peak oil production in 2009? - what next? 18

[davefitz]

There are rumblings that the peak in world oil production may occur in 2009, and that the demand for oil is increasing very rapidly in developing countries ( China , INdia) .

There does not seem to be any effort being made in the USA to reduce the rate of consumption or to reduce demand. Simple efforts such as the following are not being used :
a) increase CAFE ( auto gas mileage )
b) improve mass transit in major cities ( Seatle, Houston, LA, etc)
c) propaganda which is aimed at changing attitudes toward energy consumption.

What is the most likely end result in 2009 if noone takes steps to prepare for this event?

 

[zdas04]

davefitz,
Your post sounded so naive. There have been conservation campaigns for years. As long as energy costs are a declining portion of an individual's disposable income, requests to conserve will fall on deaf ears. The only way to affect conservation is to make each individual's short term cost-benefit evaluation fall in favor of conservation.

There is a post above about real conservation efforts in England - the reason is that the price of energy is very high in real currency. This high price is solely due to very high taxes (a case of politicians leading and setting energy policy in a way that has a chance of working). With high prices at the pump (or the home gas meter), people have a personal incentive to conserve.

With the prices in the U.S. today (less than 60% of 1981 prices in constant dollars), what is the incentive of average consumers to conserve? Civic responsibility? That dog don't hunt. Concern for the quality of life of future generations? The great unwashed masses have a hard time deciding which stupid sit-com to watch, let alone making a decision for unborn grandchildren.

Build your bike lanes - people will use them for turning lanes. 4-day workweek is fine except on 3-day weekends many of the people will drive farther than on a workday. Get the population to spread out? Great idea, make the other guy move and I'll have less congestion in my town.

If it doesn't hit the pocketbook hard enough to hurt, it won't hit home. Over the long weekend last month (Memorial Day in the U.S.), everyone was complaining about gasoline prices, but total volume of gasoline sold exceeded the previous year.

David

 

[davefitz]

There is no incentive to conserve with the present cost of energy- no question. The issue of this thread is : if the demand for oil continues to increase at 3% per annum but the rate of oil production reaches its maximum ( peak) in the year 2009, then the cost of oil ( and its derivatives) must increase in order for demand to match reduced production capabilities. If this new cost in the years after 2009 reaches levels of 2-3 times current cost ( in present dollars) , most low income persons would be priced out of their cars and lose the means to work ,and equivalent effects would also to the cost of goods that depend on low oil prices.

As an example of the resulting social impact, a few years ago the british government increased the oil tax, and reduced production of oil from the North sea rigs also infuenced the price of oil /gasoline in england. A result was a strike by truck drivers that brought the economy to its knees.

 

[jmw]

Well, not quite brought the economy to its knees, the chancelor defused the situation by taking a penny or two of his increase. He put it back on a couple of months later and no-one could be bothered to have another go, mainly because he managed to stockpile fuel against blockades of the terminals. There was about a day or two of disruption.

The Chancellor had learned well from the French approach to these matters and where insurection is frequent, and a jolly good opportunity to blockade the channel ports by French Farmers, truckers or whoever gets the turn that week.

The Gendarmes do nought (unless British truckers caught in the ports complain, in which case they are sternly spoken to), the French government promises and then never delivers.

Now e again have the chancellor making noises about a fyurther hike in fuel taxes and having learned from the last experience i doubt there will be a protest.

Note that it is diesel tax that causes the problems. It is so high that blackmarket trading is rife, fuel is being stolen from everywhere and car owners are repeatedly sold agricyltural diesel.

In the UK diesel is more expensive than petrol. This is why the Society of Motor Traders advise that diesel cars sales are bouyant on the continent and not in the UK.

This tells us that this isn't about the environment but about tax revenues.

JMW

http://www.viscoanalyser.com

Eng-Tips: Pro bono publico, by engineers, for engineers.

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips Fora.

 

[GregLocock]

"If this new cost in the years after 2009 reaches levels of 2-3 times current cost ( in present dollars) , most low income persons would be priced out of their cars and lose the means to work ,"

Um, if the price of gas trebles in the USA then it will have risen to roughly what is CURRENT in Europe. On my last visit I didn't notice any great tendency for the low income people to walk or catch public transport in any greater numbers than in the past.

You are right, as the supply of easily obtainable oil dries up, the price of oil will rise. Various doomsayers have been singing this song for 35 years, yet oddly enough, the supply of cheap oil INCREASES as time goes on.



Cheers

Greg Locock

 

[moltenmetal]

There's debate as to whether or not you get a net energy benefit out of hemp oil or any other vegetable oil once you consider all the fertilizer, fuel for tractors, and the process of producing biodiesel from it. Some calcs show a net energy benefit, others show that it takes as much as a litre of fossil fuel liquid to produce a litre of fuel-worthy biodiesel. It depends on what part of the world you're in, what cultivation practices are used, and how optimistic or inclusive your calcs are. And we'd have to convert such huge tracts of farmland to match our current fossil fuel consumption that it's doubtful we'd have enough left over to feed and clothe the current population as well. Figure growth in India and China into the picture and it becomes even more hopeless.

The same goes for sugar-based fermentation ethanol- figures I've seen show little if any net energy benefit. (I don't have figures for cellulose-based ethanol- the only figures I can find for it are biased because they come from Iogen who are in that business).

Although biodiesel does offer some smog-reduction benefit when blended with fossil-source diesel, in the end both diesel and ethanol smack more of an attempt to mask agricultural subsidy than as a sincere means to "green" the planet by reducing our dependence on fossil fuels.

Let's not forget that the automobile was invented as an environmental alternative to the more "natural" methods of transporation in use in cities at the time. Cities all over the world were piling up in horse manure and horse carcases...

If we REALLY want to deal with our fossil fuel addiction, we have to get serious about taxing consumption of these fuels, and investing the proceeds into means to reduce our addiction on them by improving energy efficiency. That means hybrid cars in the short term, and mass transit with higher population densities in urban areas in the longer term. Say goodbye to your car- or goodbye to the planet once everyone in China and India want one. Your choice.

 

[jmw]

I can't see a culture that has grown up dependent on freedom of movement disolving itself overnight so we need a viable alternative that will sustain our current way of life.

Rather than give up our cars, how about not having so many children? Seriously, negative population growth is a solution or part of it. (

http://www.populationconnection.org/com)

There is truth in the old saying "The rich get richer, the poor get children" and, in part, this is unregulated i.e. a natural consequence of the pursuit of a higher standard of living is fewer children. In poorer societies the more chidren, the more the burden of care of the older people can be distributed. A consequence is the partioning of the inheritance into too many unviable parts.

There are many logical reasons for this. Inheritance laws and inheritance taxes are factors that could be positively exploited e.g. primogenture.

There is more than one way to skin a cat. This approach addresses more than just the fuel problem.


JMW

http://www.viscoanalyser.com

Eng-Tips: Pro bono publico, by engineers, for engineers.

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips Fora.

 

[davefitz]

The low birth rate hypothesis has its own issues.

In the case where a population deliberately accepts measures to reduce the birth rate, other economic issues arise which lead toward increased immigration, and the net result is an incrasing population . It is no coincidence that increased immigration to US, Canada, Germany, England has been offically or unofficlaly increased to the result of a net population increase at the same time that the societies fertility rate had dropped.

If an economy were to allow a net reduction in population soley thru reduced birthrate, its effect on funding for social security, demand for entry level housing and other consumer commodities strongly correlated to families, labor, military , etc would result in intense lobbying efforts to convince regulators to permit practices that tend to return the society to a net increase.

 

[josephv]

Hello Greg,

Your quote:

"You are right, as the supply of easily obtainable oil dries up, the price of oil will rise. Various doomsayers have been singing this song for 35 years, yet oddly enough, the supply of cheap oil INCREASES as time goes on."

The problem is that the demand for oil will soon exceed the supply (look at how all the car companies are building cars in China and India). Cheap oil will be a thing of the past. Unless governments subsidize it, but that will not help us, because we will pay for cheap oil through our taxes.

Oddly enough, the oil companies will not lose out, they will get rich at our expense (as they have in the past).

Cheers,

Joseph

 

[Lorentz]

Hello All!

I must agree with jmw that population growth is the key factor, and I think that in the long run it will defeat any attempts to solve the problem via conservation and/or innovation. When you have a pole in the right half plane i.e. exponential growth, you have an unstable system (and to think I was arguing for less math education in another thread).

However, both conservation and innovation will be needed to buy time for people to (hopefully) adapt to the idea of a smaller population.

 

[jmw]

But, back to the what comes next aspect, i am not alone in believing our best hope is fusion:

Fusion should put its energy into oil
The energy industry is facing a crossroads. The future is fusion, suggests Dr. William Nuttall, but funding must come from private money - and where better to go than to the major oil companies.

The Engineer, 28 May 2004

JMW

http://www.viscoanalyser.com

Eng-Tips: Pro bono publico, by engineers, for engineers.

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips Fora.

 

[moltenmetal]

Yes, there are some people would rather restrict the right of others to have children than see their own "right" to drive an idiotic 2-tonne SUV in suburban commuter traffic restricted. The problem is, their so-called right is borne solely out of their ability to "afford" this luxury by virtue of artificially low fossil fuel prices propped up by major economic externalities (i.e. costs that they transfer to others by doing so). One of the costs is slow destruction of the planet's climate. The other is a premature end to people's lives. It's a problem of values that won't be solved by a simple technological fix.

You're right- unfettered population growth makes for an unstable system. Kill all the humans and on the geological timescale, Earth will be back to normal in no time! Clearly no better a solution than trying to limit people's ability to have children, a basic biological drive underpinned by aeons of evolution.

In the meantime, we humans that want to stay here and stay alive will have to moderate our consumption patterns by distinguishing our "needs" from our "wants". People "need" a means to efficiently travel from point A to point B- they don't need an idiotic SUV to do that, and once they pay the real cost of fuel PLUS a tax to act as a disincentive to excessive, wasteful consumption of fossil fuels, they'll no longer "want" an SUV either.

Yeah, I know I sound like a reactionary, but while people hold out hope of avoiding this inevitable change in consumption habits, the planet's situation gets worse and more difficult to do anything about. The "do what we're already doing" option clearly isn't risk free in this case, and sticking our heads further in the sand and hoping for a near-term breakthrough in fusion power isn't going to cut it as an alternative plan either.

 

[zdas04]

josehpv,
I just can't let your last statement slide.

Oil-company rates of return on capital for the last decade have been slightly better than bank passbook rates - every oil company has cut staffs way past the bone, every major has shut down most research facilities, and "exploration" has been cut back to things less risky than step-out drilling in the 1950's.

Big, Bad Oil Companies are currently approaching a position to stop being such a drain on society. When they've all downsized themselves into bankruptcy, the people who go out of their way to take cheep shots at the industry will wonder why they can't get fuel to operate their methonol stills.

In the Jimmy Carter "windfall profits" days, the industry defined success as one discovery well in 7 new field wildcats. Supporting that sort of failure rate required at least 30% rate of return on capital from ongoing operations to fund the failures. Today's prices in the U.S. are 2/3 the 1981 prices (in constant dollars), and the variable cost structure is about half, and fixed costs are about twice (production and business taxes have kept up with inflation).

All of remaining the Petroleum Engineering programs are having a hard time filling the seats, and schools are shutting down programs.

If the Oil companies can't get back to year-on-year profitability, then the crises will come sooner and hit harder than anyone can imagine.

Just quit bashing the easy target. You may find that Atlas really can shrug.

David

 

[GregLocock]

Josephv, I was making an observation based on past experience. You have merely stated the opposite, as if it was some sort of fact. Where is the evidence that cheap oil is 'running out'?

I'm not saying that Oil is an infinite resource, I just think the gloom and doom merchants have carved themselves a nice little niche based on emotion not facts.

If someone predits a really bad thing will happen in 10 years time, 30 years ago, and repeats that message every 5 years for 30 years, how much credibility does their methodology have?

Cheers

Greg Locock

 

[josephv]

Hello Greg,

Thank you for your reply. There is plenty of evidence that the big crunch is coming:

- Global oil discovery peaked in the 1960's
- Production curves mirror discovery curves, this means that production will peak around 2010 (depending on many factors including recessions)
- oil is not cheap, it is heavily subsidized (see my comments below)

Hello David (zdas04),

Thank you for your post, very interesting information, but you have to tell the whole story:

- The bills in the National Energy Policy provide the following
- more than $ 9.6 billion in new or expanded tax breaks and subsidies for oil and NG
- price supports for the Alaska NG Pipeline (approx. another $10 billion)
- how about if we through into the equation the taxes spent on protecting the Kingdom of Saud? We are talking about 3 Gulf Wars.... which translates to another few billion dollars ... and worse this translates to lost lives


How can anyone seriously think that oil is cheap?

Imagine we spent this kind of money and effort on something else.

Best regards,

Joseph

 

[zdas04]

Joseph,
The "tax breaks" are an interesting concept. The company that used to prepare an "Industry P&L Statement" has been driven out of business in the cost-cutting binge of the '90's, so I looked at one particular company as representative. This company had a before tax net profit in 2002 of $16.4 billion (thousand million). On that profit they paid $5.8 billion in the various taxes - that is 35% marginal tax rate. Does your company pay anything approaching that? The taxes include severance tax, production tax (which is in addition to any income tax), property tax, income taxes, harbor use taxes, etc.

Before reaching the $16.4 billion, the company deducted $2.8 billion in environmental charges. This doesn't include capital to meet progressively stricter fuel-quality regulations, just current expenses to do things like putting catalytic converters on big-horsepower engines, building sound walls, repainting all production facilities because the new head of the BLM didn't like brown equipment in the desert and wanted it green, extensive proscriptive berms around facilities (instead of the government saying "show us your plans to prevent spills", the government prescribes expensive and often ineffective procedures to "prevent spills"). On top of all that, there is a couple of hundred million dollars required to comply with extensive reporting requirements.

After all of the give-away tax breaks this company paid 35% of its margin before tax on taxes - 55% of after tax profit.

The "price supports" for the Alaska pipeline are simply an insurance policy that individual companies need to protect them from the government repeating their historically stupid energy "policies". If your business was asked to invest $20 billion on a project that would take 12 years before it flowed the first drop of saleable product and has a return on capital of 8%, would you want a price guarantee? I doesn't take much of a drop in prices to make the economics stink on that project. The country needs the gas. Seems to me that good governing would require that either the price supports be provided or for the government to embark on the construction themselves (which would make it a $200 billion project that would take 25 years).

Your contention that the Gulf War and Iraq are just oil grabs is offensive. All oil flow from Iraq stopped a couple of weeks ago and the world supply/demand balance didn't change a nickel. Saying that we went into the Gulf War because of oil is just ignoring the fact that one sovereign nation had invaded an ally of the U.S. Had that been Cuba invading Bermuda, our intervention would have been hailed as "statesmanship". But because the countries are Islamic and oil exporters it is damned as "protecting Saudi". Give me a break. My son recently returned from a year in Iraq and he's going back in the fall. It is obnoxious to sneer at his sacrifice.

David

 

[GregLocock]

- Global oil discovery peaked in the 1960's

That's right, it is uneconomic to keep looking for more because evry time they do they find more. In that context it is unwise to keep looking, until they need to.


- Production curves mirror discovery curves, this means that production will peak around 2010 (depending on many factors including recessions)

Wow, so yet again you are predicting that in five-ten years time oil production will peak, with not a shred of evidence. Having heard this in 1974, 1980, 1985, 1990, 1995 and 200, I guess at least this time you are one year early. Unless you have time machine, or more knowledge of oil reserves than is commonly available, you CANNOT make such statements.

- oil is not cheap, it is heavily subsidized (see my comments below)

OK, I was using 'cheap' as in how much we pay for it. Your use of that word presumably means something else. The proportion of the USA's GDP used to pay for its oil consumption has fallen by a factor of 3 in 25 years. Sounds cheap to me.

Cheers

Greg Locock

 

[davefitz]

For the "proof", see <

http://www.peakoil.net>.

It seems the main constraint to constantly increasing production is the increasing need to flood the larger oilfields with increasing quantities of water to force oil to levels that can be economically pumped. The ratio of water to oil has increased to very high levels in the larger fields, and thus it is straightforward to accurately predict the date of peak oil production. On the other hand , if CO2 sequestation efforts leads to a low cost source of liquid CO2 for oil field priming, then maybe another plataeu could be achieved, but that is certainly down the pike a ways.

 

[zdas04]

All reserves estimates and production forecasts that are made public are required by law to start with a price forecast.

Ultimate recovery and final rates are totally dependent upon product price and transportation costs. If prices increase, and the increase is believed by the industry to be sustainable, then the reserve numbers and the public production forecasts will change dramatically.

The water-flood technology is called "secondary recovery" and has been responsible for huge additions to oil recovered. Injection CO2 and other non-water chemicals is called "tertiary recovery" and has also added a lot of reserves. People are starting to talk seriously about "quantary recovery".

In the early 1980's I sat through a presentation by a scientist who was working on changing the wetability of reservoir rock from oil-wet to water-wet (i.e., change the rock so that the capillary forces at the rock-surface showed a measureable preference to attach water instead of oil). He had been working on this for 5 years and was starting to show progress. Since 30-50% of the original oil in place in a reservoir is classed as "immobile" or attached to the rock, changing the wetability could result in the conversion of a quantity of oil from "abandonded in place" to "recoverable" nearly equal to the amount we've produced in the last 100 years - where is the peak in that scenario. This guy was layed off in 1986 and his lab was closed, never to reopen at that company.

A buck or two change in oil price will shift the peak several years. A quarter will make the same shift in natural gas forecasts of peak.

David

 

[GregLocock]

Davefitz

http://www.peakoil.net/uhdsg/Default.htm

Where's the beef? That site is just assumption piled on opinion, not proof.

Pretty graph though.

Thinking about it, the peak is not important, after all, if there was a big recession the volume of oil shipped would drop, proving nothing about reserves.

The important question is, is there enough oil shipped at a low enough price for people everywhere to buy as much as they want? Since it is currently cheaper than milk it really seems to have a pretty low value at the moment.





Cheers

Greg Locock

 

[josephv]

David,

Thank you for your informative response. My apologies, it is not my intention to offend you or anyone else.

I never said, nor implied that the Gulf Wars were "oil grabs". I don't know the exact causes for these wars, but I believe that securing global energy supplies played an important role (sorry if this is offensive to you, but that is the only logical conclusion to me).

Let me quote John C. Gannon (deputy director of the CIA in 1996) "We have to recognize that our nation will not be secure if global energy supplies are not secure... we need a substantial quantity of imported oil to sustain our economy... the US will need to keep close watch on events and remain engaged in the Persian Gulf to safeguard the flow of vital oil supplies"

His words, not mine... by the way, why are there US troops in the Caspian Sea? I believe that energy supplies once again play a role.

Sorry, but Saudi Arabia is a Kingdom controlled by one family (this has to be offensive to anyone who values democratic principles). Yes they are an ally, but why are they an ally? (Iraq once was an ally too). At least Barbados holds elections.

Finally, I don't see many governments preparing for the oil peak.

This is all very tragic, but we have seen bad energy policies and bad foreign policies for years.. but we are still paying the bills.

Joseph