Peak oil: an Outlook on Crude Oil Depletion

pseudobrit

macrumors 68040
Original poster
Jul 23, 2002
3,418
4
Jobs' Spare Liver Jar
I've quoted most of the excerpt because it was hard to find bits that weren't wholly relevant and concise.

This is going to hurt:

Peak oil is a turning point for Mankind. The economic prosperity of the 20th Century was driven by cheap, oil-based energy. Everyone had the equivalent of several unpaid and unfed slaves to do his work for him, but now these slaves are getting old and won't work much longer. We have an urgent need to find how to live without them. It is stressed that we are not facing a re-run of the Oil Shocks of the 1970s. They were like the tremors before an earthquake, although serious enough, tipping the World into recession. Now, we face the earthquake itself. This shock is very different. It is driven by resource constraints, not politics...

...

In summary, these are the main points that have to be grasped:
-Conventional oil provides most of the oil produced today, and is responsible for about 95% all oil that has been produced so far.
-It will continue to dominate supply for a long time to come. It is what matters most.
-Its discovery peaked in the 1960s. We now find one barrel for every four we consume.
-Middle East share of production is set to rise. The rest of the world peaked in 1997, and is therefore in terminal decline.
-Non-conventional oil delays peak only a few years, but will ameliorate the subsequent decline.
-Gas, which is less depleted than oil, will likely peak around 2020.
-Capacity limits were breached late in 2000, causing prices to soar leading to world recession. This situation seems to be repeating itself now with prices around $30 as a brief economic recovery stimulates demand. The high prices may themselves trigger another economic recession in an increasingly vicious circle.
link
 

Hoef

macrumors 6502a
Jul 11, 2004
825
0
Houston, TX..... (keep walking)
I happen to be an oil expert:

Conventional oil provides most of the oil produced today, and is responsible for about 95% all oil that has been produced so far ==> The key is that the non conventional oil reserves are very very large (larger that Saudi reserves)

It will continue to dominate supply for a long time to come. It is what matters most. ==> True

Its discovery peaked in the 1960s. We now find one barrel for every four we consume ==> Key point is not discovery but resevoir and capacity

Middle East share of production is set to rise. The rest of the world peaked in 1997, and is therefore in terminal decline. ==> Better get friends with the Middle East!

Non-conventional oil delays peak only a few years, but will ameliorate the subsequent decline ==> Not true, most specialist cannot even comprehend the size of non-conventional oils

Gas, which is less depleted than oil, will likely peak around 2020 ==> Not true, most specialist cannot even comprehend the size of gas resevoirs

Capacity limits were breached late in 2000, causing prices to soar leading to world recession. This situation seems to be repeating itself now with prices around $30 as a brief economic recovery stimulates demand. The high prices may themselves trigger another economic recession in an increasingly vicious circle. ==> Not true, there was plenty spare in 2000. If any issues, it is today where we may run into capacity constrains. However, OPEC announced capacity increases for this and next year. We already see some of that happening. If anything, there is spare capacity in refining in the US, combined with poor policy from Washington which creates price pressures
 

Roger1

macrumors 65816
Jun 3, 2002
1,152
0
Michigan
Thomas Veil said:
* Sigh. *

Anybody for getting on the Jupiter 2 and heading for Alpha Centauri?
I'll go! I'll even pitch in 5 bucks for my share of the gas! :D

BTW, wasn't Shell recently thinking of shutting down a refinery to help drive up prices??
 

Xtremehkr

macrumors 68000
Jul 4, 2004
1,897
0
Hoef said:
I happen to be an oil expert:

Conventional oil provides most of the oil produced today, and is responsible for about 95% all oil that has been produced so far ==> The key is that the non conventional oil reserves are very very large (larger that Saudi reserves)

It will continue to dominate supply for a long time to come. It is what matters most. ==> True

Its discovery peaked in the 1960s. We now find one barrel for every four we consume ==> Key point is not discovery but resevoir and capacity

Middle East share of production is set to rise. The rest of the world peaked in 1997, and is therefore in terminal decline. ==> Better get friends with the Middle East!

Non-conventional oil delays peak only a few years, but will ameliorate the subsequent decline ==> Not true, most specialist cannot even comprehend the size of non-conventional oils

Gas, which is less depleted than oil, will likely peak around 2020 ==> Not true, most specialist cannot even comprehend the size of gas resevoirs

Capacity limits were breached late in 2000, causing prices to soar leading to world recession. This situation seems to be repeating itself now with prices around $30 as a brief economic recovery stimulates demand. The high prices may themselves trigger another economic recession in an increasingly vicious circle. ==> Not true, there was plenty spare in 2000. If any issues, it is today where we may run into capacity constrains. However, OPEC announced capacity increases for this and next year. We already see some of that happening. If anything, there is spare capacity in refining in the US, combined with poor policy from Washington which creates price pressures
You wouldn't be upset if I chose to believe the article over your claim would you?

Being an Astronaut, we can be a skeptical bunch at times.
 

brap

macrumors 68000
May 10, 2004
1,701
0
Nottingham
Hoef said:
Middle East share of production is set to rise. The rest of the world peaked in 1997, and is therefore in terminal decline. ==> Better get friends with the Middle East!
...or invade them. Save a bunch of OPEC hassle.
 

Ugg

macrumors 68000
Apr 7, 2003
1,985
15
Penryn
Since markets are driven by equal parts of emotion, logic, guesswork and more recently, fear, unconventional supplies will have no effect on the market until there is a proven, cost-effective way to utilize them. It's great they're out there but for all intents and purposes in the short term it's like finding pure veins of gold on Mars.

Those non-conventional sources will also cost a lot more to produce and the environmental impacts can be huge, the shale oil extraction in Alberta come to mind.

The price is going to continue to go up as long as those selfish Chinese and Indians keep building roads and buying cars, with no regard for us poor Americans and our NEED for the internal combustion engine. :rolleyes:
 

Ugg

macrumors 68000
Apr 7, 2003
1,985
15
Penryn
Since markets are driven by equal parts of emotion, logic, guesswork and more recently, fear, unconventional supplies will have no effect on the market until there is a proven, cost-effective way to utilize them. It's great they're out there but for all intents and purposes in the short term it's like finding pure veins of gold on Mars.

Those non-conventional sources will also cost a lot more to produce and the environmental impacts can be huge, the shale oil extraction in Alberta come to mind.

The price is going to continue to go up as long as those selfish Chinese and Indians keep building roads and buying cars, with no regard for us poor Americans and our NEED for the internal combustion engine. :rolleyes:

IOW, it's more a matter of supply unable to keep up with demand.
 

Desertrat

macrumors newbie
Jul 4, 2003
2
706
Terlingua, Texas
Seems there are some cross-purposes. There's a difference between the existence of oil and the availability of oil, whether conventional or non-conventional.

Hoef's correct as to the comparative amounts of non-cnventional oil. The obvious reason it hasn't been utilized is cost. We'll wind up using it; the cost of driving from point A to point B is gonna go up, Prius or no.

Natural gas? The US is importing it because of constrainsts against drilling here. Gotta have it; it's the current savior of California's electric generating systems. But, it means the probability of LNG plants for imported gas, which are Good Things if you like having the hazard nearby. (The current schemes involve having the hazards in Mexico, with the NIMBY principle doing its usual good job.)

There is a direct correlation between the consumption of energy and the GDP. There is a direct correlation between the GDP and the quality of life. The next several years oughta be interesting...

'Rat
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
You left a few important factors out of your analysis.

Yes, we import more natural gas and oil than we might because of restrictions on development here, but in fact the fossil fuels available in the US are inherently more expensive to exploit and many would remain unexploited no matter what else happened, until the market price rose sufficiently to make investing in this extraction profitable. So we also import these products for much same reason we import shirts and consumer electronics. Also keep in mind that much of the industrialized world imports most if not all of their petroleum products. They manage to have a high standard of living, perhaps because they already know what we refuse to learn.

Also, the single largest factor currently driving the energy market is China's rapid industrial development. We can't produce our way out of that problem.
 

Desertrat

macrumors newbie
Jul 4, 2003
2
706
Terlingua, Texas
"...but in fact the fossil fuels available in the US are inherently more expensive to exploit..."

Than imports, I assume?

"and many would remain unexploited no matter what else happened, until the market price rose sufficiently to make investing in this extraction profitable."

True, but the market price looks bullish for this investing. Note China's investment in Canadian tar sands.

I've offered this before, in another thread on this subject: The Exxon oil exec who, in around 1977 commented, "There's all the oil you want, at $100 a barrel." At the time, the spot price was around $25 or so and they were investigating the oil shale in the "Pizeance Creek" area of Colorado. This was shelved because of no profit below $40/bbl in 1977 dollars; I guess $80/bbl, now? (It is thought that there is a little old lady in tenny-runners in the basement of the USGS in Denver. Her job is to render old-time place names more palatable for family viewing. Ergo, Pizeance Creek, vice Pissant Creek.)

There are various ways to make motor fuel. One is direct conversion of natural gas, using palladium as a catalyst. (The reason for palladium's rise in price from around $160/oz a few years back) Shell and a couple of others are doing this in Indonesia, for use there and I think in Australia/New Zealand.

Hmmm. A return to the days of coal-fired steamers? Stanley, anyone? :)

The geopolitics of oil always have been and I guess always will be troublesome, as long as the developed/developing world is centered on it. Hell's bells, who ain't? Afghanistan is a major pipeline route. Iraq is a major source, as is Iran. The Balkans are a primary pipeline route into central/western Europe.

So since the end of the USSR we've had three oil wars: Gulf War 1, Balkans (1?) and Gulf War 2.

Gasoline is priced at $1.76 in south Georgia; around $2.20 in Terlingua. I wonder how long before the minimum is around $2.50 and, down the road, even higher? It'll get even worse as the dollar drops more and oil gets priced in Euros...

'Rat
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
Imports, yes. Oil shale is an idea that came and went. It may come again, but at what price? Supply does not always follow from demand.

One thing I've come to understand better over the years is that investment in new industrial capacity doesn't always follow directly from higher prices for products. Capital needs to have the confidence that higher prices are here to stay. Also, where scarcity is an issue, producers might very well find it more profitable, or at least less risky, to sell their current capacity at higher prices than to invest in increased production.

The California gasoline market is a case in point. It's widely acknowledged that production runs perilously close to demand here. Yet no additional production is forthcoming; in fact Shell plans on closing one of the handful of refineries in the state. The state's environmental regulations aren't a complete explanation either. The fuels could easily be produced in Nevada or Arizona, but that hasn't occurred either, despite the fact that pump prices in California are consistently above the national average by 20% or more.

Try to explain this in supply and demand terms. I don't think it can be done.
 

Desertrat

macrumors newbie
Jul 4, 2003
2
706
Terlingua, Texas
IJ, it well could be that Shell is closing the plant because of production inefficiency, compared to other plants. It could be in part due to such things as the costs of replacing equipment, the amortization of which is part of operating overhead. When the operating overhead, per gallon, is notably higher, and the age of the plant has allowed a write-down for depreciation, it's cheaper, overall, to close it.

The same sort of thing holds for power plants, whether coal or nuke. And other endeavors, of course.

Oil from shale? If and when the price of crude gets high enough that there can be profit from investment and operation to produce petroleum products from that shale, somebody will be interested. Why not? Canada's tar sands are now becoming a profit-potential endeavor...

Entrepreneurial efforts are nothing more than finding needs and filling them--at a profit. Doesn't matter whether it's a lemonade stand or a new refinery.

'Rat
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
Shell claims a lack of suitable local supplies of crude oil, but that's not much of an explanation IMO because they didn't even try to sell the plant to someone else who might be able to operate it profitably. Still in this environment, the logic of supply and demand would certainly suggest adding production, not reducing it. The reality of a less than competitive market, which is what we've already got for gasoline in California, is that there's little appetite for investment in production when disinvestment pays off just as well. The truth about the theories or laws of economics (whichever you prefer to call them), is that they only work in a competitive market. In a market with very few players, the profit incentives can change drastically, and all kinds of screwy things can happen.
 

Desertrat

macrumors newbie
Jul 4, 2003
2
706
Terlingua, Texas
Truly.

One arguement for tax reform to sales/flat is that if there were no complex tax games for business, corporations would be forced to act in accordance with the marketplace. No games about tax shelters and the like. But I don't wanna go further, with that. :)

'Rat
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
I don't blame you. Markets aren't competitive by definition, and even old Adam Smith recognized that fact. No amount of tax policy will change the tendency of some markets to develop into oligopoly and monopoly.
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
Speaking of LNG terminals, apparently Congress' solution is to eliminate local control entirely. (Not that anyone in Congress knew they were voting that way. Plausible deniability etc.)

Congress Fuels Fire Between FERC, States

WASHINGTON — State officials from California to Rhode Island are fuming over a provision, slipped into the massive year-end spending bill expected to clear Congress next week, that says federal regulators should decide where liquefied natural gas terminals are built.

Many lawmakers say they didn't know about the provision when they voted for the voluminous bill last month.

But state regulators know about it — and they don't like it. They said it could make it harder for them to block facilities that could harm the environment or pose safety and security risks.

The provision seems to leave the Republican-controlled Congress leaning against its natural tendency to support states' rights. But the language reflects the determination of President Bush and his congressional allies to increase energy supplies, especially in the face of predicted increases in natural gas prices.

California appears to be the target of the provision. The state has gone to court challenging the Federal Energy Regulatory Commission's claim that it has sole authority to decide whether an LNG facility will be built in Long Beach. The facility would receive imported natural gas that had been cooled to a liquid so that it could be transported by ship rather than pipeline.

...

Rep. Lee Terry (R-Neb.), who has sponsored legislation that would essentially give the language the force of law, said he saw no conflict with states' rights.

"Imports to the nation are a national commerce issue," he said. "Natural gas supply is a national issue, so it is quite appropriate for Congress."

The Long Beach terminal, proposed by Sound Energy Solutions, a subsidiary of Mitsubishi Corp., is among more than two dozen new LNG terminals proposed throughout the United States.

Thomas Giles, executive vice president and chief operating officer for Sound Energy Solutions, said his company did not lobby for the provision. "What we want is resolution to the dispute" between California and federal officials, he said. "We'd just like certainty as soon as possible."

An LNG facility off the Ventura County coast also has been proposed, but state officials do not dispute federal jurisdiction because it would be built in federal waters. The U.S. Coast Guard is responsible for such terminals.

Four LNG terminals are in operation in the United States, on the East and Gulf coasts.
http://www.latimes.com/news/nationworld/nation/la-na-lng3dec03,1,6256123.story
 

zimv20

macrumors 601
Jul 18, 2002
4,388
7
toronto
i'd always thought the GOP had been built on:
- fiscal conservatism
- states' rights
- christian morals

seems they're down to just one these days.
 

pseudobrit

macrumors 68040
Original poster
Jul 23, 2002
3,418
4
Jobs' Spare Liver Jar
zimv20 said:
i'd always thought the GOP had been built on:
- fiscal conservatism
- states' rights
- christian morals

seems they're down to just one these days.
That's because they've gotten hold of the federal government (state's rights) and its chequebook (fiscal conservatism) and wish to use the apparatus to leverage their religious beliefs on the general population ("Christian" morals).

I would argue they've lost all three; what they call "Christian morals" exist simply to alienate the secular and are quite often in direct conflict with Christ's teachings.
 

Ugg

macrumors 68000
Apr 7, 2003
1,985
15
Penryn
pseudobrit said:
That's because they've gotten hold of the federal government (state's rights) and its chequebook (fiscal conservatism) and wish to use the apparatus to leverage their religious beliefs on the general population ("Christian" morals).

I would argue they've lost all three; what they call "Christian morals" exist simply to alienate the secular and are quite often in direct conflict with Christ's teachings.
It's amazing how Jesus Christ has been kicked out of any discussion on "Christian morals" and has been replaced by the old testament. Actually it's incredibly sad that religion has been bastardized to such an extent merely for political gain.
 

Desertrat

macrumors newbie
Jul 4, 2003
2
706
Terlingua, Texas
About the sanest proposal for an LNG terminal is for it to be offshore of the Gulf coast. The lower Texas coast has the least populated area that could be affected by an explosion. With the terminal some ten miles offshore in 100 feet or so of depth, blast effects would be minimal. There's already an extensive natural gas pipeline network around the state.

South of (roughly) Mobile, Alabama, and west of the Florida coastal bend would also fit this parameter. And, I guess, south of Cameron, Louisiana.

I have far more fear of an accidental explosion at an LNG facility than of an excursion at a nuke plant...

'Rat