Oil’s well that ends well?

46 comments on “Oil’s well that ends well? ”

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1. jarbury 1

   7 July 2009 at 12:05 pm

   Good post Marty – yes there have been a lot of articles around recently saying that the recession is actually going to lead to an even sharper oil spike in the future “once things recover”. This is because a lot of the investment in increasing capacity (or usually just maintaining it) that was occurring in 2007 and 2008 has been put on hold.

   As I am sure you know, over time the production level of an oil well falls and more effort is needed to either simply maintain production levels of that well (through injecting oil) or to even keep its rate of decline down to something manageable. That kind of investment/effort has fallen away this year due to lower prices, so therefore I imagine that current price rises are both a combination of people speculating on when the global economy will recover, and also reducing output because prices have been too low to justify investment in maintaining (let alone expanding) supply.

   Meanwhile, in New Zealand, Treasury forecasts a price of $US68 a barrel at the end of 2013. Can they really be that retarded? (clearly the answer is yes)
2. Pascal's bookie 2

   7 July 2009 at 12:19 pm

   “Treasury forecasts a price of $US68 a barrel at the end of 2013. Can they really be that retarded?”

   But if they price it much higher than that then all sorts of things start to look like stupid ideas. And they’re not stupid ideas, and the hippies are wrong dammit. Wrongity wrong wrong wrong. So $US68 a barrel is what it damn well is.
   • jarbury 2.1

     7 July 2009 at 12:23 pm

     But if they price it much higher than that then all sorts of things start to look like stupid ideas.

     You mean like Steven Joyce’s transport policies?

     LOL
3. So Bored 3

   7 July 2009 at 12:21 pm

   This is real Jeremiah territory. Regardless of ideology, creed, or whatever there seems inherant to our species the inability to see whats coming down the track and take a realistic stance.

   With oil, yes it will run out, and no we dont have the ability to break the rules of thermodynamics and replace it. Technology will not enable us to avoid an energy crisis. resources cant just be magiced up…in short our growth economies and lifestyles are going to be history.

   Which is why any attempt to revive the corpse of industrial economy will fail with progressively more severe energy shocks. Without a radical rethink of our entire economy we are in the proverbial. The Greens have started in a mild way but even they dont have as dark a viewpoint as they should of the coming storm.

   If you think this is an extreme view have a read of Orlov, Kunstler, try oilcrash.com etc
   • jarbury 3.1

     7 July 2009 at 12:24 pm

     Have no fear, electric cars will save us all!

     (message from the Church of the Almighty Electric Car – otherwise known as the Ministry of Transport)
4. ghostwhowalks 4

   7 July 2009 at 12:25 pm

   Every school child knows that the stone age ended when they ran out of stones.

   Oil is just an intermediate step from wood ( carbon) based energy sources to the hydrogen of the future.
   • jarbury 4.1

     7 July 2009 at 12:28 pm

     How do you plan on creating that hydrogen? Or (more importantly really) moving it around?
     • ghostwhowalks 4.1.1

       7 July 2009 at 12:45 pm

       Since we dont know how much oil is ‘in the ground’ how can you say its running out.
       At the moment oil is turned into petrol and diesel and moved around the world at massive cost. The hydrogen problem is minor as we all ready have petrol stations for end users and the hydrogen is created locally
       • jarbury 4.1.1.1

         7 July 2009 at 12:50 pm

         Oh golly not this again.

         When oil “runs out” is irrelevant. What matters is the point when we can’t increase supply levels, but demand keeps increasing. That is the point of peak oil – once we hit that point prices skyrocket.

         Exhibit A: last year

         Regarding “moving oil around” – have you actually compared how easy it is to move oil compared to hydrogen? I guess not, let’s just say we’d need some GIANT TRUCKS to shift a decent amount of hydrogen, or we’d need to compress it so much that if a hydrogen truck ever crashed we’d be really far up shit creek.

         Hydrogen needs a lot of energy to create it, that energy used to create it might as well be stored in batteries for electric cars rather than hydrogen. Batteries are a million times easier and we already have an electricity distribution network.
         • Draco T Bastard 4.1.1.1.1

           7 July 2009 at 1:54 pm

           Never mind the fact that hydrogen leaks through everything.
           • lprent 4.1.1.1.1.1

             7 July 2009 at 3:08 pm

             Has something to do with it being the Smallest atom…. It has this fatal attraction for oxygen as well. Releases a *lot* of energy. Great if you have it in an engine.

             Not quite so good when it is a leak in a tanker or a hydrogen station. Virtually every petrol station leaks, and they have a muvh bigger molecule than hydrogen.

             If anyone tries to build a hydrogen station near me, then I’ll move if I lose the fight. They can’t tell me that it will be ‘safe’, regardless what storage matrix they come up with.
       • snoozer 4.1.1.2

         7 July 2009 at 1:18 pm

         We do have a good idea of how much oil is in the ground but that’s not really the issue.

         The issue is can we continue to produce as much oil as we need to run the economy we have, let alone grow that economy?

         Hydrogen is essentially a battery. There are no hydrogen mines, so to get it, we have to apply energy to substances like water that contian hydrogen to seperate it off. Just like a battery you put in energy to get a substance that can later to used to release energy… But you need the primary source of energy first – energy that is just sitting around waiting for us to utilise (like solar, fossil fuels, hydro, wind)

         and there’s no free-lunch here. It takes more energy to isolate hydrogen than is released when it is combusted.
         • Draco T Bastard 4.1.1.2.1

           7 July 2009 at 1:55 pm

           Beat me to it.
       • rainman 4.1.1.3

         7 July 2009 at 11:08 pm

         And the winner of the Breathtaking Ignorance Award goes to… GWW!
         • rainman 4.1.1.3.1

           7 July 2009 at 11:09 pm

           “goes to”… I mean “is”. Doh!

           That didn’t work as well as I’d hoped. Must get more sleep.
5. Maynard J 5

   7 July 2009 at 12:47 pm

   GWW’s comment got me to thinking – has a society ever run out of its primary energy source before? I am not sure that is has happened on a large scale but suspect it has happened before. Easter Island perhaps – did they run out of wood?

   Point there is that we are facing a bit of an unknown (although I have not doubt there is plenty of research into environmental stress factors, including the Law of the Minimum), exacerbated by the following:

   1- huge population
   2- heavy dependence upon that energy source
   3- conflicting requirements – energy source, manufacturing resource, all-round industrial lubricant
   4- ability to predict (roughly) when the resource will become dangerously scarce, and inability to point to a replacement that is close to providing equal utility.

   Point four interests me. It took a bit of skill to make fire, and more skill to cut down trees and make wood ovens.
   It took an order of magnitude of complexity and effort to make the transition to coal and boilers.
   It took a further order of magnitude of complexity and effort and cost to harness oil.
   It will take the same again to crack into hydrogen, and we are prbably wasting too much effort on getting into fossil gasses (developing a CNG/LPG infrastructure) and things like Tar Sands.

   In short, there is no easy way out. We have always made the transition relatively comfortably – there is still plenty of wood around, there is still coal.

   Our previous energy shifts came about because of the availability of a successor technology – not due to a lack of the resource that powered the past technology.
6. Maynard J 6

   7 July 2009 at 12:51 pm

   heh – anti spam word is gas.

   New system = smart as the old system.
   • felix 6.1

     7 July 2009 at 1:30 pm

     Well Lynn has control of the word list in the new system, so maybe it’s even smarter…
     • lprent 6.1.1

       7 July 2009 at 2:24 pm

       Nope – dumb dictionary list.
7. So Bored 7

   7 July 2009 at 1:36 pm

   Nice to see some commentary from all quarters, just want to challenge all of you (MJ,ghost etc) to revisit the point on the laws of thermodynamics…..its basic physics and our current technologies and resources dont come close to replacing oil in the respect of the scale of energy use required to keep going as we are.

   And “new technologies will save us”, maybe at some future date but there is absolutely nothing on the horizon today. Hydrogen is not an energy source, it takes more energy to produce than it releases….theres only a limited supply of fisile material for nuclear, only so much biomass we can grow, or solar and wind we can capture. And it wont be as much as we currently use.

   And “oil wont run out” …bollocks. Head out of the sand time.
   • ghostwhowalks 7.1

     7 July 2009 at 5:39 pm

     Microfusion !

     Who would have guessed the morse code telegraph would have ended up as the WWW
     • George Darroch 7.1.1

       7 July 2009 at 5:51 pm

       Yes, but the existing technologies doing the same job were at never of risk of running out (letters etc.)
       • ghostwhowalks 7.1.1.1

         7 July 2009 at 7:25 pm

         Liquid fuels are from the same age as the morse code.

         ie the Age of Chemistry, which was followed by the age of Physics ( which was began with morse telegraph and ended ? with the IC) and we are now beginning the Age of Biology.
     • Draco T Bastard 7.1.2

       7 July 2009 at 8:27 pm

       Micro-fusion?

       We don’t even have the big fusion reactors going yet (if we ever will is a serious question) and you’re talking of micro-fusion?
8. tsmithfield 8

   7 July 2009 at 1:42 pm

   Has anyone thought about what the effect of the falling US dollar has had on oil prices? A lot of the price increase can be attributed to the fall in the US dollar. It would be interesting to know how much.
   • snoozer 8.1

     7 July 2009 at 3:01 pm

     the USD is fallen about 10% against the Euro and strengthened against the Yen nearly as much this year. So I don’t think you can say it’s a falling USD that has made oil double in price.

     MED has a chart of oil in NZD and USD here http://www.med.govt.nz/templates/Page____39566.aspx
   • jarbury 8.2

     7 July 2009 at 3:03 pm

     It has some influence – certainly last year if the exchange rate with the US dollar has been 55c and not 80c then petrol would have been up near $3 a litre. In the end what matters is how oil prices change compared with how income levels change – if we need to spend a far bigger chunk of our income on oil (in the form of petrol or the millions of other things oil makes) then that money has to come from somewhere.
9. Draco T Bastard 9

   7 July 2009 at 2:06 pm

   Yes, it was concluded that an unreal tool makes no difference to real, physical reality. Peak oil will still happen no matter what value (or lack thereof) we place upon money.

   I think the anti-spam is more intelligent:
   This one is ignore which is what I usually do for tsmithfield as he has absolutely no grasp on reality.
10. Daveski 10

    7 July 2009 at 3:12 pm

    You’ll accuse me of avoiding the issue but it’s worth going back in time to the 70’s and Alvin Toffler’s Future Shock. Well meaning social studies teachers included this in their teaching and we all learned about the future and the problems we would have dealing with all our leisure time. I’m not sure he coined the phrase paperless society but he did come up with the concept of information overload.

    I don’t doubt for a moment that oil is a finite resource and that there are significant commercial interests keen to protect their current super profits.

    I take a middle ground here – that oil will peak and we will suffer from the consequences in the short term. However, I equally have no doubt that in the longer term greener technologies will emerge, ironically because the high cost of oil will make them viable.
    • Draco T Bastard 10.1

      7 July 2009 at 4:27 pm

      That sort of technology will emerge if we have the energy supplies to develop them. This is doubt especially if we’re already at Peak Oil.
    • So Bored 10.2

      7 July 2009 at 4:37 pm

      Taking the middle ground and hoping that a smooth transition to greener technologies would be a great idea if it were not such a precarious proposition. This ignores the issue that we are massively over geared toward oil based energy in every facet of agriculture and industry, and there is no other fuel to replace this that scales to meet demand (unless we put the entire surface of the earth under biofuel, and even then there is not enough).

      Anybody with half a brain is already making alternative arrangements, meanwhile if somebody comes up with a rescuing alteration to the laws of physics we will all applaud.
    • Lanthanide 10.3

      7 July 2009 at 5:15 pm

      “ironically because the high cost of oil will make them viable.”

      That’s not ironic, that’s economics.

      Capcha: allow
      • Draco T Bastard 10.3.1

        7 July 2009 at 5:22 pm

        But economics doesn’t have an answer to the energy (and resource) deficiency.
        • Lanthanide 10.3.1.1

          7 July 2009 at 6:51 pm

          Um, yes it does. And that’s what I was pointing out. Economics’ answer to energy and resource deficiency is to increase prices as a signal and motivation for other alternative resources and energy sources to be found.

          So yes, economics *does* have an answer.

          Whether the answer is going to be sufficient in the face of peak oil is the 64 trillion dollar question.
          • Pascal's bookie 10.3.1.1.1

            7 July 2009 at 8:31 pm

            I’m probably confused at what you are saying, but it seems to me that you are suggesting that the symptom is in fact the cure.

            The way I understand the problem is that we are not finding enough new sources of good quality easily accessible oil to keep up with the demand for it. Combine that with the fact that the sources we do have are mostly past their peak output and we are in effect ‘running out’ of cheap oil.

            This means that all the things we use that oil for are going to become much more expensive, because the price of the oil will rise and all the alternatives to that oil are much more expensive.

            Just saying that there are in fact alternatives available, albeit at a much higher price, is just restating the problem.
            • Lanthanide 10.3.1.1.1.1

              7 July 2009 at 9:54 pm

              Yes, you are correct, the symptom is actually the cure, that is how economics works.

              Oil becomes scarce and so the price goes up, making other alternatives to oil feasible – eg a process (say, bioethanol) that could only compete if oil was $400/barrell will be a bargain if oil trades at $500 a barrel. This will promote the production of the bioethanol, hopefully driving costs down further.

              This is indeed how economics works.

              It’s just not a very nice solution when the resource you are running out of is the resource that the entire modern world relies on, and for which there is no readily available replacement.

              High prices drive innovation however. There was massive investment in renewables (solar, wind, etc) in the early 70’s after the oil shocks, driven by the high price of oil. Then oil crashed and so too did the renewables. The same thing has happened again with last year’s run up in oil prices. Unfortunately in economics price signals are about the only way to drive innovation and behaviour in a particular manner – that is the whole reason behind having carbon credits and putting a price on CO2 – putting a price signal on CO2 will drive innovation and behaviour.

              While it looks very unlikely that anything is going to save us from peak oil disaster, a game-changing unanticipated discovery could come along that liberates us from relying on oil for our energy, although really the ‘peak oil’ problem is a transportation fuels problem. The obvious ‘almost there’ saviour is fusion, but people tend to only think of the expensive and unproven Tokomak reactors, but there’s a little project humming along called Polywell, which could litterally be an overnight saviour if it can be proved to work – a reactor the size of a house could provide 100MW of electricity and use and produce no radioactive isotopes – just a few kilogrames of common boron per year (in the top 10 of abundant elements in the earth, coming in at #8 or something). Do a google for “polywell fusion” and read up if you’re curious.
            • Pascal's bookie 10.3.1.1.1.2

              7 July 2009 at 10:15 pm

              Fair enough I guess. But I wouldn’t say that economics provides the solution. It’s just describing what happens, rather than pointing to a solution.

              If the problem is that ‘energy is about to get much more expensive’ then the solution will be a new source of cheap energy. Economics can’t provide that source, it’ll be physics or chemistry or biochemistry or something.

              If the new source is not cheaper than oil, and the price remains at the price that made the new source viable to develop, then the problem remains unsolved.

              If the new source is in fact a new wonder breakthrough of near free energy then the economic incentives are already there to develop it. The thing holding it back is not the price, but the difficulty.
          • jarbury 10.3.1.1.2

            7 July 2009 at 10:05 pm

            Higher oil prices will certainly mean that we look at alternatives – however the reason we aren’t exploring those alternatives more at the moment (or at any stage for the last century) is simply because oil is really cheap.

            In the future the alternatives will be more expensive than oil, so even if we do find ways to get ourselves and our goods around, it will be much more costly.

            The scariest aspect of peak oil is its effects on food supply. The “Green Revolution” which has enabled the world to feed billions more people than thought possible in the 1970s is largely based around the application of oil-based fertilisers. If those become prohibitively expensive we could be in for some horrific famines.
11. GC Martin 11

    7 July 2009 at 6:31 pm

    excuse me but who said there was a shortage of oil..?

    So far as I recall the Peak Oil book author made the case for loss of so-called sweet light crudes – a very good source for profitable refined gasoline and diesel – in the ME states.

    What it did not say (so far as I know) was how the Saudis were building refinery both there and taking stock elsewhere for that very purpose. Why..? To refine of course. But not the sweet lights..

    So, again, I ask who said a shortage of oil is looming..?
    • Marty G 11.1

      7 July 2009 at 7:44 pm

      “who said a shortage of oil is looming..”

      The IEA http://www.energybulletin.net/node/48582

      More questions?
12. GC Martin 12

    7 July 2009 at 10:20 pm

    Marty G,

    More questions?

    Yes, actually. I checked the link, thank you. As you know it is a report for the Energy Bulletin, which appears to have been adopted(co-opted) by an impressive-sounding Post Carbon Institute..

    This report is itself a letter in German to a German newspaper and whilst the IEA(International Energy Agency) is cited in it, one of the English interpreters – a fellow named Zack – refers to the EIA, which googled out to ‘environmental impact’ etc.. And may allude to the UNEP’s work.

    In short I am doubtful that the prestigious and very well informed IEA was source of this material and those claims of oil shortage (580 out of 800 wells worldwide.. looks someone’s oversell..)

    Entirely possible for a lessening production picture is actual demand declines.

    The price, as most of us know, is not entirely made from demand/supply factors. Yet yes, investors seek investment returns and so to that extent production can be profit motivated. Though not I suspect presently.

    What’s more – and I would suggest you try for a solid Goldman Sachs source on this since much of the project was formed around their global capabilities – the price ‘spike’ of 2008 was something else again. Something more aligned to future possibilities..

    I can offer some help on this by linking you directly to the IEA where among other things you will find the following clip..

    The IEA analysis demonstrates that a more sustainable energy future is within our reach, and that technology is the key. Increased energy efficiency, CO2 capture and storage, renewables, and nuclear power will all be important. We must act now if we are to unlock the potential of current and emerging technologies and reduce the dependency on fossil fuels with its consequent effects on energy security and the environment.

    This innovative work demonstrates how energy technologies can make a difference in an ambitious series of global scenarios to 2050. The study contains technology road maps for all key energy sectors, including electricity generation, buildings, industry and transport. Energy Technology Perspectives 2008 provides detailed technology and policy insights to help focus the discussion and debate in energy circles.

    They are too pro-nuclear for my liking and according to friends too anti-renewables aside from overcosting those technologies unaligned to their choices, but there you go. Small is certainly not their ambit and thus one has to make adjustments to fit one’s context. Enzed for example..
13. So Bored 13

    7 July 2009 at 10:30 pm

    Were nuclear power clean and safe we still could not relax….it relies upon fuel sources and materials that are in as short supply (in terms of demand and supply) as oil. We would postpone the energy crisis, not cure it. Its very amusing to see people claiming the primacy in economic based solutions, wierd faith in markets to provide.
14. jarbury 14

    7 July 2009 at 10:34 pm

    This blog post by George Monbiot makes interesting reading:
    http://www.monbiot.com/archives/2008/12/15/at-last-a-date/

    From an interview with Fatih Birol, an IEA official rather high up their food-chain:

    Then I asked him a question for which I didn’t expect a straight answer: could he give me a precise date by which he expects conventional oil supplies to stop growing?

    “In terms of non-OPEC [countries outside the big oil producers’ cartel]’, he replied, “we are expecting that in three, four years’ time the production of conventional oil will come to a plateau, and start to decline. In terms of the global picture, assuming that OPEC will invest in a timely manner, global conventional oil can still continue, but we still expect that it will come around 2020 to a plateau as well, which is of course not good news from a global oil supply point of view.’

    So even the IEA give us only 11 years before all hell breaks loose.
    • GC Martin 14.1

      8 July 2009 at 2:21 pm

      Yes, thanks for the link jarbury.

      I wondered at the Shell – (oil reserves overstatement and subsequent equity loss of several years back) – backstory.

      Birol appears to have taken up the challenge IEA’s prior reliance on industry data had left them with. Pity he didn’t explain this to Monbiot, but then one seriously doubts that he could and not face hostility on the job as it were.

      Allow me repeat, conventional(peak) oil supply is largely about lighter crudes and it is these “plateauing” globally at prevailing consumption to which the links refer.

      Tarsands sources, as I have blogged elsewhere, are taken as the next most profitable extraction, possibly because overland pipe – (let us hope that Secretary Clinton can stall the “Clipper” down through Ma soon) – is simpler maintenance etc.

      Oil has many uses as i think you’ve noted and to those (non-polluting or crisis-causative extents) its long term value is to be commended.
      • jarbury 14.1.1

        8 July 2009 at 2:48 pm

        I have read quite a bit about the Alberta Tar Sands (there was a good National Geographic article on them a few months back) and, to be honest, they freak the hell out of me. The amount of CO2 emissions that are created by creating oil out of the tar sands is potentially horrific, and in many ways they are the “thin end of the wedge” with this kind of non-conventional oils approach to tackling the peaking of conventional oil supplies. What next – making oil from coal? We already know how to do this, and we have plenty of coal lying around – it’s just extremely environmentally destructive.

        The other issue is that it’s although the Alberta tar sands are truly enormous in their potential, it’s doubtful that the rate at which oil is extracted from them can be significantly increased. That is because a tremendous amount of water has to be used to pump steam into the tar sands and extract the oil. There’s only so much available water in Alberta to tap for this purpose.

        They key issue with peak oil is quite simply the rate at which oil can be supplied to the market. We currently use around 80 million barrels a day across the world. Almost all of that comes from conventional oil. Once the supply of that oil peaks and starts to decline then we will need to find a way of replacing each and every one of those lost barrels, each and every day. If demand continues to rise (as it has done so with a brief recent interlude caused by the recession) then we not only have to replace each lost barrel of conventional oil, we also need to find another barrel to supply our increased demand.

        The point is that we could have a trillion barrels of potential oil within the Alberta tar sands, but if we can only ever extract it at a maximum of a few million barrels a day, it won’t really make much difference to the effects of peak oil.
15. dw 15

    8 July 2009 at 9:50 am

    Great comments. Two critical issues arise from peak oil, that many people fail to appreciate. The first issue, which a poster addressed above, is the huge over-reliance on fossil fuel inputs into agriculture. The entire green revolution was built in part on fertisiler produced from e.g. natural gas. The second issue is that any alternative to oil is going to require an infrastructure to build it out across society, and currently that relies on fossil fuels. So to create this new infrastructure you need a set of resource inputs that are almost totally dependent upon fossil fuels. Make fossil fuels more expensive and watch what happens to the cost of almost anything else, including renewable technologies.

    Note that this has already happened with Nuclear power. New nuclear construction has doubled and in many cases tripled in the past couple of years. Some companies with plants planned in the US are not even releasing their costings to the general public, instead hoping to once again feed at the public trough through government subsidies.

    This issue suggests that we need to get started right now on building and deploying renewables and oil alternatives, as by the time we are in peak oil (if not already) the cost of these alternatives is going to increase dramatically.

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