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Peak Oil – The Man & Mind Behind The Theory
“Our ignorance is not so vast as our own failure to use what we know…” -M. King Hubbert
It’s not a question of if, but of when the earth’s hydrocarbon resources will be depleted. They are nonrenewable, finite, and one day Peak Oil Theory will be vindicated- but that day will be far into the future thanks to the recent advent of technologies which can exploit previously inaccessible reserves- the technologies which have midwived the unconventional revolution.
“Tonight I want to have an unpleasant talk with you about a problem unprecedented in our history. With the exception of preventing war, this is the greatest challenge our country will face during our lifetimes. The energy crisis has not yet overwhelmed us, but it will if we do not act quickly…We simply must balance our demand for energy with our rapidly shrinking resources. By acting now, we can control our future instead of letting the future control us.”
Those were the words of President Jimmy Carter in a televised speech to the nation on April 18, 1977. The Western world was in the midst of yet another energy crisis occasioned principally by the machinations of OPEC and manifested in long lines at the US pump and a decade of declining domestic production.
President Jimmy Carter
Peak Oil Theory was ascendant and seemed to have been vindicated. Few anticipated the seismic changes that would arguably confine peak oil theory to a “plug and abandon” operation.
What follows is the story of Marion King Hubbert, the founder and leading proponent of the theory which only until recently informed to a significant degree the West’s perspectives on hydrocarbon resources: Peak Oil Theory.
“Turned Heretic”
He was a “typical Horatio Alger type of schoolboy,” was how M. King Hubbert’s classmates described the precocious youth.
He was born to a 1903 in the central Texas town of San Saba to a rancher and a schoolteacher. He attended local schools, including Cherokee Junior College (run by the Methodists) and Weatherford College, where he matriculated in 1923.
Hubbert later said that it was early in his college career that he “turned heretic” and decided to pursue a secular, non-religious-based education, forgoing the fundamentalist worldview in which he was brought up.
In January 1924, he literally arrived on the doorstep of the University of Chicago and requested admittance. Following a probationary term, he enrolled as a full-time student and later earned undergraduate degrees in geology and physics. Subsequently, he was accepted as a graduate student in the University of Chicago’s Department of Geology, which at the time had one of the most renowned university geology departments in the US.
He immediately demonstrated a knack for grasping and communicating the finer points of geology. He started out studying structural geology but soon decided to undertake the study of multiple related fields simultaneously, including chemical thermodynamics, electricity, petrography and theoretical engineering chemistry.
Hubbert believed a well-rounded knowledge of these multiple fields would advance his quest to solve various challenges in the field of geology, many of which were then believed to be impossible to overcome.
During his summer respites, he applied his growing knowledge as an assistant geologist for the Amerada Petroleum Corporation and later as a seismographic party member for the company’s newly-established Geophysical Research Corporation.
A Geological Rebel
By the early 1930s, at which point Hubbert was an instructor of geophysics at New York’s Columbia University, he had developed two firm positions that would come to serve as the leading themes for the rest of his long career- and also generate intense controversy within the scientific community and beyond.
The first was reflected in his efforts to bring together the emerging earth sciences within the domain of traditional university departments of geology, which he came to regard as scientifically sterile and excessively devoted to antiquated theories and methodologies.
Secondly, Hubbert came to recognize and insist upon the finite nature of the earth’s energy and mineral resources. He argued that these resources were being exploited much more widely than recognized by the general public and much of the scientific community. To address this predicament, Hubbert became a vigorous advocate of population control and conservation, especially in his later career.
In the early 1930s, Hubbert became one of the founding members of the Technocracy movement, which proposed replacing politicians and business people with scientists and engineers who ostensibly had the technical expertise to manage the economy. The movement was briefly popular in the early years of the Great Depression, but historians argue that the overshadowing popularity of the New Deal, coupled with the movement’s inability to articulate a coherent political philosophy, led to its declining popularity.
In 1940, Hubbert published a paper, “Theory of Ground Water Motion,” which helped to innovate methods of oil and gas exploration by demonstrating that oil and gas flowed through cracks and pores in rocks and did not remain in static, subterranean pools as had been previously thought.
During the Second World War, Hubbert practically applied his learning under the employ of the Board of Economic Warfare in Washington, DC, where he served as the chief of the Mineral Resources unit. He was entrusted with supervising assessments of natural resources throughout the world evaluated to be critical for the Allied war effort.
Joining Shell
In 1943, Shell assigned Hubbert as the associate director of the company’s Exploration and Production Research Laboratory, where he assisted in the formulation of Shell’s postwar strategy for locating and accessing oil deposits.
Shell executives soon came to regard Hubbert as a leading figure in geophysics and petroleum geology, granting him the leeway to conduct open-ended research to improve geophysical theory and its applications to hydrocarbon extraction.
By the mid-1950s, he had converted Shell’s research lab (the Bellaire Research Center) into one of the most reputable research facilities in the energy industry. During this time, his reputation began to grow in the broader energy sector, and he was selected as a distinguished lecturer of the AAPG, which granted to a wider audience his insights on applied and theoretical geophysics.
As a result of his research of theoretical geophysics at Shell, Hubbert was able to demonstrate that most hydraulic fractures are vertical. This was a significant discovery which yielded a serious reevaluation of techniques utilized to locate oil and natural gas deposits.
By the mid-1950s, he was appointed consultant in general geology at Shell, which afforded him additional time to engage in the groundbreaking research to which he was dedicated.
By this point M. King Hubbert had established himself as a leading authority on geophysics and petroleum geology.
He was on the cusp of proposing the theory which would occasion a “peak” in his fame.
Hubbert’s Most Enduring Legacy
Since the 1930s, Hubbert had been emphasizing that the earth’s resources are inherently finite and that they were being exploited at a much more rapid rate than generally believed.
At a regional meeting of the American Petroleum Institute in 1956, Hubbert articulated a position which would engender passionate reaction- both positive and negative.
Basing his calculations on the extrapolation of past discoveries and drilling activity- as well as production rates- Hubbert said that for any given geographical region- from an individual oilfield to the planet as a whole- the rate of hydrocarbon production of the reserve would over time resemble a bell curve.
He estimated the total oil reserves held in the US Lower 48 to be between 150 and 200 billion barrels. He posited that the probability of oil discovery was directly related to the amount of oil that had yet to be discovered. In other words, over time both new field sizes and cumulative oil production would decrease.
It was at that meeting that Hubbert for the first time published his findings utilizing a bell curve diagram, which represented the total volume of oil in the Lower 48. The peak of the curve represented the juncture at which half of these natural resources would be produced.
Early in the curve (pre-peak), the production rate increases due to the discovery rate and the addition of infrastructure. Late in the curve (post-peak), production falls due to resource depletion.
Two key terms were used to describe the acme of the bell curve: “Hubbert’s peak” refers to the peaking of production of a particular region. “Peak oil” came to refer to a singular event in history: the peak of the entire planet’s oil production. According to Hubbert, after peak oil the rate of oil production on earth would enter a terminal decline.
In the 1956 presentation, Hubbert presented two scenarios for US crude oil production grounded in his belief that his bell curve (used mainly to approximate past discovery data) may be constructed and utilized to provide estimates for future production: in particular, the date of peak oil production (or the total amount of oil ultimately produced).
- Hubbert demonstrated the “most likely” scenario by a logistic curve with a logistic growth rate equal to 6%, an ultimate resource equivalent to 150 Giga-barrels and a peak in 1965.
- The “upper-bound estimate” consisted of a logistic curve with a logistic growth rate equal to 6%, an ultimate resource equal to 200 Giga barrels and a peak in 1970.
These predictions relied on geological estimates of ultimate recoverable oil resources. However, Hubbert was dissatisfied with the uncertainty this introduced, given the various estimates ranging from 110 billion to 590 billion barrels for the US.
To resolve this ambiguity, in 1962 Hubbert reformulated his estimates based on calculations of ultimate recovery, based solely on mathematical analysis of proved reserves, production rates and new discoveries- independent of geological estimates of the nature of future discoveries. He concluded that the ultimate recoverable oil resource of the US Lower 48 was 170 billion barrels, with a production peak forecast for 1966 or 1967.
Hubbert achieved definitive fame when US oil production “peaked” at 10.2 M/bd in 1970 and then began a precipitous decline in the ensuing decade.
In 1975, in the midst of the ongoing oil market convulsions occasioned by OPEC’s 1973 oil embargo (yielding high petroleum prices), the National Academy of Sciences confirmed their acceptance of Hubbert’s calculations on oil and natural gas depletion.
Around the same time, Hubbert (who had retired from Shell in 1963 and subsequently joined the USGS as a supergrade research employee) forecast that global oil production would peak in 1995 “if current trends continue.” He also predicted that global production would begin to decline by 2006.
When Hubbert died in 1989, US oil production stood at 2.78 M/bd, having fallen from 3.27 M/bd four years earlier. US oil production continued to fall throughout the 1990s and early 2000s, from 2.68 M/bd to 1.83 M/bd in 2008. By 2013, however, US oil production had risen to 2.71 M/bd due to the unconventional revolution.
Looking At ‘What Might Have Been’ By Looking At “What Is”- The Permian Basin
Global oil production data show a fall-off from the late 1970s to the mid-late 1980s, increasingly on average thereafter, especially from about 2006 to the present, driven by NAM unconventional production.
Note that Hubbert and his later adherents of Peak Oil Theory made their prognostications based on conventional oil production. They did not anticipate the technologies that would soon render accessing unconventional resources (tight oil and shale gas) possible, and it has been a revolution in unconventional production was has discredited the projections of the peak oil theorists.
But what if the technologies enabling the unconventional revolution had not been developed? What the Peak Oil theorists have proven correct?
By looking at unconventional production trends in what has emerged as the busiest oilfield in the world- West Texas and New Mexico’s Permian Basin- we can speculate as to “what might have been.” Indeed, the Permian is an excellent example of how every conventional play, if developed solely via conventional methods, will eventually be tapped out before hydrocarbon in the source rock is exploited.
The Permian Basin was once thought largely relieved of its hydrocarbon potential, after having been drilled many years with conventional tactics. But in recent years, unconventional activity in the basin has shifted from rigs from drilling vertical to horizontal wells. This has produced more recoverable volumes of tight oil as well as higher D&C costs per well. Consequently, both tight oil production and spending are now growing rapidly in the basin.
Light oil production forecast from the top producing US tight plays
In a recent study, Rystad Energy concluded that accelerated drilling in key formations in the Permian Basin will likely result in the production of more tight oil volumes than any other NAM tight play.
As you can see, the rise in Permian production began precisely at the time when unconventional methodologies began to be employed in the basin, which were able to exploit previously inaccessible reserves. In other words, the industry’s innovations (and ability to produce tight oil) have resurrected the Permian from a conventional sunset.
Hubbert and his heirs did not anticipate this development. But had not the unforeseen proliferation of these technologies occurred, the rapid growth in global oil production of the last decade or so, catalyzed principally by the US unconventional boom, quite simply would not have occurred.
Hubbert’s Ambiguous Legacy
Last September, the Oil Drum, perhaps the principal outlet for discussion of Peak Oil Theory, announced it was closing shop. With the US unconventional revolution unlocking hydrocarbons at a rate once believed impossible, fracing and upstream technological advances are attracting more interest now than the theory first shaped by Hubbert.
But I believe that before definitively confining Peak Oil Theory to the “ash heap of history,” we would do well to observe that its fundamental contention remains correct: the earth’s hydrocarbon resources are finite and will one day be depleted.
Perhaps the most significant smirch on Peak Oil Theory was its adherents’ lack of foresight. Namely, the prognostications proposed by Hubbert and his followers did not adequately take into account the variable of technological advancement that has facilitated the accessing of unconventional reserves. Granted, no one really saw it coming, but the industry’s remarkable innovation and technology progression has kicked the peak Oil football a far distance into the future.
For now, the theory M. King Hubbert introduced has been confined to a plug and abandon operation. But there will come a time when his fundamental insights will once again provide the rhythm to which which the global oil drum will play- that is, unless a new wave of unforeseen technology further distances Peak Oil Theory from ongoing oil production reality.
RIP, M. King Hubbert…for now.
20 Comments on "Peak Oil – The Man & Mind Behind The Theory"
Dave Thompson on Tue, 15th Jul 2014 8:43 pm
Dumb way of explaining what is happening now. This must be for people that refuse to see the gravity and reality of the world oil situation.
Northwest Resident on Tue, 15th Jul 2014 8:44 pm
“… the industry’s remarkable innovation and technology progression has kicked the peak Oil football a far distance into the future.”
rockman might come along shortly and give this absurd statement the real ass-kicking that it deserves. But in case he doesn’t, let me make one point for him:
It isn’t innovation and technology progression that has made unconventional (shale, tar sand) oil extraction possible. That technology has existed for a long time. What did make unconventional oil extraction possible is the extremely high price we are paying in relative terms for a barrel of oil today. Without that high price, there would be very little to no unconventional oil production.
As far as kicking the peak Oil football a far distance into the future goes, define “far distance”. Unconventional oil HAS bought us time since 2005 when the conventional oil field production officially went into decline. It is still buying us time. But how much? Maybe a few more years? Is that what is meant by “far into the future”? Certainly no farther into the future than 2030 when, according to shortonoil’s most excellent graph on his website, the math seems to prove conclusively that we can’t go past that point.
What this article and most if not all anti-peak oil proponents fail to take into consideration is this one simple fact. The COST of producing unconventional oil is breaking the back of the world economy. In fact, from my point of view, the world economy has already been thoroughly crushed by high oil prices — look at the accumulated trillion$ in debt, the mockery that the stock market has become, the long held zero interest rate which enables desperate corporations to borrow money virtually for free which they use not to invest in profitable projects — there aren’t many of those left — but in buying back their own stock to maintain the illusion of financial soundness.
In the meantime, nations are feeling the internal pressure of rapidly rising food prices which always leads to unrest, prices which are directly related to the high cost and increasing unavailability of oil. Many of the worst-hit countries are in the Middle East, right where major worldwide supplies of still-cheap-to-extract (relatively speaking) oil still exist. The madness in the Middle East could burst into a conflagration which could easily result in a drop of oil exports from those countries. If that happens, NO AMOUNT of shale/tar sand oil will prevent chaos on a worldwide scale, nor even buy us any more time.
And the pressure will just build from here on out, food prices will continue to rise, unrest will simmer and boil under until it cannot be contained any longer, nations jockeying for those last few oil resources that haven’t been already claimed will cross the line. It is only going to get more intense as each week and month passes.
Unconventional oil is buying us time, that is all. Don’t fall for articles like this whose primary intent is to calm the masses, to keep YOU in the dark as to what is really happening. Behind the curtain, big things are happening, they just don’t want to many curious people taking a peak to see what they’re up to because once enough people really understand our predicament, confidence in the systems and governments erodes, and they can’t let that happen.
Now watch, rockman will be along shortly and might end up kicking MY ass for getting it all wrong. But I think (and hope) not.
GregT on Tue, 15th Jul 2014 11:00 pm
“Unconventional oil is buying us time, that is all.”
Or, it is giving us less time, if climate change, environmental destruction, and continued population growth are to be taken into consideration. Peak oil is the problem that we already face. Continuing to burn what is left, is the bigger problem that is only starting to get warmed up.
Tom S on Tue, 15th Jul 2014 11:01 pm
Northwest Resident:
“It isn’t innovation and technology progression that has made unconventional oil extraction possible. That technology has existed for a long time. What did make unconventional oil extraction possible is the extremely high price we are paying”
But that’s the “resource pyramid” argument which some economist made in the 1970s and which peak oilers always denied.
If the technology for horizontal drilling and fracking was available all along, then Hubbert and Campbell made a big mistake in not including it in their graphs of future hydrocarbon production.
-Tom S
GregT on Wed, 16th Jul 2014 12:11 am
Nony,
I thought you said that you weren’t going to post as much?
Northwest Resident on Wed, 16th Jul 2014 12:41 am
GregT — Is that another Nony sockpuppet? Could be…
Tom S — Fracturing technology has been deployed in the United States for nearly 65 years, according to one article I read.
Wasn’t Hubbard skeptical of fracking? That’s what I read. He probably realized that fracking was totally uneconomical and that the net energy produced from fracking would be so small as to almost be a waste of time and energy. He probably considered the extremely high price that oil would have to sell for to make fracking “profitable”, and couldn’t see far enough into the future to realize how truly desperate we are for oil. And he probably realized that fracking, even if technologically possible, would ruin the economy. Probably all those things and more caused Hubbard to not seriously consider fracking — just speculating.
Why do you think he didn’t include it in his graphs?
GregT — I’m agree with your sentiments expressed, definitely. But if they hadn’t resorted to fracking, the global economy would have gone belly up back in 2008 most likely, and I as most people including you I think were totally unprepared at that point in time. What’s another 7 – 10 years of massive dumping of carbon dioxide along with other waste into our atmosphere, oceans and landfills? Dumb question, I know. The trade off of that “bought time” is that it gives a lot of us time to suit up and prepare for the big one. Chances are, governments used (and are using) that time to button up security on nuclear sites and to take other measures to prepare. What the heck, once those of who make it through the bottleneck are standing on the other side, carbon emissions and pollution by humans will have been dramatically scaled back. If it happens soon enough, there may not be that severe of a climate change — compared of course to worse case scenarios.
Perk Earl on Wed, 16th Jul 2014 2:41 am
Keep in mind too that the world economy needs to remain at this pace (albeit on life support) to continue to pay for higher priced non-conventional sources. If there is a another big step down like there was in 08, the price of oil will drop enough to mothball many sources including tight oil.
strummer on Wed, 16th Jul 2014 5:15 am
Tom S: “But that’s the “resource pyramid” argument which some economist made in the 1970s and which peak oilers always denied.”
The “resource pyramid” theory is wrong because you need exponentially increasing amounts of investment capital to extract resources that are further down the pyramid. But that investment capital is in turn dependent on those resources. That’s the mistake most economists are making, that they don’t consider the origins of the investment capital. They simply assume that we are always able to create and invest any amount of capital that is needed. But the resources ARE the SOURCE of investment capital. And when the resources become harder and harder to extract, the amount of investment capital available diminishes accordingly. That was the whole point of the Limits To Growth model and it’s sad that after 40 years, so many people still don’t get it.
rockman on Wed, 16th Jul 2014 7:13 am
“As you can see, the rise in Permian production began precisely at the time when unconventional methodologies began to be employed in the basin…the industry’s innovations (and ability to produce tight oil) have resurrected the Permian from a conventional sunset.”
OK…just discovered a new word game being used to suck investors into the PB. I’ve tried to find some documented stats but no luck so far. Almost all of the PB production, both heritage and new, is from reservoirs classified as conventional. Some may not have the highest porosity and permeability but they are still conventional by long established industry standards. From what I’ve seen of the press releases very little of the increased production in the PB is from unconventional RESERVOIRS. Also note that a conventional reservoir which is naturally fractured (and thus can make a good candidate for hz drilling) is still a conventional reservoir. Some of the most prolific Texas fields are fractured conventional reservoirs. Imagine the high initial production rate of a fractured EFS well but instead of being reservoir that has very little producible rock matrix it has a significant amount of primary porosity. Essentially the best of two conditions.
But here’s the word play I’ve discovered: much of the increase has been from “UNCONVENTIONAL WELLS”. But in the oil patch there is no such thing as an unconventional WELL. For that matter most of us don’t use the term UNCONVENTIONAL OIL either. But we do recognized unconventional RESERVOIRS. And the great majority of those are very low permeability fractured reservoirs. Again notice the obvious smoke and mirrors IMHO: “unconventional technologies”. So frac’ng, which has been done in tens of thousands of wells over the last 60 years, is suddenly “unconventional”? Horizontal wells which count in the thousands drilled 20 years ago are suddenly “unconventional”? As they say on Wall Street: “We don’t sell the steak…we sell the sizzle”. I gather that adding the modifier “unconventional” makes the pitch of the promoters to investors sizzle. LOL
A horizontal well is not an UNCONVENTIONAL WELL. It is a horizontal well. I found one investor site that actually defined any horizontal well, especially if frac’d, as an unconventional well. And yet some of the reservoirs they focused on were classic conventional reservoirs. Again, couldn’t find specific documentation but again from press releases the great majority of new drilling in the PB, especially hz wells, has been infield drilling in some very old conventional fields. This varies significantly from the Eagle Ford Shale play. In the EFS operators are taking new leases and drilling EFS wells in areas where there has been little to no previous EFS production.
Thus the operators in the PB have a great financial advantage over the shale players. First, they haven’t spent 100’s of $millions taking leases. Most of the activity in the PB is happening on HBP acreage…Held By Production. Most probably know an oil/NG lease expires after 3 to 5 years. But only if commercial production hasn’t been established. But if it has that lease extends until production stops. As an example in the coastal Texas field I’m drilling my hz wells in there are still active leases there that were taken in 1944. Yes: still under the original 70 year old lease. There is another company trying to duplicate my efforts (so far with no success) on HBP acreage that was taken in the 40’s. Those leases are only producing 12 bopd total from 6 wells but that enough to perpetuate those 70 yo leases.
Another big advantage for the PB operators is the existing infrastructure. By drilling on producing leases there’s already production equipment, tank batteries and some pipelines already in place. And typically underutilized given the decline of the original wells. This can easily save several hundred thousand $’s per well.
In the oil patch we don’t classify hz drilling as an EOR process. But in effect that’s the nature of much of the activity in the PB: they are going after proven residual reserves in some very old conventional fields…just like I’ve been doing on the Gulf Coast. And just like my project those reserves have been known for decades but weren’t economic to go after until oil prices increased. The PB is not an unconventional shale play. “New technologies” have not breathed life into a dying basin. High oil prices are the primary cause of the production bump. And as long as those prices stay high the PB will continue producing more oil. The PB has produced about 40 BILLION bbls of oil. Which means there’s probably more than 40 BILLION bbls of oil left in those old fields. With higher oil prices some of those PROVEN but uneconomical reserves are now economically recoverable PROVEN reserves. But if price drop significantly they’ll quickly return to the uneconomical category.
westexas on Wed, 16th Jul 2014 7:17 am
As I have periodically noted, the available data are consistent with a probable global crude oil production peak (45 or lower API gravity crude) in 2005, while global natural gas production and associated liquids, condensates and NGL’s, have so far continued to increase.
Basically, I think that a peak/plateau in global crude oil production has been hidden by a continued increase in condensate and NGL production.
forbin on Wed, 16th Jul 2014 8:02 am
he looks a bit like David Beckham to me
must be a good guy
😉
Rockman does his bit of introducing sanity to the discussin’
Now of those 40B Bbls left how much is worth extracting at , say , $150, $200 and $300 pb ?
and for that matter how much can we get from the other “old” refreshed play?
’tis the $64k question
And , no Rock, you dont have to answer this time – I guess commercial confidentiality comes into play here 😉
Forbin
rockman on Wed, 16th Jul 2014 12:05 pm
Forbin – Heck, if I knew I would tell ya, buddy. Not my playground so I can only make the same generic guess what the new hz drilling as well as the EOR projects in the PB might recover: another 5% to 10%. With the exception of the hz drills, while EOR methods an recover a lot of oil they tend to do it very slowly. It can easily take several times longer the secondary recovery to match an equivalent volume of primary recovery. It’s handy to think of secondary EOR cash flow more like an annuity then a big lump sum win at the track.
Nony on Wed, 16th Jul 2014 2:24 pm
Rock:
I think you are making too much of the terminology. Much of the recent growth in the Permian is from horizontal drilling in less permeable sections of the basin. Whether I call that “unconventional” or not doesn’t make something a stock scam.
1. Production has increased from 0.85 to 1.35 MM bpd (documented fact)
2. The predominant methodologies and types of reservoirs have changed (documented fact, that the ratio of horizontal/vertical has increased, that total horizontal has had huge increase, that formations targeted have shifted).
“Although oil production has previously come from the more permeable portions of the Permian formations, the application of horizontal drilling and hydraulic fracturing has opened up large and less-permeable portions of these formations to commercial production. This is especially true for the Spraberry, Wolfcamp, and Bone Spring formations, which have initial well production rates comparable to those found in the Bakken and Eagle Ford shale formations. ”
(This is from the EIA. They are industry veterans, too, Rock. They are not stock manipulators.)
Nony on Wed, 16th Jul 2014 2:27 pm
On the infrastructure front, obviously there’s a lot to like about the Permian in terms of infrastructure compared to say the Bakken or Alberta. And lots of softer infrastructure (people, service companies, vendors, land rights). But they are also having some bottlenecks. Have just read a couple recent stories about how the pipelines are full and they are looking to build more.
Energy Investor on Wed, 16th Jul 2014 4:40 pm
Horizontal drilling and fracking is being used in many North American legacy fields (eg. Pembina Cardium in Canada) it is the reason why declines in North American production have been replaced by growth. Yet the decline rates show this will be a temporary phenomenon.
It is reasonable to assume globally that various legacy fields will also benefit from the technology. But some won’t. Also that new “tight” oil fields and provinces will be found – such as Cooper Basin in the land of Oz.
Clearly higher price helps and technology helps. We investors watch as oil companies work out the best techniques for exploiting the play they are working in.
But this doesn’t negate peak oil theory, it just delays the inevitable a little.
Dredd on Wed, 16th Jul 2014 4:55 pm
rockman,
” … OK…just discovered a new word game …”
A never ending game.
New words, new games.
That is how societal suicide has always worked.
Nony on Wed, 16th Jul 2014 4:55 pm
It negates the prediction from Campbell/Deffeyes of a 2005 peak followed by 2% per year drops. We should be 20% down by now. Pretty big difference…
GregT on Wed, 16th Jul 2014 6:11 pm
“Hubbert achieved definitive fame when US oil production “peaked” at 10.2 M/bd in 1970 and then began a precipitous decline in the ensuing decade.”
Smart man this Hubbert was……
“He also predicted that global production would begin to decline by 2006.”
Hit the nail on the head again, he did…….
Unfortunately Hubbert never predicted the peak of bitumen, kerogen, ethanol, or hair spray. But I am sure if he had of, he would have nailed them as well.
Nony on Thu, 17th Jul 2014 9:37 am
One thing that I think is interesting is the idea of an industry cost curve. Rock has mentioned it a few times, but Hubbert really did not emphasize it or analyze it. Higher prices enable more marginal production (simple).
You can even imagine things like lumpy curves. Even subsequent peaks higher than earlier peaks. So for instance, in Canada, conventional production peaked…but with price the tar sands are available (so the country’s “second peak” will already be higher than its “first one”). Same thing has basically happened in North Dakota. And may happen in the US as a whole.
This is a pretty Econ 101 type idea. The concepts don’t even use calculus. Just intuitive understanding of supply and demand (ask Jim Hamilton). But Hubbert never discussed it.
Geologists (depletion) argues for a near term peak. Economists (price, technology) argue for a late peak. Obviously BOTH factors occur. So far, economists are looking a bit smarter than the socialist geologists.
Tom S on Thu, 17th Jul 2014 2:36 pm
strummer:
“The “resource pyramid” theory is wrong because you need exponentially increasing amounts of investment capital to extract resources that are further down the pyramid. But that investment capital is in turn dependent on those resources.”
The resource pyramid does not specify how much capital is required to extract anything. It’s a description of the distribution of resources.
“They simply assume that we are always able to create and invest any amount of capital that is needed.”
Economists do not assume that.
“you need exponentially increasing amounts of investment capital to extract resources that are further down the pyramid.”
That’s a big assumption. How do you know that investment capital must grow _exponentially_ to move down the pyramid, in general?
“And when the resources become harder and harder to extract, the amount of investment capital available diminishes accordingly.”
That doesn’t follow. Investment capital must decrease only if the extraction of some resource requires more of that resource than it will yield. In which case, nobody would ever try to extract it.
“That was the whole point of the Limits To Growth model and it’s sad that after 40 years, so many people still don’t get it.”
Lots of people had criticisms of Limits To Growth. Insofar as I can tell, they did “get it”.
Don’t assume that people “not getting it” is the reason the book is ignored.
-Tom S