Posted on 06/27/2014 9:14:34 AM PDT by thackney
The remnants of the peak oil community cling avidly to the belief that oil production has already peaked and that high prices prove this. “Look at the data” seems to have become a catechism amongst them, and it can be hard to dissuade them otherwise, especially by considering more than one variable as explaining oil supply and price.
Most anyone can understand that high oil prices are no more an indicator of resource scarcity than the occasional spike in coffee, pork or orange juice prices. Things happen that can cause prices to rise for a period before supply and demand can re-equilibrate, with oil particularly vulnerable to political disruptions–witness developments in Iraq, Iran, Libya, Nigeria to name the primary ones.
The funny thing is that high prices in the late 1970s were also considered evidence that “the oil and gas we rely on are simply running out,” as a president said. The vast majority of the expert community believed prices would continue rising in the 1980s and 1990s because “oil was different” and the drop in 1986 to long-term mean prices came as quite a shock to nearly everyone. (M. A. Adelman was a notable exception.)
Because of that, in part, most experts did not rush to attribute the higher prices post-2002 to resource scarcity, instead of to above-ground problems such as the invasion/liberation of Iraq and the strike and mass firings at Petroleos de Venezuela. Higher costs certainly suggest to some that “the cheap oil is gone” but many others, such as myself, consider them cyclically inflated, rather than reflecting exhaustion of the so-called “easy oil”.
The second problem with the claims of a production peak are that they usually are confined to crude and condensate, rather than total petroleum liquids...
(Excerpt) Read more at forbes.com ...
I agree with much of what he says, but total liquids do give a distorted view to what most folks are interested in, transportation fuel. Additional production of ethane and propane help the economy, but they don't make a difference in filling up the gasoline tank in my truck.
Both excerpted for Forbes content:
Peak Oil 1: What Is Peak Oil?
http://www.forbes.com/sites/michaellynch/2014/06/19/peak-oil-1-what-is-peak-oil/
6/19/2014
M. King Hubbert wrote a paper in 1956 in which he noted that no particular pattern could be observed in energy production, but that for US oil, a bell curve seemed reasonably accurate, so he applied it to predict US production would peak between 1965 and 1970. When Nixon ended oil import quotas in 1970, US oil prices and drilling dropped, and production peaked in 1971, which convinced Hubbert (and his many disciples) that the bell curve was ‘scientific’ and valid. His other predictions fared much less well, but have tended to be overlooked.
In 1989, Colin Campbell revived the method, arguing that conventional oil production had peaked that year. Subsequently, he joined with Jean Laherrere to produce a series of consulting reports and then articles, making various claims for their ability to accurately estimate recoverable resources and production patterns. These proved to be incorrect, and they abandoned most of their early arguments, after initially deriding critics, like me, as not being ‘scientific’.
Their work became eclipsed by others, particularly in the US, who basically argued that production had (or soon would) peak because of difficulties in raising production. Given high prices, some argued that their argument were validated, even to the point of arguing that the loss of supply due to the 2003 Iraq war or the 2011 Libyan uprising were not very relevant.
- - - - -
Peak Oil 2: The True Believers
http://www.forbes.com/sites/michaellynch/2014/06/25/peak-oil-2-the-true-believers/
6/25/2014
But this argument gradually faded, as it became clear that most petroleum geologists did not support the concept.
Indeed, most of the writing has come from generalists, or at least people unfamiliar with the field. Granted some, like Walter Youngquist, Richard Duncan and Robert Hirsch are petroleum geologists or engineers, and Kenneth Deffeyes is a professor emeritus of geology at Princeton. But others, such as David Goodstein (physicist) and Richard Heinberg (writer) have not particular expertise regarding oil. And don’t get me started on Michael Ruppert, the retired police officer.
Crucially, most geologists are not familiar with statistical modeling, which has been the primary method supporting claims of an imminent peak (not science). Few if any are familiar with supply modeling history or theory, and they often make technical mistakes as a result. Their embrace of the Hubbert curve as a scientific model has proven an embarrassment, especially since novices still see older publications and don’t realize it has been refuted.
And Matthew Simmons book, “Twilight in the Desert” about Saudi oil was full of technical mistakes, yet was enthusiastically embraced by the peak oil community.
Well, that problem has been solved, to a great degree, and the solution applied with varying results in other formations and basins.
There are still more places we know there is oil (oil shale, for instance). --other formations which will not lend themselves to the methodology of today, but people are still working on the right combination of method and technology to extract that oil, too.
I don't think we are anywhere near the peak, but I think there will be temporally localized highs and lows in supply, driven by a combination of market, technology, and need.
Reading the “Real Time Plus 70 Years” threads has been very intersting. There were articles in the New York Times back in 1942 or 1943 about Peak Oil, although they didn’t use the term. The estimates then were a 20 year supply at estimated post-war consumption levels. Of course they didn’t factor off shore drilling.
Also interesting was that they knew there was a significant amount of oil in shale that could extend the day of Peak Oil, but of couse they knew they didn’t have the technology to make it economical to extract it.
There are several that would fit that type of thinking.
For example, on the Alaskan North Slope, in the area they have already drilled is a very large field not currently in production. The field is well known as it is shallow, many (most?) of the wells on the slope drill through it to get to the producing oil deeper down.
The field, Ugnu, has two problems. First it is a very heavy, thick oil that doesn’t flow well normally, secondly, it is so shallow it is relatively near the permafrost, making it quite cold compared to typical oil fields, making the thick oil flow even less.
It will be developed, eventually. It is very large. But there is other fields also know that while heavy oil, are not quite as hard to produce. They will be chased first.
More info at:
http://www.aoga.org/wp-content/uploads/2011/01/8.-Pospisil-Heavy-Viscous-Oil.pdf
Part of the problem solving, including advancements of technology, get driven by relatively higher prices.
The concern of running out of cheap oil is more real than running out of producible oil. Competing energy sources help drive this.
I think of Naval Petroeum Reserve #4 on the north slope of Alaska. Established in 1923, long before any commercial exploitation.
The concern of running out of cheap oil is more real than running out of producible oil. Competing energy sources help drive this.
Cheap oil. Get the Fed Gov’t out of it. Let the free market run...
Now it is called the National Petroleum Reserve in Alaska (NPRA).
I was actually part of the design team for the first production oil wells for NPRA. The project was delayed for so many years I left Alaska before it began construction. Construction has begun but is still tied up in lawsuits.
With CD-5 half-built, judge faults Corps permit
http://www.alaskajournal.com/Alaska-Journal-of-Commerce/June-Issue-2-2014/With-CD-5-half-built-judge-faults-Corps-permit/
2014.06.05
A U.S. Alaska District Court judge has ruled that the U.S. Army Corps of Engineers did not provide an adequate rationale for its decision to allow ConocoPhillips to proceed with road and bridge construction at its $1 billion CD-5 project in the National Petroleum Reserve-Alaska.
The ruling by Judge Sharon Gleason issued May 27 did not suggest a remedy for the decision and asked for briefings from the plaintiffs and defendants on how to proceed. She did not require the preparation of a supplemental environmental impact statement or issue an injunction that would stop construction now underway at CD-5.
The bridge and roads, meanwhile, are about half-built. CD-5 is scheduled to begin production in late 2015.
In March, Gleason denied plaintiffs’ request for an injunction to stop construction at CD-5, finding that, “based on the Court’s determination that the balance of the equities was then tipped sharply in favor of ConocoPhillips and the other Intervenor-Defendants and that a preliminary injunction would not be in the public interest. The March 2014 Order did not address the Kunaknana Plaintiffs’ likelihood of success on the merits.”
Gleason also tossed a lawsuit filed separately by Center for Biological Diversity, finding that the Outside environmental group lacked standing in the case.
The other plaintiff is Sam Kunaknana, who is represented by environmental law firm Trustees for Alaska. The CBD and Kunaknana cases had previously been merged by Gleason.
Gleason made no decision on the plaintiffs’ Clean Water Act claims.
The Corps of Engineers was joined in its defense by Arctic Slope Regional Corp., the North Slope Borough, Kuupik Corp. and the State of Alaska.
Kuupik owns the surface rights at the proposed CD-5; ASRC owns the subsurface rights.
It isn’t just the US Feds. Oil isn’t “cheap” anywhere in the world if it can get to the demand.
Set the price at $500/bbl, and I guarantee you production will increase.
I wonder when the demand side will drop. I recently read about the Koreans finally getting solid oxide fuel cells about ready for the transportation market. It would allow commercial vehicles to drop fuel consumption about 50% and for personal transportation probably around 75%.
Exciting times.
Oil and other hydrocarbon products are commodities that are bought and sold on the world market for prices based on US dollars. If the dollar fluctuates in value, so will the price of all commodities that are bought and sold in US dollars. A US refiner pays just as much for a barrel of oil as a Chinese refiner does. Countries with nationalized oil production and refining assets don’t pay the going world rate, it’s set by government policy. Price is also set by recovery costs, meaning how much money and energy is required to get those hydrocarbons out of the ground. Fracking and oil sands can’t compete at less than $80.00 a barrel, until technology can drive that price down, and refiners can utilize all of a feedstock to make one finished product. If you really wanted to make a profit, get the feds to allow the export of crude oil, and let the domestic market come up to the world level for fuel prices.
Sure, but who will they sell it to at that price?
They can pretend they do not, but when your refinery consumes a barrel of oil worth $100 on the global market, you either value it at $100 or you operate for a loss. When you can make more money selling the barrel than processing it, you are only fooling yourself, reality is government it subsidizing that production.
Tough to make that claim when our total production rate is rising anyways.
The whole article is baseless.
In 1960 I bought gas for 19.9 cents a gallon.
Today for the same two dimes (if I use silver dimes) I can actually buy more than a gallon of gas. The price of gas is down. At $4.00 a gallon it is cheaper today than in 1960. Two silver dimes today cost over $2.20 each, that would be $4.40, in some states that would leave a dollar left over in change for that one gallon of gas.
What has changed is only the value of the American Dollar. Pure and simple, government counterfeiting has raised the prices of all commodities.
Fiat money is the downfall of all societies.
Tough to make that claim when our total production rate is rising anyways.
If you looked at production on public property especially public land in Colorado it came to a screeching halt.
Ironically, just the opposite. High enough price will cause demand destruction and production will drop. No one will produce what they can't sell.
Still, your point is valid. Production is driven by price and demand. But there is a point where price drives down demand to a level where production has to decrease. It's a boom and bust pendulum swing. In the 80s when the removal of price controls sparked a spike in production the subsequent glut collapsed prices ($10 a bbl) and suppliers were capping wells. Gluts are caused by overproduction or collapse in demand. $500 bbl will cause the latter.
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