[onlooker]

I am in, on the side of Pstarr!

[Armageddon]

Count me in the peak oil is now side

[spike]

But this is a bet on some set of a) peak oil; b) a recession; c) price weakness and an OPEC production cut.

[Tanada]

Mike has a point, there have been periods when world demand slowed so much due to economic disruptions that production was cut even though capacity was still available. Most noticeable was the late 70's early 80's recession when world wide demand dropped so much that world production dropped to a lower level. Then as demand kicked back into gear starting around 1982 the production ramped up apace and by 1986 the world was producing and consuming more than ever before proving the 'peak' was an economically induced illusion.

[Plantagenet]

$this->bbcode_second_pass_quote('Tanada', 'M')ike has a point, there have been periods when world demand slowed so much due to economic disruptions that production was cut even though capacity was still available. Most noticeable was the late 70's early 80's recession when world wide demand dropped so much that world production dropped to a lower level. Then as demand kicked back into gear starting around 1982 the production ramped up apace and by 1986 the world was producing and consuming more than ever before proving the 'peak' was an economically induced illusion.

[onlooker]

But, I think the situation going forward is different now than ever before. The Etp price predictions did not pan out. But, does that mean that the theory underlying it was wrong? Maybe not. If indeed the EROEI is falling and thermodynamics is insuring that it cannot improve, then we have a situation whereby counting barrles or total world oil production might at this very moment not be telling the full story of what is going on. Because, if indeed the rest of the Economy is subsidizing or being cannibilized by the Oil indistry, this will allow production to continue roughly the same but it will instead be reflected in lower demand and economic disruptions. Is rampant lending to the Fracking Shale Industry of the US a sign that this cannibilization is indeed occurring already? I am not sure about the answers to all this but I am trying to understand and do believe that for various reasons including responses to CC, the Oil Industry will be in fits and starts producing less Oil going forward worldwide.

[ROCKMAN]

Looker – “If indeed the EROEI is falling and thermodynamics is insuring that it cannot improve”. As explained in detail many times the EROEI of global oil development INCREASED significantly as a result of the dramatic decrease in oil prices several years ago. Of course, as oil prices have increased the EROEI has also increased. As long as folks continue to ignore the dominant effect the price of oil has on the EROEI they’ll never understand the true complexity of the dynamic.

As far as the current bet on global peak oil I doubt anyone here will be alive when a sufficient amount of time has passed to convincedly prove the wager correct or not.

[marmico]

$this->bbcode_second_pass_quote('', 'T')he Etp price predictions did not pan out. But, does that mean that the theory underlying it was wrong?

[aspera]

$this->bbcode_second_pass_quote('', 'R')ockman wrote: Looker – “If indeed the EROEI is falling and thermodynamics is insuring that it cannot improve”. As explained in detail many times the EROEI of global oil development INCREASED significantly as a result of the dramatic decrease in oil prices several years ago. Of course, as oil prices have increased the EROEI has also increased. As long as folks continue to ignore the dominant effect the price of oil has on the EROEI they’ll never understand the true complexity of the dynamic.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('Tanada', 'M')ike has a point, there have been periods when world demand slowed so much due to economic disruptions that production was cut even though capacity was still available. Most noticeable was the late 70's early 80's recession when world wide demand dropped so much that world production dropped to a lower level. Then as demand kicked back into gear starting around 1982 the production ramped up apace and by 1986 the world was producing and consuming more than ever before proving the 'peak' was an economically induced illusion.

[kublikhan]

$this->bbcode_second_pass_quote('aspera', 'I')'m confused here Rockman. I've followed your Peak Oil Dynamics arguments for some time and find those insights useful. But I do not understand your own understanding of EROEI. EROEI is, by both intent and it's very formulation, a metric that removes price from the calculation. (Energy returned on dollar invested, an ROI formulation, would follow your logic, but that is not EROEI). Thus, isn't your argument confusing correlation with causation?

[onlooker]

Aspera, the barrels do not tell you the energy balance between energy inputs and energy output. And notice that the rig count for new oil dropped. That is what Short has been saying, that new production is being neglected or in the parlance of the Oil Industry R&D Research and Development. Why? Because only so much lending can be doled out and because, the flow rate must continue to service the voracious world economy. So, basically sacrificing tomorrow for the sake of today.

[kublikhan]

$this->bbcode_second_pass_quote('onlooker', 'A')spera, the barrels do not tell you the energy balance between energy inputs and energy output. And notice that the rig count for new oil dropped. That is what Short has been saying, that new production is being neglected or in the parlance of the Oil Industry R&D Research and Development.

[kublikhan]

$this->bbcode_second_pass_quote('', 'I')n my recent Oil Production Vital Statistics post, commenter rjsigmund posted a link to this EIA update on shale oil production efficiency, which in my opinion contains some astonishing data on how the industry has drilled better and better wells, year on year, for a decade. US production is heading higher.

Figure 4 shows how drilling and production efficiency has risen year on year for a decade. When the frackers first drilled, the Bakken wells produced 150 barrels per day initially. By 2017, that had grown to near 700 barrels per day. Following the 2014 oil price crash, the number of active rigs declined (Figure 5). The slowdown in drilling was compensated by this improved efficiency and did not produce the reversal in US oil production that many had expected.

[kublikhan]

$this->bbcode_second_pass_quote('onlooker', 'I')f indeed the EROEI is falling and thermodynamics is insuring that it cannot improve, then we have a situation whereby counting barrles or total world oil production might at this very moment not be telling the full story of what is going on. Because, if indeed the rest of the Economy is subsidizing or being cannibilized by the Oil indistry, this will allow production to continue roughly the same but it will instead be reflected in lower demand and economic disruptions.

[onlooker]

$this->bbcode_second_pass_quote('onlooker', 'I')s rampant lending to the Fracking Shale Industry of the US a sign that this cannibilization is indeed occurring already?

[rockdoc123]

$this->bbcode_second_pass_quote('', 'B')ut, again you are not seeing how the monetary funding is allowing the Oil Industry to produce at current high levels and this in turn is proping up Demand as Oil allows for economic activity over a wide range of activities and incites this activity as higher supply ultimately translates to higher Demand see Jevons Paradox. But, ultimately this is putting balance sheets across the Economic spectrum ever more into the red and inflating unrealistically asset prices. Even as the net energy is declining. Setting up for a highly indedted Economy teetering under this onerous Debt levels with diminishing returns from its principal energy source ie. OIL.

[kublikhan]

$this->bbcode_second_pass_quote('onlooker', 'S')ure, you can print money out of thin air and keep production ramped up, but you are NOT improving the EROEI one bit. They seem totally to not see or wish to see that the underlying Thermodynamics is the EROEI not the pendelum swings of supply/demand and price which can and are being affected by other outside forces and manipulations

[ROCKMAN]

aspera – Lots of answers to your questions. But here’s the simple explanation. As you probably know companies don’t make drilling decisions based on EROEI. They are based upon anticipated rate of return…so it’s really very simple. I have a project that I anticipate will return 200,000 net bbls of oil and will cost me $X millions to drill and complete. So I use $90/bbl to calculate the anticipated ROR. Then oil drops to $60/bbl before I drill. So now I use that price to calculate my ROR. Obviously the ROR has decreased significantly since the net income has decreased significantly. Right? But I would drill the well using the same number of Btu’s and produce the same number of Btu’s…right? So the EROEI is obviously the same.

But guess what: the ROR at $60/bbl doesn’t justify my investment so I don’t drill the well at $60/bbl. But I do have another project (which uses the same number of Btu's to drill and complete) that may produce 300,000 bbl and at $60/bbl the ROR is adequate. So I use the same number of Btu’s and PRODUCE MORE BTU’S. IOW the EROEI of those investment $’s deliver more energy then the 200,000 bbl well I’m not drilling.

As someone pointed out when oil prices fell the rig count as dropped. But there were the same number of shale prospects that could be drilled. BUT there were few of those wells that were as economic to drill as when oil prices were higher. Wells still got drilled at the lower oil prices but only those that produced more oil then the ones being drilled when prices were higher. IOW the EROEI of the well drilled at lower oil prices had to have much higher EROEI’s in order to produce more oil which allowed adequate ROR’s for those investments to be made.

So yes: the EROEI of wells being drilled is obviously VERY DEPENDENT on the price of oil. The energy returned (IOW the number of bbls produced) on a drilling investment AND the price of oil DETERMINES the ROR.

A long explanation but unless you fully understand how economic analysis is done by the petroleum industry it will be very difficult to appreciate that the big decrease in oil prices resulted in a dramatic INCREASE in the EROEI of the wells subsequently drill. It should now also hopefully obvious that the increases in oil prices have caused a reduction in the EROEI of wells now being drilled.

Now imagine what the EROEI of new wells will be if oil goes above $100/bbl. If you think back 10+ years you might remember that EROEI only became a popular subject when oil prices boomed and not so much when oil was less then $20/bbl in the late 1990’s. Newbies lack the perspective that some of us old farts like the Rockdoc and the Rockman have. LOL.

[aspera]

$this->bbcode_second_pass_quote('', 'K')ublikhan wrote: Aspera, is this what you believe as well? Should we exclude energy values when talking about EROEI ...