By Chris Nelder
Posting in Education
Energy analyst Chris Nelder fires back at the latest fact-free commentary on peak oil.
The Oil Drum, a Web site dedicated to informed discussions about peak oil and energy, announced on July 3 that it is closing down. (For a brief primer on peak oil, see my conversation with Brad Plumer in the Washington Post.) Those who hate the peak oil story didn’t bother to conceal their glee at the news; some even saw occasion to claim victory for their side in the "debate" over the future of fossil fuels.
“We could say ‘I told you so,’ not as a school-yard epithet, but simply as a fact,” crowed Mark Mills, co-author of a lightweight book entitled The Bottomless Well, which Publishers Weekly described as “Long on Nietzschean bombast but short on some crucial specifics.”
David Blackmon, a Houston-based consultant with a 33-year career in the oil and gas industry who is one of Forbes’ 1,300 advertorial “contributors,” called The Oil Drum “a site devoted a theory based on lack of imagination and growing irrelevance” in his mouthful of nuts.
Economist Karl Smith, another Forbes contributor, scoffed at the crucial distinction between crude oil and “all liquids” in his confusing word salad, asserting that “liquids like butane, propane and ethane are important petroleum products” without explaining why he believes they should be counted as crude oil, when they are not.
Emboldened by the recent exuberance over fracking in the United States, these pundits now claim that the only thing that has peaked “was the ability to argue that the era of oil, and hydrocarbons, was over.”
Not one of them said a single word about the global rate of oil production, which is the essence of the peak oil question. Why get into the data when merely slinging mud at your opponents and proclaiming your faith will do?
A handful of other writers offered less ideological takes. Matt Yglesias confessed that he “always found the ‘Peak Oil’ debate to be a little bit confusing” but recognized that there has been a profound price revolution: “The good old days of genuinely abundant liquid fuel really do appear to be behind us,” he wrote. Noah Smith had the most informed post of the bunch, noting that the transition to unconventional oil is a big part of why prices have been rising, and that “there is no substitute on the horizon” for good ol’ crude.
But neither of them mentioned the rate of oil production either.
Keith Kloor borrowed an Energy Information Administration (EIA) chart of U.S. production from a BBC article that repeated all the industry’s favorite talking points about how new technology has produced “a new oil rush.” Apparently, neither Kloor nor the BBC author realized that the chart represented “all liquids” production in the United States, not just crude oil, nor bothered to explore the detailed EIA data for themselves, nor tried to explain how this recent boom in U.S. production might dismiss the specter of a global peak. Kloor concluded that The Oil Drum was closing because “the numbers aren’t in your favor right now.” But like the others, he didn’t actually mention any numbers.
In short, all of these authors used The Oil Drum news to comment on the debate about peak oil -- the poor predictions and demagoguing and pollyannish posturing and name-calling, which have, truth be told, tainted both sides of the issue -- but none of them discussed peak oil.
I really didn’t think I’d have to say this again, but peak oil is about data, and specifically data about the production rate of oil. If you want to claim that peak oil is dead (or alive), you have to talk about data on production rates. There is no other way to discuss it.
Just for the record
Then what’s really going on here?
First, what did in The Oil Drum was volunteer burnout, falling visitor traffic, and an insufficient flow of high-quality original work and contributors. It’s unfortunate, because for the past eight years The Oil Drum has been the best free site on the Web for good rigorous work and informed discussion about energy data. I owe it a great debt for the education, the contacts, and the visibility that I gained through it.
I learned of its closing the same day I learned that Randy Udall had died. It was truly a sad and dark day for the peakists, one of those watershed moments that felt like a real turning point in the peak oil dialogue. Using the occasion to dance on their graves, as some ardent peak oil opponents did, was a low blow.
But the reason The Oil Drum has been lacking for good original content wasn’t that it had lost the argument and there wasn’t anything left to say. Far from it. The flow of content simply moved to where good analysts and writers on the subject could actually get paid for their work. That was inevitable, because a publishing model that relies on a steady flow of free articles that take days or weeks or even months of hard, highly skilled work to create simply isn’t sustainable. Freelance writers like me moved on to paying publications like SmartPlanet where we could actually make a living. Consultants and hedge funds began restricting their work to their private clients and subscribers, with maybe a teaser of free stuff posted in their blogs and newsletters. Investors and oil and gas companies began hiring capable analysts to do the work privately, after many years of enjoying the assembled intelligence on The Oil Drum (and trading it very profitably, I might add) for free. The volunteers who had put so much time into the site all these years discovered that they needed to spend their energies elsewhere. And the public got accustomed to higher prices, so the media stopped talking about peak oil, which led to a dropoff in traffic. Hey, that’s show biz.
It’s also true that many of us, having cut our teeth on the data and the dialogue at The Oil Drum, moved on to other pursuits. Once you’ve learned something, you don’t need to keep relearning it. Just speaking for myself, I moved on to grappling with the solutions to the peak oil problem: efficiency upgrades, financing, policy issues, transportation paradigms, and the transition to renewables. Merely revisiting the peak oil problem didn’t seem like a good use of my time, though I have continued to write about it as a context. I know that some other former contributors to the site changed their tacks similarly.
Second, fracking mania has been fairly well confined to the United States, because that’s where it is happening. Get outside the States for awhile, as I have done this year, and you quickly discover that people are still worried about the future of oil and gas. Probably because their oil and gas prices haven’t gone down, and their reserves haven’t gone up. There is absolutely no evidence that fracking will produce significant volumes of oil outside the United States any time soon.
Third -- and I know this is gonna hurt a few writers out there, but it has to be said -- very few people who have written about peak oil outside of sites like The Oil Drum ever did the hard study required to really understand it. They just picked a side, usually on tribal or ideological grounds, and commenced to defend that. Many of them don’t have a clue, even now, what the difference is between, say, proved reserves and resources, or what a reserves to production ratio is, or what a P50 estimate actually represents, or the production costs and energy content of non-crude liquids. Not a clue. I’d be willing to bet that 95 percent of them have never even built a spreadsheet of oil and gas data and tried to analyze it.
Most of what you’ve read about peak oil in the broader press has been written by generalist journalists. It’s an insanely complex topic that really takes thousands of hours of study to understand. But most of them haven’t done that study, and much of what they write is wrong. Usually they just rewrite the summary of a long and technical report written by someone in the industry. They don’t read the whole thing; they don’t have the time, or they may not have the chops to understand it. They don’t do original analysis or fact-checking. And too often they don’t seem to understand the context of the data, so they don’t give you any. What does 7, or 19, or 91 million barrels a day mean to the average person? Nothing. So they don’t talk about it. But they can certainly write the hundredth variation of a story about incipient U.S. “energy independence” and how that will overturn geopolitics, blah blah blah, while playing into the mythos of American exceptionalism, without understanding the data.
Likewise, it’s easy to speculate that the solution du jour -- ethanol, biofuels from algae, the ‘hydrogen economy’, space-based solar power, fuel cells, methane hydrates, and so on -- will save the day if you don’t actually dig into the data. Generalist journalists love to do that. Those articles generate lots of traffic and no one will ever hold them accountable for writing about a popular fantasy.
Actually, I’m being generous here by attributing their inattention to being generalists on tight deadlines. After a decade of this innumerate nonsense, I’ve begun to suspect either disinterest or laziness, or worse. Especially on the part of science and economics writers who clearly do have the chops to research and understand data. As Robert Bea, an expert who has studied some of the biggest civil engineering disasters in recent history, recently observed, failure is usually the result of hubris, shortsightedness, and indolence, not engineering. Our failure to prepare for peak oil is no different.
The only thing that most writers seem to have grasped is the hard reality of price. That’s easy enough; It’s published every day by a variety of agencies. A quick Google search will find it. It requires no study. Everybody cares about it. It’s cake. When prices are high, as they are now, those who only understand price look at it as evidence that the peak oil explanation has some merit. But price is fickle. When prices crashed into the $30s per barrel at the end of 2008, everybody was writing about how it was proof that the peak oil theory was wrong.
Those who do understand the technical aspects of the data are generally in the oil and gas industry. Most don’t talk about it because the data tells a story they don’t want told. So they try to divert the focus away from the data and onto the attitudes of the debaters. Or they just talk about the data that favors their point of view, like increasing technically recoverable resources and booming production in North Dakota and Texas. Most of the time, the ruse works.
So the tiresome "debate" about peak oil goes on, repeated as an endless Kabuki theatre of Malthusians vs. Cornucopians, ignoring the data in favor of another thousand words about attitudes and beliefs.
And in the middle, dear reader, is you. Caught between unwary and innumerate journalists on one side, and propaganda carefully constructed by those who are 'talking their books' on the other. Paying $4 a gallon for gasoline one day, then $2 six months later, then $4 again four years later. You don’t know why because the press never really explains it to you, the industry deliberately tries to confuse you, and politicians tell you whatever is needed to get your vote.
All I can say about that is: I’m sorry. It’s sad. I’ve been trying to get the facts out for years. It doesn’t seem to help.
Now let’s talk about some data.
The world currently produces around 91 million barrels a day (mb/d) of 'oil' in the International Energy Agency's definition, which is for all liquids. For the past two years, actual crude oil production (which includes lease condensate in the EIA's definition) has been hovering around 75 mb/d on an annual basis, just slightly over the 74 mb/d plateau established in 2005.
The moment of truth for peak oil will be when the decline of mature fields finally overwhelms new production additions, and global supply begins to turn south. (A vogue alternative is that we’ll reach “peak demand” first, where oil is replaced by other fuels and demand falls due to greater efficiency, but as yet I find the proof that this has happened, or will happen, unconvincing.)
That moment of truth isn’t quite here yet. Fracking, along with all the other methods the world is employing to squeeze a bit more oil out of the earth, has barely budged global oil production. Here is the chart:
What do you see there? An ignominious end to an unimaginative story perpetrated by self-interested mavericks looking to raise their profiles and sell some books, or a plateau of production that just barely broke higher in the past two years after an absolutely heroic effort that required hundreds of billions of dollars of investment and a quadrupling of oil prices?
Now let’s look at non-OPEC production, without U.S. production:
Source: Peak Fish
See how production has been falling off in recent years? That’s happening because the the aggregate decline rate of all fields is around 5 percent per year. In other words, the world loses around 3.0 to 3.8 mb/d of production each year (depending on whose numbers you use). Most of the 2 mb/d "tidal wave of oil" from U.S. fracking was absorbed by the decline in the rest of non-OPEC, as we can see from the aggregate non-OPEC production in this chart:
Source: Peak Fish
The question isn’t “Can fracking save the world from peak oil?” but “How long can America make up for declines in the rest of the world?” The answer is probably not much longer. The growth rate of tight oil production has cooled considerably over the past year, and per-well production is falling.
Now let’s look at U.S. production in isolation. Here’s the “all liquids” chart that Kloor reprinted, presumably without realizing that it wasn’t just for oil:
Looks great, right? Huge turnaround. We're back to 1985 levels!
Now let’s look at the chart of actual U.S. crude and condensate production, without all the natural gas liquids and biofuels and refinery gains:
Hey, what happened to that huge spike in production returning us to 1985 levels?
Now look at the article where I explained the difference between those numbers, and why the “all liquids” numbers overstates actual U.S. oil supply by about one-third. Do you still believe Karl Smith, who explained none of that and offered no data but simply asserted that “ 'liquids' is not a weaselly term” and that we should count all liquids equally “because the US Presidential Primaries begin in Iowa?”
A few more facts about U.S. oil, since there has been so much confusion disseminated about it in recent months: America consumes 19.5 mb/d of oil and produces 7.4 mb/d. On an annual basis through 2012 it was the world's largest crude oil importer, but has probably been surpassed since by China on a monthly basis. It exports more refined products like gasoline and diesel than it imports, but that's simply because it has a very large refining complex and falling domestic demand, not because it's on its way to energy independence. The United States will never be a net oil exporter, nor will it surpass Saudi Arabia in oil production, no matter what you may have read about "Saudi America."
Now let’s talk about price. Since 2003, who forecast the global repricing of oil best, the peakists who expected prices to spike into record territory, or the Cornucopians who consistently predicted that oil prices would return to historical levels? The answer is indisputable: the peakists.
For the past decade, the Cornucopians have told us that a new abundance was coming from deepwater oil, tar sands, enhanced oil recovery, biofuels, and other unconventional sources. Global oil production would rise to 120 million barrels per day, and prices would fall back to $20 or $30 per barrel. Those stories were all completely wrong. The peakists called it.
Here’s what happened: Oil repriced in response to scarcity. Triple-digit prices were responsible for the new flush of unconventional production. That production, including fracking for tight oil in the United States, raises prices, it doesn’t lower them. We’ve hit and fallen back from the consumer’s price tolerance repeatedly for the past six years.
For a last bit of data, look at this forecast from the final post that petroleum engineer Jean Lahèrrere did for The Oil Drum:
(I used another of Laherrère’s charts in my post from March.)*
Laherrère concludes: “With the poor data available today, it seems that world oil (all liquids) production will peak before 2020, Non-OPEC quite soon and OPEC around 2020. OPEC will cease to export crude oil before 2050.”
Looking closely at Laherrère’s data, it seems essentially in line with my view that in another 18 months or so we're going to get the signal that oil needs to reprice higher still to maintain production. That will be very difficult for U.S. and European consumers to stomach. Whether that repricing will bring more oil to market, or simply kill demand, remains to be seen.
This is what the data -- not beliefs or rhetoric -- tell me.
What’s your bet?
So here’s what we know.
High value crude oil -- the good stuff with 5.8 million BTU per barrel that we can make into diesel and gasoline and a million other things -- has been generally holding on to a global production plateau since 2004. Global production will fall when the decline of mature fields overwhelms new additions. When, precisely, that will happen, no one can say for certain. But it’s almost definitely before 2020.
Most of the non-crude liquids are not equivalent to crude. Apart from tar sands and heavy oil, they contain less energy and are far less useful. Some of them can’t be made into gasoline and diesel. But with regular crude production trapped at around 75 million barrels a day, these other liquids must meet all future increases in demand for oil. As they take an increasing share of the liquid fuel market, they gradually increase the price of “oil.” Nothing on the horizon will change that.
Eventually, the price will become too high, and we’ll have “peak demand” alright, but it will be primarily because of price, not efficiency gains, and will lead to economic contraction, not growth. That price will owe to increasingly marginal and difficult -- hence, expensive -- prospects. In that sense, it’s a supply side problem, a concept at the heart of peak oil. Is it clear now why the “peak demand” vs. “peak supply” argument isn’t really that interesting?
If U.S. consumers are able to tolerate, say, $5-7 a gallon for gasoline by 2020, then it’s possible that the production plateau could extend a bit farther, and my expectation that global supply will begin to slip around 2015 could be wrong. It won’t be off by much, and in the grand scheme of what it means for the global economy, a year or three plus or minus is essentially irrelevant. But if I am off by even six months, you can be sure that my detractors will come out of the woodwork to say I'm all wet, and that production is going to da moon.
But my bet is that U.S. and European consumers can’t tolerate significantly higher prices. Price tolerance is something that Cornucopians never talk about, so you won’t hear that argument from them. If I am correct on that point, then production will have to decline as prices become intolerable. By virtue of its upward pressure on price, unconventional oil production contributes to, not cures, peak oil.
I expect world oil production to rise, weakly, for another two years or so, as America falls into a deeper slumber believing that fracking has cured everything. The media will reinforce that belief. And when it comes, the wake-up call is going to be harsh. In the meantime we’re just going to be waiting for the punchline.
So to those who can grasp the data, here’s my final thought: How will you prepare yourself for The Great Contraction? You've got perhaps two good years left of business as usual, and maybe another three or four after that before things really get difficult. I encourage you to use them well, and do what you can to make yourself resilient and self-sufficient. What will you do 10 years from now if the price of gasoline is $10 a gallon?
Yes, we do need to have a serious talk about our values, hopes, beliefs, mythologies, and ambitions; about the embedded growth paradigm, the debt overhang, and economic theory in an age of diminishing marginal returns. Those are all important discussions. But let’s have them after we understand the facts about energy. Not before.
Whatever you do, don’t think that peak oil is dead just because some guy who doesn’t know what he’s talking about said so in a fact-free blog post. It’s coming. Later than some thought, but sooner than you think.
Photo: Mark Rain (AZRainman/Flickr)
*Correction July 25, 2013: In the original version of this post, I said that Laherrère’s chart "leaves out extra-heavy oil volumes which may or may not materialize from Venezuela and Canada." Laherrère responded that this chart does in fact include those heavy oil volumes. The text has been corrected accordingly. -- CN
Jul 23, 2013
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Chris, Let's pretend that we can match growth in demand with increases in production. Over the last 30 years, consumption has grown on average of 1.21% annually (spreadsheets required). let's also assume that there actually is about 8,000 billion barrels in known oil resources (or approx. 5 times the current "proved reserves") The last few years have seen global consumption at around 32 billion barrels per year. By 2044, that figure will be 48 billion barrels per year (at that point we will have used around 1,400 billion barrels (or 86% of today's proven reserves). By 2071 our consumption will have reached 65 billion barrels and we will have used 2,880 billion barrels of oil. By 2100, the world will be consuming 91 billion barrels per year and we will have consumed 5,145 billion barrels (about a 65% recovery rate of in situ resources). By 2113, the world will consume 107 billion barrels per year and the total consumption will have been 6,445 billion barrels (we are now at 81% recovery rate). In the year 2127 we will have pumped the last drop of oil from the ground, consuming 127 billion barrels per year and having consumed a total of 8,093 billion barrels of oil. At that rate of usage, we'd have to discover a new Saudi Arabia every 2 years. Without "drastic and fantastic" increases in today's efficiency, there isn't more than 100 years of economically recoverable oil in the world-- PERIOD. A 1.21% yearly increase in consumption assumes a lot-- including consumption rates that barely match reasonable expectations for population increases and don't even begin to touch the required energy production to grow the economy. The figure does not include the rapid consumption growth of emerging economies with high populations like China, India, Indonesia and Malaysia. It assumes that Africa will never reach a widespread level of industrialization and standard of living on par with even pre-WWII USA. It does not take into consideration increasing world per capita usage rates. Based on per capita consumption in 2010: Average US citizen -- 22.5 barrels of oil per year. Average human being (after subtracting the USA's consumption & current population) -- 3.7 barrels of oil per year. Cornucopians have no idea what they are suggesting when they proclaim that any area has an oil supply for "hundreds of years" -- unless they are also advocating peak production rates that cannot satisfy even modest annual growth in global demand.
Good piece. And, reality is even simpler -- the >500 billion tons of carbon already converted to $ in combustion-industry accounts is now beginning the inexorable process of shutting down both the dominant natural carbon cycle and the food chains in seas that supply ~20% of all human food protein. To quote an oil-state Gov: "Oops". Climate change and sea rise are peanuts compared to ocean acidification's rapidly approaching non-linearity (tipping point). Ocean pH hasn't averaged the current low of 8.1 for ~300 million years. When 8.0 is reached before 2050, there will be more cries than "oops". This is also why combustion fuel companies are grossly overvalued -- their known reserves are ~10x the 500Gt already sold & released. Little of their valuations are thus real, because little of their reserves can continue to be burned. And, present methane leakage makes natural gas worse than coal for climate. So, apart from never providing true "energy", the 'energy' companies not only owe the world remediation for most of what they sold that's causing grief, they owe for the Oxygen they never paid for and without which all their fuel products are worthless (try lighting a match on Titan, whose 'air' is nitrogen & methane/ethane). ;] Peak valuation is what we're seeing.
As a geologist with 37 years of experience in the O&G game I couldn't agree more with your view of peak oil. I just wanted to point out what appears to be an error in the Y-Axis label on your chart " U.S. field production of crude oil". The label should read "barrels" and not " thousands of barrels". For example 4,000,000 thousand barrels per day would imply 4 billion barrels per day.......a prolific production volume by any measure.
that they're being blocked from getting read. That's the way of the liberals and the environmentalists to make sure that, the opposing views aren't heard or read. It's a form of denial. Fear of hearing the truth, and fear of having the truth heard.
So the question is, have you done anything about it? Over a decade ago I threw up my hands waiting for the 'new technology' in solar panels. How many years do you wait before acting? Twelve years ago I put up solar panels (two houses, one on-the-grid, one off) and am on my third (plug-in, because, after all, electricity is free) Prius. ACT! DO SOMETHING ABOUT IT.
Well done Chris - a forceful and succinct slapdown to cornucopian theory (or rather the lack of theory). What's really amusing is that the cornucopians are out in force here and essentially saying, "Okay, you've proven that peak oil is alive and well, but it's still dead, so there!" As you say, facts aren't really relevant to their philosophy.
Closing down, is good news. There is no problem with oil production, there is no capacity problem, there are no conflicts that could seriously compromise logistics... Peak oil is driven by greedy oil companies, greedy states, greedy speculators and greedy banks. Oil was $15/barrel 15 years ago, and it's high price is another of the causal factors in the current global financial malaise.
Every time Mr. Nelder talks about peak oil, it's important to review his record on the subject. In May, 2008 during an interview on Fox Business, he predicted peak oil by 2010 (see https://www.youtube.com/watch?v=vQ_5S0bbjwU about 2 minutes in). It didn't happen, and now Mr. Nelder spends his days trying to convince us that fracking makes no difference and peak oil is still right around the corner. It's interesting that in that interview his didn't mention fracking at all, even though in 2008 that revolution was well-known to anybody who closely followed the industry. Mr. Nelder talks about fracking being confined to the US for now. That's true, largely because it takes skilled people, detailed geological data, and a developed infrastructure to support it. However, he gives no reason why these technologies won't be exported to other places like Europe in the future (just like earlier oil drilling technologies were) other than people are worried. That's hardly a definitive reason why fracking can't be done elsewhere. Also, while some fields are maturing, many others are not being exploited because of political or economic problems. Venezuela has the world's largest oil reserves, but because of the damage Chavez did to his country's infrastructure its output has actually declined. Similar stories have happened in the past with Iraq (only now recovering from Sadaam), and countries in Africa. Iran, of course, is the target of an international boycott because of its nuclear program. And let's not forget the US, the only country in the world to put known oil fields with billions of barrels of oil off limits. Mr. Nelder also says that modern fracking hasn't brought us back to the levels of the '70s. Of course, we got to the '70s output only after decades of infrastructure development. Modern fracking has been around for less than a decade. Output is restricted, for example, by the lack of transportation in the new areas where fracking is going on. Output is expected to increase well into the 2020s if not beyond. This is not to say that one day we will ultimately reach a limit in how much oil we can produce each day, or that we won't have shortages in the future. But oil is no more special than any other natural resource important to modern civilization, despite what Mr. Nelder may say. I remember growing up in the '60s and being told we would run out of iron, copper, and just about every other metal. The quality of ore was becoming much worse, and we weren't finding new ore (sound familiar?). And yet somehow the world adapted. Ways were found to utilize low-quality iron ore such as taconite, for example. New mines were found using computers, satellites, and other technology. I've learned over my many decades to take the lessons of history over the predictions of the gloom-and-doomers such as Mr. Nelder.
Chris, thank you for (what amounts to) a eulogy for an exemplary combination of talent and perseverance that the Oil Drum represents. I used to follow it quite closely, but in recent years I've turned my attention to the other dilemmas of human society - climate change, economy and social justice - but I knew where to turn for answers to questions about peak oil. Keep up the good work where-ever you go.
COLUMN-Peak oil and other fallacies: John Kemp http://uk.reuters.com/article/2013/01/21/column-kemp-peakoil-idUKL6N0AQ76U20130121
http://www.american.com/archive/2013/february/memories-of-peak-oil "When the final figures for the fourth quarter of 2012 are in, the world will have a new crude oil production record: the total for the first three quarters was about 1 percent ahead of the 2011 total. This is a remarkable achievement for a commodity with annual output that now surpasses, for the first time ever, 4 billion metric tons and which has been, for decades, the largest source of fossil energy and the most valuable item of international commerce." "But the most remarkable story has been unfolding in the United States, where horizontal drilling and hydraulic fracturing (commonly referred to as fracking, pioneered on a large commercial scale by natural gas producers) have been rapidly adopted by oil drillers and have led to a remarkable turnaround in U.S. crude oil extraction. Until 2008, the countryâs crude oil production kept following its long-established gradual decline (the output peaked in 1970 at 533.5 Mt), and between 2001 and 2008 it dropped by nearly 13 percent, from 349.2 Mt to 304.9 Mt."
OMG, finally a lucid examination not just of peak oil but also of the insane conversation that's arisen lately thanks to Forbes and others. I'm reposting this on Atlanta's peak oil facebook page: https://www.facebook.com/pages/Refining-Atlanta-Addressing-Peak-Oil/525651360828451 Thanks again!
As Fracking Rises, Peak Oil Theory Slowly Dies http://www.forbes.com/sites/davidblackmon/2013/07/16/as-fracking-rises-peak-oil-theory-slowly-dies/ "Peak Oil theory has basically gone the way of the California Condor, from widespread existence and acceptance in the oil and gas environment to near extinction as its environment has dramatically shifted thanks to the discovery of and ability to access massive oil shale reservoirs not just in the United States, but all over the world." "Today, given the new abundance of shale oil, almost no real industry thought leaders are Peak Oil proponents, and the theory is now mainly advocated by self-promoting opportunists looking to gain free media attention by being contrarians to prevailing belief, and environmental activists who cobble together misleading data and fright scenarios to justify costly policies that throw billions of public dollars at renewable energy schemes." That last paragraph has you pegged pretty well there, Mr Nelder. "The main reason why Peak Oil theorists always turn out to be wrong is that they by and large appear to be unable to grasp the huge role advancing technology plays in allowing the industry to discover new oil resources previously unknown, to access known resources that were previously thought to be unexploitable, and to extract an ever-increasing percentage of oil long known to be in place via secondary and tertiary recovery techniques." Peak oil "theory" is dead, and smells pretty rotten too, because, it was never anything that should have been given life, to begin with.
I try and read what I can on Peak oil and have read this "entire" article. There are a few holes from my point of view. First, most estimates of what is in the ground say we haven't produced even a fifth of whats under "there". There are huge amounts of "oil" still to be produced. Next to produce it you need rigs and people to run them. What the rig counts show me is that the US dominates the rigs in use and the people, around the globe, and in my view is the likely pinch point for supply. So more rigs and people producing all that potential supply is nothing more than a market forces problem. (As always). What market forces will significantly change the world's rig count and the people to run them? Answer - Sustained high oil prices. What's sustained? 20 years. What's high? $100 a barrel. Generally I think there is a weird dysfunction with peakists. They somehow believe that oil production rates will peak in isolation from market realities. That there is a production cliff, yet the much vaunted data here shows the more likely result, production based on demand's impact on prices, and flat or slightly increasing production.
and perceptions. Reality in the world is about what people need and how it's produced and how it's provided. It's not about perceived valuations or what is "owed".
say that Mr Nelder's "views" are wrong? If you agree with a view that is wrong, then you are agreeing with non-facts.
But it's because you consistently put forward opinions from the fringe. I remember when you wrote... ----------------------------------------------------------------------------------------------- So, go back to school if you can, and learn what real science is about. But, don't go to a liberal university or the public school system, because, they'll be trying to sell you on the principles of "junk science". ----------------------------------------------------------------------------------------------- It was part of your comment to article "With driverless cars, Volvo seeks injury-free cars by 2020" Your "junk science" statement in that comment was absurd. When you write such things readers vote you down.
You said: "and now Mr. Nelder spends his days trying to convince us that fracking makes no difference and peak oil is still right around the corner." The reason he says that is because fracking is only useful for tight oil formations, where there's lots of oil but the rock is not permeable. There aren't many such oil formations around the world. There are only two major ones in the continental U.S.--the Bakken and Eagle Ford in Texas. Those are each expected to peak in production at about 1 million barrels per day, for a total of 2 or maybe 2-1/2 million bpd. We burn 19.5 million bpd, so it's significant for us, but not a game changer. Europe is not known to have substantial tight oil formations. So how long with the Bakken and Eagle Ford produce oil for us? Probably 10 or 15 years at a rate of 2+ million bpd. Not bad, but not enough to encouage complacency about peak oil. And fracking isn't much help in re-opening old, exhausted conventional fields, either.
Mr. Nelder has made a good point with historical data and history does tend to repeat itself. After calling wolf many times people dismiss it and then collapse seems to come abruptly (Collapse: How Societies Choose to Fail or Succeed is a 2005 book by Jared M. Diamond, professor of geography and physiology at University of California, Los Angeles. Diamond's book deals with "societal collapses involving an environmental component, and in some cases also contributions of climate change, hostile neighbors, and trade partners, plus questions of societal responses". In writing the book Diamond intended that its readers should learn from history) One question then is to ask if the myth of technology will prevail? This is a sort of fundamental paradigm that reaches divine proportions in this time and age. But it may very well not be forever true. Debt, population and environmental degradation cannot go on as-is forever. I believe Mr. Nelder has made the case clear that the gains ahead seem marginal. If one adjusts the average price to reflect the price of the "extra" production one would see a $1,000/barrel vs a low price for the normal stuff. That is indeed pretty marginal. So it does look that much of a long term solution. Yet you make also a good point, why assume "all things being equal"? you mention Iraq/Hussein and Venezuela/Chavez - taking over Venezuela would be a walk in the park compared to Iraq, and would put on stream vast reserves. Mr. Nelder asked what a $10/gallon would do, and a monster of consumption would not hesitate to change a few rules.
1% above 2011 is not a remarkable achievement. It's within the +/- 5% production band we've been on since 2004/2005. The addition of a couple million bpd of tight oil (Bakken, Eagle Ford) has just barely overcome falling worldwide production of regular, conventional crude. The Saudis quietly announced in April 2006 (if memory serves) that henceforth their RCC production would be declining at about 4-8% per year, but that they thought they could keep their overall production decline to about 2% by opening some more expensive heavy oil fields that hadn't been attractive before (because of higher price and less refining capacity because heavy oil can't be refined in the same refineries as light, sweet crude). So small increases in tight oil, bitumen and deep sea are barely overcoming declines in onshore light sweet crude. How long that can continue is the argument over when peak of all liquids occurs. The most sophisticated optimist (Freddie Hutter at Trendlines) says 2030. Peak oil gurus say sooner. It either case, it's alarmingly near.
We have lots of oil. True. No argument. We really don't have an oil supply problem. We *do* have an *energy* supply problem and a *price* problem, and that's a different matter entirely. We don't drill for oil, per se. We're drilling for NET energy, the energy left over after all the energy we use to find, extract, refine and distribute the stuff. When we could put a straight pipe into the ground and get a gusher, net energy was very high (estimates go as high as 100:1). The laws of physics dictate that NET energy can't be as high when you're drilling miles into the gulf of Mexico, or fracking, or metling tar sands in situ. Whatever you do takes energy to do, and makes your final energy yield lower. That's physics, plain and simple. You can't argue with it, or get around it. Ultimately, nature has the final say, not economists or politicians. That said, the economic effect of using all that extra energy means that the remaining oil costs more to get, extract, refine and distribute. The final oil problem will blindside everybody, including oil economists who should know better, and that's "oil price feedback." High oil prices make everything more expensive since oil is a "critical path" energy. Anything that's transported anywhere has its price effected by the price of oil. Eventually, oil prices get high enough to effect the price of oil production itself, at which point the gently increasing oil price slope we've seen so far starts getting very very steep, very very quickly. So near the end, we see wild price spikes, followed by falls, followed again by rapid spikes, until oil prices reach a permanently high price plateau. When this happens, we're more or less done with oil as a major energy player. As to when this happens, it's hard to say, but I'm guessing it happens fairly quickly after we start getting into actual production shortages, and those are not far off. Less than 20 years, certainly.
Yes, there's a lot of bitumen in Alberta. Current production is about 1.5 million bpd. That's out of 91 million bpd total liquids worldwide. By 2020, that figure is expected to hit 2 million bpd, and by 2030, 5 million bpd. In other words, in 17 years, the tar sands will produce another 3-1/2 million barrels per day. Not a game changer, either. As for Venezuela's Orinoco bitumen, the deposits are vast but production will be even slower than Alberta's. Not a factor, I'm afraid.
You said: "First, most estimates of what is in the ground say we haven't produced even a fifth of whats under "there". There are huge amounts of "oil" still to be produced." It's true that in most conventional oil fields such as, say, the famous East Texas field one often sees in historical photographs with oil gushing out of the ground, still contain about 2/3 (maybe 60%) of all the oil that was ever there. The rest couldn't be extracted because the natural gas that was mixed in with the oil and that provided the force to make the oil gush out of the ground, bubbled out of the oil as production proceeded and either filled in pores in the rock where the oil was, or was burned off at the wellhead when the oil came out. So, to journalists of the type Mr. Nelder speaks of, that means there's hundreds of years of oil still left in the ground. The problem lies in getting out that remaining 2/3 out. The natural gas no longer provides any pressure to force it out, so one has to move to "secondary" methods. There are a number of these, but they only work under special circumstances in certain locations. Not all the techniques are applicable to most of the old fields. By far the most productive secondary technique is pumping water down into the field to "sweep" or flood more oil out, which you then separate, and then use the water again. But in most places there isn't anywhere near enough fresh water available to flood these giant fields (saltwater can't be used because the salt will plug the pores in the rock). The Saudis have been doing this for years with desalinated water from the Persian Gulf (an inexhaustible supply for them) which is literally right next to all their big fields near the coast. This is not a viable solution for all the big old Texas and Oklahoma oil fields, and none of the other secondary techniques, including fracking, will accomplish much. So there lies most of that "remaining oil" so many commentators are convinced is still available to us. What else is under there? Some writers say the "oil shale" of the Green River formation in and around Wyoming is our very own Saudi Arabia. But that isn't oil. It's "pre-oil". Nature turned lots of that stuff into oil around the world by baking it for a long time between 7,000 and 15,000 feet below the earth's surface. The Green River stuff, which is vast, never spent any geologic time at those depths. It could have become oil, but just never did because of geologic realities. Can it be baked into oil artificially? Attempts have been made with some technical success but it's totally non-economic. And in any case, the stuff is so diffuse over hundreds of thousands of square miles that you can't collect enough of it in a given area to make the effort worthwhile at any price. So there goes the second major source of "what's under there." The third source of "what's under there" would be crude oil yet to be found. Well, the only cheap source of such oil would be in Iraq. We don't really know how much is in their existing fields. It's possible there's another Saudi Arabia there, but that's likely rather optimistic. There's definitely none in western Iraq, which many optimists thought had a lot. Then there's the South China Sea, which is also a bit of a mystery. There's also more offshore oil off the the North Slope of Alaska, but not likely all that much, and some in the ANWR (maybe 10 billion barrels). The offshore TUPI field in Brazil probably only has 3 to 7 billion barrels, and it's very slow flowing, so daily production won't be high. So we are playing at the margins of oil production now. The cheap stuff is all spoken for, which is why we're going to such lengths to produce such exotic stuff. Remember that there have been over a million oil wells drilled in the continental United States in the past 150 years. We know where the oil is, or was, and there are no more significant deposits, period. Remember that even the Bakken and Eagle Ford were not recently discovered--we've known about them for decades. It's just that fracking (the newest secondary technique) works well in those particular tight oil formations.
lngtrm1: You're on the right track, but the resources that remain to be drilled and produced are not uniformly prospective. So there is an increasing (not flat) curve of prices that will be needed to make them commercial. Also bear in mind that there is a consumer price tolerance; it's not infinite. I do not know any peakists who "believe that oil production rates will peak in isolation from market realities." They all understand that production can increase in response to sustained high prices, and recognize that this is exactly why the recent tight oil boom in the U.S. happened. But look again at the non-OPEC non-US chart above. At some point even high prices aren't quite high enough. Among others, these articles from my SmartPlanet archive may illuminate things further: http://www.smartplanet.com/blog/energy-futurist/energy-independence-or-impending-oil-shocks/375 http://www.smartplanet.com/blog/energy-futurist/the-cost-of-new-oil-supply/468 http://www.smartplanet.com/blog/energy-futurist/the-last-sip/455 http://www.smartplanet.com/blog/take/americas-oil-choice-pay-up-or-get-off/484 Hope that helps.
The Y-axis on chart above the one I questioned (Total oil production in the U.S.) is labelled as barrels per day. You then proceed ..." Now letâs look at the chart of actual U.S. crude and condensate production, without all the natural gas liquids and biofuels and refinery gains": If you are going to make a comparison of production data with & without the liquids components it is misleading to change the axis labels/scale. In any event, the label should have stated as barrels per year.
If you have oil reservoir and production data to support your belief that the concept of Peak Oil is incorrect, please provide it.
and universities. Those institutions of "higher" learning are there to advance the liberal agenda, and not to seek the real truth or facts. And, yes, criticism can be painful, and you apparently felt the pain when I wrote those comments which you quoted. And criticism is painful to those who voted down my comments, just to make them disappear, which is the liberal method of discussion, in order to keep people from finding the truth.
and now, even some countries in Europe are getting into the action, and Brazil and others. Peak oil is a failed myth and a failed strategy. Where the oil exists, it will be dug out. The middle-east countries are watching all the action with worried looks in their faces, and the peak oil nonsense deserves the death knell that it's gotten.
that he's ever done, is to pick and choose the data which might better serve his agenda, while making sure that, the truth is not heard. Mr Nelder is very good at accusing others of what he does. Example: "Why get into the data when merely slinging mud at your opponents and proclaiming your faith will do?" Nobody does that better than Mr Nelder. It's either his data and conclusion, or those who contradict his opinions have to be ignorant otherwise.
Given how much emotion I can sense in your replies to this topic I can see that the reality of peak oil scares the bujeezus out of you. It should.
Forbes failed to mention the fact that a single Bakken well will produce, in its 30 year lifetime, 10 minutes worth of oil at current rates of consumption. Where does that fact fit into your bent version of reality?
TexasPK, thanks for contributing some knowledgeable and factual observations. It's a refreshing rarity! Please come back and share your views any time.
Thank you Chris, at the risk of overstaying my welcome, I can't see the "prospective" nature of the holes drilled is as important at least as it used to be. We seem to be able to "locate oil" much more easily now and it really comes down to production expertise and the associated technology to 'produce" the well at a profit. In other words, I think we can drill an awful lot of holes at a profit for 20 years at $100 a barrel around the world if we just had enough rigs and the proper people. If that's true then Peak production is merely the peak of rigs x people x % productive wells drilled. And of course at $50 that "peak" is lower and at $200 it's higher. (At least for awhile). The only other reasonable constraint in 20 years is probably water availability. As for a foreign development "plateau" or decrease, it still comes down to rigs, people, and expertise availability and there is way more of that at work here in the US than the world combined. Why would any development company choose to ignore North American plays over the other non-opec countries? So in my view, it definitely doesn't seem to be oil availability that drives the production peak. And, that's the whole point of the argument I thought, to instill a valued perspective on how "much" there is....and if not, I'm in the "it's all a moot point" camp.
Both of those charts are from EIA, and both are labeled correctly. But perhaps I should have alerted the reader that one is daily and the other annual, to avoid confusion. I try to stick with bbls/d data for uniformity but EIA didn't offer that particular chart in that format and I didn't think it worth the time to recreate it. Thanks for your comment.
this discussion have voted down my posts to the extent where they are not available for referencing. The facts are all against the peak oil nonsense, and it's quite easy to find those facts on your own. But, don't just selected the articles and studies which seem to support the peak oil nonsense. Be realistic.
at Trendlines: http://trendlines.ca/free/peakoil/PeakScenario2500/PeakScenario2500.htm He is by far the most sophisticated optimist on peak all-liquids production, and he says it's in 2030, only 17 years from now. He recently moved that ahead from 2035. He likes to make fun of "McPeaksters" and regularly does so, but if you read his graphs--the first one at the top of the page will do--he's remarkably pessimistic.
Actually, M. King Hubbert's famous prediction in 1956 about U.S. conventional crude production was quite accurate indeed. He had predicted a U.S. peak (of regular, conventional crude--"Texas tea") in 1970. I believe it was actually 1971. He then in the 1970's predicted world peak in 1995, with the reservation that the energy crisis of the 1970's might push the world peak out about 10 years. So when was the world peak in regular, conventional crude production? It was at the beginning of 2005, which in my book is about 10 years after 1995. On the other hand, today there are many more streams of liquid fuel production in play than there were in Hubbert's day (tar sands, shale oil, NGL's, deep sea, tight oil) but even the optimist at Trendlines (Freddie Hutter, who likes to make fun of "McPeaksters") says that all liquids will peak and go into permanent decline in 2030. That's only 17 years away, which ain't long. At that point, annual liquid fuel production becomes less every year, which means the end of consumerism and the great American lifestyle. Why? Because over the past 100 years, economic growth and oil production are directly related. Increasing GDP basically requires moving more people and things around faster and faster, and any way you slice it, that takes liquid fuel, and there' no liquid fuel like oil.
scare tactic used by the "peak oilers" to try to get the oil industry and others to stop digging and using that oil. Take away the scare tactics, and the agenda, and peak oil would be simply about reaching a maximum sometime in the future. That future could be centuries away, though.
the maximum rate of world production of regular, conventional crude oil. Nelder's graphs indicate that we have been on a plateau of 74 to 76 million bpd since 2005. That's nearing a decade. It's not about the world running out of oil. That would indeed be a stupid myth, but not one that peak oilers have ever propagated.
and it's just about the myth of the world running out of oil, and the predictions have turned out to be wrong in every instance, and that's been the same for about 100 years. Oil prices is more about market forces, and a lot to do with market manipulations, especially by government forces and speculators. But, it's not at all about the stupid myth of "peak oil".
so he's parrotting others and not thinking this through. Peak Oil is a simple bell curve. It was very accurate regarding US oil production because we knew a lot more about the US reserves than reserves elsewhere in the world where in some countries they are litterally state secrets. Sure, we have a bump on the right side of the curve. But for how long and at what cost? And with the change to include all liquids, shale oil, tar sands, there is a glaring inconsistency in methodology adding to the height of that bump as well. Many say "we'll never run out of oil". They are technically a bit more accurate than those who say "we WILL run out of oil". BUT both sweeping generalizations are all too obviously filtered through a left or right idealogical bias. It's simply the case that to recover more oil, it gets more expensive to do so as all the cheap and easy to get oil has been gotten. Can we get oil from the bottom of the Pacific? Maybe, if you want to pay, say, $400 a barrel for it! We won't technically run out because the cost will contine to rise to the point were it simply won't be worth it to retreive it. A crude(no pun intended) example. We can technically retreive gold from ocean water. We can technically turn other elements into gold, something the alchemists always dreamed of. So why don't we? Because in either case the cost of product is so much higher than the value of the resource that it makes no sense to do so. Long range projections are always subject to refinement. By definition the longer out you look, the less accurate you can be about such a complex topic. But based on increasing retreival costs alone, there will be a peak or plateau in global production. We can argue about WHEN, but not IF.
Let me quote so you don't have to go searching for the relevant slapdown to your "prognostications have always failed" assertion: "For the past decade, the Cornucopians have told us that a new abundance was coming from deepwater oil, tar sands, enhanced oil recovery, biofuels, and other unconventional sources. Global oil production would rise to 120 million barrels per day, and prices would fall back to $20 or $30 per barrel. Those stories were all completely wrong. The peakists called it."
Emotions is not how I think, contrary to how the peak oil crowd thinks, which cannot face the real reality that, their prognostications have always failed, big time!
All reserve estimates are guesswork in the strictest sense, but technology has made them pretty accurate. Over the years, the USGS has tended to be optimistic, but they're still sticking with their 3-4.5 billion barrel (or thereabouts) guess in the Bakken. There just isn't that much there, and as I say, production becomes asymptotic at low levels after only about 2 years.
setting up permanent shop there. The USGS work is just as much guesswork as actual measurable data. Bakken is also helping to get the oil countries to notice, which could mean that, they'll have to lower their price demands on the U.S. That's another positive from Bakken.
Bakken is about as productive as was expected when fracking tight oil formations became practical. The expectation was that total daily production would peak at about 1 million bpd, or maybe 1.2 million bpd. So progress toward that expectation continues. However, production increases have been slowing, and it is quite clear that the production of each well falls off dramatically after a couple of years. Then, the well has to be moved, and this can be done a number of times. But the bottom line is about 1 million bpd or a bit more all told. The next question is: how much recoverable oil is actually there, in the Bakken? The USGS still says about 3 to 4.5 billion barrels. How much is that? About 6 months' U.S. consumption of oil (now about 7 billion barrels per year). So it's hardly an inexhaustible resource. It may provide us with about a million bpd for 10 or 15 years. Not bad, but not a game changer. The Eagle Ford tight oil play in Texas has similar prospects, I believe. Maybe a little better. Those are the two big tight oil plays on shore in the U.S.
Despite Mother Nature, the Bakken Oil Boom Continues http://www.fool.com/investing/general/2013/07/19/despite-mother-nature-the-bakken-oil-boom-continue.aspx "North Dakota's oil and gas production hit a new all-time high this past May according to recently released data from North Dakota's Industrial Commission. Preliminary estimates indicate that oil production reached 810,129 barrels of oil per day, which is up from the previous record of 793,852 set the prior month." ******************************************************************************************** Despite Obama and environmental groups wishes and desires, Bakken is very productive, and is creating a booming economy for the area and North Dakota, so much so that, it's created so many jobs that, they have to import them from other states with offers for great salaries and benefits, and very affordable housing and just about anything that anybody could want. Perhaps you should take a job there. Mr Nelder too. ;)
and the overwhelming evidence is what matters, and that evidence puts the peak oil nonsense to sleep, or into the grave. Deal with it. Life goes on, and you won't be worse off because of it.