Peak Oil is You
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Page added on March 25, 2014
Peak Oil: Laherrère, Real Curves, and Official Curves
The graph above is Figure 11 from Jean Laherrère, “World Oil and Gas Production Forecasts up to 2100,” The Oil Drum, July 16, 2013. Retrieved from www.theoildrum.com/node/10009
Notes on some of Laherrère’s abbreviations:
AEO = Annual Energy Outlook (from EIA) (= US Energy Information Administration)
NOPEC = non-OPEC
Tb = trillion barrels
U = ultimate recoverable
WEO = World Energy Outlook (from IEA) ( = International Energy Agency)
WOO = World Oil Outlook (from OPEC)
The thin blue line at the top right is Laherrère’s prediction of the grand totals, differing considerably from the others.
He explains: “The confidential technical data on [mean values of proven + probable reserves] is only available from expensive and very large scout databases. . . . There is a huge difference between the political/financial proved reserves [so-called], and the confidential technical [proven + probable] reserves. . . . Most economists . . . rely only on the proved reserves coming from [the Oil and Gas Journal, the US Energy Information Administration], BP and OPEC data, which are wrong; they have no access to the confidential technical data.”
The difference between his figures and the various government figures is enormous. It reminds me of the 1950s, when M.K. Hubbert and others were saying one thing, and the government was saying quite the opposite.
A few years ago I met someone who told me that his father had been a geoscientist in the 1950s. Back in those early days, the father had told the son about “peak oil” (in the years to come), but the father also said he would risk being fired if he made any public statement.
It’s considered bad for business to tell your investors that you’re going to be running out of product to sell. To me that sounds in some ways like superstitious nonsense. Surely if a product becomes rarer, each unit of that product gains more financial value for its owner. I suspect the real answer to that question, though, is closer to what Colin Campbell said to Adam Porter in 2004: “If the real figures were to come out there would be panic on the stock markets. . . .”
The general public must be kept happy but ignorant. Well, maybe not too happy, but certainly ignorant, as anyone knows who has had tried to deal with any important global issue, from pollution to population. Newspapers aren’t allowed to print bad news, at least not bad news that would shake anyone up. And the only books one is supposed to read are high-school romances. Orwell had it right, a perfect score (except for the title) when he wrote 1984. Reminds me of a conversation I have at irregular intervals with people I meet. They say, “Everyone knows what Freud/Marx/Darwin said. He was a terrible man.” “Have you ever read any of his books?” Without embarrassment, the answer is an angry “no!” In other words,”Why should I read the books of such a terrible man?”
Oh, well, even Galileo had to deal with disinformation, so who am I to complain?
28 Comments on "Peak Oil: Laherrère, Real Curves, and Official Curves"
deedl on Tue, 25th Mar 2014 11:53 am
Laherrere has made very exact predictions over the last 15 years, so there is a high probability that his further forecasts will be quite close to reality.
Davy, Hermann, MO on Tue, 25th Mar 2014 12:26 pm
Folks, confidence is liquidity and liquidity is the blood of this complex interconnected global system. We don’t know what it will take to panic the population and or the market. I don’t think most people are capable of connecting the dots of what contraction and or collapse means. Most people I meet know in there gut things are not getting better but society has drilled into people’s heads to have optimism and hope. All the problems preventing themselves to the general public are in their view long term. Short term everything is still working although getting more expensive. I need to clarify that because a significant portion of the global population is already in a collapse like state relative to the better off folks. We may see this condition soon for all of us. There is no place to hide and no decoupling. It annoys me here to hear propagandist ideologues claim a new world order of dominance of China, Russia, and or Asia. The reality is if the critical nodes of the global financial system fail the whole system fails. I cannot see any other outcome. How will a factory in China run if it can’t get a critical part from Germany, US, and or Thailand? When these factories shut down the knock on effect is immediate. Where will China sell its exports if the US is collapsed? If it goes on long enough personal and business bankruptcies further effect economic activity until you have a deflationary spiral with hyperinflation of vital resources. We have some more years to go probably because the message of the Lobby of plenty cornucopians and the technological exuberance exceptionalist still dominates. The general public today except for a few octarians know nothing but growth. We are near a “Korowics Crunch” or more precisiely a “Minsky Moment” like 2008. It is only the deception of the global MSM and financial repression that keeps things humming along. This situation is not a healthy system in my mind!
Pops on Tue, 25th Mar 2014 12:52 pm
Laherrere’s has been the prediction I’ve hung my hat on these last years since the SciAm article. But understand that his two main points are thus:
The data is next to worthless so any forecast of URR that purports to show a greater degree of accuracy than one, or at most 2 digits is misleading.
But accuracy is not really that critical at these levels of consumption since an increase of conventional URR by even 1 trillion barrels only moves the peak 5-10 years.
Arthur on Tue, 25th Mar 2014 1:56 pm
So, the end of the peak liquid plateau is 2020 and in 2040 there is still 70%, albeit likely with lower EROEI. Fair enough. Then there is natural gas, pushing peak fossil beyond 2030, meaning we have at least another 16 years to keep investing in renewables. We can expect most private homes in western Europe and elsewhere owning solar panels by 2020.
Although 1950-2008 BAU is over for ever, no Olduvai scenarios becoming reality any time soon either.
http://en.wikipedia.org/wiki/Olduvai_theory
Davey on Tue, 25th Mar 2014 2:02 pm
Dream on Arthur
Northwest Resident on Tue, 25th Mar 2014 2:39 pm
It looks like ultimate recoverable and non-OPEC start the downhill slide around 2015 – 2016 – 2017, but OPEC is able to continue pumping flat out and holding steady for about another ten years before they start sliding into decline. That jives with a lot of other information I have read on the subject.
The non-OPEC would take an immediate dump of course were it not for unconventionals. The fact that we’re just barely holding the line against shortfalls by madly drilling and frac’ing holes in shale rock says to me that we are in big trouble, and that Peak Oil is in fact upon us.
Once those first oil shortfalls start hitting, investors are sure to panic. Once that panic hits, all bets are off as far how much oil the world might be able to produce in future years because all oil production is dependent on finance/credit, and a panic in the stock market will most likely shut down finance and credit in a heartbeat. No credit = no more oil, game over.
Davy, Hermann, MO on Tue, 25th Mar 2014 2:47 pm
NR, glad someone else realizes that money makes the world go around or at least keeps drill rigs going!
Arthur on Tue, 25th Mar 2014 3:29 pm
No credit = no more oil, game over.
NR, glad someone else realizes that money makes the world go around or at least keeps drill rigs going!
Wrong. There is one almost endless source of saving potential: the wages of western workers.
Millions of Ukrainians make 3000$/year.
An average westerner makes 10 times as much.
Why?
Why would this situation be cemented for ever?
Don’t get me wrong, I hope we can avoid large drops in income. Guarantee to the door though.
Northwest Resident on Tue, 25th Mar 2014 3:39 pm
Arthur — So, you think that panic in the stock market due to oil shortfalls and resulting lack of credit can be remedied by cutting the wages of average western workers? Dude, what in the hell are you smoking?!
shortonoil on Tue, 25th Mar 2014 3:52 pm
Even though Laherrere’s graphs differ from the “official” graphs considerably they are probably still overly optimistic. Our analysis places conventional crude production at 44 mb/d by 2030. The official C+C figures are now 72 mb/d, which are probably also over stated. The majority of this data comes from self reporting sources. Most NOC’s have no incentive to be truthful, on the contrary, a report of declining production is likely to have severe financial repercussions for most nations who are heavily dependent on oil revenues.
The balance of this reported production is other liquids. The majority of these other liquids are not used to produce transportation fuels; they are mainly used as chemical feedstock. As conventional crude production declines, the economy will decline, and demand for feedstock material will go down with it. Graph# 25 at our site indicates very strongly that world economic activity has been powered by conventional crude for at least the the last half century.
Around 2030 a divergence from the above graph will appear. A rapid decline will begin that will not be related to reserve levels. It will result from thermodynamic considerations. The energy to extract petroleum, and produce its products is increasing. A point is reached where sufficient energy to complete the process will no longer be available. We will run out of energy long before we run out of oil.
http://www.thehillsgroup.org
Arthur on Tue, 25th Mar 2014 4:43 pm
Arthur — So, you think that panic in the stock market due to oil shortfalls and resulting lack of credit can be remedied by cutting the wages of average western workers?
There is this erroneous idea that at some point remaining oil is not going to be extracted because there will be no credit lines.
One barrel of oil represents 8 man year of manual labor.
Current price barrel of oil ca. $120,-
Let’s assume average wage cost western worker at (I’m guessing) $30,-/hour
Based on these figures and since Mother Nature does not invoice, just workers, it costs 4 hours of work to produce a barrel of oil, itself representing 8 * 30 * 160 = 38400 hours.
This comes down to an “humanlabor-to-oillabor eroei” of 38400/4 = 9600!!!
You should get the point by now.
As long as the “humanlabor-to-oillabor eroei” remains substantially higher than 1, oil is always going to be extracted. And the wages are going to be adapted such to make that happen.
Arthur on Tue, 25th Mar 2014 4:50 pm
Sorry, made a mistake:
It should be 8 years * 12 months * 160 hours/month = 15360 manhours equivalent in a barrel ==>
“humanlabor-to-oillabor eroei” = 3840
My apologies.
Northwest Resident on Tue, 25th Mar 2014 5:08 pm
Arthur — I agree in part. As long as oil can be extracted by mere human labor alone (digging, swinging a sledge hammer, sucking on a straw till blue in the face and lungs collapse, etc…), then that oil will most definitely be extracted.
BUT, when the ability to extract oil requires an equal or greater amount of oil to power the equipment that does the extraction — which is what we are very close to right now — then extraction will stop.
AND, when the credit that is required to pay for all the equipment, materials and labor to extract oil is no longer available, then extraction will stop.
Maybe in a “command economy” — say, Obama and his evil minions seizing control of government (yeah — its a big joke, but bear with me for the sake of argument) and ordering oil workers, equipment suppliers, materials suppliers, international shipping of parts and materials, foreign suppliers of parts and materials — everybody around the world basically — to “get to work extracting that oil”, THEN MAYBE we’ll get some oil without credit being available. But only if everybody around the world follows Obama’s orders, and how likely do you think that is?
Point is: Panic in the stock market = freezing up of credit = severe decline or total stoppage of oil extraction, the original point I was making.
GregT on Tue, 25th Mar 2014 5:16 pm
“Millions of Ukrainians make 3000$/year.
An average westerner makes 10 times as much.
Why?
Why would this situation be cemented for ever?”
So I wonder exactly who will be buying $120 bbl oil, if most people would be making less per day, than the cost of 1/3 of a gallon of gasoline?
You should get the point by now, or maybe not.
GregT on Tue, 25th Mar 2014 5:21 pm
Sorry, 3 gallons of gasoline.
The point remains the same.
J-Gav on Tue, 25th Mar 2014 5:41 pm
Shorton – Thanks for your pertinent round-up on the subject.
Pops on Tue, 25th Mar 2014 6:10 pm
“As long as the “humanlabor-to-oillabor eroei” remains substantially higher than 1, oil is always going to be extracted. ”
No.
There needs to be demand and demand is made from desire plus the ability to pay.
Even with a large amount of labor available at a low price during the great depression there was no demand for labor because there was no ability to pay.
Arthur on Tue, 25th Mar 2014 6:18 pm
NWR, I fully agree that there is another, far more critical eroei, namely fossil energy cost/fossil energy return, the real eroei. When that value is approaching 10, 9, 8, 7, 6, 5…
..yep, than extraction is pointless. That’s the real showstopper.
But NOT money. Money can be printed, as any ‘evil Wallstreet minion’.lol can confirm. Oil extraction will either come to a halt if eroei is getting too low or if other sources will provide for lower cost energy. I think the latter is going to happen. At some point in time it is cheaper to install wind/solar than extract oil and than extraction stops, regardless of how much is left.
Maybe in a “command economy” — say, Obama and his evil minions seizing control of government (yeah — its a big joke, but bear with me for the sake of argument) and ordering oil workers, equipment suppliers, materials suppliers, international shipping of parts and materials, foreign suppliers of parts and materials — everybody around the world basically — to “get to work extracting that oil”, THEN MAYBE we’ll get some oil without credit being available. But only if everybody around the world follows Obama’s orders, and how likely do you think that is?
Wow, you are ignoring the reality of 70 years of communist plan economy in the not so distant past for a large part of world’s population! You apparently seem to think that capitalism is ‘non-negotiable’ and here to stay. But what if the crash of the financial system, many, including me, do expect to happen, does indeed occur?
System crash could very well mean: system exit. Like was the case with communism or 1933-German democracy.
Don’t get me wrong, I support capitalism and am not longing for it’s demise.
So I wonder exactly who will be buying $120 bbl oil, if most people would be making less per day, than the cost of 1/3 of a gallon of gasoline?
Not the average consumer. The military, government, industry.
But again, in Europe the situation is already such (twice the energy prices compared to the US) that solar and wind already can compete with fossil. And that’s happening long before fossil is really running out. Now it is a race against time: do we have enough years left to generate/earn the cash to make the necessary investments and renew our energy system.
Arthur on Tue, 25th Mar 2014 6:23 pm
Even with a large amount of labor available at a low price during the great depression there was no demand for labor because there was no ability to pay.
A depression is a temporary situation that lasts a few years, not a permanent one and in the case of the US was finally overcome by large government programs and a big war.
J on Tue, 25th Mar 2014 6:32 pm
There are definitely challenges in predicting “the economics” of producing oil when we have resources with an EROI of 1-1.5 like corn methanol being produced. So we can’t underestimate special interests. It seems like the government can always write Exxon a check that they can’t refuse. There was even some news out of UK of “production mandates”…
But geology is geology right, and no printing in the world changes that.
Energy available to each person in a world with rising population is also clearly declining already, although the distribution of the brunt is uneven.
But the biggest challenge is that humanity is cornered. If we burn all hydrocarbons, BAU can go on a little longer. But we will pay a hefty price for this. No one knows how large, but near extinction is on the table.
Of course if we start curtailing carbon use now in an aggressive way the scenario becomes even worse than the standard peak oil scenario.
But it’s pretty clear which way it’s going to be. Climate doesn’t stand a chance. Everyone is clinging on to their jobs as best they can, and all businesses are pulling the same way.
That’s a pretty formidable force, and of course “renewables” are not going to move the needle very much.
I like the observation that not much money is being channelled into other paths than fossil fuel and that’s because they won’t work maintaining BAU.
So the differentiator will be whether you have a (reasonably well paying) job or not, and if you do, life is great. Otherwise – not so much. Also, having just one child will help immensely I think.
But the sick part of me actually think that this will be one of the most interesting times to live through. At least as long as I have a job.
GregT on Tue, 25th Mar 2014 6:51 pm
When it costs more to get to work, than what a person makes at work, people will stop working, or go further into debt. Kind of like what is happening already, except it is the governments that are putting us into debt. We are already living beyond our means.
J on Tue, 25th Mar 2014 6:57 pm
Totally agree. It’s all about the marginal consumer, marginal barrel, marginal cost of .
And the Fed is printing money to make sure that corporations have to do something with their assets rather than sitting still.
That must be the core reason why “we need” inflation. And when doing business is a money losing proposition we’re going to need a lot of inflation.
That’s how my Social Security is going to be worthless. It’s not going to buy anything.
Pops on Tue, 25th Mar 2014 7:04 pm
“A depression is a temporary situation that lasts a few years, not a permanent one and in the case of the US was finally overcome by large government programs and a big war.”
And lots and lots of cheap oil.
There is no rule that says a depression is temporary, only that GDP declines.
shortonoil on Tue, 25th Mar 2014 7:25 pm
“BUT, when the ability to extract oil requires an equal or greater amount of oil to power the equipment that does the extraction — which is what we are very close to right now — then extraction will stop.
AND, when the credit that is required to pay for all the equipment, materials and labor to extract oil is no longer available, then extraction will stop.”
Undoubtedly these two are closely linked. Credit is debt, from the buyers point of view. The present administration has piled up more debt than what was amassed by all the other administrations in the nation’s history. The society can obviously no longer survive on what it produces, and must borrow from the future. The problem here is that petroleum depletion is not leaving us much future to borrow from!
With no more than fifteen years of anything resembling a reasonable source of supply, it probably won’t be that long before the creditors that hold that debt realize that they won’t, can’t ever be payed back. Then ” all the equipment, materials and labor to extract oil” will no longer be available.
Will the end of the present era come about because of a diminution of petroleum, or the end of the present monetary/financial system. There is a good chance that we won’t be able to tell the difference! The are like Siamese twins; they were born at the same time, and share the same heart.
http://www.thehillsgroup.org
Plantagenet on Tue, 25th Mar 2014 7:33 pm
All I can say is its a good thing we’ve got lots and lots of natural gas thanks to fracking.
GregT on Tue, 25th Mar 2014 10:54 pm
“All I can say is its a good thing we’ve got lots and lots of natural gas thanks to fracking.”
If nothing else, at least we’ll have home heating for a while longer.
Dave Thompson on Wed, 26th Mar 2014 12:35 am
I see a global alarm coming. All the powers that be, need to do, is shift to accepting human caused climate change. Then proclaim we as humanity must cut our fossil fuel use. A conscious paradigm shift approaches. If done in the same way that WWII railed the people, we could all make do with less and perhaps buy more time instead of hard fall,collapse.
Davy, Hermann, MO on Wed, 26th Mar 2014 1:11 am
Dave, sounds great but in practice less leads to collapse with our growth based system. This is also true with carbon (fossil fuels) less again means collapse. It is a catch 22. AGW may hit hard around 2030 so in the meantime it is energy and finance that are the clear and present danger. We are heading towards less carbon but the time frame is uncertain. The financial collapse could happen any day. The energy induced collapse 9 years or less. Then AGW induced collapse in 16 years or less. See the math and the dangers. Status quo BAU means many people will live now but our children have no future. There is no way to manage a de-growth. Our system will fail and there is no alternative system to reboot our support systems into. We are not like the fall of the Berlin Wall when the USSR had a plan B which was capitalism. We have nothing now. Even a totalitarian state will not be able to reboot a collapsed status quo BAU except in a limited area with great loss of economic activity, living standards, and life. The reason is directly related to the complexity and the interconnectivity of the global economic system. Everyone’s local support system depends on the global. Besides to make a dent in AGW of any significance all other activity except for agriculture would have to end. That is how far we are over our carbon budget. We are doomed as an industrial society from multiple predicaments.