Peak Oil Matters

Continuing with my recent theme of getting readers to recognize more “I didn’t think of that” moments as they relate to Peak Oil (while avoiding any kind of structured or overly-detailed approach that might discourage readers from continuing on), today I’d like to discuss the ubiquitous laptop/personal computer.

These almost-mandatory-for-our-lifestyles products are in no small measure made out polycarbonates and synthetic plastics—petrochemicals … oil. Microchips and housings and keyboards and many of the assorted other elementary components essential to the manufacturing of one of our greatest inventions do not exist without fossil fuels.

How many hours a day do you use this marvel of ingenuity and vision and technology? How many different uses and applications do you employ in the normal course of your day without thinking even once about your computer’s ready availability and its relative affordability? Turning on our computers at home and/or at work has become as commonplace and as taken for granted as brushing our teeth.

Can you imagine what your work and personal life would be like without the computer you rely upon to simplify work and daily living a hundred different ways?

So when we soon enough begin the inevitable decline of oil production owing to geology, geopolitical events, economic factors, natural depletion rates, business investment decisions (take your pick)—while we’re simultaneously confronted with increasing demand from other parts of the world for an ever-decreasing supply—who loses out?

When we no longer have at the ready all of the oil each and every one of us needs to satisfy all the demands and preferences and expectations of industry as well as our own lifestyles, what are we prepared to sacrifice? What if you now had to share one computer with your entire family or with the co-workers in your office or department? Are you prepared for that kind of possibility?

What production limitations is Dell or IBM or Apple going to impose when they no longer have the needed quantity of petrochemical-based components they need to manufacture their products in amounts sufficient to match demand—let alone the fossil fuels needed to run the machinery that builds and delivers their products?

Who in the distribution chain is either going to be left out entirely or forced to make all kinds of accommodations to a decreased supply of fossil fuels they need to manufacture and transport their own pieces of the puzzle? When the quantity of component parts is curtailed because we simply no longer have enough oil to satisfy the industrial food chain and thus personal and business demands for all kinds of computers can no longer be met, how are we to decide which components, suppliers, transportation modes, manufacturers, marketers, stores, and consumers have priority in the supply and acquisition of computers?

Is the investment department of your financial services firm more deserving of a couple of computers than the business you run, or the emergency room of your local hospital? Multiply that scenario by the countless legitimate needs of your family members and friends and acquaintances and local and national and international businesses, and then imagine what happens when someone has decreed that the computer industry and the entire supply and distribution chain it relies upon will from now have to make do with 15% or 25% or 40% less of everything needed to meet demand because oil producers worldwide simply cannot meet demand any longer.

What happens then?

How is this all supposed to work itself out of we don’t start taking steps to recognize the limitations and challenges we’re going to face and begin doing something about it now?

Do we really want to wait until we are forced to try and implement last-minute plans and endure drastic changes? Keep in mind that I’m just presenting a casual overview of personal computers. Multiply the disruptions by the countless products we all use every day….

How are we going to even produce all of these items when we don’t have enough fossil fuels to meet the production and transportation and marketing and delivery processes? How many people lose their jobs along the entire distribution and production chain when Apple and Dell and all the others simply cannot manufacture enough laptops to meet demand because their suppliers can’t meet their own quotas?

Which businesses along the chain of computer manufacture and distribution have to revise their business practices because they no longer have a sufficient number of computers to match and meet the needs of their employees? Which departments get shortchanged? How do you undo the benefits of computer technology required to manufacture and distribute those very products—benefits we completely take for granted now?

How much re-configuration and re-invention of the entire computer manufacturing and distribution process will be needed to meet demand if suppliers and manufacturers and all the other necessary parties have to figure out how to make do with either less energy resources or alternative energy sources that simply do not match the efficiency and productivity of fossil fuels?

What kind of substitutions might then be available to these computer manufacturers? What cost increases would be associated with alternative components? What kind of restructuring would be needed up and down the supply and distribution chains? How quickly can this entire chain of revised production and distribution fall into place?

The reality is that in the not-too-distant—as oil supplies continue their decline and manufacturers everywhere and in all industries are obliged to re-configure the work they produce and the products they supply—we will have nowhere near the alternative sources of energy in place to effect seamless transitions for manufacturing and delivering computers.

What happens then?

I spent some time on Friday catching up on my readings for the week, and came across several terrific articles that just happened to tie in quite nicely with the themes discussed in a series of posts I recently concluded.

I think it’s worthwhile to give those articles a little extra publicity. They will help provide readers with a broader perspective on what will or has to happen with Peak Oil looming on the horizon.

First up is a very nice piece by David Roberts, addressing points recently made by Microsoft founder Bill Gates. For those who think technology is going to save the day, Roberts presents a thoughtful essay on why technological innovation alone is not the answer.

As I have discussed, the solutions are going to come about and succeed only if we all contribute. What will happen in the wake of Peak Oil is not a problem we can pass on to our business and political leaders and then wait patiently for them to decide and do for us.

This is about as succinct and accurate a statement of what will have to be as you’ll find (from David Roberts):

“The point is that the way we live together now, the way we govern ourselves, the way we arrange our physical spaces and our commerce, the way we do economics and measure prosperity—all these have to be changed in creative ways if we want to achieve the goal of sustainable prosperity. All these changes require … wait for it … innovation. Innovations in the way we think, interact, and structure our lives require just as much imagination, intelligence, persistence, and funding as innovations in technology.”

What also cannot be overlooked, despite the fact that events across the waters tend to be removed from our immediate consideration, are geopolitical factors that will indeed play a role in the continuing availability of oil to meet all our needs.

In the second part of his discussion, Professor Ferdinand E. Banks discusses not only some basic facts about decreasing oil production; of greater significance are the OPEC strategies he highlights. Like many other nations, countries in the Middle East have their own ambitions and economic objectives, many if not most of which will require oil to realize. The more oil the exporting nations decide to keep for themselves as they seek to meet their industrial and societal aims, the less the rest of us have to use.

It’s their oil, and if they decide they need it more than they need the petrodollars provided by exports, there won’t be a hell of a lot any of us can do about it. The shortsighted “drill, baby, drill” strategy isn’t going to help much over the next decade if that scenario plays out, as is likely.

A related political component is one raised in an informative article from The Economist.

Although most knowledgeable experts legitimately question the feasibility of Iraq’s stated goals of quintupling their oil production in these next few years, any successes that nation achieves by significantly expanding their production capabilities will have a measureable impact on OPEC politics and production quotas. If it influences or affects OPEC, it influences and affects us.

The article does a much better job of cogently explaining the prime issues than I could in attempting a summary. I’ll recommend that you read it to help you understand what impact successful Iraq oil production will have on the dicey politics of oil.

Last up: a warning from two major international investment institutions that oil prices are likely to rise soon; and a related piece from The Oil Drum’s Gail Tverberg on what happens to households and businesses in the wake of those higher prices.

Peak Oil is not just about the amount of oil in the ground. For those of us who hope to inform and educate others about the likely consequences of Peak Oil, these recommended articles offer vital details on the factors that do play just as important a role as do the billions (or trillions) of barrels of oil that may still lie beneath our feet.

We don’t have the luxury of cherry-picking which Peak Oil element we get to address. They’re all related, and the convergence of some or all of these factors (economic, geopolitical, technical, production, etc.) can only have adverse effects on our economy and living standards. We can pretend otherwise, but that accomplishes little here in the real world.

The more we incorporate these broader and related perspectives in our understanding of Peak Oil and the necessity for planning now on how to deal with its impact, the better served we’ll all be when reality intrudes

Sources:

http://www.grist.org/article/2010-02-17-why-bill-gates-is-wrong-on-energy-and-climate/ - Why Bill Gates is wrong by David Roberts (Published Feb 17 2010 by Grist)

http://www.oilprice.com/article-more-about-oil-part-2-opecs-strategy.html – More About Oil (Part 2): OPEC’S STRATEGY; Contributed By : Ferdinand E. Banks Published : 15th Feb 2010

http://www.economist.com/world/middleeast-africa/displaystory.cfm?story_id=15549365&fsrc=rss – Iraq, Iran and the politics of oil - Crude diplomacy; Feb 18th 2010 | BASRA AND UMM QASR From The Economist

http://www.theoildrum.com/node/6226#more – Peak Oil: Looking for the Wrong Symptoms? Posted by Gail the Actuary on February 18, 2010

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7266837/Barclays-and-Bank-of-America-see-looming-oil-crunch.html – Barclays and Bank of America see looming oil crunch By Ambrose Evans-Pritchard; February 18, 2010

I came across this very nice piece at The Oil Drum today, written by David Murphy (here). His discussion about energy transitions is well worth considering (and happens to be a nice corollary to issues I raised in my last post, among others). It’s a terrific summary of significant changes in the history of mankind’s progress, and offers meaningful objectives for all of us to contemplate as we move away from fossil fuel dependency.

Waiting for magic technology to save the day will guarantee a wait, but not necessarily anything else.

Hello again!

In my last post, I took a brief look at some of the facts suggesting that we are indeed at or very near the point when our planet’s maximum rate of oil production has been reached.

Today, I’ll point out some of the more popular arguments here in the U.S. disputing Peak Oil. As I’ll do with the information from my prior post, I’ll likewise expand my examination of this material in future discussions.

Four popular arguments against Peak Oil are discussed below (although they are not necessarily the primary debating points). In no particular order, these refutations are as follows:

• there are billions if not trillions of barrels of “unconventional” oil in the shale deposits of the western United States
• there are comparable amounts of unconventional oil in western Canada (the oil or “tar” sands of Alberta), and thus the  combination of these oil resources will supply us with all the oil we need for hundreds of years
• the Arctic region/Arctic National Wildlife Refuge (ANWR)/offshore areas here in the U.S hold billions of barrels of oil
• technology will be developed to boost oil production in existing fields or aid in the discovery of as-yet undiscovered fields

While reminding you that I lack the professional expertise of an engineer or geologist, I nonetheless do not challenge the range of estimated oil resources touted in the Alberta oil sands and America’s oil shale deposits.

Where I take issue is that the related facts and details about production and extraction of shale and sand are all too often conveniently omitted when these massive resources are hailed as the solution to any oil supply problems we might face. Just throwing out the phrase “trillions of barrels” is at best disingenuous. (Despite other arguments suggesting similar amounts of conventional oil reserves, most experts state with about 90% certainty that there are about 1.2 trillion barrels of crude oil reserves. [1]) Resources are not the same as reserves. There are no guarantees that “resources” can ever be successfully produced.

In more than thirty years of attempted production, about 110 million barrels of oil have been produced from oil shale (principally in the Bakken region of Montana and North Dakota). [2] That’s not per year. That’s a thirty-plus year total. (Our nation uses somewhere around 20 million barrels per day; worldwide the usage is approximately 85 million barrels per day). No one has yet managed a commercially viable method of production. One hundred and ten million barrels doesn’t sound quite that impressive when you stack that up against daily usage.

Most experts, even the most optimistic ones, suggest that it will be decades before oil production from oil shale reaches as much as 200,000 barrels per day. With demand expected to rise to over 100 million barrels per day in the next two decades (ignoring depletion rates in existing fields entirely, which the International Energy Association’s World Energy Outlook 2008 estimated at 6.7% a year and rising [3]), that’s not much of a dent.

Most underdeveloped nations aren’t especially inclined to wait a few more decades to improve their lot. Certainly China and India aren’t idling! Demand will increase, supplies will become more strained, and problems will ensue.

Similarly, most experts have pegged maximum lifetime production from the Alberta tar sands at a total of less than two hundred billion barrels. Not an insignificant amount to be sure, but it will take many decades to extract it all. Even the most optimistic supporters of oil sand production don’t expect production rates of more than a couple of million barrels per day—and that is many, many years down the road.

That won’t help much. It’s even less significant when you factor in the environmental degradation wrought by oil sands mining (as will be discussed in an upcoming post). The amounts of water and natural gas required in the process of extracting oil from the sands will cause its own set of problems in the not-too-distant future. Soil and water contamination issues are also prevalent.

As for the Arctic and offshore areas, there may indeed be “significant” finds, but … hello! Exactly how easily and efficiently is that going to be achieved? How many hundreds of billions of dollars and how many years and how much effort will it take if those areas do turn out to be a bit of a boon once again?

There are reportedly about 10.5 billion barrels of oil available in the ANWR, and tens of billions of barrels offshore. Natural topography and climate alone mean that herculean efforts would be needed … and none of that is free! Experts tell us that offshore fields (ignoring the immense difficulties of extraction/production) decline faster and sooner than fields on land.

If we have to go to those lengths and expenses to locate and produce oil, what does that tell you? No expertise required … just a bit of common sense.

Let’s not ignore the fact that as oil exploration becomes more challenging, expensive, and time-consuming, the energy required to locate and extract the oil increases as well, and thus the net energy gained is much less. Crude oil is a remarkably productive source of energy, and for all the talk about oil from the sands and shale, the return on those sources of energy is minimal in comparison. We’ll need a lot more of those resources to produce the same amount of work as crude oil.

As for technology, if one pays attention to the language used, there’s a lot of “potentially’s” and “maybe’s” and “could’s” and “might’s” liberally sprinkled through the optimistic declarations that peak oil is not an issue. My own favorite is “future discoveries of ‘superfields’ of conventional oil reservoirs could boost world production.” [4] Uh, well … ah, yes, I guess that’s true. Not exactly a solution we can count on, though. Future discoveries that indicate we can get oil from mattresses or hats could also boost world production, but….Need I say more?

The notion that higher gas prices will spur development of new technologies conveniently ignores the fact that there are not oodles of new technologies hiding in laboratory closets just waiting to be loosed on planet Earth next week. I have no doubt that technology will continue to improve the quality of our lives, but technology developed and perfected for commercial usage requires time, energy, effort, and money—among other things. What might prove economically or practically feasible 5, 10, 15, or 50 years from now isn’t of much help … now!

There are legitimate and not-so-legitimate arguments for and against peak oil, and like most complicated issues in this day and age, trying to figure out what is right and what is rightfully ignored is no easy task. I’ll do my best in future posts to help you sort through it all and assist you in coming to a better understanding of Peak Oil and its implications.

Next: Some Related Considerations About The Peak Oil Debate

Sources

[1] http://www.canada.com/montrealgazette/news/saturdayextra/story.html?id=153514b8-0a4f-47d8-a68f-24e779264fcd&p=3
        The age of oil is ending – WILLIAM MARSDEN
[2] http://www.theoildrum.com/node/3868
        The Bakken Formation: How Much Will It Help?
[3] http://www.aspousa.org/index.php/2008/11/a-peak-oiler-but-still-in-the-closet-iea/
       A Peak-Oiler, but still in the closet? IEA’s 2008 Report
       By Matt Simmons • on November 17, 2008
[4] Cambridge Energy Research Associates (CERA), as noted in http://science.howstuffworks.com/peak-oil2.htm
       Have we reached peak oil? – Josh Clark