves.
Why did nature bless Russia with the world’s largest “natural” gas reservoirs?
There have been massive CH4 fields found in Canada, with deep drilling techniques.
Now, his proposed $3-billion Kitimat liquid natural gas project has the backing of some of the biggest names in the business – including the world’s largest gas importer, Korea Gas Corp., and U.S. gas producers EOG Resources Inc. and Apache Corp. , two key players in the Horn River.
The change from an import to an export facility is emblematic of the changing B.C. economy and the province’s emerging role as a significant gas producer on a global scale.
The scientific problem of the genesis of hydrocarbons of natural petroleum, and consequentially of the origin of natural petroleum deposits, regrettably has been one too much neglected by competent physicists and chemists; the subject has been obscured by diverse, unscientific hypotheses, typically connected with the rococo hypothesis (1) that highly reduced hydrocarbon molecules of high chemical potentials might somehow evolve from highly oxidized biotic molecules of low chemical potential. The scientific problem of the spontaneous evolution of the hydrocarbon molecules comprising natural petroleum is one of chemical thermodynamic-stability theory. This problem does not involve the properties of rocks where petroleum might be found or of microorganisms observed in crude oil.
Natural petroleum is a hydrogen–carbon (H–C) system, in distinctly nonequilibrium states, composed of mixtures of highly reduced hydrocarbon molecules, all of very high chemical potential and most in the liquid phase. As such, the phenomenon of the terrestrial existence of natural petroleum in the near-surface crust of the Earth has presented several challenges, most of which have remained unresolved until recently. The primary scientific problem of petroleum has been the existence and genesis of the individual hydrocarbon molecules themselves: how, and under what thermodynamic conditions, can such highly reduced molecules of high chemical potential evolve?
The evolution of multi-component systems at high pressures: VI. The thermodynamic stability of the hydrogen–carbon system: The genesis of hydrocarbons and the origin of petroleum, By Kenney, Kutcherov, Bendeliani, and Alekseev
The following is an excerpt from Thomas Gold’s book the Deep Hot Biosphere which that outlines some of the observations he believes supports an abiogenic origin (non-biological, primeval origin), for petroleum and natural gas.
(1) Petroleum and methane are found frequently in geographic patterns of long lines or arcs, which are related more to deep-seated large-scale structural features of the crust, than to the smaller scale patchwork of the sedimentary deposits.
(2) Hydrocarbon-rich areas tend to be hydrocarbon-rich at many different levels, corresponding to quite different geological epochs, and extending down to the crystalline basement that underlies the sediment. An invasion of an area by hydrocarbon fluids from below could better account for this than the chance of successive deposition.
(3) Some petroleum from deeper and hotter levels almost completely lack the biological evidence. Optical activity and the odd-even carbon number effect are sometimes totally absent, and it would be difficult to suppose that such a thorough destruction of the biological molecules had occurred as would be required to account for this, yet leaving the bulk substance quite similar to other crude oils.
(4) Methane is found in many locations where a biogenic origin is improbable or where biological deposits seem inadequate: in great ocean rifts in the absence of any substantial sediments; in fissures in igneous and metamorphic rocks, even at great depth; in active volcanic regions, even where there is a minimum of sediments; and there are massive amounts of methane hydrates (methane-water ice combinations) in permafrost and ocean deposits, where it is doubtful that an adequate quantity and distribution of biological source material is present.
(5) The hydrocarbon deposits of a large area often show common chemical or isotopic features, quite independent of the varied composition or the geological ages of the formations in which they are found. Such chemical signatures may be seen in the abundance ratios of some minor constituents such as traces of certain metals that are carried in petroleum; or a common tendency may be seen in the ratio of isotopes of some elements, or in the abundance ratio of some of the different molecules that make up petroleum. Thus a chemical analysis of a sample of petroleum could often allow the general area of its origin to be identified, even though quite different formations in that area may be producing petroleum. For example a crude oil from anywhere in the Middle East can be distinguished from an oil originating in any part of South America, or from the oils of West Africa; almost any of the oils from California can be distinguished from that of other regions by the carbon isotope ratio.

February 3, 2013 1:54 am

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

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

You are flatly refusing to recognise that “human ingenuity” HAS solved what you perceive as a potential problem. Or, to be precise, that potential problem has been solved for the next at least 300 years. And it cannot be known what – if any – oil will be needed 300 years in the future.
This is explained in my post at at February 2, 2013 at 2:57 pm.

February 3, 2013 1:57 am

E M Smith writes “Willis is absolutely correct in how typical energy commodities respond over time to prices signals. Raise the price, more total production comes into existence.”
From my understanding of Willis’ articles on peak oil, Willis at his heart doesn’t believe in it. He believes we’ll always be able to produce oil from “other sources” and that we’ll be able to do it at a rate that matches demand.
He says “I am making a more fundamental argument, which is that the size of a given resource is a function of the humans, rather than a function of the physical world.”
Well we are seeing price rises and no associated production increases right now. For the economists out there, once the hedging contracts expire I would expect to see prices at the pump begin to increase.
I hope to hell I’m wrong and these price spikes and production plateau are temporary. I really do.
E M Smith says this is due to a global conspiracy of which OPEC plays a part and all the other producers play along rather than increasing supply to ease prices. Apparently the oil cartels aren’t making enough money. And apparently this global conspiracy is conspiring to keep our economies in the holes they’re in because its in the interests of the producers to do so. I dont subscribe to that point of view myself but YMMV.

John Marshall
February 3, 2013 2:25 am

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

February 3, 2013 3:05 am

The whole point though is not whether we have carbon fuel or not…….But whether we intend to use it. Britains energy policy explained here, with easy to follow diagrams….

richard verney
February 3, 2013 3:57 am

E.M.Smith says:
February 2, 2013 at 10:42 pm
On a previous post by Willis on Peak Oil, I commented upon oil extraction from coal process at about US$80 per barrel. For many years it was suggested that this would act as a long stop on the market cost of oil, ie., that long term the market cost of oil would not exceed US$80 pbbl. Obviously, inflation adjustment would become a factor.
The present cost of oil has little to do with the cost of extraction, and more to do with markets which in turn take account of real or imagined geopolitical concerns. Oil companies would, even today, still make healthy profits if the market cost fell by half (eg., down to about US$55pbbl). It is political cartels that are keeping the price artificially high. This is madness: it is mad that the world is forced to needlessly endure unnecessarily high energy costs. It is difficult to put a price on the human missery that has been needlessly caused by this.
It is probably because many still consider that the market price of oil is presently artificially high and will drop in the not too distant future that there is not more investment in the oil from coal extraction. The fact that this technology exists and that oil can be extracted from that process with viable returns at around the US$80 level, and the Icelandic example referred to by Björn says: February 2, 2013 at 8:46 pm, will inevitably mean that long term, the market cost of oil will be kept down.
The geopolitical landscape has now completely changed in view of the extensive discoveries of shale and tar sands all over the world. This will inevitably drive down prices.
By definition, there must inevitably be a Peak, but given that we can theoretically make anything (it being merely a question of how much energy the process requires and thus just a question of price and technology), and the ‘new’ shale and tar finds that Peak has been kicked into the long grass.
As long as the sun shines, we will never, if truly needed, run out of anything. Man’s history shows that it is the advent of new technologies that renders past essentials reduntant. It is the advent of new technologies that will define when Peak Oil is reached.

February 3, 2013 4:14 am

Willis Eschenbach says:
February 3, 2013 at 1:02 am
MorningGuy, if you believe that I think that you better provide a quote, I don’t ever recall saying “price of extraction is not an issue”.
Correct me if I’m wrong but your whole effective premise is that we’ve got endless reserves… well the point of the peakists is that we’ve run out of the easy stuff and are left with the hard to extract stuff – the point you’re missing is that it doesn’t matter that we have effectively endless reserves of methane hydrates as it can’t be extracted economically, and I dare say won’t ever be extracted. Not due to greenies or climate change or anything like that but due to cold hard economics as renewables and solar are getting to cheap.

February 3, 2013 4:15 am

Willis writes “and I’m supposed to ignore all that because you don’t have imagination?”
I do think we’ll diversify our energy sources as we go along but I dont think its all going to be about oil. My gut says that once we do hit peak oil (of the conventional variety plus whatever non-conventional stuff exists) then oil’s days will be numbered and we’ll be increasingly transitioning away from it. I think human ingenuity extends beyond maintaining oil production.
Ultimately my imagination extends to other technologies entirely not to a pond filled with algae.

February 3, 2013 4:35 am

@ E.M.Smith
February 2, 2013 at 10:00 pm
Thanks for the link to the zeolite primer.
Yeah I agree with you, it’s better to use the electricity directly if possible
than use it to convert chemicals to hydrocarbons as there is bound to be a good
deal of kwhr lost in the process. However Iceland outranks all other nations of
the world in installed electric power capacity per capita by large margin at
around 9 Kw installed per head ,it’s f.ex. roughly 3 times the installed
capacity per capita in the U.S.A and 4 times the same for Denmark the often touted
capital of the renewable electricity from birdblenders, and I think we are headed
for a double digit number in this context whithin foreseable future. Around 80%
of this is hydro the rest mostly geothermal the use of which we went in for in
big way orginally to heat buildings and provide hot running water etc, after the arab
oil embargo last century and the steam that came out of the drillholes was so
much warmer than what was suitable for the orginal purpose intended that it had
to be cooled down.Some brigth headed enginer involved with one of the projects found
out that there were an off the shelf closed system electricity generating turbines available
that could be inserted into the cooling process and presto a 10 Mw on the side electric plant
became a reality, at rather insubstantial extra cost to his project, and I think all
the geothermal plants built save the latest one were built mainly to provide hot water with the electricity generation as a kind of side show. Well enough of that I, what I really wanted
say was that i think this methanol project was started orginally as a result of a marching order to our governmment from the European Union in Bruxcelles (Iceland is not an EU member nation, but we are a party to an wider European agrement that allows the ogres of the Behemouth in Belgium to order our government about sometimes ) to mandate that the gasoline sold here was blended with some preordained percents of renewable fuel asap ,and the methanol plant is the outcome of some shopping around for ways to fullfill that order ( and in my view its a better way to go about it than topping up the tank with foodstuff) , but was designed for bigger capacity ,than we need to use internally to keep Bruxcelle happy, to optimize the plants economy, that has then lead to ideas of building another and a far bigger one, for diesel generation to use for our fishing fleet which is the biggest user in the country of that fuel type. I do of course not know what the end there result will be, but if the crude price comes tumbling down within the next year or two , as I suspect it might if the future market players get a case of nerves, i suppose that idea might remain just an idea for the next few years to come, but if it can really be done to a a stable and sustainable tune of half the current crude price it might survive an become a reality.

February 3, 2013 4:52 am

The arguments offered by Thomas Gold in his book “The Deep Hot Biosphere” (especially chapters 3, 4 and 5) seem to me as clear and thorough as they are compelling. I have never seen them rebutted in any way other than by dogmatic offhand dismissals that avoid addressing the arguments themselves — an all too familiar technique. The book is a must read (and a very pleasant one) for anyone with a genuine interest in the matter, regardless of where they stand and what they believe they know.
Some Amazon reviews:

John Doran
February 3, 2013 4:57 am

I love this site. I learn shedloads.
I’ve learned peak horse[snip]. 🙂 Thanks Jimbo, Feb 2 @ 4.04pm.
I’ve learned the eco-freaks have cost us 280 billion dollars. 🙁 ThanksEW3, Feb 2 @ 8.42pm.
Thanks for this post Willis, most enjoyable, most informative, what more can a man ask?
Dont answer that one.:)
The needles are chalk cliffs eroded by sea action into spires near the Isle of Wight off the UK south coast, though I expect you’ve googled that already.
What credence if any do you give to the theory that the Global Warming Scare Scam is tied in with UN Agenda 21, a plan to depopulate this Earth by about 80% – 90%?

Kurt in Switzerland
February 3, 2013 5:05 am

To everyone inclined to take cheap shots at Willis for not willing to “accept” that oil has peaked:
My interpretation of his argument is that the dividing line between “conventional” and “unconventional” is constantly moving. Much of what was unconventional / uneconomical yesterday is conventional / economical today. Some of what is still unconventional / uneconomical today will be conventional / economical tomorrow. Since the extraction costs of petroleum is driven by ingenuity and the sale price is driven by market conditions, look for ingenuity to establish a new benchmark whenever the market price comes to a new level.
As long as the total world production is still on the rise, claiming that oil has peaked sounds rather daft.
Perhaps bar charts comparing quantity extracted as a function of estimated extraction cost per barrel (e.g., by decade over the past half century) would be helpful to visualize the process.
The assumption is that the chart for 1960s would show one or two tall bars at the left, followed by a steep drop off. The chart for the 2010s would show shorter bars at the far left, more bars just to the middle, then a drop off. Look for this “flattening” trend to continue.
Kurt in Switzerland

February 3, 2013 5:46 am

There’s a reason that hydrocarbons are rated in BOE – Barrels of Oil Equivalents. There are at least two reasonably efficient methods of extracting BOEs from coal. There are processes to extract BOEs from tar/tar sands. These two areas send the “Peak Oil” date out so far that you need a perpetual calendar to log it.
Before the POs get their unmentionables in a wad – IT PROBABLY WON’T HAPPEN AT THE CURRENT PRICE POINT!
Willis, if a publisher hasn’t got you under a contract already for what most of us here think is a fantastic life story, TANJ! Your writings and life story have got to be work upper six figure $s.
The whale blowhole story is the best single written anecdote I’ve ever read.

Gail Combs
February 3, 2013 5:53 am

“The fracturing technology was developed about forty years ago, and has been used ever since, mostly for secondary recovery. And for all those decades the oil coming from the fractured rocks has been “conventional oil”.”
Actually “fracking” was invented just after the Civil War.

Shooters – A “Fracking” History
For more than 100 years, nitroglycerin detonations increased a well’s production from petroleum bearing formations. Modern hydraulic fracturing technology can trace its roots to April 25, 1865, when Civil War veteran Col. Edward A. L. Roberts received the first of his many patents for an “exploding torpedo.”
In May 1990, Pennsylvania’s Otto Cupler Torpedo Company “shot” its last oil well using liquid nitroglycerin – abandoning nitro but continuing to pursue a fundamental oil field technology.
Although President Rick Tallini remains in the business of improving oil wells’ production, today’s fracturing systems are much advanced from Lt. Col. Edward A. L. Roberts’ original 1865-1866 patents…..
Today, about 30 percent of U.S. recoverable oil and natural gas reserves are accessible through hydraulic “fracking” – about seven billion barrels of oil and 600 trillion cubic feet of natural gas….

An ice history of “fracking” and the technological advances of oil field production.

David L. Hagen
February 3, 2013 5:58 am

The benefit of multi-hubbert analyses is in predicting the likelihood of availability of fuel from given resources.
See: Exponential growth, energetic Hubbert cycles, and the advancement of technology, Tad W. Patzek, Archives of Mining Sciences of the Polish Academy of Sciences, May 3, 2008
Economist James Hamilton documents the oil production in each of the US States/regions. See:

Oil Prices, Exhaustible Resources, and Economic Growth. This paper explores details behind the phenomenal increase in global crude oil production over the last century and a half and the implications if that trend should be reversed. I document that a key feature of the growth in production has been exploitation of new geographic areas rather than application of better technology to existing sources, and suggest that the end of that era could come soon. The economic dislocations that historically followed temporary oil supply disruptions are reviewed, and the possible implications of that experience for what the transition era could look like are explored.

Note that the International Energy Agency 2012 now shows crude oil production peaked in 2005.

February 3, 2013 6:03 am

re your post at February 3, 2013 at 3:05 am
In case some people missed the chance to click your wonderful link, I copy it here to give them another opportunity to have the joy of it.
Absolutely brilliant! I really did need the laugh today so many thanks.