Guest Post by Willis Eschenbach
Dramatis Personae:
The “EIA” is the US Energy Information Agency, the US agency in charge of data about energy production, consumption, and use. It has just released its January 2014 Short Term Energy Report, with current and projected oil production figures.
And “M. King” is Marion King Hubbert, the man who famously predicted in 1956 that US annual oil production would peak in 1970, and after that it would gradually decrease.
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So why is the King meeting the EIA? Figure 1 shows why.
Figure 1. US crude oil production. Data from 1965 to 2013, projections for 2014 and 2015. As is customary, “crude oil production” includes what are called “natural gas liquids”. Data from the BP Statistical Review of World Energy and the EIA.
Now me, I see that as a testament to human ingenuity, as fantastic news for the planet, and as another example of the futility of betting against said ingenuity. As my dear dad used to say, “Imagination is free.”
I don’t really have much more to say about this great news, other than I see it as a huge opportunity for the poor. The implications are clear. Cheap energy is the salvation of the poor, and this can only be good news for them … not to mention good news for the rest of us as well.
Best regards,
w.
PS—Folks, don’t bother telling me it is “unconventional oil”. That is a meaningless distinction, invented by supporters of Hubbert’s peak oil theory, to try to salvage Hubberts moribund claims. For example, when fracking was done in vertical wells for fifty years, it was counted as “conventional oil” … but now that the drilling is done horizontally, suddenly fracking produces “unconventional oil”. And given that for many centuries oil was collected from surface seeps, in historical terms all modern oil production is “unconventional”. See my post Conventional Wisdom, Unconventional Oil for a full discussion.
PPS—If you disagree with something that I or someone else said, please QUOTE EXACTLY WHAT THE PERSON SAID in the comment where you discuss your objections. I can’t tell you how many times I’ve been attacked over things that I never said … so quote it if you want to discuss it. I’m going to get more hard-headed on this one, I’m tired of picking spitballs off the wall. I’m happy to defend my words if I know which ones you are talking about … but I can’t defend your interpretation of my words. Quote it or lose it.
Hi Willis … how many weeks sea time do you have as commercial fisherman (not including sport stuff)?
stanb999 says:
January 12, 2014 at 2:27 pm
.
OK, I’ll bite.
If not “exactly” what is required by the actual, current, will-pay-for-it worldwide market for oil, lubricants, petro-chemical feedstocks, transporation and infrastructure (asphalt and grease and paint, etc.) … Exactly what “should be” the worldwide production of crude oil be?
The world’s economies ARE DELIBERATELY being restrained or limited BY the CAGW religious zealots now in charge across the western economies (US, UK, France, Germany, Netherlands, Norway, Sweden, Canada, NZ, etc) – with only a fgew exceptions in the Czech Republic, Australia, (and perhaps underlings in Texas, North Dakota, and Montana) …. So, why should worldwide oil production be one single barrel higher than it is now being regulated to by these CAGW controllers?
Oil “reserves” will NEVER be any higher than what can be developed and marketed economically within 6 years, and NEVER will be higher than what is needed at each day’s current prices. Any cheaper source – whether in-ground oil instead of whale oil, Texas oil ratehr than Ontario (the first drilled wells, Pennsylvania shallow-ground oil seeps, or Texas Spindletop high-pressure salt dome wells, Texas Permian Basin regional wells, or Saudi deep wells) will always be chosen over other existing but more expensive sources –
And those older-but-more-expensive-sources will ALWAYS still remain un-exploited-but-in-place until prices rise. So, if old wells could only be produced until 85% was left in the rocks, that 85% is still there. If today’s well can produce until “only” 60% is left in the rock, then we have expanded resources, but not exhausted them.
We just are not using it.
Yet.
There are 2,000,000,000,000,000 tons of copper in the continental crust. Copper is readily recycled and it is estimated that at least 80% of the copper ever mined is still in use today.
Most metals have similar stories. All the metals that were here 4.4 billion years ago are still here. There is no peak metal-anything. (okay maybe a few elements but there are world-scale metal mills that operate on nothing but recycled metals).
Hi Willis,
I would like to add two comments on Hubbert and his 1956 paper, “Nuclear Energy and the Fossil Fuels” which is available at
http://energycrisis.biz/hubbert/1956/1956.pdf
As you point out, Hubbert can certainly be criticized for his too-confident predictions for natural gas. No one has shown any skill at predictions for natural gas. And Hubbert’s crystal ball really failed him on the role of nuclear power, which he viewed as being the dominant source of power by now. That didn’t happen.
However, in his paper, Hubbert was quite specific in his curve of future US crude-oil prediction. He excluded natural gas liquids, shale oil, and tar sands for technical reasons, even though he viewed them as significant. It is also clear from his discussion of Illinois production in the paper that he was respectful of the potential for new technology. From that perspective, I wouldn’t ding him too hard on the recent tight oil production. As you point out, from the consumer’s perspective, it is all oil, but Hubbert was speaking from a geophysicist’s perspective to an audience of petroleum engineers. To that audience, the difference matters.
Dave
Gunga Din says:
January 12, 2014 at 1:00 pm
I’m 59. Well on my way 60. Since I was old enough to pay attention I can’t remember a time when somebody out-there wasn’t screaming some alarm about whatever energy civilization used. Oil. Nuclear. Hydro. The “alarm” always seemed be rooted in some kind of “environmental” impact. Sometimes, at the start, there was a concern for people but it always morphed into something that put “nature” ahead of people.
_______________________
I’m glad to see that you young people have been paying attention.
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I’ll trade you my “three pronger” for your “four pronger”. 😎
Wisdom isn’t guaranteed with age but age helps.
(Trial and error. More time to find out out what doesn’t work.)
tty, I gave you the proper URL. You used a table showing liquefied products from refineries which includes imported crude oil, which is about 40% of the total. Hubbert was talking about crude oil for USA fields not from refineries.
I’d like to say that I expected people would be responding to things Willis didn’t say or imply. What he wrote is not in dispute here. Mostly what is disputed are things that are being projected upon his statements. His claim which got some people so upset was “Now me, I see that as a testament to human ingenuity, as fantastic news for the planet, and as another example of the futility of betting against said ingenuity.”
+++++++
That statement has not been honestly contested by anything anyone has written in regard to this post. There is no Gaussian curve of oil production –because of human ingenuity. The naysayers are fighting an ideological battle. There was no disrespect as far as I can see it here on Willis’ part. As he said, this “a testament to human ingenuity, as fantastic news for the planet.” I agree.
So why I ask are so many people so upset?
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Hit a nerve.
@Willis Eschenbach 12:35 pm
Do you just do your best to ignore the facts, Stephen, or are you actually immune to them?
That was uncalled for.
michel says:
January 12, 2014 at 12:52 am
“Hubbert would probably argue that exactly the same pattern will follow with natural gas, extracted through fracking or whatever.”
You are wrong about what Hubbert argued. This man was thoroughly familiar with the geology of petroleum in the US and believed that there could be no major reservoir undiscovered that would be large enough to postpone his “pimple”. Naturally, oil shales were know but there appeared to be no economic way to produce these “tight” resources. Here is what he argued:
http://www.hubbertpeak.com/hubbert/tribute.htm
“”A child born in the middle 30s,” Hubbert told reporters, “will have seen the consumption of 80 percent of all American oil and gas in his lifetime; a child born about 1970 will see most of the world’s [reserves] consumed.” ”
I met King Hubbert in 1976. He was an honorary guest at an energy conference dealing with lithium – Was there enough reserves and resources for an Li-electric car future in 90s to new millennium? was the the theme. He was in his 70s then and already celebrated for his work in predicting accurately (it seemed at the time) the peaking of US oil production in 1974, 20 years before this date.
At a “mixer”, I asked him what he thought we would do to deal with the decline. He remarked in essence that he felt there was nothing to worry about. Man’s ingenuity would find a way. It always had. He was a darling of such as the club of romers, but he definitely wasn’t of their mentality.
Gunga Din says:
January 12, 2014 at 3:57 pm
Mario Lento says:
January 12, 2014 at 3:42 pm
So why I ask are so many people so upset?
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Hit a nerve.
+++++++++++
Yes – I agree!
I am hoping people will be candid / honest enough to state what they think, rather than project on Willis things he did not say. If what Michel (for example) wants is to force us to believe there is a problem and make solar panels and wind turbines, I want her to say it. For she is stubbornly obfuscating from the conversation.
David Ball says:
January 12, 2014 at 8:24 am
Willis Eschenbach, E.M Smith and Richard Courtney, bravo.
Agree!
Good article, good discussion, and many interesting contributions from commentors….
Some commenters seem to have missed the key point: the up-slope in the graph is in US production, not US consumption. This is a graph about the US reducing the rate at which it is sending its wealth to foreign nations in exchange for oil.
Willis,
Great article.
Some people cannot accept the facts and still want to convince the weak minded that the US is not in an oil boom. The Government has done everything in it’s power to destroy oil production including reduced production from Federal lands, regulating fracking, illegally stopping production in the Gulf, threatening more taxes, and inventing endangered Prairie chickens.
You have schooled all who still believe in peak oil.
Oil is not, in fact, cheap at all. Brent, the global oil price, is running at $107 / barrel just now. And that’s after two years of blow-out shale oil production growth. It hasn’t budged oil prices. And there’s a reason for that. US shale oil and Canadian oil sands production growth together are more than 100% of global supply growth in the last five years. The legacy oil system (everything other than US shale oil, Canadian oil sands, and natural gas liquids)–94% of oil crude oil production even today–peaked in 2005, and has declined by about 1 mbpd (million barrels per day) since then. In the meanwhile, we will have spent close to $3 trillion (trillion–more than the GDP of Itay) on exploration and production on this legacy system since that time.
And this shows on the consumption side. US oil consumption is still 2 mbpd (about 9%) lower than it was in 2005; European consumption is about 14% lower. The advanced economies have been forced out of oil consumption markets by high prices, and since the beginning of the recession (Dec. 2007), advanced country (OECD) consumers–not producers, mind you, but consumers–have provided half of the incremental consumption of the emerging economies.
As for the shale outlook, if you look at the EIA forecast, you’ll see that they forecast US shale production peaking before 2020, and the pace of growth declining from here on out. Indeed, if you do the math in the EIA’s newly inaugurated Drilling Productivity Report, you’ll see that the decline rates for shale oil plays are on the order of 50-70% per year. In other words, if we stop drilling, shale oil production will collapse almost overnight.
So, shale oil is certainly welcome. It is a key enabler of US GDP growth, in my opinion. However, it is far from clear that shale extraction is profitable for the producers, that it can be sustained over a longer period, and the US experience can be replicated elsewhere. Meanwhile, claims by Ken Deffeyes, Hubbert’s disciple and Prof. emeritus of Geology of Princeton University, that the oil supply of 2005 would peak in 2005 have held up, and the vast increase in upstream spend over the last seven years has not been able to reverse this trend.
Perhaps technology will save us, but importantly, shale oil has not. In the bigger scheme of things, shale has only modestly moved the volume needle in global terms, and has been unable to affect international oil prices materially. It may be a nice icing on the cake, but the cake remains as it was in 2005.
“Meet the man who revolutionized oil and gas production around the world. Richard Findley, who decided to try horizontal drilling and fracking in a near-by related formation at Elm Coulee, Montana.
And this was just the year 2000. Although horizontal drilling and fracking has been done for decades, it was Findley who decided to try both together. The result is the reason for the fracking revolution.”
The real revolution came with the invention of sliding sleeves. That allowed horizontal bores to be fracked cheaply.
JR says:
January 12, 2014 at 2:46 pm
No clue, JR, but it’s years of sea time, not weeks … a couple of years of fishing nights for three weeks a month for anchovies, a couple of years doing the same for pompano, a half-season working albacore, four seasons skippering a succession of salmon trollers four months out of the year, three seasons fishing salmon in the Bering Sea in Alaska, two seasons fishing herring roe in San Francisco and Togiak (AK) … plus other odds and ends of short-time fishing gigs.
Regards,
w.
Stephen Rasey at 10:26 am
Hubbert’s curves gave warning that prices must rise.
Willis Eschenbach at 12:35 pm:
(shows a graph of Gasoline prices, nominal and real)
Then includes a gratuitous piece of nastiness:
Do you just do your best to ignore the facts, Stephen, or are you actually immune to them?
My reply:
Here is a Graph of 1869-2011 Oil Prices (Const 2010-$) from WTRG where I added Hubbert’s 1956 paper and his predicted peak oil of 1965-1970.
In the chart, the 2010-Constant $ price of oil is
$19/bbl in 1956, the date of Hubbert’s paper
$14/bbl in 1970, the last year of Hubbert’s 1965-1970 peak period.
$44/bbl in 1974, (Arab Oil Embargo)
$37/bbl in 1977, Trans Alaska Pipeline first oil.
$73/bbl in 1979, Iranian revolution
$22/bbl in 1986, peak Trans Alaska Pipeline production.
$35/bbl to $95/bbl from 2003 to 2008.
A couple of other dates of note:
Aug 15, 1971 – Nixon Wage Price Freeze for 90 days…. That lasted 1000 days in Phase One through Four.
Summer 1972 – Gas lines in Denver, Co
Late 1973 Arab Oil Embargo and everyone in the US had gas lines.
In the 40 years from 1973 to 2013, the constant $ price of oil was below the $19/bbl of Hubert’s publication on only three years, 1993, 1999 and maybe 1998. In no year was it ever as low as the $14/bbl of the peak.
Here is a second similar chart in 2013 constant $ froom inflactiondata.com Here 1999 is the only year in the last 40 where the price was lower than Hubbert’s peak.
I said in this thread, “Hubbert’s curves gave warning that prices must rise.” A logical conclusion from Hubbert’s work was that once a rising demand curve met a constant or declining supply curve past the production peak in 1965-1970, prices would likely rise. The history of oil prices shows they did rise above the prices between Hubbert’s publication data of 1956 and his predicted peak oil of 1965-1970.
Stuart Elliot says on January 12, 2014 at 7:50 am
Thank you Stuart and Happy New Year!
Best regards to you and your family, Allan
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HI Willis,
Apologies for the spelling error – posted at 4:24am my time, pre-coffee. Mea culpa! Mea culpa! Mea maxima culpa! Can we move on? 🙂
It took remarkable courage for Hubbert to make his very public prediction in the go-go American oil industry at that time, especially a prediction that his industry was about to go into “irreversible decline”.
Another brilliant man, Henry Groppe of Groppe Long and Littell of Houston has been running similar analyses on petroleum basins all over the world for decades, with considerable success. http://www.groppelong.com/index.htm
Hubbert took flak for many years for his bold prediction. Similarly, you can bear witness to the vicious treatment accorded to global warming skeptics over the past decades. Nobody likes it when you mess with their cherished beliefs, or their rice bowl.
A prediction like Hubbert’s that lasts for fourteen years is about as good as it gets, especially in our fast-moving technological age.
As I said above, if you develop a new unforeseen technology that makes a previously untapped resource economic, then you just start another Hubbert’s curve.
The math may not be perfect, but I suggest that for the time, Hubbert’s was a remarkable achievement.
I think too many people extrapolate “Hubbert’s Peak” concepts in ways he would not have supported – he was clearly much smarter than that.
Best regards, Allan
Stephen Rasey says:
January 12, 2014 at 4:00 pm
You are likely right, Stephen … but I fear I’ve grown weary of people casually making assertions like your claim that
without taking the few minutes needed to check if their claim has any basis in fact.
In the case of your claim that resource prices “must rise”, offered without a single scrap of evidence to back it up, even a few moments searching should have shown you that prices in constant dollars have not risen for oil or almost all other extractive commodities. That’s how Julian Simon won his bet.
So, my apologies for the direct statement, but you didn’t do your homework …
w.
Some EIA numbers for you.
Current daily world oil consumption is end of 2103 – 90 millions barrels per day.
This is 30 billion barrels per year.
The US consumption figure is around 20 million barrels per day.
New discoveries are running a little over the 30 billion barrels per year.
Consumption is increasing about 2 -3 % per year – in this economic climate. This means that the yearly demand will double in a little over 30 years. If the world’s economic climate returns to a boom or back to “normal levels” then you can expect that the yearly oil product demand will also increase ergo : the 30 year demand doubling period will be shorter.
Peak oil will theoretically be reached when the demand exceeds the discovery of new recoverable resources. Many industry experts have put this time frame of being somewhere between 2020 an 2030.
The figure bandied around for the current recoverable world reserve is between 800 million and 1.3 trillion barrels – depending on which expert you talk to.
Finding a billion barrels here or five billion barrels there is just a few days supply. The reality is that trillions of barrels must be found before the end of 2040.
As someone has already posted. Recoverable oil is all based on the economics. So in reality those stated reserves are moot.
I seem to remember the oil price going up to around 150 -160 dollars a barrel back in 2008. That didn’t go down too well did it?
At least as long as the U.S. owns the world reserve currency and oil is priced in those same U.S. dollars and the Fed can print as many of them as required then we should all be hunky dory.
I worked in the oil industry back in the seventies. The consensus was then that oil supply would be in short supply by the end of the century. Bit like the scientific consensus of an imminent ice age. Certainly the oil field I worked at had a life of 25 years – it actually lasted 30.
Gary Pearse says:
January 12, 2014 at 4:04 pm
Thanks, Gary. Given that the US proven oil reserves have been steady for the last forty+ years at ~ 30 billion barrels, I can’t even begin to imagine what he means by “all American oil and gas” … because we don’t know either how much that is, or what he is referring to. Does he mean the consumption plus the proven reserves in the year he made the prediction? Does he include shale gas? Does he include unproven reserves?
In any case, the problem isn’t Hubbert, who was a very bright and imaginative man … the problem is in the less logical of his devotees.
w.
More on my note: “Summer 1972 – Gas lines in Denver, Co”
I lived through that. I remember it as an isolated problem, but the Wiki quote below indicates it might have been a problem in a few other areas as a result of Nixon’s Wage/Price controls and the brand new concept of “Oil Oil” (price fixed) and “New Oil” (able to get a higher price). It didn’t take long for people to realize their oil was more valuable left in the ground to be sold another year.
May we never live in a period with such economic stupidity. (But I fear we may all too soon.)
c1ue says:
January 12, 2014 at 2:39 pm
I’d also note that a significant part of the already existing increase in oil production isn’t new wells, it is fracking performed on existing wells. Why does this matter? Because in this case, the production is literally only accelerating what was already going to be produced.
Or in other words, robbing Peter to pay Paul.
Actually, fracking and re-fracking also brings the recovery factor up, producing oil which would have been left behind. I hear that argument over and over, usually on some internet forum. I never hear it from a reservoir engineer. I have an interest in wells in North Dakota which are producing more than they did thirty years ago. Without modern techniques they would have been plugged by now.