Presented for your consideration -- Twilight Zone in the Desert

[GliderGuider]

‘Peak Oil’ Is a Waste of Energy

REMEMBER “peak oil”? It’s the theory that geological scarcity will at some point make it impossible for global petroleum production to avoid falling, heralding the end of the oil age and, potentially, economic catastrophe. Well, just when we thought that the collapse in oil prices since last summer had put an end to such talk, along comes Fatih Birol, the top economist at the International Energy Agency, to insist that we’ll reach the peak moment in 10 years, a decade sooner than most previous predictions (although a few ardent pessimists believe the moment of no return has already come and gone).

Like many Malthusian beliefs, peak oil theory has been promoted by a motivated group of scientists and laymen who base their conclusions on poor analyses of data and misinterpretations of technical material. But because the news media and prominent figures like James Schlesinger, a former secretary of energy, and the oilman T. Boone Pickens have taken peak oil seriously, the public is understandably alarmed.

A careful examination of the facts shows that most arguments about peak oil are based on anecdotal information, vague references and ignorance of how the oil industry goes about finding fields and extracting petroleum. And this has been demonstrated over and over again: the founder of the Association for the Study of Peak Oil first claimed in 1989 that the peak had already been reached, and Mr. Schlesinger argued a decade earlier that production was unlikely to ever go much higher.

In the end, perhaps the most misleading claim of the peak-oil advocates is that the earth was endowed with only 2 trillion barrels of “recoverable” oil. Actually, the consensus among geologists is that there are some 10 trillion barrels out there. A century ago, only 10 percent of it was considered recoverable, but improvements in technology should allow us to recover some 35 percent — another 2.5 trillion barrels — in an economically viable way. And this doesn’t even include such potential sources as tar sands, which in time we may be able to efficiently tap.

Oil remains abundant, and the price will likely come down closer to the historical level of $30 a barrel as new supplies come forward in the deep waters off West Africa and Latin America, in East Africa, and perhaps in the Bakken oil shale fields of Montana and North Dakota. But that may not keep the Chicken Littles from convincing policymakers in Washington and elsewhere that oil, being finite, must increase in price. (That’s the logic that led the Carter administration to create the Synthetic Fuels Corporation, a $3 billion boondoggle that never produced a gallon of useable fuel.)

This is not to say that we shouldn’t keep looking for other cost-effective, low-pollution energy sources — why not broaden our options? But we can’t let the false threat of disappearing oil lead the government to throw money away on harebrained renewable energy schemes or impose unnecessary and expensive conservation measures on a public already struggling through tough economic times.

(Emphasis mine: GG)
More of the same at the link.

And some people think the peak oil community are shills for big oil...

[HamdenRice]

1. I think peak oil is a geologic reality but not an economic reality

That has been my "gripe" with Malthusians, generally. Almost every time I read a Malthusian theory, it seems not to take account of elasticity or substitution -- both fundamental economic concepts from college Econ 101.

Oil may geologically run out, but that doesn't mean that fossil fuel -- which includes gas and coal -- runs out.

The only hard Malthusian limit to carbon based fossil fuel is greenhouse gas effect. But even that can be addressed if the proper pricing regime is put in place.

[Javaman]

3. Okay, are you seriously saying that peak oil

could be controlled via economic measures?

So even last summers rush up to $150.00 a barrel could have been controlled via economic measures?

Granted, most of the rush up was due to speculators. At some point in the near future, the rise in oil prices will have nothing to do with speculation and will be due to low production because industries inability to meet demand.

If you have a resource that is unable to meet demand, basic economics dictates that prices rise.

Unless there is a replacement for that particular resource, nothing will keep the price down as long as their is massive demand.

Yes, we have coal and natural gas, but as far as oil is concerned, nothing matches it's energy carrying capacity. Nothing.

Now, I'm certainly not trying to put words in your mouth, but your post seems to lead in the direction that various economic devices can thwart any rush up.

Please correct me, if I'm wrong.

Cheers.

[OKIsItJustMe]

6. last summer's rush up to $150.00 a barrel /was/ controlled via economic measures

I think it was caused by speculators (not a "peak oil" supply problem.)

I asked at the time, "Did we all of a sudden come up against the stops?"
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=115&topic_id=150155&mesg_id=150252

(That doesn't mean I don't believe in "peak oil.")

[Javaman]

9. I stated that in my post, my point is...

are you saying that in a future situation, when the rise in oil prices are not caused by speculators can be controlled by economic means?

[OKIsItJustMe]

10. Prices can be controlled artificially

Speculators can drive them up.
Regulators can keep them down.

[GliderGuider]

12. Take a look at wage and price controls or rent controls

to see the kind of damage they do in the context of an otherwise unregulated system

Keeping "speculators" out of the market may be useful, so long as the term is properly qualified. Speculators can have useful functions in controlling the long term structure of a market (e.g. creating backwardation or contango futures markets) - not all their influence is axiomatically pernicious.

[OKIsItJustMe]

17. Compared to speculators? I'll take regulators (thank you!)

"Go go capitalism"—"whatever the market will bear," leads to just this sort of cyclic boom/bust behavior.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/08/25/ED7C19D496.DTL

Over-the-counter oil trading needs oversight

Bart Chilton

Tuesday, August 25, 2009

As the "crecession" - the credit crisis and the economic recession - neared its zenith last year, many commodity prices (like oil and gas) hit record highs, creating a commodity bubble. Individuals, small and large businesses, and governments were all affected. Gas prices in California and across the nation soared as crude oil prices topped $147 per barrel. Many wondered if speculators in these commodity markets were pushing up prices beyond what was fair for consumers. Legislation was even passed in the House (under the leadership of Speaker Nancy Pelosi) with 283 bipartisan votes to rein in what some called "excessive speculation."

As investors realized the economic chaos that was about to ensue, speculators and other traders fled the markets in droves, causing prices to tumble. When the price of crude oil dropped to just over $35 per barrel in December, so too did the impetus to pass legislation to address excessive speculation.

Here we are a year later, at the end of the driving season, and what do we know?

Remember the economics of supply and demand here for a moment. When demand is high and supply is low, prices rise. Pretty simple. However, crude oil supplies this year have reached 10-year highs and demand has reached 10-year lows. So prices should be low, right? Well, crude oil isn't where it was last year, certainly, but so far this year the price of the U.S. crude oil benchmark contract has increased roughly 60 percent (to more than $74 per barrel Monday - a 10-month high) - even with record high supplies and low demand. As a result, the nationwide average price for regular gasoline is $2.62 per gallon. In California it's $3.04, New York $2.83 and in Arkansas $2.46.

…

[Viking12]

4. But oil is an inelastic commodity and there are physical limits to substituion.

[GliderGuider]

18. As far as I can tell, the price elasticity of both supply and demand are very close to 0.

That fact makes it very hard to separate out the effects of speculation, because in this situation relatively small market events can be expected to have relatively large impacts on price.

Substitution will take a while, as will improving the oil-specific energy intensity of global economies, so we should expect significant price volatility in the short and medium term, whether speculators are involved or not.

For me, the fact that oil's price elasticity of supply is close to 0 is a strong signal of peak oil.

[Viking12]

19. I could have clarified my point on substitution...

While there are physical possibilities to substitute the energy from oil, there isn't anything on the horizon that is as cheap in both EROEI or in real dollars.

[GliderGuider]

20. So could I

My statement that "substitution will take a while" simply camouflages my real opinion that it ain't gonna happen in this lifetime. EROEI, real dollars, infrastructure costs and energy density issues all work against generalized substitution for oil in transportation.

We're in violent agreement :-)

[Viking12]

21. .

:toast:

[NNadir]

29. And your evidence for this sweeping statement is what?

It's a nonsense statement.

[tama]

58. It does make sense

While getting a good holistic feel of currently available data and what it means (EROI, availability of net energy from various sources, big numbers of economics of scale in relations to each other, contexts of social and other inertia etc. etc.) various projections of likelihoods can be made. None of which absolutely exclude some miraculous Deus ex Machina that satisfies future energy needs of growth based social order, but all of which just basically confirm that the growth based socal order is in deep doodoo.

[kristopher]

27. Oil isn't "inelastic" so much as it is

...inelastic in the short term. Over longer time frames it is fairly responsive to price signals.

That is due to the fact there are, in fact, myriad substitutes. For example, we long distance commerce versus local commerce is a manifestation of energy prices - lower energy prices results in profit seeking behavior that looks for low labor or resource cost at greater distances. Increase energy prices (over a longer period than a summer spike) and that behavior changes.

I'd also disagree with your presumption that there are no substitutes for personal transportation. EVs (battery and H2), biofuels, and H2 ICEs are all technologically acceptable substitutes. The only reason they are not used is that the price of fossil fuels is low. Raise the price of fossil fuels and these alternatives become economically viable. The more the ff price increases, the more the alternatives will be preferred.

Post #1 made by HamdenRice is exactly correct.

[GliderGuider]

28. How long is "long" and how high is "high"?

If the short-term inelasticity of supply drives the price to $300/bbl in the next ten years, the time frame for substitution before the rest of the economy grinds to a halt might be only half that. Given that the price of oil went up 500% in 4 1/2 years from 2003 to 2008, such a rise has already been demonstrated possible.

In order to say that successful substitution is probable, one would have to say that such a scenario is improbable. Given that it's happened once already, how improbable is it really?

[kristopher]

30. What?

[GliderGuider]

31. The idea's not that hard.

Really.

[kristopher]

34. Actually it is.

Your premise and question make no sense as a response to what I wrote.

[Viking12]

32. Economics 101

http://www.investopedia.com/university/economics/economics4.asp

[kristopher]

35. Good. You have the basics in front of you.

Is A.3. what you are looking for?

[Viking12]

37. Hold my hand, I'll walk you threw it.

If the demand of a commodity takes a long time to respond to the price of said commodity it is, by definition, inelastic. Elasticity is not an either or, it occurs on a continuum.

Your implication that people will just quit using oil cold turkey as one would quit tobacco is delightfully optimistic, but not at all realistic.

[kristopher]

42. That's what you got from reading A.3.?

OK. I suppose I see where there could be a misunderstanding. The case of cigarettes is an example of how structural changes that affect elasticity take time. It seems odd you'd read it as meaning that time equals only cessation of use. I gave two examples: one of particular proven technologies that can come online as the price of petroleum increases, and a time dependent factor that is representative of increases in energy efficiency.


A. Factors Affecting Demand Elasticity
3. Time - The third influential factor is time. If the price of cigarettes goes up $2 per pack, a smoker with very few available substitutes will most likely continue buying his or her daily cigarettes. This means that tobacco is inelastic because the change in price will not have a significant influence on the quantity demanded. However, if that smoker finds that he or she cannot afford to spend the extra $2 per day and begins to kick the habit over a period of time, the price elasticity of cigarettes for that consumer becomes elastic in the long run.

The final word is that the claim that petroleum demand is inelastic is true for the short term but false in the long term. That doesn't mean there aren't consequences such as more people performing manual labor or a reduction in gross consumption, but that is a different discussion.

[Nederland]

40. Agreed

I would add that oil is elastic at prices that we haven't seen yet. People may not cut down on their driving when gas doubles from $2/gal to $4/gal, but they will if gas doubles again from $4/gal to $8 gal.

[tama]

59. What is needed to understand

That building a whole new infrastructure in 10-20 years requires a massive input of energy capital, which needs to come from somewhere. That is not going to happen because

1) net energy per capita has been stagnant (or decreasing) since 1979
2) maintaining the social order of a growth based sociaty needs more and more net energy
3) as we see currently, "Green Capitalism" is just load of huff and puff and all resources of society are put in service of maintaining support for "The Eye of the Pyramid" (http://www.thedailyshow.com/watch/thu-july-16-2009/pyramid-economy), ie. the banking system - which is a energy dead end, not only a non-productive misinvestment but... well, let's say frankly, evil.

[kristopher]

60. There is absolutely no evidence to support

your assertion "that is not going to happen".

Your 3 points have NONE of the data that would be needed to ascertain the truth of your assertion. If you had an amount of energy required to accomplish this transition as a percentage of our consumption related to our industrial output over time, that would be relevant; as would a comparison of the effort to other industrial undertakings such as building and distributing the 15,000,000 personal autos sold each year in the US. I suspect that 1/2 million wind turbines could fit into the auto framework fairly well, while there are lessons in the personal electronics industry that can inform the area of solar and batteries for EVs.

Without doing a detailed work-up, I see no reason to believe there is a limitation imposed by available energy. In fact I'd say it has about the same level of validity as all the other Mad Max visions floating around the Peaker Camp.

[tama]

62. You are correct

This is not the place or time for a "detailed work-up". For me, a detailed work-up has meant years of study, following discussions and debates between those better informed than me and sometimes participating in constructive criticisms, getting good understanding of various basic principles and learning to apply them in various contexts. So I trust you'll understand such detailed work-up is not possible here, I can only share the conclusions I've reached so far.



One energy transition (power down) you've probably heard was and is the post-soviet "special period" in Cuba, which is proof that a society can endure and survive a sudden collapse of available energy maintaining basic social functions (education, health care etc., which in US are collapsing as we speak, most visibly in those states that are now de facto bankrupt). In Cuba's case, social order was and is build upon foundation of material growth and competition but cooperation and social cohesion... in US situation is very different of course.

Cubans didn't drop from very high to way of life based on organic gardening (and sure, they too are still far from sustainable way), in US, the hub of Global Capitalistic Empire, national psyche is very different and imperial growth is Dogma. So energy transition and power down a là Cuba, a soft landing, seems for USA much less likely than the "Mad Max visions". But give it a try, please. Time much better spent than arguing with "Peaker Camp" that growth can go on growing and availability of energy is no problem...

[kristopher]

63. No one says the availability of energy is no problem

There is a vast gulf between that and the conclusion that fossil fuel supplies are insufficient to allow a transition to alternative energy sources. If there is a lesson from Cuba, I fail to see it.

As for a detailed work up, sometimes it isn't really essential. I gave you one example that should have put the issue in perspective. If, in addition to all our other economic activity, we can build 15,000,000 cars for the US market each year, how rapidly and far would petroleum production have to fall for us to not have the energy to build and install 500,000 wind turbines over 5 years?

Why is coal ignored? Is it going to peak at the same time oil does?

Why is natural gas ignored? Is it going to peak at the same time oil does?

Even allowing that a petroleum crisis such as you fear were to happen, aren't these substitutes sufficient to build out enough of a renewable grid to make renewables self sufficient?

The entire idea that there would be such an extreme energy shortage just doesn't hold water.

[tama]

65. So,

What are we really speaking about here?

No matter what, at current pace all fossile fuels will peak relatively soon (this century, while our kids live their lives). And more and faster we burn them, the more abrupt the climate change will be and adjusting more painfull.

Renewable grid can or could be built (though jury is still out if that could be done sustainably, EROEI wise etc.) and renewables can or could substitute some of the fossile - how much in a given time frame, nobody can really say. What is certain is that what powers that be publicly plan is too far too little far too late and they cannot be trusted to be able to deliver even that little. What is even more crucial, the social model based on continuous growth (driven by banking system based on interest... on interest) cannot endure stagnation, even less diminishing energy resources. And the fact is, world energy per capita peaked allready in 1979 and the global ecomy since than has been based on inflating humongous financial bubble and pillaging of last remaining natural and human resources at ever increasing pace, not real growth of real economy like it was earlier last century. And when foundation (growth) crumbles away from a social order based on growth, what happens is what happens to every pyramid fraud. Just on a scale never seen before.

That's what implied by the lesson from Cuba. It proves that soft landing is possible, at least in principle and in a socialist society, just like even double or triple our numbers could live sustainably on this planet as organic gardeners, in principle. But what matters is practise in the social reality of capitalism, where every VIP keeps on thinking, speaking and acting in terms of unlimited growth and consumption. And all actions for the insanity of unlimited growth is away from adopting to sustainable way of life with as soft landing as can be achieved.

To summarize:
- Unlimited growth in limited environment is impossible, simple as that.
- The energy ceiling has been hit allready (1979 to be exact) and things will get only worse in that respect this century
- To avoid suffering that could be avoided - "soft landing" - the causes of the problem of growthmania need to be understood so we can stop causing it. Meaning that the whole capitalistic social order must change, starting from declaring again interest (aka usury) suicidal sin.

To end with a more positive note, the collaps of the capitalistic/corporate fascist system which creates mainly misery and suffering is of course not a bad thing but a good thing. It opens up wonderfull new opportunities. During and after the collapse I see three main tendencies, happening simultaneously in different locations:
1) Mad Max style barbarianism ("gun toting survivalists and zombie herds")
2) Socialism (on state levels, aiming for global socialist state, "soft landers")
3) Ecoanarchism (small self sufficient permaculture communities aka "ecovillages" governed by anarchistic principles ("seed planters"))

I've allready gone through my socialist stage (in a trotter group), currently I'm learning gardening and dreaming of moving to an ecovillage. :)

[Name removed]

67. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Terry in Austin]

43. A note on oil price elasticity

It's very quantifiable for the short term and mid term: -.07, according to Canadian Imperial Bank of Commerce chief economist Jeff Rubin. The minus means it's inelastic.

For the long term, to paraphrase a well-known economist, we'll all be dead. So we can indeed view substitution as a very limited proposition.

A repost from last year:

In response to price increases, demand for a given product will fall at a particular rate -- what's known as the "price elasticity" of the product. If it's fairly inelastic, it takes a large price increase to reduce the demand by even a small amount.

Oil products are very inelastic, it turns out.

A recent piece at the Oil Drum discusses this and cites a Congressional Budget Office report that puts elasticity for gasoline at -.06. This means it would take a 100% increase in price to reduce consumption by six percent.

The price elasticity for oil, according to another source, is -.07.

The the second link above is dead now, but the same article on Rubin's report can be found here.

[kristopher]

44. From your link at oil drum

2. Price Elacticity of Demand

Alan Drake asked a question about oil price elasticity. Ron Felmey, Chief Economist for API, indicated that there was a new report out by the Congressional Budget Office (CBO) that gives some indications with respect to price elasticity of gasoline demand. The CBO report estimates that price elasticity is .06 over the short term. Over a longer term period, the CBO report assumes that people will buy new smaller cars. When this was considered, the long term price elasticity was estimated to be .40.

Both your repost and the original misstates the CBO report:
"The research suggests that a 10 percent increase in the retail price of gasoline would reduce consumption by about 0.6 percent in the short run.5

Over a longer period, consumers would be much more responsive to an increase in the price of gasoline (should the higher price persist) because they would have more time to make choices that took longer to put in place, such as buying an automobile that gets better gasoline mileage.

Estimates of the long run elasticity of demand for gasoline indicate that a sustained increase of 10 percent in price eventually would reduce gasoline consumption by about 4 percent.6

That effect is as much as seven times larger than the estimated short-run response, but it would not be fully realized unless prices remained high long enough for the entire stock of passenger vehicles to be replaced by new vehicles purchased under the effect of higher gasoline prices — or about 15 years.

Over that time, consumers also might adjust to higher gasoline prices by moving or by changing jobs to reduce their commutes — actions they might take if the savings in transportation costs were sufficiently compelling. Those long-term effects would be in addition to consumption savings from short-run behavioral adjustments attributable to higher fuel prices." pg.13

Effects of Gasoline Prices on
Driving Behavior and Vehicle Markets
January 2008
CBO

[GliderGuider]

5. Most of us who are relatively serious about the topic

do in fact take elasticity and substitution into account. People do drive less when the price goes up, however we expect the price elasticity of demand to decrease as the supply drops due to the essential nature of oil for modern civilization in its current form. We have also looked at substitution, but have decided that the world can't substitute enough, fast enough, to keep both elasticity and overall economic activity from dropping. Economic activity may not drop as much in the USA as in other, poorer, places since the USA can simply reallocate spending from Twinkies to gasoline and absorb the rising prices.

[Terry in Austin]

7. Malthusian theory

It makes a convenient whipping boy for energy consultants and their followers, even though its relevance to oil depletion is a puzzling claim.

Oh yeah -- those concepts from Econ 101? Those are theories, too.

Now we know what you've chosen to believe, and that you're griped by other beliefs that don't quite mesh with yours.

[tama]

8. Fundamental economic concept

It was interesting to see one FEC (and not only economical but also biological etc.) pointed out by fellow DUers when the oil price was at 140, namely Exponential Growth (EG) followed by Collapse - to prove graphically that the exponential curve of oil price will collapse. As it did.

What is strange that the same people who had no problems predicting seeing the EG price curve crash fail to apply the FEC of EG followed by Collapse to larger contexts of EG subsuming the oil price curve, such as the current state of this civilization after a period of exponential growth... (ie. currently in the state of a beginning systemic collapse).

[GliderGuider]

11. That's a very nice point!

:thumbsup:

[Barrett808]

2. Anecdotal?

A careful examination of the facts shows that most arguments about peak oil are based on anecdotal information, vague references and ignorance of how the oil industry goes about finding fields and extracting petroleum.

You can judge for yourself how anecdotal the Peak Oil analysis is:

http://en.wikipedia.org/wiki/Oil_megaprojects
http://en.wikipedia.org/wiki/Oil_depletion

[Nederland]

13. Interesting links

The American Petroleum Institute estimated in 1999 the world's oil supply would be depleted between 2062 and 2094, assuming total world oil reserves at between 1.4 and 2 trillion barrels and consumption at 80 million barrels per day.<4> In 2004, total world reserves were estimated to be 1.25 trillion barrels and daily consumption was about 85 million barrels, shifting the estimated oil depletion year to 2057.<1> The United States Energy Information Administration predicts world consumption of oil will increase to 98.3 million barrels per day in 2015 and 118 million barrels per day in 2030.<5>

Would you agree with this assessment?

[GliderGuider]

15. No, they're much too conservative with that date.

The actual depletion date could be around 2200 (or even later). The problem is not in having oil to consume, the problem will be the rate of supply. That's what "Peak Oil" is all about - the maximum rate of supply. There has been no indication that the world can actually pump more than about 75 mbpd of conventional crude. In fact, for the last 5 years we've been on a plateau of 73.5 mbpd, +/- 1 mbpd. That time period encloses both the price peak and the subsequent crash, so price doesn't lok like it's playing much of a role in determining supply.

The number I'd say the API is dreaming in technicolor about is 118 mbpd in 2030...

[Nederland]

22. Question

There has been no indication that the world can actually pump more than about 75 mbpd of conventional crude.

What do you base this assertion on? More importantly, why is it relevant?

[Terry in Austin]

24. Petroleum Review's megaprojects

Petroleum Review's ongoing "megaprojects" analysis goes along pretty conventional lines and is widely accepted in the industry. They track the fields in development, along with projected timelines and production rates.

From this analysis, new production in 2010 is expected to be around 5.5 mbd, then in subsequent years (2011-2015) it's 5.1, 5.1, 3.7, 2.7, and 2.1 mbd, respectively. Meanwhile, decline rate on existing fields is 4.5% at the most optimistic (Yergin et. al). Applying this to the 75 mbd present output, we start getting a shortfall some time in 2014.

This is all assuming that demand stays flat, instead of the historical average increase of about 2%. If demand goes up at all, or decline rate is greater that the optimistic 4.5%, then we get there even sooner.

"Why is it relevant?" Let's just say that this can be left as an exercise for the reader!

[GliderGuider]

25. Because for the last 5 years the price elasticity of supply has been zero.

Over a period when the price went from $50/bbl to $140 then back to $40 and then up to $70, the actual supply was constant at 73 mbpd +/- 1.7%. Combine that with the megaprojects data that Terry pointed to, and the signals are very strong that we're at some kind of significant limit.

[Barrett808]

16. I'd say the API / EIA / IEA numbers for future flow rate are optimistic

Here's a collection of the various predictions against observed data:



World oil production (EIA Monthly) for crude oil + NGL. The median forecast is calculated from 15 models that are predicting a peak before 2020 (Bakhtiari, Smith, Staniford, Loglets, Shock model, GBM, ASPO-<70,58,45>, Robelius Low/High, HSM,Duncan&Youngquist). 95% of the predictions sees a production peak between 2008 and 2010 at 77.5 - 85.0 mbpd (The 95% forecast variability area in yellow is computed using a bootstrap technique). The magenta area is the 95% confidence interval for the population-based model. Click to Enlarge. http://www.theoildrum.com/node/5521#more

Here's the


World Oil Production to 2012 as forecast by Tony Eriksen ("ace") in May 2009. Oil includes crude oil, lease condensate and oil sands. http://www.theoildrum.com/node/5582#more

[Nederland]

23. How can you know that?

According to the Oil Drum, accurate data on 90% of the worlds oil reserves is not available. How do you make predictions when only 10% of the data you need to make a prediction is available?

[GliderGuider]

26. One gentle hint is that

Every single prediction they've made about future flows for the last 10 years or so has been optimistic. That's a good indicator that their prediction methodology is biased.

[Nederland]

36. If that is true

What can we say about the predictions that where made 30 years ago that said we had 30 years of oil left? Or the predictions that Hubbert made concerning US oil production that turned out to be off by 66%?

[GliderGuider]

38. Well, I would say

that you may believe whatever you wish.

30 and 40 year old predictions have no bearing on the observed behavior of the oil supply over the last 5 years. All predictions in this field have inherent biases in them, and the EIA/IEA/EIEIO predictions are being made by people with a position (aka paycheck) to protect, so they are much more likely to err on the side of excessive optimism.

[Nederland]

39. Response

So it is significant that every single prediction about future flows for the last 10 years or so has been optimistic, but irrelevant that the predictions that Hubbert made were pessimistic? I would say that inclination is merely a reflection of your own bias...

Far better to say what is obvious: all predictions are just shots in the dark due to insufficient data.

Let's review the predictions made by Peak Oil "experts" regarding oil production rates:

In 1986:



In 1991 and 1997:



Are these predictions relevant?

[GliderGuider]

46. I didn't say the older predictions were irrelevant.

I said they had no bearing on the current situation -- just as the more modern predictions have no bearing on the current situation.

All predictions, including predictions of oil production, are necessarily incorrect to some degree. They will also all be relevant to something, though perhaps not to the situation they attempt to predict. The nature of the errors in predictions speak to the the assumptions and biases of the predictor at least as much as to their methodology and input data. All predictions suffer from incomplete data and the requirement to construct a map that is an abstraction of the territory. As a result there's a lot of room for the predictor's biases to come into play. Hubbert and Campbell were excessively pessimistic, the EIEIO are excessively optimistic. I see no reason to expect any of them to be gospel, nor do I feel a need to expect them to be such.

Hubbert and Campbell were notable not because they were entirely "right" because they were among the first to realize there was a non-zero probability of a decline in oil supplies much sooner than others were predicting. The fact that their attempts to quantify that realization may have missed the mark by a few (or few dozen) years is less significant than their fundamental understanding. To take an analogy from a different field, the fact that Copernicus still thought planetary orbits were circular in no way lessened his achievement in realizing the truth of heliocentricity.

[Barrett808]

33. Reserve estimates do come with big error bars

But flow rates are known with some precision. Peak Oil, by definition, arrives with the maximum flow rate. Looking ahead at potential future contributions to the world's flow rate (e.g., Chris Skrebowski's Megaprojects) does not give us a lot of room for hope. There are not enough new projects coming onstream to offset the observed decline in flow rate.

So reserve estimates are somewhat beside the point. There will be oil well into the 22nd century, but the production rate will be a fraction of today's rate.

[Nederland]

41. If flow rates are known with some precision...

...why do the advocates of early Peak Oil make predictions that are always wrong?

[GliderGuider]

47. Because everybody's predictions are always wrong.

All predictions for dates in the past, whether for declining or rising levels of supply can be shown to be wrong. It's just that the errors in predictions of production declines matter to you more than the errors in the other direction (i.e. predictions of production increases that have similarly not been met).

Some current advocates of Peak Oil (and similarly, the EIEIO) have made supply rate predictions that have yet to be proven out one way or the other, while most Peak Oilers will point to the current 5-year undulating supply plateau and say it suggests that we are at or near a limit.

[Nederland]

48. This is true

But the degree error is greater for advocates of early Peak Oil than for those predicting Peak Oil at a later date. Even with more transparent numbers available to him, Hubbert's 2005 production predictions for the lower 48 were off by 66%. 66%! Likewise, Campbell's production predictions in 1986, 1991, and 1997 were way off. This suggests that the methodology of people like Campbell and Simmons is flawed and should be taken with a huge grain of salt.

[GliderGuider]

49. Not so fast.

Hubbert peak theory

Reliability
US oil production (Lower 48 states crude oil only) and Hubbert high estimate for the US.

Hubbert, in his 1956 paper,<3> presented two scenarios for US conventional oil production (crude oil + condensate):

* most likely estimate: a logistic curve with a logistic growth rate equal to 6%, an ultimate resource equal to 150 Giga-barrels (Gb) and a peak in 1965.
* upper-bound estimate: a logistic curve with a logistic growth rate equal to 6% and ultimate resource equal to 200 Giga-barrels and a peak in 1970.

Hubbert's upper-bound estimate, which he regarded as optimistic, accurately predicted that US oil production would peak in 1970. Forty years later, the upper-bound estimate has also proven to be very accurate in terms of cumulative production, less so in terms of annual production. For 2005, the upper-bound Hubbert model predicts 178.2 Gb cumulative and 1.17 Gb current production; actual US production was 176.4 Gb cumulative crude oil + condensate (1% lower than the upper bound estimate), with annual production of 1.55 Gb (32% higher than the upper bound estimate).

A post-hoc analysis of peaked oil wells, fields, regions and nations found that Hubbert's model was the "most widely useful"(providing the best fit to the data), though many areas studied had a sharper "peak" than predicted.<7>

Hubbert's upper bound prediction was accurate with respect to peak date and cumulative production, while the error in production rates could be attributed to the influence of unforeseen technology developments as well as the oil crises of 1973 and 1984 leaving oil in the ground for later.

All things considered, I regard his estimates as phenomenally accurate given that he was predicting out 50 years. Care to try your hand at a 50 year prediction? I have, and it's very risky business. You have to be prepared to eat a lot of crow.

Why is it important to you that Hubbert and Campbell be wrong?

[Nederland]

51. Your own link supports my assertion

From the Wikipedia article you linked to:

Despite his valuable contribution, M. King Hubbert's methodology falls down because it does not consider likely resource growth, application of new technology, basic commercial factors, or the impact of geopolitics on production. His approach does not work in all cases-including on the United States itself-and cannot reliably model a global production outlook. Put more simply, the case for the imminent peak is flawed. As it is, production in 2005 in the Lower 48 in the United States was 66 percent higher than Hubbert projected.

If this assertion is incorrect, I would suggest you edit the Wikipedia article.

[GliderGuider]

52. I'm not suggesting it's incorrect.

I just said that in my opinion getting two out of three predictions right from the 50-year line in the face of all those imponderables was a pretty good performance.

By the way, the comment you posted was from CERA, well-known cornucopian oil industry shills. Their assertion, "His approach does not work in all cases-including on the United States itself-and cannot reliably model a global production outlook. is simply that -- an assertion. Their position is rebutted in this article: http://www.energybulletin.net/node/19120. In the 2006 CERA graphic reproduced in that article they appear to be predicting an oil supply of about 97 mbpd in 2009. In a 3-year prediction they were too high by 14%. I submit that this is even worse performance than Hubbert's.

Ultimately though, who cares if the predictions of Hubbert or CERA were high or low by some margin? The question is, is the underlying theory correct, and if it is does it look like we have a long time or a short time (relative to the time and money required for the adoption of replacement technologies) before we run into trouble?


I'm still looking for your point.

[Barrett808]

50. There's no doubt about it, prediction is difficult

Even with reasonably precise numbers. That's why some of us won't do it. :)

However, the fundamental argument behind oil depletion theory is sound: oil is a finite resource. There will be a point at which we have consumed half of the economically extractable oil. When does that point arrive? I don't know, but it sure looks like we've hit some sort of either a) equilibrium, or b) boundary constraint.

Of course, oil will still be available in the ground, but it will be a largely stranded resource. Better technology will enable us to extract it, but at nowhere near the flow rates achieved in the early 21st century.

To my mind, if a peak/plateau in inevitable (sooner or later) we would all be better off if we started dealing with it sooner. The cornucopian view suggests the opposite: do nothing until we are richer and have better technology. Which makes sense, but presupposes that we will be richer and have better technology, neither of which is clearly the case in an energy-constrained economy. Incidentally, Bjorn Lomborg makes the same argument against immediate climate change action.

Who's right? The data may come with large uncertainties, but I think they break in the direction of the peakists. Most convincing is the discovery rate, which has vastly underperformed the cornucopian projections; there simply is not enough capacity coming onstream in the foreseeable future to offset the observed decline rates. This is bad news in a lot of ways, paradoxically even for climate change mitigation. We need to be a wealthy, high-tech society to be able to pull 500 gigatons of carbon out of the atmosphere -- and to avoid burning up the world's remaining forests as fuel. Alas, an early peak will greatly undermine our ability to fix humanity's cumulative damage to the biosphere.

[tama]

57. History is bit easier

And a historical fact (which also most POilers tend to forget) is that world oil (and total energy) PER CAPITA peaked around 1980 and/or has stayed stagnant since then.

PS: here's a nice tool for projecting:
http://www.quaker.org/clq/2007/TQE155-EN-WorldEnergy-2.html

[Barrett808]

61. True enough, although Peak Oilers are very aware of this

Just do a quick search on "energy per capita" at http://www.theoildrum.com .

[hunter]

53. Two doctors disagree about how long a very ill hospital patient might live...

They both agree he's not going to leave the hospital alive, that this time the cancer is going to take him.

The patient dies.

If one doctor's estimate of how long the patient is going to live is "...off by 66%. 66%!..." how does that matter? If you are a friend or relative wishing to visit the patient one last time before he dies you'd best pay attention to the shorter estimate.

[Nederland]

55. It matters...

...because in this case how you approach and solve the problem varies wildly depending on how much time you have.

[joshcryer]

64. Our coal will outlast our oil.

If we are going to work on solutions I do hope that we chose something other than fossil fuels.

[Barrett808]

14. Here's the "rebuttal" open thread at The Oil Drum:

http://www.theoildrum.com/node/5711#more

[depakid]

45. Classic

[Barrett808]

54. Another rebuttal from The Oil Drum:

Energy analyst Michael C. Lynch's op-ed piece ‘Peak Oil’ Is a Waste of Energy, published in the August 24th edition of the New York Times, has naturally garnered much attention from those in the peak oil community itself. Lynch's dim view of predictions of declining supplies of energy is evident from the title of his piece, and those familiar with views espoused by him in the past weren't surprised by this new batch of commentary...

http://www.theoildrum.com/node/5716#more

[excess_3]

56. the electric car is coming

there are millions of people worldwide that want
to be able to tell the oil companies
to pound sand

[lfairban]

66. Where did he get 10 trilion barrels from?

Actually, the consensus among geologists is that there are some 10 trillion barrels out there. A century ago, only 10 percent of it was considered recoverable, but improvements in technology should allow us to recover some 35 percent — another 2.5 trillion barrels — in an economically viable way.

According to my web search, there are only something like 1 trillion barrels in proven reserves.

Is he including unconventional sources, such as heavy crude oil, oil sands, and oil shale?

And this doesn’t even include such potential sources as tar sands, which in time we may be able to efficiently tap.

I guess not.