Discussion on:

The politics of peak oil

There's one problem with Nelder's approach; he neglects the effects of technology improvement on the production of conventional crude oil. About a decade ago, we thought we had reach peak natural gas production in the U.S. Large companies, including Exxon, and new ventures, such as Cheniere Energy, began investing 100's of millions of dollars to build Liquified Natural Gas (LNG) import terminals, so that we could import LNG from foreign natural gas producers. Along came horizontal drilling and fracturing technology, and the shale gas plays. All of those LNG terminals are now in the process of being reconfigured to *export* LNG. So much for peak U.S. natural gas production.

The same fracking technology applied to natural gas production is beginning to be applied to crude oil production. The peak oil production point is being pushed off into the future by improved technology. So, yes, we ought to be concerned about peak oil, but we shouldn't get into a Malthusian tizzy over it. We're still a long way from peak oil production. If crude oil is to be unseated from it's preeminent position as the source of fuels used for transportation any time in the next several decades, it's going to have to come from significant improvements in other competing technologies which as yet, and for the foreseeable future, cannot compete economically.

If you believe that improved technology means "we're still a long way from peak oil production" then, if you understood my argument at all, you must present DATA to show that. Changing the subject to natural gas, or calling a study of data "a Malthusian tizzy" doesn't cut it.

If you want numbers, take a look at my response to an earlier post of yours (http://www.smartplanet.com/blog/energy-futurist/when-should-we-pursue-energy-transition/159) entitled "World oil reserves are NOT decreasing". Using CIA figures, reserves between 2005 and 2011 have hardly changed, even after six years of global oil use.

You make artificial distinctions about type of hydrocarbon, reserves versus production, etc. So what if bitumen takes more energy to process than crude oil? The real issue is dollars and cents, not chemistry. Around 1850 you might have argued that kerosene is not the same as whale oil, therefore we will not be able to light our lamps. Such a distinction would have been ridiculous, and the similar distinction you make now is also ridiculous.

We can hope that similar to what electricity did for lighting in the late 19th century, a new technology will come along that will ultimately make hydrocarbons obsolete. No such technology is now economically feasible, despite our best efforts. Trying to make artificial distinctions and pretending that somehow the "unconventional" hydrocarbon products we are already putting into our gas tanks somehow don't work is silly.

Although the question of reserves was explicitly not the subject of this post, it is an important one. Unfortunately we only have semi-reliable reserves data for non-OPEC countries. OPEC reserves data is notoriously opaque and unverifiable, and has been the subject of violent debate for decades now. If you want to understand the issues with that data, I suggest you check out my book, Profit from the Peak, where I explored them in some depth. One good study is "The End of Cheap Oil" by Colin Campbell and Jean Laherr??re: http://dieoff.org/page140.htm (Scientific American, March 1998), but there are literally hundreds of papers on the subject of reserves data. It's a complex and difficult subject.

One example: Saudi Arabia has claimed around 260 billion barrels of reserves for the last 20 years straight, while producing 8 to 9 billion barrels per year, and without declaring any new discoveries. For another: In 1985, Kuwait increased its reserves by 50%, without new discoveries. In short: those numbers simply cannot be trusted, nor verified. Serious observers regard them as political fictions, and indeed there were some damning revelations about them exposed in Wikileaks.

Just because the reserves numbers aren't going down while production continues does NOT mean that the equivalent amount of new oil has been moved up into the reserves category. It means that the data is bad!

The world has been consuming more oil than it discovered since the mid-1980s. In a recent Exxon paper, "2012 Outlook for Energy: A View to 2040," they note, "More than 95 percent of the crude oil produced today was discovered before the year 2000. About 75 percent was discovered before 1980." According to IEA's World Energy Outlook 2011, an estimated 16 billion barrels of crude reserves were discovered in 2010. But the world consumed 27 billion barrels of crude in 2010.

In any case, I would not use the CIA Factbook as a data source, since they do not indicate where their data came from (not that I found in a cursory look, anyway), or how they define it. EIA, IEA, BP, and the Oil & Gas Journal are the data sources most analysts trust (with an asterisk).

Back on topic: the distinction between regular crude oil and the various categories of unconventional oil is not artificial at all. Unconventionals are not equivalent to crude on several important counts, including, but not limited to, the production cost per BTU. In fact, a new barrel of syncrude from bitumen costs three to four times as much to produce as an old barrel of crude. This is a subject I intend to write about it in a future article. Most importantly: The world still relies on conventional crude oil for about 85% of our total liquid fuel supply.

As for data sources, I would trust the CIA before other sources. They have to make vital decisions about how resources will affect global security, oil being one of the most important. And they can afford to employ analysts who do this for their career. I do agree, it's hard for *anyone* to get facts about foreign countries -- but by itself does not give any reason why you should trust one source over another.

As for the distinction between "unconventional" and "conventional" oil, let me point to one simple fact. I live in the Denver area. The other day I paid $3.20 per gallon for *premium* gas, while the national average for *regular* is around $3.48. Why is this? It turns out that the midwest currently has a glut of oil. Oklahoma, North Dakota and other areas are producing increasing supplies of what you call "unconventional" oil (i.e., fracing). The current Keystone pipeline bringing down bitumen from Canada also terminates in Cushing, OK. At the moment, there's no cheap way to get all this oil out of the area (lack of pipeline capacity, which nobody wants to build), so the net result is that we in the midwest currently have much cheaper gas than other places -- mainly due to "unconventional" sources. Me, I don't care. It all runs the same in my car, and it costs less. So what if it takes more energy to refine? It's obviously cost competitive with "conventional" gas. The truth is that there's so much profit in a barrel of oil or even bitumen that the oil companies still make money at $3.20 per gallon. How does "conventional" and "unconventional" matter in the end???

[BTW, sadly for me this is a temporary situation. They are in the process of reversing the flow of a pipeline from the gulf area to Cushing so that it will take oil to the gulf instead of from it. Unfortunately, most of this oil will be refined at the gulf and exported. Why exported? Because by US law (Merchant Marine Act of 1920), to ship oil products between US cities via tanker you have to use US flagged ships with US crews, and they are just too few and too expensive.]

I can assure you that CIA does not create and maintain original reserves data, and is not an authoritative data source on that.

A low local price due to your proximity to Cushing is irrelevant to the question of global oil supply, and where it comes from.

As I said, I will elaborate in a future article about why conventional is far superior to unconventional, and what that means for future supply.

"he neglects the effects of technology improvement on the production of conventional crude oil."

Actually, if you read what he says, he does no such thing. If "peak oil" is the peak of production rate of crude oil, as he says it is, then improved extraction technology is accounted for since these techniques will extract more crude oil, and the stas show that production has peaked.

So next time, please pay attention.

I think the issue is that you and your opponents talk past one another.

You say that conventional crude production is peaked and we need to do something about it. They say that conventional crude production is peaked and we are doing something else. They point to tar sands and super heavy crude from the orinoco basin and methane hydrates, et al. Their view is that, as the price of conventional crude moves up, then that will prompt substitutions. My impression by your statement "Price is not a proxy for production." is that you view the price mechanism as inadequate to create meaningful substitutions. Either that or you have a prejudice against the use of distillates for fuel, industrial production or consumer goods.

I was not talking about substitution. When I said "Price is not a proxy for production" I meant that higher prices do not necessarily mean production will rise, that low prices do not necessarily indicate a glut. Price is a function of supply AND demand, not just supply. But that's a separate topic from substitution. I don't see how you could have inferred any such prejudice on my part. I said what I meant and I meant what I said.

I apologize if I drew the wrong inference about any prejudice towards distillates. I agree with you that production may not increase in the face of higher prices. Production can and will be constrained by physical, technological or political constraints. I also agree with you that low prices do not indicate a glut but rather a lack of effective demand in the face of a given supply. That does not sully the fact that higher prices surely will force consumers and producers to seek substitutions. This is why some don't see a problem with peak oil, or peak stone, or peak wood, or peak coal or peak anything else.

The PRICE of substitutes is the killer. The return on investment for renewable energy is all over the place but always much less than on crude oil, especially when the amount of oil used in that production is considered. The same for chemical feed stocks. If this were not true you would have seen photovoltaics already supplying a major fraction of our energy.
The future is going to be an expensive place.

I am much more sanguine about the future. The future will not be more expensive nor more cheap, only different. People will not consume the same things or even desire the same things. The same things won't even be available. That's why I don't understand all the hoopla about peak oil. People are clever. They will find something else to do and a different way to live.

The information in the charts seem to indicate that oil production has been at a plateaue for a few years. It is possible to produce oil from some oil fields with improved technology or a higher price to make it economically feasible to produce oil. Oil supplies are not infinite and we are increasing the demand for oil at the same time that production is plateauing.

The article states that the producers, planners as well as regulators are using dodgy information as if it were fact and that distorts energy policy as well as distorts the market. Oil is a part of so much of our lives, we use oil to run the machinery that farmers use to grow abundant crops that are fertilized with oil by products. Oil is used to make plastics, tires, cosmetics and more. All of that increases the demand for oil and the demand is growing faster than it can be produced which leads to higher prices for oil and everything else.

It doesn't help that a lot of oil is under lands controlled by hostile regimes. It is good to have a frank discussion on what the future of energy will be and what we can do to survive without cheap oil.

Chris
Excellent and concise summary of what peak oil really is - and is not.

But as you can see from one of the comments the immediate tendency is to change the subject - "but fracking is pushing peak oil into the future". Completely ignoring that the actual DATA is showing that we are on an apparent peak now. And then to talk about future natural gas exporting and "so much for peak gas". Funny - I don't think you talked about peak gas.

The hind end of a vampire squid. Great.

Chris,

One of the great problems to being a big picture dilettante like myself is that I don't know enough about any one thing to answer my own questions. I do know that cheap, high intensity energy, the ultimate easily transportable, pound for pound, being oil, has driven our growth civilization for a century. The driver is no longer cheap and has reached the end of our ability to deliver it at growth dimensions, and if we somehow manage to do it, we'll likely foul our nest irepairably.

What's gonna break first, a financial system that presupposes growth to pay interest, or the energy system on which growth is predicated? Does it matter? Doesn't one break ensure the other, along with a lot of other breaks? I guess what I'm asking is whether you can envision any set of social, political, economic policies that presents a chance of a softer landing when the party falls apart? Is there a working elevator or will we all be jumping out of a 3 or 4 story window?

All great questions, Ron. I can imagine multiple scenarios, but who can say? Generally I expect a slow-squeeze rather than a fast-collapse scenario, which will go on for the next 100 years, and be far more about adaptation and efficiency than supply-side saviors. And as I suggested two weeks ago, it may also be more about personal action than policy.

Chris,

I beseech the Gods that you are correct in your expectation. There are way too many guns, gunners and regressive attitudes around for the ???fast-collapse??? to be anything but terrifying. Fortunately, my family has a lot of those guns and attributes, so I'd probably be all right, but I don't want to go there. Save me from Kunstlerism. (grin)

???...??it may also be more about personal action than policy.???

That sort of implies hunkering down survivalism, and I'm sure you didn't want to imply that, even though a dose of it is probably prudent. If I read you right from the past, the ???personal action,??? is in the service of local communal actions, by involvement in the directs needs and visions of our neighbors. We can't go it alone.

I recently read, ???The Transition Handbook,??? quite a slog for a too linear thinker like myself. Sticking to it did reward me with a vision for myself that might be of value to some of your readers. I am now pretty certain that there are action plans in that book for peak oilers that do and can work.

I've signed up with Post Carbon Institute to be trained on-line as a local facilitator of the peak everything/end of growth message. From there I expect to find like minded folk to network and work on a local transition movement some time in the next year. If we can get something going that is relatively self sustaining, I'd then back off from the whole, and work with groups of folks who are interested in the two things that most excite me, very light electric vehicles, and urban agriculture. Permaculture and aquaponics are just too fascinating.

We've gotta start somewhere after all the necessary blathering. (grin)

I click Add Your Opinion and my comment just disappears. It does not re-appear when I reload the page from the main page link.

And often it says ""You just added" when it's my very first comment and I haven't added anything yet.

It's very frustrating!

I have the same problems but it is not consistent. Sometimes I can make a comment, and other times it just disappears. I contacted the support but it was not helpful. It is frustrating to spend a bit of time writing a reply or a comment and have it not post.

I really worked at a comment and lost it last nite. Just have to compose elsewhere and copy and paste for safety, I guess.

There was an article leading the daily SP that said that the problem was a spam filter that was set too aggressive. It seems to have been fixed; I have not had problems today.

http://www.sajs.co.za/index.php/SAJS/article/view/1040/1050

The link above is to a South African Journal of Science commentary article, on the theme of Hubbert's Peak.

Inculcated as we are with the notion of rubber tire mobility, any suggestion of another standard for transport is simply shunned. From the Civil War until the VietNam era, US transport mode mix included a very comprehensive matrix of railway connection. The US railway network included 1000's of branch rail lines assuring most every community had a rail haul option along with trucking service. As trucking offered long haul along with door-to-door, and inventory tax prompted "Just-In-Time" to eliminate local rail-served warehousing and on-site retail goods inventory, the branch rail line was removed. Commitment to trucks up and down the supply chain was a natural step with easy and cheap oil flow.

US budgets were flush to the point of supporting very large military forces, naval and air force presence in the Middle east and other originators of imported oil. In 1956, the Suez Crisis (prompting military expansions to oil patch arena) and Ike's Interstate Defense Highway Act set the stage for the transportation methodologies we see today. Railways were merged as demanded in Barriger's "Super Railroads" book. But take away the easy and cheap oil...

Will US corporate leaders, policymakers and strategic planners have needed prescience and circumspection (nerve and skill) to confess to the body politic of needed rethinking of railway mode's part in the Oil Interregnum solution set? We truly are in a period of shifting away from Oil's undisputed reign as king of the economy, and transport is the most vulnerable element in the necessary changes in the way we do things. Or more to the point, we are vulnerable to gridlock and famine if we count on trucks and cars to somehow maintain distribution and mobility status quo as motor fuel limits and surging pump price gang up on our economy.

The solutions are not anything of a complicated nature. Rebuild dormant rail branch lines, beginning with the agricultural and manufacturing node corridors most affected in a trucking crisis. Add to the inventory of rail line enhancements with a steady growth of rail mode employment, including reformed US Railroad Operating & Maintenance Battalions. US military standing down from overseas locations fit right into this new tasking. Training is expedited by bringing military personnel into US Regional Short Line Railroad Association member companies across the USA. Actual operating railroad companies assume responsibility of specific dormant rail corridor and take over operation as lines come back to operating condition.

After years of batting around the Peak Oil potato, it is now well chopped, diced, mashed and hashed. Served up with a resounding Middle East meltdown, Peak Oil is most nutritious with a strong helping of railways: Second Dimension Surface Transport Logistics Platform... In medical lingo, trains would be referred to as "Parallel Bar Therapy"?

Indeed.

Excellent article, as are all your pieces.

"It???s a bit hard to believe that in 2012 anyone is still unclear about what ???peak oil??? means..."

Nooo -- it's not at all hard to believe -- I think the process of informing the general public has only just begun. There is sooo much misinformation swirling around out there...

I love the controversy. Alternative energy or "green" energy is a good choice for all countries to save resources and reduce production of oil. While it seems many disagree with me... Only time will tell who is right on this issue. femmes russes