Peak Oil: Say Hello Again to $100 Oil

Discussion in 'Archive: The Senate Floor' started by Darth_Yuthura, Dec 1, 2009.

Thread Status:
Not open for further replies.
  1. Danaan Jedi Master

    Member Since:
    Apr 23, 2008
    star 4
    I agree with the Jabbadabbadoo. The primary peak oil theorist I have seen (professor Aleklett, University of Linköping) is an expert on energy issues, and tend to criticize the global warming movement for barking up the wrong tree. Indeed, he has argued emphatically and repeatedly that the scenarios of the IPCC are entirely unrelastic because there is not enough oil or coal left in the world to pump out anywhere near those amounts of CO2 that are needed to achieve those levels of warming.
  2. Darth_Yuthura Jedi Master

    Member Since:
    Nov 7, 2007
    star 4
    Excuse me, but US oil production peaked almost 50 years ago and has since been in terminal decline. The price of oil has not spiked because increasing foreign supplies have allowed for imports to meet demand. The global peak oil theory involves having no new sources you can turn to once the Middle East goes dry.

    In all accounts and terminology, peak oil isn't a geographic theory. It's an economic prediction that involves the price of oil expected to skyrocket when demand outpaces the increase in supply, which we can expect will go into terminal decline. Demand continues to increase as new supplies are becoming harder to access. The goals behind averting peak oil crisis and global warming go hand-in-hand, but it's for economic reasons that we should not depend on oil. If we don't have to depend on coal... even better.

    Not at all. It would make sense to be concerned for peak oil, even if we confirm there is no negative effect on the atmosphere. There will come a point when we must turn from oil to another source of energy. The economic crisis can't really be dismissed, as it has already happened in several locations. The concern is what is expected to happen once it hits the Middle East. Who would we turn to then?

    Switching to using mass transit is more for reducing demand altogether than better fuel efficiency. Green products are an example of inspiring demand for new products, but using transit oriented development is aimed for reducing the number of miles we travel to reach our destinations. Reducing demand doesn't really have any financial incentives, which is why it's not been practiced so heavily in a capitalist economy. Europe is doing better, but still rely heavily on petroleum for their economies. The US should follow their example... and then improve upon it.
  3. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    [image=http://www.theoildrum.com/files/peakoil.gif]

    Just contemplating this fun graph. We are in the "unemployment and recession phase" of the peak oil downside slope now. I'll probably die in the riots & famine stage, but many of you may be lucky to live to see the more or less complete collapse of global western-style civilization.
  4. Fire_Ice_Death Chosen One

    Member Since:
    Feb 15, 2001
    star 7
    Hmm...nice graph. Sadly and woefully bad. But nice.
  5. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    One of the things my peak oil friends like to talk about is the "Export Land Model" It's just an observation of the relationship between peak oil production in a given country, its domestic consumption and exports of oil from that country.

    If a country produces 5 barrels of oil, consumes 2 and exports 3 to other countries, it is of course a net oil exporter. The picture may be a bit more complicated, obviously. A country may produce 5 barrels of oil, consume 3, export 2, but of the three it consumes, one barrel goes to refining oil products that are then exported.

    In any case,big examples of countries that were formerly net oil exporters but are now net oil importers: the United States, Indonesia, the UK. Indonesia and the UK being the most recent examples, only a few years since each of them became net oil importers as declining oil production intersected with rising domestic production.

    The point is that exports fall to zero long before a country "runs out" of oil. Consequently, it's possible to guess, or predict, or estimate, when various countries will no longer have oil to export:

    Mexico will be a net oil importer by 2015.
    Russia will be a net oil importer by 2020
    Norway by 2025
    Iran by 2029
    UAE by 2030
    and Saudi Arabia by 2035

    Again, this isn't related to peak oil, only to the peak oil production of given countries, their growing populations and growing domestic consumption.

    Essentially, by 2025 or so, the age of oil as a global commodity will be over. We will never run out of oil, per se, but production in various countries will peak and decline, as it did in the U.S., Mexico, UK, Indonesia, Kuwait, etc. and eventually these countries will need all their production for domestic use.

    People will still trade refined oil products to some extent for other vital strategic resources, particularly food, but the world is going to be a lot different in a mere 15 years. And we will be feeling the effects of declining oil exports a lot sooner, probably by 2015 or so.
  6. Danaan Jedi Master

    Member Since:
    Apr 23, 2008
    star 4
    Read in the news a while back that American scientists have made a major breakthrough with regards to Fusion power - apparently they can achieve the required extreme temperatures by using high powered lazers. It's just one of the steps, but it apparently means that commercial use of fusion power would be about 20 years away, or so. The quoted scientist said something about being able to power all of San Diego with a bath tub of water. So maybe there won't be any major energy crisis after all...;)
  7. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    Since before either of us were born, viable commercial fusion power has always been "20-30 years away." We haven't moved the ball meaningfully closer to the goal in my lifetime.
  8. Danaan Jedi Master

    Member Since:
    Apr 23, 2008
    star 4
    The interviewed scientist seemed pretty excited, but I obviously wouldn't be able to evaluate the significance of the event, I'm not a phycisist. What I can say, though, is that unlike when I was born, there is now significant experimentation on the matter in the works, what the with the reactor being built in France, so if the ball hasn't moved meaningfully closer yet, it would seem that such a big toy might at least facilitate the potential of things moving forwards. At least it seems so to me, but, again, I'm not a phycisist and can't really say anything insightful on the matter...
  9. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    I'm not against researching fusion power at all, just skeptical that it will arrive in time to save us from a peak oil crisis. I'd say heavy research into ocean energy (wind, tidal, current, etc.) would bring a bigger return on investment in the short term.

    If I were going to list technological milestones unlikely to be reached in my lifetime, the list would definitely include:

    commercial fusion power
    manned mission to Mars
    cure for cancer
  10. Darth_Yuthura Jedi Master

    Member Since:
    Nov 7, 2007
    star 4
    Fusion power is considered the holy grail of energy, but it's not something we should count on. The problem with fusion... well there are a lot of them... is that it normally occurs within stars. As you know, the sun is over a million times the volume of earth. Compare that to the size of a reaction chamber in a laboratory, and you have to replicate the same conditions while also sustaining a reaction. We have yet to yield a net energy gain.

    Take my advice: don't expect some magic bullet to solve all our energy problems. The US already has more than enough coal deposits that we don't have to worry about running out of energy for at least 50 years. The problem is that our transportation infrastructure is 95% dependent on oil. No other energy source can substitute for that. What the US should try to do is develop transportation to use electricity. That will allow for a variety of different sources, and cleaner ones as well to be used instead.
  11. Danaan Jedi Master

    Member Since:
    Apr 23, 2008
    star 4
    Oh, I am aware that it usually occurs in the stars and that it's a complex process. If it was easy, it would have been mastered by now. I guess that our good fortune is that we need nowhere near the energy output of even the smallest star to keep our civilization ticking. As the scientist said- he needed a bathtub of water to power San Diego. Anyway, I have no idea about how significant the breakthrough was or how much closer it brings us to fusion power, or even what steps are left to get us there. I just found that piece interesting. To evaluate the prognosis made in the piece, one would have o turn to someone who know more about physics than I do.
  12. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    While we're waiting for fusion power to be perfected, however, we're going to be suffering a series of oil shocks that cycle down the global economy and make fusion research less and less affordable.

    The first oil shock was 2008 when the price of oil in the U.S. peaked above $4.00/gallon. there will be another mini oil price shock by the end of 2011 and then a cascading series of demand peak/supply shortage-induced recessionary shocks until there is no oil left for export markets by 2025.
  13. Darth_Yuthura Jedi Master

    Member Since:
    Nov 7, 2007
    star 4
    I'm not aiming to keep extending on this subject. I'm not a nuclear physicist either, but the issue isn't the technology; it's the scale of which a fusion process occurs. A star can sustain a fusion reaction because it's so massive; replicating such extreme pressures and mass may just not be physically possible. The heat is so intense that it would vaporize any kind of matter, which is why a powerful magnetic field must keep the plasma from coming in contact with the reactor vessel itself. We can easily build a hydrogen bomb with an absolutely astounding sum of energy, but the challenge is whether you can contain such destructive power.

    At least with nuclear energy, you can easily maintain a controlled reaction. Reactor grade uranium doesn't run the risk of exploding, but hydrogen cannot be moderated in such a way. In a way, the sun is much like a nuclear reactor because all its fuel is self-contained, but it all doesn't react at the same moment.


    While we're waiting for fusion power to be perfected, however, we're going to be suffering a series of oil shocks that cycle down the global economy and make fusion research less and less affordable.

    The first oil shock was 2008 when the price of oil in the U.S. peaked above $4.00/gallon. there will be another mini oil price shock by the end of 2011 and then a cascading series of demand peak/supply shortage-induced recessionary shocks until there is no oil left for export markets by 2025.


    This is a very important point that we need to prepare for. We can't just go off of the price of oil to measure how abundant supplies remain. The market has the nasty habit of creating artificial prices for products in order to cover up for the severity of the resource in question. We should be going a step beyond that and prepare for the day when we can no longer count on oil for fuel. Not hybrids, but electricity must be our lifeline.
  14. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    Detroit is the first American city to be swallowed up by peak oil.

    Detroit: the last days

    The stats:

    - 40sq miles of the 139sq mile inner city are abandoned and now slowly being reclaimed by plant life.

    - one in five houses is empty

    - home prices have fallen by 80%

    - unemployment is 30%

    - nearly half the city's children live below the poverty line

    - 29 schools closed last year
  15. Danaan Jedi Master

    Member Since:
    Apr 23, 2008
    star 4
    And exactly how do you establish that causality? I mean, that it's related to peak oil, rather than any number of other factors, like the once-proud car manufacturing industry having folded and so on and so forth...
  16. Darth_Yuthura Jedi Master

    Member Since:
    Nov 7, 2007
    star 4
    You might notice a trend in American industry which began its decline shortly after the oil crisis of the 1970's. Outsourcing was likely started as a result of steep oil price increases, but corporations found that it also came with the benefit of paying lower wages to workers. America's manufacturing base may have gone into decline either way, but it began after the oil crisis.
  17. Danaan Jedi Master

    Member Since:
    Apr 23, 2008
    star 4
    Or maybe it was the other way around - when people in the third world could compete with people in the first world for industrial jobs by ways of lower salaries, the multinationals took the chance to lower costs. Remember, those cars still had to be shipped around the world to reach their markets, including the American, and shipping is driven by oil, so maybe it was the salary levels and benefits that were judged simply not giving enough bang for the bucks by the corporations. My impression is that American manufacturing (including the car industry) was simply beaten on an increasingly level playing field by companies that had better producitivy rates. Indeed, AFAIK, both the US and Canada are increasinly falling behind in terms of productivity over the last couple of decades. Another factor that fuelled the Happy times of the post war world was that there was an entire continent to be rebuilt - Europe, which explains the continuing positive growth (though there were still some dips) between 1945 and 1970. That effect was over by the 70s.

    I'm just saying that there are many variables that go into this, and it seems that maybe one shouldn't jump to conclusions. The demise of Detroit could simply be the result of the demise of its main industry - car manufacturing. The lesson I draw, without being extremely familiar with the city, is that it's a bad idea to have an economy that is overly reliant on only one source of income, because even if it might look like an eternal golden goose, it probably isn't and when the good times are over for that source, there has to be something else there to pick up the slack. I.e. don't put all your eggs in one basket...
  18. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    The high oil prices of 2008 had a lot to do with killing the American auto industry. Also, I think eventually history will reach the conclusion that high oil prices contributed significantly to the bursting of the real estate bubble and the rollover into financial catastrophe.

    Regardless of what people say about when crude oil production peaks, it's certain now that light sweet crude production peaked several years ago. Most of the new oil that's come online in the last decade is heavy, sour crude that is harder to refine. It was in part this shortage in light sweet crude and the limited global refinery capacity for processing heavier, sour grades of oil that created the refined products bottlenecks that caused the extreme runup in gas and diesel prices before the financial collapse.

    Detroit was caught with its pants down when first driving SUVS became unaffordable, and then in the wake of the financial collapse, buying cars became unaffordable.

    The lesson of 2008 is that global economic growth is fundamentally constrained by the oil industry's ability to supply it with transportation energy.

    There is a delicate balance in these peak oil plateau years between the oil price necessary to make finding and producing those last difficult to access reservoirs of heavy, sour crude and then refining it profitable, and the price of oil that will spark another economic downturn. That fragile relationship is going to define our world economy on the downward slope of global oil production. Our economies will become increasingly too weak to pay the price at which the last (marginal) barrel of oil is economically recoverable.
  19. Darth_Yuthura Jedi Master

    Member Since:
    Nov 7, 2007
    star 4
    That sounds great and everything, but it's more complicated than that... I know that's what you said earlier.

    Chicago is really the only Rustbelt city that hasn't gone into decline following the internet boom of the 90's. It did so because it was really the only city strategically placed where it could take advantage as a hub to commerce and as a corporate headquarters to the region. Virtually every other city that once depended on manufacturing is expected to collapse unless they could find some other usable form of economic activity.

    Problem is that when we are even outsourcing services and education to India and manufacturing to China, there really is almost no incentive to use products and services made by Americans. They can save anywhere from 30-50% of going to India and importing than in using domestic sources.
  20. Danaan Jedi Master

    Member Since:
    Apr 23, 2008
    star 4
    Fair enough - and indeed, we see the same development all over the Western world, with manufacturing moving East/South and former booming manufacturing towns becoming cities in decline, unless they can reinvent themselves (which, incidentally, t least some have by ways of the communications revolution). But that still puts the causality with the shift in global economy to increased labour competition due to increased industrialization of previously poor countries rather than to peak oil. Now, I'm not saying that peak oil won't become a factor, we saw last Summer just how much of a factor high oil prices can be. I'm just saying that until now, other structural shifts are probably more important with regards to the decline in manufacturing in the West than peak oil...
  21. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    I agree with you mostly, but I think the automotive industry in the U.S. is a special case of an industry that fell into the peak oil trap early whereas the auto industry in other countries that kept gas prices relatively higher than the U.S. as part of their strategic energy policies were more able to survive that initial onslaught of oil price volatility.
  22. Darth_Yuthura Jedi Master

    Member Since:
    Nov 7, 2007
    star 4
    And with higher gas prices came a vastly different urban landscape within Europe. You won't find many locations like downtown Chicago and New York City anywhere, but you will find Paris and Berlin don't have many single family detached homes with vast lawns all over the place. They had much less land to work with and more people, so they built very densely. Now as the oil prices go up, they will be in a far better position to adjust to the change in transportation demands.
  23. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    An interesting update on Pemex and U.S. oil imports from Mexico,

    As background, form EIA The top sources of US crude oil imports:

    Canada (2.051 million barrels per day)
    Mexico (1.063 million barrels per day)
    Nigeria (1.020 million barrels per day)
    Saudi Arabia (0.886 million barrels per day)
    Venezuela (0.772 million barrels per day).
    Algeria (0.336 million barrels per day)
    Iraq (0.325) million barrels per day)
    Angola (0.266 million barrels per day)
    Brazil (0.181 million barrels per day)
    Colombia (0.179 million barrels per day)

    So, from Reuters:

    Losses wipe out equity of Mexico's Pemex

    Intersecting Mexico's 5% production decline rate with their domestic consumption suggests that their imports to the U.S. will fall to zero within a few short years. It's going to be a very difficult import hole for the U.S. to plug. The recession went a long way toward killing off some of our oil demand, but we will likely "need" another recession soon in order to rebalance the supply/demand picture.
  24. Blithe Force Ghost

    Member Since:
    Jun 24, 2003
    star 4
    The oil picture is truly bleak, Jabba. The last report from the IEA I had access to said that of the world's 800 largest post-peak oil fields, the estimated decline rate in annual production was 6.7%. It doesn't take a genius to realize that unless the world manages to get ahold of some new, easily accessbile oil within then next decade or so, there will be so little oil left that the shock will devastating.

    The recession has reduced world oil deman, but only by about a million barrels per day or so. That may be enough to keep the price relatively contained, at least as compared to the 2007-2008 oil shock, in the short-run, but the long-run picture is virtually the same.

    We're stuck between a rock and a hard place. The ironic aspect of the situation is that if the global economy recovers, we'll have another oil shock before too long. Even if the economy doesn't recover, it'll only make the long-run oil outlook worse because that'll mean there will be virtually no incentive for investment in new oil supplies, or alternatives, because the price will be cheap enough, in the short-run, that people will not pay it any mind, meaning that the ultimate shortage will be much, much worse. I personally believe that the current crisis has only served to ensure a global oil crisis. The temporary drop in demand has everyone hoodwinked into thinking there won't be an oil issue as long as the economy is in the trash. However, that's simply not true. Oil prices have doubled, from roughly $35-40/barrel to ~$80/bareel in a little over a year. Admittedly, part of that has been due to OPEC production cuts, but the demand for crude oil is essentially as inelastic as raw materials can get. That's enough to keep the price sustained for quite some time, even with the global economic meltdown.
  25. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    That's the way I see it Blithe. Current oil prices are still higher than any year other than during the 2008 price spike, and the economy's ability to withstand higher oil prices is likely weaker now than in 2008. It might not take $145 oil to spark another downturn. $90-$100 oil may do the trick.

    The rock/hard place is exactly as you describe it The oil price point that can justify the ultra deepwater exploration and drilling, the high end tertiary recovery efforts on older fields, etc., is the same oil price that crashes demand. But the failure to maintain consistent level of investment as prices fall magnifies the problem 7 or 8 years down the road when those new projects would have to come online.
Thread Status:
Not open for further replies.