[W]hy are petroleum prices so high? Although some commentators are quick to blame oil companies or speculators, the main factor keeping the price of oil above $100 a barrel is supply. Yes, OPEC frequently reminds us that the oil market is continue reading…
This is the fourth in a series of posts [* links below] examining the latest entry straight from the playbook on peak oil denial—that seemingly never-ending attempt to ignore facts, mis-/under-inform readers, or create ever-rising levels of non-credible optimism.
[NOTE: Any quotes in this series are taken from the above-referenced Manhattan Institute paper unless otherwise noted. Links to sources/citations/footnotes within those quotes are located in the original report.]
This post examines the issue of forecasting.
~ ~ ~
Just wondering: the Manhattan Institute author devoted several paragraphs to what he labeled “doomsday energy predictions,” including the by-now almost obligatory smack down of 1972’s The Limits to Growth with their allegation that the book “predicted that the world would be out of oil by 1992 and out of natural gas by 1993”. Unfortunately, there’s the truth about this allegation conveniently overlooked, as Ugo Bardi points out here and here.
These assertions are another in the line of arguments deniers make all the time as evidence that those of us urging greater awareness and understanding of peak oil are constantly wrong. There’s wisdom in the financial world’s cautionary adage that “Past performance is no guarantee….” Extrapolating statements of some along the way as blanket projections by all is convenient, but accurate? Not so much.
By the way, what makes the deniers’ forecasts any more certain?
It’s more than a bit curious that they consistently and conveniently overlook their at-least-equally sorry-ass track record of predictions (see this, also), which shows a healthy and regular deviation from the ultimate outcomes. But then again, evidence does muck-up a good ideological narrative.
I mentioned at the beginning of this series (and in most of my discussions about peak oil denial) that the absence of context and a fuller recitation of facts are certainly helpful, but only if not explaining all the essential details is the motivation. For instance, the Manhattan Institute paper offered this statement:
… (C)onsider what has actually happened. Between 1980 and 2011, global natural gas production increased by 129 percent, and oil production jumped by 33 percent. What happened? Why were so many forecasters—including the chairman of Exxon, one of the world’s biggest and most technically savvy companies—so wrong? The answer: all of them underestimated innovation in the Oil Patch.”
Although it’s not uncommon to find variations of these statistics from different sources, let’s agree that the numbers above are correct. There’s no question that production in certain areas at various times in those past thirty years has increased. What’s not mentioned: increases here in the U.S. are still well-below the 1970-1971 peak as predicted (correctly) by the often-maligned M. King Hubbert; and crude oil production has been on a plateau for almost a decade. Among many analyses detailing that fact is this [ links in original quote ]:
US Energy Information Administration (EIA) data confirms that despite the US producing a ‘total oil supply’ of 10 million barrels per day, up by 2.1 mbd since January 2005, world crude oil production and lease condensate – conventional production – remains on the largely flat, undulating plateau it has been on since it stopped rising that very year at 74 million barrels per day (mbd).
The IEA’s ‘World Energy Outlook’ actually corroborates this picture – but the devil is in the largely overlooked details….
[T]he report’s projected increase in ‘oil production’ from 84 mbd in 2011 to 97 mbd in 2035 comes not from conventional oil, but ‘entirely from natural gas liquids and unconventional sources’ (and half of this from unconventional gas including shale) – with conventional crude oil output (excluding light tight oil) fluctuating between 65 mbd and 69 mbd, never quite reaching the historic peak of 70 mbd in 2008 and falling by 3 mbd sometime after 2012. 
And Robert Rapier offered this:
Because U.S. production has fallen over the years (even though production has been rising, 2011 production was still 31% below the peak level of 1970) and because global production has risen, the U.S. percentage of global crude production has declined from 24% in 1970 to 9% in 2011….
One final note about oil production that gets very little attention is the fact that the 83.6 million barrels produced in 2011 is of a lower quality than the 32 million barrels produced in 1965.
Saudi Arabia’s production is in decline [see this discussion of mine with its additional references]; conventional crude oil fields continue their inexorable depletions ** [a critical fact never mentioned by peak oil deniers—all the more critical since current rates of production from shale aren’t exceeding those rates of decline and depletion, leaving us essentially on a treadmill—as China/India demands screw up the math even more); current oil exporting nations are keeping more of their production to meet domestic needs, as Jeffrey Brown takes great pains to explains via his Export Land Model (see this, along with other links and Jeffrey’s clarification in the Comments), and so the challenging future we urge officials and the public to consider more carefully rounds into shape because of reality. An amazing concept!
Amazing too is how a fuller offering and explanation of facts provides a different perspective on energy supply reality.
More to come….
** [Kurt Cobb has a nice summary here]
~ My Photo: Key West, FL – 02.24.06
* links to prior posts in this series:
 http://truth-out.org/opinion/item/13629-age-of-cheap-oil-abundance-a-myth; Rosy Forecast of Cheap Oil Abundance, Economic Boom a Myth by Dr. Nafeez Mosaddeq Ahmed – 12.31.12
As anyone with even marginal interest in the future of fossil fuel production knows, the International Energy Agency’s [IEA] recently-released World Energy Outlook 2012 offered some exuberant assessments about American production in the years to come. The prediction is that in a handful of years, the United States will become Numero Uno once again in oil production.
A small sampling of recent headlines shows no small measure of delight in some quarters at the news:
US oil production hits 15-year high
Remembering “Peak Oil” Madness
A Cause for Thanksgiving, Part I
A Cause for Thanksgiving, Part II
World’s oil industry won’t be the same in the wake of shale
Bakken revolution is only half-complete
The story of plenty is yet to be realised
Sounds so wonderful, doesn’t it? Almost all of our problems have been solved! Any day now, we can only hope that the tens of thousands of climate scientists and related peers will fess up and tell us that they had indeed engineered an elaborate plot to try and convince the world that our planet was warming for reasons they’ll soon divulge. Can’t wait! All that’s left is for reputable economists and leaders on the Democratic side of the aisle to admit that they’ve been making up charts and evidence for close to three decades, and that yes indeed, tax cuts for the 2%-ers [a/k/a “job creators”] does indeed trickle down to the rest of us, and thus the illusion of the Great Recession and unemployment/inequality woes have just been figments of our imagination.
President Obama will thus have no choice but to finally admit that he and three close friends from his days as a gay Kenyan Muslim community organizer engineered an elaborate scheme of their own to steal the last two elections (mind-control was involved, for those who must know); that in fact he has no real birth certificate because he was not born on this planet (he and his mother conspired to make him a “terror baby” just weeks before his pod-hatching), and that he indeed will convert us all to Communist Islam Socialist Liberalism as soon as he personally removes all guns from the possession of every gun owner in America. (It’s expected that he will wait until the first week of January to do this, after changing the laws so that everyone is taxed at a rate of 83%.)
Back to the main topic….
As for the so-good news about our energy future, I prefer the more accurate assessment offered in this headline:
Peak oil, peak bullshit
Recent posts of mine—among others—have been pointing out some of the other commentary and information contained in that IEA Outlook (that annoying fact stuff) which gives us pause before jumping on the bandwagon of good news. Not that we don’t want to believe it, despite what some will surely argue. As I’ve stated on numerous occasions, I would really like to be wrong about my take on Peak Oil. I enjoy a very nice lifestyle which Peak Oil is sure to screw up royally, so there’s no incentive on my part to be a “doomer.” I’d prefer we just take a more careful look at the facts and perhaps make a plan or two….
To that end, ASPO (Association for the Study of Peak Oil) President Kjell Aleklett recently examined the IEA report and offered up some commentary of his own. Of course, his current role as ASPO President and “Professor in Physics at the Department of Physics and Astronomy, Global Energy Systems Group (former Uppsala Hydrocarbon Depletion Study Group) at Uppsala University” should not be taken to mean he knows much about the subject. I’m sure former insurance executive and now U.S. Senator James Inhofe could teach Dr. Aleklett a bit about energy production and climate change in one sitting, just to set him straight.
For purposes of this article, however, I’m going to give Dr. Aleklett the benefit of the doubt, and let you ponder a few of his observations about the information and statements contained in the IEA Outlook which serve in part as the basis for its optimistic assessments of future oil production:
Around 50% of the USA’s crude oil production in 2035 is to come from fields yet-to-be found. New regions must be opened up for exploration.
In common with all attempts to describe future market trends, the projections in WEO-2012 are subject to a wide range of uncertainties. Indeed, it is unlikely that the future will follow any of the precise paths described in our scenarios. But that is not the aim of the WEO: none of the scenarios is a forecast. Each is intended to demonstrate how markets could evolve under certain conditions. How close those scenarios are to reality not only hinges on how well the model represents the way energy markets work and the validity of the assumptions that underpin that model, but also on the occurrence of ‘game changer’ events in the economy at large….
When reading articles about the findings in WEO-2012, these scenarios, although not forecasts, are treated as being the truth….
The majority of the oil we consume is crude oil and this statement from WEO-2012 should be noted by all: ‘Crude oil output from those fields that were in production in 2011 falls by close to two-thirds, to only 26 mb/d by 2035 (Figure 3.15). Thus, the projected production of 65 mb/d in 2035 requires almost 40 mb/d of new capacity to be added over the projection period. Of this capacity, 26 mb/d, or 66%, comes from discovered fields yet to be developed, most of which are in OPEC countries, and the remaining 13 mb/d from fields that have yet to be found, mainly in non-OPEC countries.’
Is there any possibility at all—any—that Dr. Aleklett (among others critical of the Outlook) might possess at least some vague working knowledge of the information reported and might thus be at least marginally correct in his assessments? If we’re willing to grant him that at the very least, wouldn’t it make sense to start some conversations at a broader level to determine if we might/should consider a plan or two … just in case he’s right?
Granted, it’s only our, and our children’s, future well-being that we’re talking about, so it’s not as though it’s anything of importance. But just to give us all something to do on the weekends, perhaps some plans might be kicked around?
* My Photo: Good Harbor Beach, MA – 09.04.05
There’s been a fair amount of rejoicing in some circles of the energy world in recent weeks on the heels of the wildly optimistic forecasts for future oil production as contained in the recently-released 2012 World Energy Outlook by the International Energy Agency (IEA). As if the generous expectations weren’t enough, miracles of miracles the good ‘ol U S of A is predicted to once again be Number One in world oil production in less than a decade.
Peak Oil is history! Hooray for us. The Magic Technology Fairy has come through just in the nick of time. What a holiday gift for everyone; those gas-guzzling SUVs should start flying out of showrooms any day now.
But every now and then, a little rain must fall on parades. Facts and reality have made their way into the dialogue about our future “energy independence.” A slightly different story results when those in the know take a look behind the International Energy Agency’s curtain.
Yes, United States’ oil production has risen in recent years. No one disputes that. However, few in the media and fewer still who should know better (and most likely do), decide against telling the whole story. Why bother to let the rest of the world know that the rise in oil production still leaves us many millions of barrels per day short of our 1970 production peak? [It goes without saying that those who deny the facts never get around to pointing out pesky little factoids such as the IEA’s own caveats, or that it is once again asserting a portion of the increase in U.S. oil production will come from fields “yet-to-be found.” Good to be optimistic!]
Adding liquids to the production totals which should not be factored in adds another feel-good element to the story of oil abundance, but that’s not exactly the truth, either.
[N]atural gas liquids are not equivalent to oil. They contain only about two-thirds of the energy content of oil; they are far less versatile in their applications; and only about 19 percent of a barrel of natural gas liquids is actually usable as vehicular fuel. If the implication is that the U.S. is going to be able to drive around on its own domestically-produced fuel, then that implication is simply wrong.  [See this also].
So while gushing over our marvelous ingenuity and technological prowess in having revolutionized oil production by utilization of “fracking” to blast open shale formations and release oil trapped in the layers [a very simplistic explanation of what is actually a complex process], those who deny the reality about our fossil fuel resources never get around to sharing important details which most of us should be aware of. Who benefits when the details are omitted, shaded, or hidden? Fairly certain it’s not you or me….
Even just a few more of those damned annoying facts dull the luster of the feel-good news. And I won’t begin to discuss the environmental issues associated with fracking, our ongoing failure to invest more aggressively in alternative energy options, or the effects on climate change—but thank goodness that’s a “hoax” perpetrated by tens of thousands of scientists who are scheming to … ah, do things in … um, certain ways to … ah, get some … uh, benefits of some kind.
[I’d highly recommend reading the articles cited in the “Sources” section below to get the full picture….]
Recent US news reports have highlighted the fact that US oil production has been rising and is now higher than it has been in years. Reports that highlight the recent US oil production increase don’t mention that oil production outside of Texas and North Dakota has actually declined in the last few years….
It appears to me that in the near future, the prime producing area within the four [North Dakota] counties is going to be saturated with oil wells considering that the fracking wells being used can extend up to approximately 2 miles. Assuming that the industry continues to add new wells rapidly, they will have to go to less fruitful areas outside of the prime producing area.
Oil wells in the Bakken region decline rapidly. From data I’ve seen, the average decline in the first year is ~60%. The only way to maintain or increase Bakken oil production is to rapidly increase the number of wells.
As the industry has to drill in less fruitful areas, being able to maintain production will become an increasing challenge. 
[P]resently the commercial profitability for new wells is barely positive.
The ‘average’ well now yields around 85 000 Bbls during the first 12 months of production and then experiences a year over year decline of 40% (+/-) 2%
The recent trend for newer ‘average’ wells is one of a perceptible decline in well productivity (lower yields)
As of 2007 and also as of recent months, the total production of shale oil from Bakken, has shown exceptional growth and the (relatively high) specific average productivity (expressed as Bbls/day/well) has been sustained by starting up flow from an accelerating number of new wells
Now and based upon present observed trends for principally well productivity and crude oil futures (WTI), it is challenging to find support for the idea that total production of shale oil from the Bakken formation will move much above present levels of 0.6 – 0.7 Mb/d on an annual basis.
Authoritative research companies (like Bernstein Research) and widely acknowledged specialists/institutions like USGS and SPE have recently and in general arrived at identical conclusions by applying different sets of methodologies and from studying other areas….
The wells normally have a high production at start up that rapidly enters into steep declines.
To facilitate growth in total production an accelerating number of wells needs to be brought into production.
To sustain a plateau requires a continual addition of a high number of producing wells. 
One reason the WEO 2012 estimates are unreasonable is because the oil prices shown are unrealistically low relative to the production amounts forecast in the report. This seems to occur because the IEA misses the problem of diminishing returns. As the easy-to-produce oil becomes more depleted, and we need to move to more difficult reservoirs, the cost of extraction increases.
In fact, there is evidence that the ‘tight’ oil referenced in Exhibit 1 is already starting to reach production limits, at current prices. The only way these production limits might be reasonably overcome is with higher oil prices–much higher than the IEA is assuming in any of its forecasts.
Higher oil prices cause a huge problem because of their impact on the world economy. The IEA in fact mentions that current high oil prices are already acting as a brake on the global economy in its first slide for the press. Higher oil prices also mean that investment costs required to reach target production levels will be even higher than forecast by the IEA, adding another impediment to reaching its forecast production levels.
If higher prices put the economies of oil importing nations into recession, then oil prices will drop lower, reducing the incentive to invest in new oil production infrastructure….
There are other issues as well. If there is a need to drill an increasing number of wells just to stay even, or an even larger number, to increase the amount of oil produced, we start to reach limits on many kinds: number of rigs available, number of workers available, miles driven for water to be used for fracking. Perhaps the issue that will limit production first, though, is limits on debt available to producers. Rune Likvern has also shown that cash flows from tight oil extraction tend to run ‘in the red,’ so an increasing amount of debt financing is needed as operations ramp up. At some point, companies hit their credit limit and have to stop adding new wells until cash flow catches up. 
But wait, suggests the IEA, there’s still one wild card hope out there: Iraq. Yes, Iraq. In the belief that the Iraqis will somehow overcome their sectarian differences, attain a high level of internal stability, establish a legal framework for oil production, and secure the necessary investment and technical support, the IEA predicts that its output will jump from 3.4 million barrels per day this year to 8 million barrels in 2035, adding an extra 4.6 million barrels to the global supply. In fact, claims the IEA, this gain would represent half the total increase in world oil production over the next 25 years. Certainly, stranger things have happened, but for the obvious reasons, it remains an implausible scenario. 
I’ll ask the same question I and others have asked on countless occasions: Wouldn’t it be a good idea to do a bit of planning for something other than fossil fuels as our energy supplier?
* My Photo: low tide at Good Harbor Beach, MA – 11.13.12
 http://www.smartplanet.com/blog/take/us-will-not-surpass-saudi-arabias-oil-production-by-2020/268; U.S. will not surpass Saudi Arabia’s oil production by 2020 by Chris Nelder – 11.28.12
 http://peakoil.com/geology/a-closer-look-at-bakken-and-u-s-oil-production/; A Closer Look at Bakken and U.S. Oil Production by Roger Blanchard – 11.21.12
 http://www.theoildrum.com/node/9506; Is Shale Oil Production from Bakken Headed for a Run with “The Red Queen”? by Rune Likvern – 09.25.12
 http://ourfiniteworld.com/2012/11/13/iea-oil-forecast-unrealistically-high-misses-diminishing-returns/; IEA Oil Forecast Unrealistically High; Misses Diminishing Returns by Gail Tverberg – 11.13.12
 http://truth-out.org/news/item/12988-world-energy-report-2012-the-good-the-bad-and-the-really-truly-ugly; World Energy Report 2012: The Good, the Bad, and the Really, Truly Ugly by Michael T. Klare – 11.27.12
(A continuation of my two posts from last week)
In this third and final part of my look at The Hirsch Report, a series of “Wildcards” (all from p. 63) were offered which the authors believed might have the effect of either minimizing the adverse consequences of Peak Oil (“Upsides,” which were covered in my last post), or making it much worse (“Downsides”). I’ll offer a comment or two on the “Downsides” today, as they apply to current conditions.
“World oil production peaking is occurring now or will happen soon.”
Two words: Already there.
“Middle East reserves are much less than stated.”
As I wrote in Part 2 of this series on The Hirsch Report: “After decades of already-questionable representations and a complete inability for outside sources to verify those stated reserves, we shouldn’t be counting on more magical discoveries or even a half-rational explanation as to how Middle East reserves magically increased by substantial amounts when OPEC production quotas were changed in the 1980s to tie in with stated reserves: higher reserves = more oil allowed to be sold = more revenue.” What’s the more likely and logical answer? Seems pretty obvious to me….
“Terrorism stays at current levels or increases and concentrates on damaging oil production, transportation, refining and distribution.”
Terrorism is of course always an issue, sad to say. Given the current political turmoil throughout the Middle East, it may be a more pronounced consideration than it has been in recent years. More likely, however, the general discord in that region is cause enough for concerns about oil production and related issues. Recent price spikes are but one indication of how fragile our supply sources have become.
“Political instability in major oil producing countries results in unexpected, sustained world-scale oil shortages.”
Hello! As of this writing, significant sustained shortages are not an immediate concern, but there’s no doubt that if the upheavals in the Middle East spread into Saudi Arabia in particular, we may very well be dealing with that kind of a crisis very quickly.
“Market signals and terrorism delay the realization of peaking, delaying the initiation of mitigation.”
The same considerations stated above would apply here as well, although evidence that we’ve reached peak seems clear enough. Whether our leaders and the majority of citizens realize (or at least acknowledge) it is a different issue. Initiating mitigation is not a concern because we haven’t even gotten there, yet, and that is a problem having nothing to do with market signals or terrorists.
“Large-scale, sustained Middle East political instability hinders oil production.”
I’m thinking there isn’t a need for me to say much about this….
“Consumers demand even larger, less fuel-efficient cars and SUVs.”
There are indications that this is exactly what is happening now. I don’t think we’re prepared yet to underestimate the sense of entitlement which governs much of our behavior—notwithstanding a solid body of evidence about climate change and the ongoing challenges we face in providing adequate energy resources for increasing demand.
“Expansion of energy production is hindered by increasing environmental challenges, creating shortages beyond just liquid fuels.”
This is certainly within the realm of possibility. Increases in oil shale production here in the U.S., along with increased production from the tar sands of Canada notwithstanding, the amounts available now and for a number of years to come is not going to meet demand. Oil depletion from existing fields marches on, and just maintaining current levels of supply is challenging enough.
I won’t bother reiterating too many of the points I and others have raised in recent months about current oil supplies and future prospects. Suffice it to say, demand has exceeded discovery for several decades now; “giant” oil fields discovered in recent years aren’t even close to matching the giant oil finds of forty, fifty, and even seventy years ago. The fact that we continue to rely on those giants many, many decades after their discovery ought to raise at least one obvious question: How much longer can they produce at current/past rates? (See this good summary.)
I wrote this more than a year ago, and it’s safe to assume the situation is not any better today: “Cantarell in Mexico has long been considered of the supergiant oil fields on the planet. As recently as 2004 it was producing about 2.5 million barrels a day of oil, and about half of that was shipped here. Production has fallen off a cliff since then, and in 2 – 3 years, it’s expected that production will have declined by close to 80%. Aside from the enormous financial, political, and social problems that will create for our neighbor south of the border (Cantarell was the major source of income to the Mexican government), this also poses a dilemma for us. Where and how do we make up that shortfall?”
“According to the report [the International Energy Agency’s World Outlook 2010], by 2035 three quarters of currently operating oil fields won’t be producing anymore. In fact, current fields are only expected to account for less than one fifth of that year’s production.
“That leaves over 80 per cent of the IEA’s 2035 production projection coming from new oil fields, ones that either haven’t yet been developed or haven’t even been discovered. And the contribution from that undiscovered category alone is still far greater than the one from currently producing fields. That’s a tall order for new field discovery.
“Undeveloped or undiscovered oil fields, growth in tar sands production and increased reliance on natural gas liquids account for all the expected growth in world oil production over the next two and a half decades.” 
Spin is good only for so much and for so long. The sooner we recognize the challenges we’ll be dealing with in the not-too-distant future, the sooner we can start having an intelligent, meaningful, and productive national dialogue about what we need to do. Now is as good a time as any, because later won’t be a better alternative.
 http://www.huffingtonpost.com/jeffrey-rubin/even-the-international-en_b_787450.html; Even the International Energy Agency Forecasts Peak Oil by Jeffrey Rubin – November 23, 2010
(A continuation of Monday’s post.)
In this second part of my look at The Hirsch Report, I’d like to focus on the advice and conclusions Dr. Hirsch and his colleagues offered, as they now apply to current conditions.
“It is possible that peaking may not occur for several decades, but it is also possible that peaking may occur in the near future. “We are thus faced with a daunting risk management problem:
• On the one hand, mitigation initiated soon would be premature if peaking is still several decades away.
• On the other hand, if peaking is imminent, failure to initiate mitigation quickly will have significant economic and social costs to the U.S. and the world.
“The two risks are asymmetric:
• Mitigation actions initiated prematurely will be costly and could result in a poor use of resources.
• Late initiation of mitigation may result in severe consequences.” [p. 59-60]
Given the magnitude of the transition away from a fossil fuel-based economy to one in all likelihood requiring combinations of alternative sources of energy—depending on the region and industry—it’s fair to wonder whether any mitigation efforts can be considered “premature” at this point. With 70% of our transportation needs currently being met by fossil fuels, the effort to convert and/or implement alternative plans to satisfy that personal and commercial demand alone will require years of effort … more than a decade in all probability. At this point, absent some magical intervention by energy angels, we are simply too late into the game to prepare ourselves for an effortless shift away from fossil fuels.
That being the case, the sooner we begin the process of planning and implementing (with due regard for the testing and ramping up of new sources of energy), the fewer problems we will nonetheless have to contend with, and the lesser their severity … I hope. It makes no sense to delay for any reason at this point, as we can be certain that there will be some disruptions to our economy, industrial production, and lifestyles as the full brunt of declining oil production seeps inexorably into almost every facet of our ways of life.
There are almost no legitimate assessments which suggest we’re still decades away from Peak Oil. Any time frame shorter than that will be a problem. Let’s not add more problems on purpose because of ignorance or delusion that a rescue is just around the corner, or that we can afford to wait. We can’t.
While we still have at least a sufficient supply of fossil fuel resources, let’s begin the process of re-designing/re-creating our transportation and industrial infrastructures to accommodate alternative energies. Diverting existing resources to those efforts will cause enough hardship as it is. Let’s not make it any worse for ourselves by waiting for the resource pie to get even smaller.
The Hirsch Report offered up a series of “Wildcards” (all from p. 63) which might have the effect of either minimizing the adverse consequences of Peak Oil (“Upsides”), or making it much worse (“Downsides”). I’ll offer a comment or two on each, starting with his “Upsides” in this post. I’ll cover the “Downsides” in my next post.
“The pessimists are wrong again and peaking does not occur for many decades.”
The simple answer is that this wish and hope is extremely unlikely at this point. I’ve yet to come across a single credible report from any authoritative source suggesting anything of the kind. Given that the International Energy Agency ‘s World Energy Outlook 2010 report concluded that Peak Oil occurred five years ago, this is probably not a good bet. (See this and this.)
“Middle East oil reserves are much higher than publicly stated.”
After decades of already-questionable representations and a complete inability for outside sources to verify those stated reserves, we shouldn’t be counting on more magical discoveries or even a half-rational explanation as to how Middle East reserves magically increased by substantial amounts when OPEC production quotas were changed in the 1980s to tie in with stated reserves: higher reserves = more oil allowed to be sold = more revenue. Funny how that all worked out….
“A number of new super-giant oil fields are found and brought into production, well before oil peaking might otherwise have occurred.”
After decades of exploration with all the advanced technology available (and several decades of demand exceeding discoveries—see this), it would be borderline delusional to think that there might still be any such fields remaining. Most recent discoveries of “giant” oil fields turn out to be not nearly as impressive when those annoying facts are added to the discussion.
“High world oil prices over a sustained period (a decade or more) induce a higher level of structural conservation and energy efficiency.”
While energy efficiency (including higher mileage standards) are more frequently discussed, there are indications that the auto industry is already balking at raising mileage standards, and that consumers are not exactly racing to purchase the most fuel-efficient automobiles. With one of our major political parties having already taken the oh-so-mature and visionary step of returning Styrofoam packaging to the House of Representatives’ cafeteria rather than continuing to use recyclable materials (they sure showed us, right?), the education process is a long way from being complete.
“The U.S. and other nations decide to institute significantly more stringent fuel efficiency standards well before world oil peaking.”
A legitimate question to ask is: What’s the likelihood of getting any such agreement at this point? We can’t get everyone (meaning the fact-free GOP) to get on board with greenhouse gas emission standards … we can’t even get them to accept climate facts! “Drill, baby, drill” sums up their energy policy … facts about its at-best questionable value as a solution notwithstanding, of course.
“World economic and population growth slows and future demand is much less than anticipated.”
A possibility, of course. One has to wonder if slowing economic growth is what any of us should be actively rooting for, however. The truth is that it’s likely going to happen in any event. I’m advocating that we ought to actually plan ahead for that eventuality rather than just “count” on it as a possible solution to Peak Oil. I won’t go down the road of population growth except to state that it might be wise for at least some of our leaders here—and across the planet, for that matter—to at least wonder once in a while just how many resources they think this planet has left to provide for an approaching nine billion citizens.
“China and India decide to institute vehicle efficiency standards and other energy efficiency requirements, reducing the rate of growth of their oil requirements.”
Clearly this is not beyond the realm of possibility (and certainly China has taken many steps already in that direction as it is, exhibiting an understanding about the need for energy efficiency and the future which seems notably lacking here in the States—highlighted by a recent Pew Research Center report indicating that China now accounts for almost half of the world’s solar modules and wind turbines). That option alone won’t do the trick, however. But any contributions from major population and energy-consumption regions are a step in the right direction.
“Oil prices stay at a high enough level on a sustained basis so that industry begins construction of substitute fuels plants well before oil peaking.”
Two words: too late. Besides, sustained high fuel prices will curtail demand, which curtails profits, which curtails incentives for investments, which….
“Huge new reserves of natural gas are discovered, a portion of which is converted to liquid fuels.” See this recent post.
“Some kind of scientific breakthrough comes into commercial use, mitigating oil demand well before oil production peaks.”
Two words: too late. For all the astonishing technological breakthroughs mankind has introduced into the marketplace, hoping for that breakthrough here and now which will quickly replace a substantial majority of the 80+ million barrels of oil we use each and every day borders on the insane. Hoping for it to even slowly replace that oil is not much better. Certainly there is a great deal of research and innovation taking place as I write this (not nearly enough in the United States, unfortunately … tough to do when funding is reduced because the Magic Economic Fairy has decided that doing less for our future prospects is the best way to ensure more for our future), but we are many, many years away from successful invention, production, testing, implementation, and full commercialization of anything that could do the trick. Miracles do happen now and then, but if that’s our primary strategy, we are in some deep sh_t.
Crisis, or opportunity?
To be continued….
As I have been consistently urging in most of my posts in recent months, planning for what happens in the wake of Peak Oil’s arrival must become a national priority—and not just one for Congress. This is an all-hands-on-deck necessity, and every day we choose not to begin the complex, lengthy process of figuring out how to adjust to a world where the basic energy source for almost everything that we’ve produced in the last 100+ years will no longer be available as we’ve come to expect and demand is another day of almost certain difficulty for all of us. That’s not a good formula for growth and prosperity in the years to come.
Given what is at stake, I thought it might help readers new to the Peak Oil discussion to review the observations and suggestions of one of the seminal works of the past decade (see a prior discussion here). Back in 2005, energy advisor Robert L. Hirsch and his colleagues, on behalf of the federal government, issued a report entitled “The Peaking of World Oil Production: Impacts, Mitigation & Risk Management”—commonly cited as the Hirsch Report—sponsored by the National Energy Technology Laboratory of the Department of Energy (PDF here). The Hirsch Report offered an informative assessment of the then-current state of oil/fossil fuel production in the early part of the 21st Century. Of greater importance, it presented a clear warning about the potential consequences if we all fail to plan for the day when oil production has begun its inevitable slide down the slope from its peak.
According to the International Energy Agency (IEA), peak oil production occurred about a year after the Hirsch Report was released. Not good.
The Hirsch Report begins with a stark advisory:
“The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking.
“Dealing with world oil production peaking will be extremely complex, involve literally trillions of dollars and require many years of intense effort.” [p. 4]
Among its key recommendations, the Report suggested that a “crash-course” of mitigation efforts would need to be undertaken at least a full decade before Peak Oil’s arrival in order to avoid many if not all of the drastic challenges and consequences brought about by declining oil production and the availability of fossil fuels to meet our (increasing) needs. If the IEA assessment is correct—and there’s no reason to believe it is not substantially accurate as is—then we are already five years behind in preparing ourselves. Not good.
“Intervention by governments will be required, because the economic and social implications of oil peaking would otherwise be chaotic.” [p. 5]
“Prudent risk management requires the planning and implementation of mitigation well before peaking. Early mitigation will almost certainly be less expensive than delayed mitigation.” [p. 6]
That’s just for starters. “Less expensive” seems to be out as an option for us now. What kind of “intervention” by governments might be needed has by all indications not yet been considered—at least publicly, as I discussed in my last post. That should be cause for concern.
A quick acknowledgement about how much of our nation’s transportation depends on a ready supply of inexpensive gas and oil suggests even to the entirely uninformed that adapting to the post-Peak Oil world is at a minimum going to be a monumental undertaking of almost-indescribable complexity … in other words, a big challenge! The transportation aspect is not just about dependence on our personal vehicles, either. A significant percentage of our produced goods are transported via trucked freight, and there’s a fair amount of air travel to keep in mind as well. This sobering observation offers plenty of motivation:
“We cannot conceive of any affordable government-sponsored “crash program” to accelerate normal replacement schedules so as to incorporate higher energy efficiency technologies into the privately-owned transportation sector; significant improvements in energy efficiency will thus be inherently time-consuming (of the order of a decade or more).” [p. 24]
So what’s the Plan? Business as usual and a whole lotta hope ought to be off the table already. Denial and ignoring it in the hopes it will just go away aren’t of much help, either. Three questions posed to readers [p. 10] when the report was issued have even greater relevance today. Do we have answers yet?
“What are the risks of heavy reliance on optimistic world oil production peaking projections?
“Must we wait for the onset of oil shortages before actions are taken?
“What can be done to ensure that prudent mitigation is initiated on a timely basis?”
Optimism is fine and well … up to a point. Believing that we’re doomed is not the best starting point, so a recognition that with great, concerted effort we may still be able to count on our nation’s great intellectual and cultural resources to lead the way is certainly advisable. But that notion alone, without planning and then implementation, is not much more than an empty platitude. Obviously waiting until we’re up to our eyeballs in Peak Oil’s impact and consequences is not the preferred approach, but time’s a-wastin’. We’re damn close to that point now.
“[D]oing the research required to bring new technologies to commercial readiness takes time under the best of
circumstances. Thereafter, more than a decade of intense implementation will be required for world scale impact, because of the inherently large scale of world oil consumption.” [p. 7]
Ensuring prudent mitigation is one of the key topics I’ll be devoting scores of posts to in the coming weeks and months. Suffice it to say, leaving it all up to our nearly-useless Congress without a great deal more involvement on our parts is a sure strategy for not-so-pleasant consequences which I don’t want to give even a first thought to. We need to start having difficult, painful, but honest public conversations about what happens in the years to come when the oil and gas we rely on every day is simply no longer as available as it has been for decades. There’s no getting around that fact.
“Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades.” [p. 59]
That outcome ought to be scaring the bejesus out of us right about now—to least enough for us and our leadership to get off our asses and start having those conversations and putting plans into place starting today. That phase alone is going to take many months of thoughtful consideration and an examination and understanding of what makes our industries productive and successful, and in turn affords us the myriad options and opportunities we’ve enjoyed for decades. Plan B for all of that is not going to be the end result of a couple of chats at someone’s weekend retreat.
The concluding advisory is not comforting given how inadequate our preparation has been to date:
“In summary, the problem of the peaking of world conventional oil production is unlike any yet faced by modern industrial society. The challenges and uncertainties need to be much better understood. Technologies exist to mitigate the problem. Timely, aggressive risk management will be essential.” [p. 7]
We’ve past the point where “aggressive” is called for. Whatever comes after aggressive is where we need to be, and soon.
I don’t like the thought of crash-program anything, but with oil production having at a minimum plateaued half a decade ago, the signs are not good for a return to business as usual. A minor bump-up in production from oil shale is not a reason for concluding that the Peak Oil problem can again be put to bed. We need to have the courage and wisdom to recognize that, and then begin the process of putting our magnificent talents and the ethics and creativity of our peers to work as we lead the way into the post-Peak Oil world.
Crisis, or opportunity?
To be continued….
[NOTE: This is the latest installment in a new PeakOilMatters series (which started here). It’s about finding a new and better vision to get to, through, and beyond Peak Oil and its widespread impact on what we produce, how we produce, and how we live. We won’t be falling off a cliff tomorrow, and the full brunt of Peak Oil’s effects won’t be experienced all at once, either. Gas and oil do not have to disappear entirely, nor do gas prices have to rise into the stratosphere before Peak Oil’s impact is felt.
Gradually, but inexorably, changes will be in the offing, however. We need to come to a better understanding of this, and start preparing ourselves now for the lengthy transition and just as lengthy ongoing impact of Peak Oil on all of us. Many issues must of necessity be considered, and I hope to make a contribution to the public dialogue we need to have. I hope you’ll find these objectives enjoyable as well as beneficial. We have more of a voice than we think we do. Finding that voice just might be our best hope.]
Before I dive into a series of posts discussing general objectives as the next step in this ongoing “New Direction” series (and other issues of note), I thought it might make sense to give us all just a few simple reminders about where we stand with Peak Oil. About a year ago, I posted the first of several pieces discussing some basic facts in support of my position that we’re now in the early stages of irreversible declining oil production. It’s a good starting point, if I do say so myself.
More recently, Sharon Astyk posted a genuinely terrific article (which I blogged about at the time) which offered a refreshing take on the peak-oil-is-here-no-it’s-not debate. If you haven’t read it, I wholeheartedly encourage you to do so in conjunction with this. It is really good and stands up just as well as it did when she wrote it several months ago.
“A major reason for the rising prices and flatlining production is that for ‘the currently producing fields of crude oil, the production will decline,’ [International Energy Agency Chief Economist Fatih} Birol said.
“Today's active oil fields produce about 70 million barrels per day, but by 2035, he said, ‘they will produce less than 20 million barrels per day of oil.’
“Just to keep crude oil production flat would require much more production from new oil fields—including those discovered but not yet developed, and others still to be discovered.” 
This quote follows release of the IEA’s World Energy Outlook 2010, in which the Agency admitted for the first that Peak Oil is in fact here, and has been since 2006. Oops! That report also predicts that almost half of the oil we’ll need by 2030 will have to come from oil fields not yet developed or found! Hello!
And as Jeff Rubin noted in his own review of that IEA report,
“According to the report, by 2035 three quarters of currently operating oil fields won’t be producing anymore. In fact, current fields are only expected to account for less than one fifth of that year’s production.
“That leaves over 80 per cent of the IEA’s 2035 production projection coming from new oil fields, ones that either haven’t yet been developed or haven’t even been discovered. And the contribution from that undiscovered category alone is still far greater than the one from currently producing fields. That’s a tall order for new field discovery.
“Undeveloped or undiscovered oil fields, growth in tar sands production and increased reliance on natural gas liquids account for all the expected growth in world oil production over the next two and a half decades. Curiously absent from this list is any contribution from conventional oil production–you know, the type you can afford to burn in your car, the type the global economy can afford to use to power transoceanic trade?”
None of this is good news, and the contortions one has to perform so as to convince others that there are no oil supply issues on the horizon would seem to be at best pointless. Reliance on unconventional resources such as oil shale, the Canadian tar sands, deep-water wells (anyone remember that little oil spill in the Gulf of Mexico last year?), and other reserves carries its own set of risks and challenges.
None of those alternatives are guaranteed to even replace what’s being lost each year just from normal depletion in existing fields, much less provide more; they are more expensive to locate and produce; the efforts needed to extract and then refine them are significantly greater than traditional oil production; it’s taking longer to bring the final product to market because of the inherent challenges in extracting those unconventional reserves (see this and this, for example); the net energy from those efforts (simplified: what’s left from the energy expended to extract vs. the energy potential gained) is much less; it’s costing so much more to obtain the same quantity and quality of energy efficiency as conventional oil, and there’s that little problem of environmental damage….That’s just for starters.
Let’s not forget that the world-wide recession of recent years has sharply curtailed investment in oil exploration—conventional or otherwise. Oil exploration and production is not a two week start-up to final production undertaking. Delaying needed investments by several years sets the entire industry back by at least that much … and while all of that is happening, demand continues to increase for a supply that simply is not expanding any longer. No matter how one does the math, the results are not good.
It’s become a common refrain that “the days of cheap oil are now behind us.” That does not bode well for countries hoping to regain their economic footing while their citizens clamor for more energy to meet their increasing demands for all kinds of products and services they’ve watched U.S. citizens enjoy for decades. Who wants to tell those several billion people “No”?
It’s also worth noting that recent turmoil in the Middle East has made it quite clear that we are in many respects largely dependent on suppliers who are less than stable or reliable. [Michael Klare recently offered a very informative piece on this topic.] The political calculations and consequences of continuing instability (and hostility to America) are not insignificant. A related consideration which gets too little attention is that oil-exporting nations also have their own citizens’ demands to provide for. Those exporters are not immune to the desires of their own people to improve their living conditions and prospects for prosperity. Who wants to tell those nations “We insist you supply the United States with what we need before you satisfy the requirements or demands of your own people?” Good luck with that!
As the domestic needs of exporting nations increase, the simple math result is that they will this have less oil to export. (A nice summary of the key points is here.) That’s not terribly shocking or difficult to appreciate, but what it means to nations like ours (as it relates to the by-now familiar statistic is that we consume approximately one-fourth of oil supplied each year) is that we’ll be getting less. Our demand for increases matched against less being supplied to us does not lead to good outcomes.
Finally, before this concise summary turns into an epic novel, I’ll direct you to one final article which provides readers with a generous amount of information about oil production and existing oil reserves. Jim Puplava, the author, provides a concise perspective on some key, fundamental aspects about the oil fields we continue to rely on after decades of production. As I touched on in my own above-referenced post, and as Mr. Puplava highlights, we are relying on fewer and fewer giant oil fields whose replacements simply cannot match the quantity and quality of those ever-depleting giants.
It is not a formula that gives optimists much to hang their hats on.
 http://news.nationalgeographic.com/news/energy/2010/11/101109-peak-oil-iea-world-energy-outlook/; Has The World Already Passed Peak Oil? by Mason Inman – November 9, 2010