[Graeme]

Members: Anything new here? I've extracted a few key sections to pique your interest.

Peak Oil Deferred

$this->bbcode_second_pass_quote('', 'I')n 1956 Marion King Hubbert, The Chief Geology Consultant (some say it is more correct to refer to him as a research geophysicist) to Shell Oil, shocked the World by proclaiming that the production of U.S. crude oil would soon peak and then rapidly decline. His projections for U.S. oil production proved to be accurate and a legend was born. Associated with these projections were two assertions:

Production in a given geographical area would follow a particular pattern somewhat resembling a normal distribution but slightly skewed into the future presumably because certain applications for oil would support the higher prices required for production as the resource depleted.
The peak would occur roughly when half the recoverable resource had been extracted.
It is this second assertion that has always bothered me for two reasons:



The production from Canadian Oil Sands is a good example of this and even very heavy oils may not have been considered part of the recoverable oil resource by Hubbert. And then there is the wide variety of liquids that are recovered from natural gas extraction. In many cases these liquids (propane especially) are not oil refinery feed stocks, so are they oil?

Generally, Hubbert depended on estimates of existing proved oil reserves prepared by others and also estimates of remaining to be found oil. Today almost sixty years later the current estimates of proven reserves are very different than the 250 billion barrel estimate used by Hubbert. Here are two estimates[1]:


One of the major reasons that Peak Oil has been pushed out in time is the declining ratio of energy use required per unit of GDP growth. This has occurred for two reasons:

One has to get used to the reality that in the oil industry, definitions are a moving object. For my purposes, I tend to define conventional oil as oil that has fully allocated production costs of $30 a barrel or less and unconventional oil as oil that has fully allocated production costs in the range of $60 to $100 with wells in the middle being hard to categorize. With this in mind the better redefinition of Hubbert’s concept would be that we have entered the age of unconventional oil with conventional (mostly Middle East) oil enjoying Ricardian profits.


To say that Peak Oil has not yet happened and is not likely to happen within the next twenty years is not to say that Peak Oil will not eventually occur. It is inevitable. But the Hubbert explanation of depleting the resource is probably not going to be the reason that oil production will peak. I offer two other more likely scenarios.

The declining intensity of oil use per unit of GDP or alternatively the amount of GDP able to be generated per barrel of oil may decline to a point that consumption will peak. If consumption peaks, production will peak.
For a long time technology was winning the race with respect to maintaining the constant dollar costs of oil even as the difficulty of extracting a barrel of oil increased.

[sparky]

.
Certainly Hubbert had conventional and close offshore in mind
the rapid exploitation of deep offshore , gas and tar sand source rock has changed the picture
but the practical result is a slide down expensive recovery with decreasing results

Peak oil will be followed by peak coal , peak nuclear power plants , peak farming

[Lore]

It's not the peaks I'm worried about, it's the valleys.

[ROCKMAN]

Graeme - He makes some good points IMHO but he also seems to want to slide into the oil reserves vs. oil production rate confusion. It's also good to remember that Hubert’s approach dealt with a closed and fairly well defined system. The shales were not part of that system due to their poor economic value at the time. The DW GOM wasn’t part of the system he analyzed since it was not recognized at the time. Geologic development is obvious controlled by much more than what’s in the ground. The price of oil is an obvious factor but so is technology and regional political structure and stability.

I think one of the biggest problems with Hubert’s analysis isn’t his fault: that too many folks misapply it. As he defined it his work it was clearly correct. But correct only based on the geologic knowledge base and price expectations at the time. For the most part Hubert’s model is very accurate. What tends to not be accurate are the assumption metrics we decide to insert into it. Again, consider the US oil shales: have they peaked yet according to Hubert’s model? You can’t answer that question without establishing a price expectation. If going forward oil prices slide 30%+ one might say yes. But increase the assumption with $120/bbl oil for many years out and the peak may yet to be seen. A properly constructed model is never wrong. But the assumption used in the model can be terrible flawed.

[sparky]

.
@ Lore , not to worry it's just human societies running the movie backward ,
both slope of the peak are different ,
scratch farming and herding are the valley , or rather a very very long plain
we came from there and will return there ,
too many of the accessible resources are gone , progress is not a law
it's a one off , people could be happy in the neolithic

[Tanada]

People COULD be happy with any level of technology, stuff doesn't make you happy. Some people are miserable no matter what, some people are happy no matter what. How much stuff they have doesn't alter the feelings.

[Graeme]

Just saw the following article this morning which provides further insight into PO apart from the analysis by Silber above.

Peak oil lives, but will kill the economy

$this->bbcode_second_pass_quote('', 'F')ollowing a chorus of industry hype on the wonders of shale gas and fracking, Shukman finally referred in passing to a new scientific paper published by Eos, Transactions - the newsletter of the American Geophysical Union - saying that the paper "supports the assertion that a peak in oil production is 'a myth' but argues that the rising cost of extraction could itself provide a limit, and may act as a brake on economic growth." He then closed his report with the following quote from a leading industry figure: "The era of cheap oil is over, but we're a long way from peak oil - costs will go up but the technology will respond."


The increasing dependence on more expensive unconventional sources with lower EROI has a fundamentally negative economic impact from which there is no easy escape. Murray and Hansen point to International Monetary Fund (IMF) data proving a historically "strong correlation between global economic growth (measured by an average of gross domestic product (GDP)) and oil production." They note that out of 11 recessions in the United States since World War 2, ten were preceded by oil price spikes:


However, the "potential for recession increases", because the whole cycle was set in motion by "an increase in the price of oil." As a seeming glut in unconventional production permits a nominal relaxation in prices, economic demand ramps up, once again pushing up oil prices as the economy hits the supply ceiling, reigniting the process. The result is an undulating production plateau correlating with higher but more volatile oil prices, as well as a prolonged recession punctuated by small cycles of 'recovery' and contraction.


To the contrary, the paper suggests peak oil is alive and well - but that until we face up to the historic link between GDP growth and our over-dependence on cheap fossil fuels, we face the prospect of unrelenting economic strangulation.

[Pops]

the first author's point (and Hubberts) that the peak will be at the midpoint of production or even shifted into the future is probably incorrect. I can't cite the source without searching but I've recently read that in fact, of the countries that have already peaked, the peak comes at about 40% of URR, not 50% and definitely not 60%.

That would make sense because harder oil is to extract... the longer it takes, think of the oil sands, x-heavy and oil shale. Actually his argument that "certain applications for oil would support the higher prices required for production as the resource depleted" is true but he ignores the fact that "certain applications" probably does not include driving to the Quic Sac for a bottled water. IOW, higher prices for harder oil will force lower consumption and that, by definition, means lower production not higher.

[americandream]

As I have said from almost when I joined PO.com all those years ago, the peak oil call is out by about 4 decades (5 back then). Global capitalism resource peaking will be marked by a very visible decoupling of the global markets, the onset of regionalism and war drums abeating. At the moment however, globalisation is continuing apace as, for example. Islam quakes before the rise of reformism in the Arab empire and of course, formerly socialised nations such as China continue to push ahead with the embracing of capitalist social-economy and the emergence of a new capital owning elite.

[americandream]

$this->bbcode_second_pass_quote('Tanada', 'P')eople COULD be happy with any level of technology, stuff doesn't make you happy. Some people are miserable no matter what, some people are happy no matter what. How much stuff they have doesn't alter the feelings.

[sparky]

.
Capitalism might be consumerism , but the alienation is not of the same order as a slave owning society
as many neolithic societies were
happiness might be universal but bastardy has a rich variety

[americandream]

$this->bbcode_second_pass_quote('sparky', '.')
Capitalism might be consumerism , but the alienation is not of the same order as a slave owning society
as many neolithic societies were
happiness might be universal but bastardy has a rich variety

[LateGreatPlanetEarth]

the end of peak oil - at one time i believed it all so true.
click on energy for peak oil. http://activetrader.schwab.com/ReutersNews.aspx

[ROCKMAN]

pstarr - And you were expecting reality from a trader. Tsk, tsk. LOL. Once I saw Schwab I knew not to waste time.

[americandream]

$this->bbcode_second_pass_quote('pstarr', '')$this->bbcode_second_pass_quote('ROCKMAN', 'p')starr - And you were expecting reality from a trader. Tsk, tsk. LOL. Once I saw Schwab I knew not to waste time.

[LateGreatPlanetEarth]

http://business.financialpost.com/2013/ ... =fab1-2848

[ROCKMAN]

pstarr - That's actually what I was implying. It's the motivation factor: is the goal of the pitch to educate or to get the herd to move in a certain direction? I see it the same be it a cornucopian or doomer pitch. Take me for instance. I try to avoid having my biased attitudes effect the info I put out. You might have notice I don't tend to go out of my way to justify the activities of oil & gas industry. I really don't care if folks don't love or even respect what we do. I gave up worrying about that decades ago. Likewise I don't tend to join my conservative cohorts when they feel like bashing environmentalists. I try my best to lay out what I feel are supportable facts whether they make me and the oil patch look good or not. For instance it took weeks to get one of our cohorts on this site to understand that, from a personal standpoint, I would benefit if not one more bbl would be produced from the Canadian oil sand...like most of the rest of the US oil patch feels. But that position wasn't going to deter me from expressing my expectations of their continued and even expanded development. I would list one fact after another which he took as my support for their development. It took forever to convince him that while I wouldn’t condemn the Canadians for developing their resources it also wouldn’t hurt my feelings if one morning I woke up to discover all those Canadians had died of some mysterious disease overnight. LOL.

Nothing personal…just business.

[americandream]

$this->bbcode_second_pass_quote('ROCKMAN', 'p')starr - That's actually what I was implying. It's the motivation factor: is the goal of the pitch to educate or to get the herd to move in a certain direction? I see it the same be it a cornucopian or doomer pitch. Take me for instance. I try to avoid having my biased attitudes effect the info I put out. You might have notice I don't tend to go out of my way to justify the activities of oil & gas industry. I really don't care if folks don't love or even respect what we do. I gave up worrying about that decades ago. Likewise I don't tend to join my conservative cohorts when they feel like bashing environmentalists. I try my best to lay out what I feel are supportable facts whether they make me and the oil patch look good or not. For instance it took weeks to get one of our cohorts on this site to understand that, from a personal standpoint, I would benefit if not one more bbl would be produced from the Canadian oil sand...like most of the rest of the US oil patch feels. But that position wasn't going to deter me from expressing my expectations of their continued and even expanded development. I would list one fact after another which he took as my support for their development. It took forever to convince him that while I wouldn’t condemn the Canadians for developing their resources it also wouldn’t hurt my feelings if one morning I woke up to discover all those Canadians had died of some mysterious disease overnight. LOL.

Nothing personal…just business.