[Markos101]

Some people here understandably have problems with arguments such as Michael Lynch's stark theory that economics means infinite oil will be derived from a finite earth.

However, I'd like to explore for a second the possibility that energy prices may not skyrocket as is thought be some after oil peak.

Most of the peak theory is based upon obviously M King Hubbert's projections for oil peak. As net oil production becomes more of a pump than a free-flowing straw, more work has to be done to extract the oil from the ground and therefore the net energy becomes less, as you have to put more energy in to get the same amount of energy out. And since the US peaked back in the 70s, then legend has it that the world will peak too.

That's fine. But let's think a second. Why did oil peak in the 70s in the US? Was it because the same amount of money per unit volume of oil was being spent on production, and because we needed to put more effort into extracting oil ('suck' rather than 'pressure valve') therefore making it more expensive - and therefore making other fields more feasible for extraction, due to their lower cost of extraction per unit volume oil at this net level of pressure in the earth's oil fields?

The US went to the middle east after peak - is this not because it was cheaper to do so rather than tackle the currently economically harder and less feasible fields in the US? And when there are less such easy fields to deal with, will it not become cheaper to deal with harder fields, and therefore the price per unit energy profit will remain the same?

Does this point of view mean infinite oil? Well sortof, yes. But then at the same time, money is a ficticious substance created by bankers via Fractional Reserve Banking (I believe it was invented by Mayer Amschel Rothschild, if anyone wants to elaborate on that).

The view that prices of oil will rise after peak seems to assume that this ficticious substance holds constant value per unit energy profit and I fail to see why it should. I cannot see why prices should rise after peak oil, and I can only see that Campbell's view of the world's oil fields suggests ignorance of currently unfeasible fields.

COST PER UNIT PRESSURE

He assumes that the cost-pressure ratio of the world's oil fields remain in direct proportion. In other words, the less pressure delivered by a field, the more expensive it gets. But that isn't necessarily true. It is at the moment, because there are currently fields which give oil for less work, but as those types of fields get less and less, then the cost per unit pressure will reduce - as less naturally pressured oil fields become the norm.

So Campbell's peak supply theory assumes that the price per unit of pressure required to extract oil from a field remains in inverse direct proportion to cost (higher natural pressure of field = lower price), when it doesn't have to. Does everyone see what I mean? Even if the world's natural oil field pressures do get less, the price doesn't have to rise to follow this trend. In the perfect case of this, oil production would continue to rise with demand, and then suddenly one day would fall off to zero as all the world's oil would all be used up. In the real case, of course, prices would fluctuate and oil probably wouldn't all be used up at once.

I hope that makes sense - it doesn't follow, since money is a ficticious substance, that average natural oil field pressure is directly and inversely proportional to price. Therefore prices may not have to rise after peak - and peak itself might assume this relation, incorrectly.

Mark

[Markos101]

Just to be a bit clearer on what I have said, Campbell assumes:

Price (Ficticious Currency, say $) = X * (1/Net Internal Pressure Of World's Oil Fields)

Where X is a constant. Since he assumes that X is a constant, he assumes that net production will be directly proportional to net oil field pressure in the future.

But my point is this - X is not a constant, because price will adjust to the net pressure as it decreases, as whatever net pressure at present becomes the norm. In other words, as net oil pressure reduces, constant X will decrease, keeping price the same. As a consequence of this, net production need not be directly proportional to net pressure - and this is the whole assumption of peak oil theory.

Mark

[killJOY]

I just gave you the benefit of the doubt and read your essay--twice.

I have a Master's in English and find nothing but gobbledygook here.

Maybe it's not your fault but the field of economic theory itself: I'm allergic to pseudosciences like economics, psychology and sociology--even literary "theory"-- for this very reason. They're full of abstract sentences like this$this->bbcode_second_pass_quote('', 'W')as it because the same amount of money per unit volume of oil was being spent on production, and because we needed to put more effort into extracting oil ('suck' rather than 'pressure valve') therefore making it more expensive - and therefore making other fields more feasible for extraction, due to their lower cost of extraction per unit volume oil at this net level of pressure in the earth's oil fields?

[UIUCstudent01]

But. All funny, simplified equations aside.

Price might as well increase because there is going to be more demand from China. And the fact that oil production will decline, and considering how much we use PER DAY, It doesn't seem likely that business-as-usual will continue at all.

You're essay was kind of hard to understand, you're trying to disconnect pressure and cost, but they are related... pressure means production, production determines cost (along with demand). And what the hell is 'X'? What does it account for, why is it there? (FYI, in science, most of the time constants have units. There a few exceptions, but not many.)

[killJOY]

RE my previous rant:

THIS explains it all, and I found it JUST this moment. It doesn't overintellectualize, it's just plain and simple:

"Come on in -- the quicksand's fine"

http://www.unknownnews.org/050426a-tfm.html

[Markos101]

Ask yourself this for a second - why will decreased net pressure in the world's fields cause less net production of oil per day? This is the whole assumption of peak oil theory - that as net pressure in the world's oil fields decrease, net production will decrease. That's the whole basis of Campbell's work! I cannot see why that should be the case. It does not mean that there is infinite oil - it just means that there is no reason why the production curve shouldn't keep up with demand - determined by price (remember the only reason why oil is being produced at current levels is because of an existence of a demand in the first place) - and then suddenly reach a maximum point and drop to zero (in strictly theoretical terms only, of course in reality we'd probably be switching to something else, price would fluctuate, etc.). The area under this graph would reflect of course the total amount of oil in the earth.

But Campbell's assumption that the amount of work required to extract a barrel of oil is directly proportional to price (i.e. the more difficult to extract, the more expensive) just isn't correct. The only manifestation of peak oil in Campbell's treatment is that as net pressure of the oil fields goes down (requiring more net energy to extract a unit of energy from the earth's oil fields as pressure decreases and we get less help from nature to extract the stuff) the price goes up, leading to less production as more are priced out of the market - because the demand for it reduces.

To support the factual basis for that claim, if the demand for oil suddenly dropped to zero tomorrow, then the world's net pressure in oil fields would remain the same, wouldn't it? My point is that peak oil is an economic phenomenon, because it assumes a demand, which depends on price in the first place, otherwise peak oil theory wouldn't exist.

Mark

[arretium]

$this->bbcode_second_pass_quote('Markos101', 'A')sk yourself this for a second - why will decreased net pressure in the world's fields cause less net production of oil per day? This is the whole assumption of peak oil theory - that as net pressure in the world's oil fields decrease, net production will decrease. That's the whole basis of Campbell's work! I cannot see why that should be the case. It does not mean that there is infinite oil - it just means that there is no reason why the production curve shouldn't keep up with demand - determined by price (remember the only reason why oil is being produced at current levels is because of an existence of a demand in the first place) - and then suddenly reach a maximum point and drop to zero (in strictly theoretical terms only, of course in reality we'd probably be switching to something else, price would fluctuate, etc.). The area under this graph would reflect of course the total amount of oil in the earth.

But Campbell's assumption that the amount of work required to extract a barrel of oil is directly proportional to price (i.e. the more difficult to extract, the more expensive) just isn't correct. The only manifestation of peak oil in Campbell's treatment is that as net pressure of the oil fields goes down (requiring more net energy to extract a unit of energy from the earth's oil fields as pressure decreases and we get less help from nature to extract the stuff) the price goes up, leading to less production as more are priced out of the market - because the demand for it reduces.

To support the factual basis for that claim, if the demand for oil suddenly dropped to zero tomorrow, then the world's net pressure in oil fields would remain the same, wouldn't it? My point is that peak oil is an economic phenomenon, because it assumes a demand, which depends on price.

Mark

[Carlhole]

The article currently posted on peakoil.com about Henry Groppe of Groppe, Long and Littell is worth reading.

In it, he says that first we ran out of $2 oil, then we ran out of $5 oil, then we ran out of $8 dollar, then we ran out of $15 dollar oil...now we are running out of $40 oil and soon we will be running out of $105 oil.

So we've got an extensive history of running out of oil it seems.

[Markos101]

$this->bbcode_second_pass_quote('arretium', 'P')lease keep it coming, but it appears that you are suggest that (economic theory) world demand for the product will increase and that the suppliers "will find a way" to satisfy it? Is this your argument?

The problem with this argument is that it ignores known laws of physics and geology. You simply assume that production will meet demand, when it won't. In a sense, production will meet demand because the price will increase to such a level that demand will drop, isn't that supply and demand as well?

[Markos101]

$this->bbcode_second_pass_quote('', 'I') think you are confusing the issue. You are suggesting that as the pressure required to produce oil from all fields rise, the cost-pressure ratio will not necessarily" remain in proportion, thus not necessarily resulting in increased prices. I believe this argument is flawed. You fail to account for the fact that the energy inpute for the fields rises, thus meaning more work required, thus raising costs, thus raising price.

[arretium]

$this->bbcode_second_pass_quote('Markos101', '
')The laws of physics and geology come in and say 'the more you oil you extract out of an oil field, the less net natural pressure will be stored in that field'.

[arretium]

$this->bbcode_second_pass_quote('Markos101', 'Y')ou are assuming then that the price per unit input energy must remain to some absolute constant over time then, yes? Here we are again - that simply isn't the case. The price of that input energy does not have to remain constant, thus price does not have to rise.

[khebab]

A lowering oil reservoir pressure means your cost are increasing because you have to invest in more complex extraction methods. But it's not the only problem, it is becoming harder and harder to keep the same production rate on an aging oil field. For instance, if you are using water to increase pressure, your water cut increases until water becomes a large fraction of what you are extracting. Demand for oil is increasing, so you have to produce more as well as to fight the falling pressure. Lower pressure affects cost but also affects production rates and falling production rates make oil less available therefore demand cannot be satisfied in real time.

[Viper]

Markos,

Here is what you are missing, and the $'s have nothing to do with it.

If it is twice as hard for me to pull the oil out of the ground, I will force you to mow my lawn twice per barel instead of once.

Money is just a way of translating work (human, chemical, or the posetion of property) between different actors.

-Viper

[MicroHydro]

Markos, I feel your pain, but what you are doing is called bargaining. When you work your way through depression and acceptance, you'll feel better.

[ohanian]

$this->bbcode_second_pass_quote('Markos101', '
')Now the first point about physics and geology is correct - but Campbell's assumption about the direct consequences for production (i.e. supply) is wrong. Harder oil to extract does not equal more expensive, because whatever pressure becomes the norm becomes the norm in price. The X decreases.

[Antimatter]

Campbell's argument is that the net drop in field pressure (and other factors) causes a reduction in supply leading to price increases through supply and demand, rather than price increase due to production cost increase. Production cost has very little to do with the market price of a barrel of oil, Saudi Arabia's production costs are reported to be around $2 per barrel, and even difficult deep water oil is produced for under $20/bbl. Oil from tar sands can be 'produced' for around $10-$15/bbl. The issue is not higher production cost leading to lower demand and hence peak production, it's declining supply leading to high prices and shortages through supply and demand, even though production costs may stay about the same.

That being said, the Hubbert curve is not cast in stone and peak doesn't have to occour when 50% has been used. When the US lower 48 peaked oil could be imported cheaply (embargos aside). When the world peaks price will rise (to say the least ) and might spur enough exploration and development activity to allow a plateau or slight rise for a few years, although decline will probably be steeper in that case. Oil production rising untill the last drop is gone is impossible - in that case at the end all the world's oil would be coming from the last field at a rate of 140 million bbl/day or so, draining the field in a few days even if it was a large one.

The max flow rate of a field is determined by pressure, oil viscosity, reservoir rock porosity and the number and type of wells drilled into the field. Juggling those around I suspect that a point of diminishing returns is met with regard to drilling more wells into the field, where doubling the number of wells in the field will result in only a small increase in production at large money and energy expense, followed by a steeper decline as pressure drops more rapidly. Assuming then that our oil fields have a production rate not easily increased by throwing more money at them, the only realistic way to add new supply (and offset decline) is to bring new fields online. This becomes troublesome when discovery rate is only 7GB/year or so while production is close to 30GB/year. As new fields become scarce and smaller it becomes harder to add new capacity and offset declines from other fields, which accelerate as they age and more go into decline.

A thought experiment - assume that every oil field is the same size and flows at the same rate, with production starting and ending at maximum for simplicity's sake, rather than the classic bell curve. Peak production wil then occour when the maximum number of fields are online. This should occour somewhere around the 50% point depending on discovery pattern, but obviously can't occour towards the end of the curve unless a huge number of feilds are discovered late in the cycle, which doesn't seem likely in our case. In this example the individual production curve of each oil field doesnt make much difference - adding together a large amount of step functions instead of bell curves will have the same effect. In real life with huge fields such as Ghawar suppling a large amount of oil the individual production curves of these fields can significantly alter the world oil production curve. Hope I didn't bore you all too much, just thinking aloud.

[ohanian]

$this->bbcode_second_pass_quote('Antimatter', '
')A thought experiment - assume that every oil field is the same size and flows at the same rate, with production starting and ending at maximum for simplicity's sake, rather than the classic bell curve. Peak production wil then occour when the maximum number of fields are online. This should occour somewhere around the 50% point depending on discovery pattern, but obviously can't occour towards the end of the curve unless a huge number of feilds are discovered late in the cycle, which doesn't seem likely in our case. In this example the individual production curve of each oil field doesnt make much difference - adding together a large amount of step functions instead of bell curves will have the same effect. In real life with huge fields such as Ghawar suppling a large amount of oil the individual production curves of these fields can significantly alter the world oil production curve. Hope I didn't bore you all too much, just thinking aloud.

[nero]

I would like to emphasize that a single field's production does not follow a bell curve. The pressure in a single field decreases continuously as it is depleated and there is no possible way you can associate peak oil production with peak reservoir pressure. So I am rather suprised at the claim that Campbell said the below. Do you have a reference for this quotation?

$this->bbcode_second_pass_quote('', 'C')ampbell then comes along and says this: that "the less net pressure stored in the oil field, the more work will be taken to extract it, and therefore the more expensive it will become. This raises price, reduces demand and therefore reduces production, causing peak oil to correspond at peak net oil pressure in the earth's fields".

[Markos101]

I've got a few points to say about Peak Oil. Having already studied the subject, and made many posts on here regarding its consequences, I think it's safe to say that I've been through the depression-acceptance phase. I then found that I came back with the reaction that actually it probably wasn't going to be as bad as I thought. I call this the 'matured peak oiler' phase. Here's why.

Beware Doomsayers

When the Sept. 11th attacks happened, everyone was shocked. For a week or so, everyone was in a sort of stunned myopia as nothing of the sort had ever happened on US soil.

And then, after that, came media frenzy. Al-Qaeda is some mass network of independent terrorist cells operating from Bin Ladin's hidden hideout with millions of dollars of funding and the ability to spring up anywhere at short notice.

The truth was far from it. The US made only a single successful prosecution for any so called 'al-Qaeda' group in the US, and even then there was very dubious apparent ties to any such group, and actually the so called 'al-Qaeda training camps' in Afghanistan were not training 'terrorists' to overcome the West, they were actually to train fighters to create Islamic states in the East, and they had no interest in the US. The camps were originally funded by - guess what - the US(!) in order to train the guerilla fighters there to overcome the Soviets back in the 70s/80s. Ironically, the US may have actually profitted from such conflicts through the loans made to Russia via the IMF. If you understand finance, suddenly a lot of world events begin to make sense.

In fact, even the term 'al-Qaeda' was only used by Bin Ladin after September 11th - because that is what the US administration had decided to label it in the media. In fact, only a small group of very extreme Islamists were responsible for Sept. 11th, rather than it being the first rung in a series of devastating attacks orchestrated by Bin Ladin from his 'hideout' in Afghanisthan. And, of course, where is Bin Ladin now? No one ever thinks about him unless he is mentioned in the media, and of course, he isn't.

Despite this, all of a sudden, whoever was the biggest doomsayer got the power. Whoever gave the worst possible scenario, whether it be to bioweapons, nuclear or chemical, got more and more power to them as the fearing masses turned to them for a solution to this veiled and unseeable threat.

Such a technique is a classic dictatorship mass-psychology control game; present people with unending threat, and then present the solution. The result is, you can get a large mass of people to accept things they wouldn't normally accept, willingly, to solve that so-called problem. Use media and other forms of propaganda to create an image of the threat, because it is image that is king. And as soon as people like Clarke here in the UK (whom I believe is the most dangerous man on the face of this planet) come up with new 'solutions' to these 'problems' - such as the fact that legislation now allows the UK government to indefinitely imprison an individual, and now their friends and family too, without trial - people then say 'well, it's bad, but I guess we have to accept it, with all this unending illusionary threat going on around me that hasn't actually harmed a single hair on my body at all since I watched 9/11 on TV 100 times when the media got into a sales frenzy about it'. Such legislation harks real dictortorial government.

The same, although slightly different, thing is happening here. I see this in the complete ignorance directed towards food supplies. Again I hear 'oil production is directly proportional to food production'. And yet fertilisers are derived from natural gas and not oil, and Haber-Bosch is not the only way to intensively farm a mass of crops. It is used at the moment because, yes, it's the cheapest because it has become the most widely used method. And yes, gas prices will be hit by oil prices, and yes, some fertilisers are made from oil derived products. However, they are not the only types of fertilisers out there, but they are currently the cheapest, being the most widely used and produced (economies of scale). So all these doomer die-off scenarios are based purely on the fact that I think some people (a) Like being doomers - it gives you a sense of absolute power and (b) It might be a solution to the fact that they might not like their lives at the moment. Again, humans are by instinct problem solvers, and this instinct like all others can be abused.

Beware Anything That Consolidates Power Into Few Hands

And then we're forgetting the fact that most of the major oil companies derive from Standard Oil, which was started by John D. Rockefeller in the last quarter or so of the 1800s. An anti-trust case forced John to break up Standard Oil, with his ruthless business acumen, into smaller companies such as Standard Oil of New Jersey, which then all turned into, via a change of trading name, into Exxon, Mobil, Texaco...all of these are derived from the same one company.

Campbell claims that these companies have been merging and acquisitioning (if that's a word) because they foresee in 'truth' a less profitable future, specifically because of peak.

And yet at the same time, the nature of capitalism breeds larger and larger corporations, forming through mergers as those who apparently get the vote for the best service/product with the people's money get larger and merge into companies of a similar size.

The result is consolidation of control over oil supply into fewer and fewer hands, and since all human beings are corrupt, this spells bad news. If the people are dependent upon oil, then what power it gives to the few if only few have control over the supply of it.

When Cecil Rhodes started up De Beers, also funnily enough in the mid/late 1800s, he used to deliberately pull back supply in order to inflate prices. This is another classic industrial technique - increase the public's perceived preciousness of the commodity by pulling back its supply. In doing so, you raise price, and people become willing to pay more for it.

Campbell also I feel trivialises the situation by focussing purely on what he defines as 'conventional oil' at the exclusion of all other hydrocarbons. I don't know, and anyone can make conjecture about it. Peak is right, but just when it happens depends on the amount of oil being exploited in the future, and on that no one on this forum, whether they think they are an expert or not, can be sure. It also depends upon your definition of the word 'oil'.

Mark