Peak Oil
Donate Bitcoin

Donate Paypal


PeakOil is You

PeakOil is You

Low energy prices -> Production declines (hearsay)

Discussions about the economic and financial ramifications of PEAK OIL
Post a reply

Re: Low energy prices -> Production declines (hearsay)

Unread postby jupiters_release » Fri 01 May 2009, 14:19:31

$this->bbcode_second_pass_quote('shortonoil', '[')b]AirlinePilot said:

$this->bbcode_second_pass_quote('', 'T')he million dollar question though is at what point does the meager decline in global demand become outstripped by natural decline and our inability to afford going after the more expensive and difficult to refine oil.


The model predicts in 16.6 years, but the model does not, and of course, can not include Black Swan events (as I have previously stated).

Basically, we don’t know!


16 years before supply can't meet demand(excluding black swans)??
Do not seek the truth, only cease to cherish opinions.
jupiters_release
Heavy Crude
Heavy Crude
 
Posts: 1301
Joined: Mon 10 Oct 2005, 03:00:00
Top

Re: Low energy prices -> Production declines (hearsay)

Unread postby shortonoil » Fri 01 May 2009, 16:42:01

AirlinePilot said:

$this->bbcode_second_pass_quote('', 'T')he million dollar question though is at what point does the meager decline in global demand become outstripped by natural decline and our inability to afford going after the more expensive and difficult to refine oil.


jupiters_release said:

$this->bbcode_second_pass_quote('', '1')6 years before supply can't meet demand(excluding black swans)??


Well...... not exactly. I’ll try to explain.

Oil is extracted from the ground to use for all kinds of purposes. It is used as feedstock to make plastics, as a lubricant and etc. but it is primarily used as an energy source. It runs our planes, trains and the family go-mo-bile. It is the main power source that runs our civilization. That is, all economic activity requires energy to happen, and oil is one of our main sources of energy.

The problem lays in that oil itself is a product of economic activity. It requires energy to get oil. It takes energy to drill the holes, it takes energy to pump it out of the ground, transport it, process it, and pump it into the family go-mo-bile. It takes a lot of energy.

Since we first started to use oil as an energy source the holes have gotten deeper, it has taken more energy to pump and etc. That is, on average every barrel of oil we have ever extracted has required a little more energy to get to the end user, than the barrel that came before it.

The day will soon come when it will take almost as much energy to extract that oil as what it provides in energy to the economy. The economy will slow down for lack of energy and the demand for oil will go down. The Model gives that day as 16.6 years from the present.

Another way of saying this is that the utility of oil is falling. When it is not longer contributing energy to the economy, the economy that it was fueling stops. Oil fuels 38% of the world’s economy. The end of the oil age will not come about because of a lack of supply, it will come about because there will be a lack of demand.

Hope that helps.


AvailableEnergy
User avatar
shortonoil
False ETP Prophet
False ETP Prophet
 
Posts: 7132
Joined: Thu 02 Dec 2004, 04:00:00
Location: VA USA
Top

Re: Low energy prices -> Production declines (hearsay)

Unread postby jupiters_release » Fri 01 May 2009, 17:22:17

I think it's pretty common knowledge around here that TEOTWAWKI will have happened long before EROEI reaches 1:1 if you're saying that's what the numbers by themselves would project to in 16 years. Do you know what the average EROEI is currently?
Do not seek the truth, only cease to cherish opinions.
jupiters_release
Heavy Crude
Heavy Crude
 
Posts: 1301
Joined: Mon 10 Oct 2005, 03:00:00
Top

Re: Low energy prices -> Production declines (hearsay)

Unread postby shortonoil » Fri 01 May 2009, 18:05:55

jupiters_release said:

$this->bbcode_second_pass_quote('', 't')hink it's pretty common knowledge around here that TEOTWAWKI will have happened long before EROEI reaches 1:1 if you're saying that's what the numbers by themselves would project to in 16 years. Do you know what the average EROEI is currently?



The US, at peak in early ‘71, was 21.9:1. They are the only fields that we have reliable enough data on - from which to build a good model. As the US fields constituted 13% of the world’s reserves it seems safe to extrapolate to the world in general. With that cravat stated, it is safe to say the world’s ERoEI at the well head is now 20:1. It must be remembered that well head ERoEI is only part of the story. That material must be transported and processed for the final consumer. Finished product ERoEI is now in the US almost exactly 8:1. That is an average of product mixes and varies from 3:1 to about 10.5:1. We’ll see some products discontinued long before others.




AvailableEnergy
User avatar
shortonoil
False ETP Prophet
False ETP Prophet
 
Posts: 7132
Joined: Thu 02 Dec 2004, 04:00:00
Location: VA USA
Top

Re: Low energy prices -> Production declines (hearsay)

Unread postby AirlinePilot » Sun 03 May 2009, 01:54:19

I believe I have read that when you go back to the very beginning of oil drilling and exploration, the ratio was near 100:1. If its around 7 or 8:1 now that gives you some form of basic measure. I think too that as Short is pointing out it appears that this trend may not follow any smooth or gradual path. My guess is that the time will come soon where that ratio gets uglier far quicker than it ever did in the past due to many things but most of all our inability to grasp the exponential function. That plus our inability to wean ourselves off of this highly addictive black goo we call oil.
User avatar
AirlinePilot
Moderator
Moderator
 
Posts: 4378
Joined: Tue 05 Apr 2005, 03:00:00
Location: South of Atlanta
Top

Re: Low energy prices -> Production declines (hearsay)

Unread postby shortonoil » Sun 03 May 2009, 15:00:54

AirlinePilot said:

$this->bbcode_second_pass_quote('', 'I') believe I have read that when you go back to the very beginning of oil drilling and exploration, the ratio was near 100:1. If its around 7 or 8:1 now that gives you some form of basic measure. I think too that as Short is pointing out it appears that this trend may not follow any smooth or gradual path. My guess is that the time will come soon where that ratio gets uglier far quicker than it ever did in the past due to many things but most of all our inability to grasp the exponential function. That plus our inability to wean ourselves off of this highly addictive black goo we call oil.


That’s right AP, and as we get nearer the end the worse it will become. Very close to the end it will get down right nasty (if we haven’t collapsed into an economic vortex by then).

To explain: according to the model the annual point change in ERoEI is about 0.5 (.47 exactly..but). If the ERoEI for finished product in ‘09 is now 8:1, in 2010 it will be 7.5:1. That represent a 6.3% decline in energy contribution to the general economy. Within 5 years the ERoEI will have dropped to 5.5:1, or a 9.1% annual drop in energy contribution to the general economy. The decline is geometric.

According to studies done by Cutler Cleveland, Ph.D. there is a linear relationship between energy use and economic activity. It is reasonable to assume that will hold for short durations like a decade. By the 10th year the economy will be dropping by 17% per year. You can see where the 16.6 years come form. 16.6 years will be the point when we have reached the end of the oil age, and world economic activity will have dropped 38%.

In the AvailableEnergy thread you will find a post that explains why it can be expected that for the next two years the decline in economic activity will slow. World GDP in 2009 will be -4.3% and 2010 -4.7%. This will occur because the world’s oil industry is reducing its E&D development. The energy that would have been used in those efforts will come back as a short term bonus to the general economy. I’m assuming that it will take no longer than two years for the bulk of it to used. After that, back down we go.
User avatar
shortonoil
False ETP Prophet
False ETP Prophet
 
Posts: 7132
Joined: Thu 02 Dec 2004, 04:00:00
Location: VA USA
Top

Re: Low energy prices -> Production declines (hearsay)

Unread postby simplelife » Sun 03 May 2009, 18:52:43

$this->bbcode_second_pass_quote('shortonoil', '[')b]AirlinePilot said:

$this->bbcode_second_pass_quote('', 'I') believe I have read that when you go back to the very beginning of oil drilling and exploration, the ratio was near 100:1. If its around 7 or 8:1 now that gives you some form of basic measure. I think too that as Short is pointing out it appears that this trend may not follow any smooth or gradual path. My guess is that the time will come soon where that ratio gets uglier far quicker than it ever did in the past due to many things but most of all our inability to grasp the exponential function. That plus our inability to wean ourselves off of this highly addictive black goo we call oil.


That’s right AP, and as we get nearer the end the worse it will become. Very close to the end it will get down right nasty (if we haven’t collapsed into an economic vortex by then).

To explain: according to the model the annual point change in ERoEI is about 0.5 (.47 exactly..but). If the ERoEI for finished product in ‘09 is now 8:1, in 2010 it will be 7.5:1. That represent a 6.3% decline in energy contribution to the general economy. Within 5 years the ERoEI will have dropped to 5.5:1, or a 9.1% annual drop in energy contribution to the general economy. The decline is geometric.

According to studies done by Cutler Cleveland, Ph.D. there is a linear relationship between energy use and economic activity. It is reasonable to assume that will hold for short durations like a decade. By the 10th year the economy will be dropping by 17% per year. You can see where the 16.6 years come form. 16.6 years will be the point when we have reached the end of the oil age, and world economic activity will have dropped 38%.

In the AvailableEnergy thread you will find a post that explains why it can be expected that for the next two years the decline in economic activity will slow. World GDP in 2009 will be -4.3% and 2010 -4.7%. This will occur because the world’s oil industry is reducing its E&D development. The energy that would have been used in those efforts will come back as a short term bonus to the general economy. I’m assuming that it will take no longer than two years for the bulk of it to used. After that, back down we go.


Wouldnt "38%" be a direct impact, and not considering indirect effects. Cheap oil frees up other captial (human) to persue other things (service industries, research etc etc) and when oil is gone much of that capital will be plowing fields/gone. So in reality the economy may acually fall like 80%
User avatar
simplelife
Wood
Wood
 
Posts: 33
Joined: Wed 10 Dec 2008, 04:00:00
Top

Re: Low energy prices -> Production declines (hearsay)

Unread postby shortonoil » Sun 03 May 2009, 19:43:29

simplelife said:

$this->bbcode_second_pass_quote('', 'W')ouldnt "38%" be a direct impact, and not considering indirect effects. Cheap oil frees up other captial (human) to persue other things (service industries, research etc etc) and when oil is gone much of that capital will be plowing fields/gone. So in reality the economy may acually fall like 80%


The AvailableEnergy model is an exact mathematical model that was built on the best data that could be found. I do not speculate outside of what the model predicts.

That said - we have no idea of what further ramifications could result from such a tremendous impact on the world’s economic system. I think a lot will depend on how the world reacts once it learns the truth. My most optimistic estimate is 40 years for a successful restructuring of society to occur. If we do nothing - it could take centuries.
User avatar
shortonoil
False ETP Prophet
False ETP Prophet
 
Posts: 7132
Joined: Thu 02 Dec 2004, 04:00:00
Location: VA USA
Top

Re: Low energy prices -> Production declines (hearsay)

Unread postby joewp » Sun 03 May 2009, 22:33:38

$this->bbcode_second_pass_quote('AirlinePilot', '
') It's a fools errand to believe that we just crank it right back up when we need it again.


Especially when, as time progresses, older fields are depleting and production is collapsing in places like Mexico, the North Sea and Alaska and most of the old provinces(perhaps even Saudi Arabia too). Many of the canceled projects were supposed to replace the shortfall from the older fields that are past their peak production and the longer they are delayed, the lower the production from the old super giants and giants.

It's like waiting to stop a ball rolling down hill, the longer you wait, the faster the ball is rolling, and the harder to stop it becomes. I'm starting to think that our economic system is going to make the right side of Hubbert's curve into a very, very steep cliff.
Joe P. joeparente.com
"Only when the last tree is cut; only when the last river is polluted; only when the last fish is caught; only then will they realize that you cannot eat money." - Cree Indian Proverb
User avatar
joewp
Intermediate Crude
Intermediate Crude
 
Posts: 2054
Joined: Tue 05 Apr 2005, 03:00:00
Location: Keeping dry in South Florida
Top
Previous
Post a reply

Return to Economics & Finance

Who is online

Users browsing this forum: No registered users and 1 guest



cron