Peak Oil is You
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Page added on July 14, 2013
The danger in wishful thinking on oil
James Howard Kunstler knows a lot of people think he’s a fool right about now. He’s OK with that. Just wait, he says.
Back in 2005 Kunstler published “The Long Emergency: Surviving the Converging Catastrophes of the Twenty-First Century.” Such a brief description is inadequate, but rode the “peak oil” wave that argued that humanity was on the verge of a massive crisis when the era of cheap petroleum came to an end.
I called Kunstler and wrote a column headlined, “Oil Peak? Uh-Oh” that ran in the May 8, 2005, Daily Camera. In it I wrote, “Is Kunstler just our era’s Paul Erhlich, whose dire 1968 prediction of a ‘population bomb’ hasn’t gone off yet?”
Fast forward eight years and things have changed unexpectedly; tricky thing, history. According to a new Carnegie Endowment report, humanity has to date consumed 1.2 trillion barrels but “Calculations of today’s economic reserves — those that are technologically recoverable at current prices — are on the order of 6.5 trillion barrels. However, experience suggests that the share of recoverable oil grows as economic conditions and technological innovation change.” Among other things, this means that the United States will become the world’s largest oil exporter by 2020.
Take that, Saudi Arabia.
As the report noted, “Nobody predicted the extraordinary surge in North American oil production.” It’s all being done through new technologies, including horizontal drilling, hydraulic fracturing — fracking — methods of extraction for oil sands, gas-to-liquid and coal-to-liquid processes and deep-water drilling.
So, to paraphrase Joel Goodson in “Risky Business,” it’s time we all said “What the heck!” and — to quote the artist formerly known as the artist formerly known as Prince — let’s go crazy! The stuff will never run out! Par-tay!
“I’ve taken a stand and made statements. Because of the nature of what has gone on the last few years, it makes me look foolish,” Kunstler says. “I just have to soldier through that. But I have a serene conviction that my version of the story is probably more correct than the other side’s.”
So what is his story?
“What we are seeing now is an enormous amount of wishful thinking by people who ought to know better but don’t,” he says flatly.
His argument is more or less what it was in 2005. Yes, there are plenty of “reserves” of petroleum. But the question is, can you get to it economically? The cheap oil that fueled the automobile and technological ages in America, the “low-hanging fruit,” is long gone. Now we have to go to ever more forbidding places and use increasingly inefficient processes to extract oil.
For example, everybody’s all giddy about shale oil. But a “classic” east Texas oil well from the boom years, Kunstler says, cost about $400,000 to drill in 2013 dollars. For that amount, oil would flow in rivers, sometimes for decades.
“They produced thousands, sometimes tens of thousands, of barrels a day. Some had flow like that for decades, drilled in the 1930s and they were still easily getting a thousand barrels a day in 1960. That is a long time,” he says. Even a “stripper” well, one that was basically tapped out, could “still squeeze out 10 barrels a day.”
In contrast, a shale-oil well in the Bakken formation in north central North America costs between $6.5 and $10 million to drill and produces around 80 barrels a day. What’s more, Kunstler says, such wells are almost always wrung dry in five years or less.
“What people don’t understand is the relationship between capital and oil production. … When the energy becomes too expensive or non-economical, it’s barely worth getting out of the ground,” he says. Then, he argues, there isn’t sufficient capital to plow back into the energy sector and production inevitably declines.
Same goes for tar sands and remote extraction beneath the Arctic, and so on.
But, Kunstler says, we all have a vested interest in the wishful thinking because nobody wants to give up our cushy, oil-driven lifestyles. Petroleum is almost literally part of everything we do or consume, in fact — as in plastics or fertilizers — or as an input — the diesel that powered the truck that brought that tomato from California.
Kunstler is not the only one still sounding the alarm. Arthur Berman, Bill Powers and other independent oil analysts have said the shale-oil bubble will burst sooner than anyone expects. Alas, we’ve done exactly nothing to prepare for a future of oil made more scarce due to the expense of extraction. In 2005, Kunstler was suggesting things like investing in the national rail system and gearing up for more community-oriented economies and moving away from the suburban model. We didn’t do anything like that and with the latest “Yee-haw!” about endless oil forever, we won’t now.
“I didn’t call the book ‘The Long Emergency’ for nothing,” he says. “Shale oil bought this culture a little time, but I don’t think it’s going to be more than five years. … We’re still cruising for a bruising.”
And let’s not forget how much carbon we’ll produce burning all those supposed trillions of barrels.
So, is James Howard Kunstler just this era’s version of Paul Erhlich? Who knows? I told him I’d call back in another few years and see where we are. If things aren’t going the way he predicts by then, the answer may just be yes.
19 Comments on "The danger in wishful thinking on oil"
Arthur on Sun, 14th Jul 2013 11:25 am
These 6.5 trillion recoverable barrels still in reserves… does anybody have a link to an article supporting that claim? I thought the deal was 2T conventional, of which 1.2T already consumed + one decade worth of shale?
rollin on Sun, 14th Jul 2013 12:14 pm
Population bomb is in the process of exploding.
Oil is still a finite resource and we are in the difficult to get phase.
This article is based on the premise of “we haven’t crashed yet”. Has the author been paying attention to what is happening in the world or just watching the mainstream media hype on a wide-screen TV?
BillT on Sun, 14th Jul 2013 1:10 pm
Well, on May 8, 2005, oil was $43.00 /bbl. It was only the beginning of the climb 8 years later to $105./bbl. or an increase of 250%. If that is NOT Peak Oil, what is. Remember, prior to 2005, with the exception when no oil was coming out of the ME in the 70s, oil has always been bouncing in the $20 to $30 range (2010 dollars).
Now we have to worry about every little thing that might disrupt the supply or the methods of getting that oil that has not peaked…lol.
Take away the oil pretenders and it has already started the decline. Take away the tar sands and fraking (soon to be too expensive/dangerous) and it is in a steep decent. Take away the lies and we would KNOW that it is over.
mo on Sun, 14th Jul 2013 1:42 pm
Another writer who confuses resources and reserves
J-Gav on Sun, 14th Jul 2013 2:35 pm
Looks to me like our financial system, which has been squirming on the pot ever since the 2008 debacle, is just about ready to deliver another big one. If so, the demand destruction would give us some time before the next big spike in oil prices. We’ll see but, either way, where we are is not a comfortable place to be. Within a decade, millions more people on the planet are liable to be poorer, hungrier and angrier.
westexas on Sun, 14th Jul 2013 2:58 pm
From the article: “Among other things, this means that the United States will become the world’s largest oil exporter by 2020.”
If we look at EIA data for 2012, US total petroleum liquids + other liquids was 10.1 mbpd (basically total liquids not counting refinery gains). Our consumption was 18.6 mbpd in 2012, for net imports of 8.5 mbpd (excluding refinery gains, which represents a net energy loss).
Saudi net oil exports in 2012 were 8.7 mbpd (EIA). So, to become the world’s largest net oil exporter, we have to offset declines from existing wells and add more than 17 mbpd of production from 2012 to 2020, to bring 2020 production to over 37 mbpd.
If we assume a 10%/year decline rate from existing wells and assume an average production rate of 23 mbpd between 2012 and 2020, the industry would have to put on line new production of about 37 mbpd in 8 years, to have a 37 mbpd production rate in 2020, or close to 5 mbpd per year in new production for 8 years.
westexas on Sun, 14th Jul 2013 3:18 pm
Some corrections and additions:
From the article: “Among other things, this means that the United States will become the world’s largest oil exporter by 2020.”
If we look at EIA data for 2012, US total petroleum liquids + other liquids was 10.1 mbpd (basically total liquids not counting refinery gains). Our consumption was 18.6 mbpd in 2012, for net imports of 8.5 mbpd (excluding refinery gains, which represents a net energy loss).
Saudi net oil exports in 2012 were 8.7 mbpd (EIA). So, to become the world’s largest net oil exporter, with a net export rate of about 9 mbpd or so in 2020, we have to offset declines from existing wells and add about 17.5 mbpd of new production from 2012 to 2020, to bring 2020 production to about 27.6 mbpd (assuming flat US consumption).
If we assume a 10%/year decline rate from existing US wells and assume an average production rate of 19 mbpd between 2012 and 2020, the industry would have to put on line new production of about 15 mbpd in 8 years, to offset declines, plus another 17.5 mbpd, for a total gross increase of about 32.5 mbpd to have a 27.6 mbpd production rate in 2020, or about 4 mbpd per year in new production for 8 years, in order to offset declines and show a large net increase in produciton. This would require us add the productive equivalent of Canada’s 2012 production ever year for 8 years.
And to maintain a production rate of 27.6 mbpd in 2020, assuming a (conservative) decline rate of 10%/year from existing wells, would require the US to put on line every year the approximate productive equivalent of Iraq’s 2012 production.
CAM on Sun, 14th Jul 2013 3:22 pm
Because we have not yet run out of oil, we never will? Seems like a rather dubious line of reasoning to bet the future of the human race on!
shortonoil on Sun, 14th Jul 2013 4:40 pm
westexas, good to see you you posting here. Your well thought-out appraisals are always most welcome.
Got to agree with you. The idea that the US will become energy independent as a result of shale oil is a mere mirage of delusion. Even though we have more fundamental reasons to reject the shale oil hypothesis the economic side, alone, disallows any possibility of it becoming the fountain of US oil independence. Assuming a 35% decline rate for these wells, and assuming that the Eagle Ford and Bakken are not unique, development cost would have to exceed $3.5 trillion by 2020 to bring about such an event. In a world where the FED is challenged to print $85 billion a month to keep the Federal Government afloat its not likely. Plus, by 2017 the the “cat will be out of the bag” on shale oil the the would be investors will be heading for the hills!
Jerry McManus on Sun, 14th Jul 2013 4:46 pm
A good summary with regards to some of the questions around the new unconventional sources of fossil fuels.
They talk about the rate of extraction, and the question of economic costs. They touch ever so briefly on the costs to the environment. No mention, unfortunately, of the cost in energy which is equally as important as the other costs.
@Arthur
Unfortunately I don’t have a link for the 6 trillion number, but I have seen that number before as a credible estimate of worldwide Original Oil in Place or (OOIP).
The thing to remember about the slippery topic of “resources” vs. “reserves” is the fact that, on average, only about 30% of oil is recovered in conventional oil operations. Please note that is the GLOBAL AVERAGE and not representative of any given individual field.
Six trillion barrels in the Earth’s crust multiplied by 30% average recovery is what gives us the 2 trillion “proved and probable” (2P) reserves estimate that we hear so often.
Just for grins, let’s add a few hundred billion barrels to that 2P estimate. Guess what? Only moves the peak of production out a few years, at best.
Meanwhile the costs continue to rise exponentially…
FarQ3 on Sun, 14th Jul 2013 4:47 pm
Thanks WT your post here pretty much wraps up the real situation IMHO
CAM, we’re not running out of oil. PO is about production of conventional oil which has been in decline. SOME oil will always be available but not for us slaves.
Plantagenet on Sun, 14th Jul 2013 5:37 pm
Kunstler couldn’t foresee the invention of fracking anymore than Hubbert could.
GregT on Sun, 14th Jul 2013 6:29 pm
Hydraulic fracturing was invented in the 1940s. It wasn’t until 1956 that Hubbert predicted that US oil production would peak in the early 70s. Hubbert’s prediction was right on the money.
shortonoil on Sun, 14th Jul 2013 7:06 pm
“PO is about production of conventional oil which has been in decline.”
That’s correct. Conventional crude (API 30-45) offers an energy window that heavier, and lighter crude does not provide. It is the amount of energy that is delivered to the end consumer that drives the world’s economy. Helicopter Ben may think otherwise, but he’s an economist!
shortonoil on Sun, 14th Jul 2013 7:21 pm
“Hubbert’s prediction was right on the money.”
Actually Hubbert was off by two years. The reason is that there is a slight skewness to the logistic distribution that could not be identified until after the peak was reached. All in all, however, Hubbert’s prediction was close to genius considering the data and processing capabilities he had available to him in his day.
James A. Hellams on Sun, 14th Jul 2013 11:40 pm
From what I read, the EIA estimates the worldwide “technically recoverable” shale oil reserves to be 345 billion barrels. In another report, the British Petroleum annual statistical review (as of 2012) shows a daily consumption of oil of 89.8 million barrels per day.
If you connect the dots in the above paragraph, here is what you get. 345 billion barrels of shale oil that is technically available; with a worldwide annual consumption of oil being 33 billion barrels annually. This results in all the technically available shale oil being consumed in 11.5 years to supply the worldwide demand.
DC on Mon, 15th Jul 2013 3:01 am
Q/ This results in all the technically available shale oil being consumed in 11.5 years to supply the worldwide demand.
Sure enough using simple math. But, how many years would it take to extract those 345 billion barrels? A lot longer than 11.5 years. Even now, tar-sanders in alberta keep claiming ‘production’ will reach 3.3 mpd by 2028. They figure that will still take several more decades, and they have been AT it for decades already. Assuming they ever reach the lofty outputs they project in 20 years time or so, what would a gallon of alberta tar-sorta oil cost an end user in 2030?
Problem is, the longer it takes to extract, the more likely the financial system that supports those heavily subsidized billion dollar boondoggles, will have collapsed in the meantime. However, when that happens, the huge mess they made extracting the stuff while they could still make money at it, will never be re-mediated either. And why not? No technology exists, or will exists to ‘fix’ the damage and even if it did, there would be no money to pay for it. IoW, you get a toxic crated moonscape for all time, and US soccer moms get to shuttle there fat obese kids around decaying suburbia for a few extra years.
Yup, winners all around…
shortonoil on Mon, 15th Jul 2013 2:28 pm
345 Gb divided by 33 is 10.5 years. If you take into consideration that a barrel of shale oil (because of its high condensate fraction) only has 92.5% of the energy content of conventional crude that “technically” extractable crude is now 9.7 years.
The key term here is “technically” extractable; how much is “economically” extractable? Best WAG; 5 to 7! Don’t worry James, they won’t be laughing at you for very long!
EarthProjects.info on Mon, 15th Jul 2013 11:49 pm
The US being the largest exporter by 2020 does not mean that global oil production will not be in decline by 2020. It should go into decline by 2015 according to former president of Shell Oil and CEO of Core Laboratories. It is good news for the US (and all the OPEC countries that the US is ready to go to war to get oil from) but not good news for the world.