Pain at the pump is finally putting energy on the front burner in this election season, but media coverage of the issue has been fraught with misinformation.
I hate to say it, but I am beginning to think some of the confusion is intentional. From the news that Cheney's office has interfered with reporting on climate change science (what a shocker!), to the assertions of some pundits that there are 12 trillion barrels of oil yet to recover out there, to assertions by politicians that we can drill our way to energy independence, it's tough for the average person to get a real grip on the issues.
Confusion breeds apathy, and that's not something we can afford anymore. I believe that the impending energy crisis is too urgent to allow misinformation about peak oil to go unanswered.
So I am attempting to set the record straight.
For this week's Energy and Capital column, I am publishing a formal rebuttal to a May editorial on peak oil in Investor's Business Daily, which got the facts about peak oil-as I understand them-badly wrong.
It refers to a companion piece which has just been published, a "Peak Oil Media Guide" that I developed for the Association for the Study of Peak Oil - USA.
I hope my readers will find these two pieces helpful in separating fact from fiction about peak oil.
Until next time,
Chris
To the editors of Investor's Business Daily:
I feel compelled to respond to your editorial of May 28, 2008, entitled "Peak Oil: An Idea Whose Time Is Up." For a respected financial publication such as yours, I found your coverage reprehensible and rife with errors. I have to wonder if it was deliberately designed to confuse the public, or if the authors were merely deeply misinformed.
Our nation urgently needs to get up to speed on the realities of energy before we can have any sort of intelligent conversation about reforming energy policy. Articles such as yours do the public a grave disservice.
First, peak oil is a study, not a "theory." That is why the name of the world's top authority on peak oil is the Association for the Study of Peak Oil (ASPO), not the Association for the Theory of Peak Oil. The peak oil study is simply a scientific analysis and modeling of available data. More data might correct existing models, but there is no theory to prove or disprove. Likewise, politics plays no role in the scientific assessment of the ASPO's respected petroleum geologists.
Second, peak oil is not about "running out of crude," it's about the rate of oil production. You are correct "that one day the crude supply will effectively dry up," but that day, perhaps 100 years in the future, is not what the study of peak oil is about.
I will refer to the "Peak Oil Media Guide" as I address your remaining statements.
To begin with item 1, "It's not the size of the tank which matters, but the size of the tap."
Talking only about the number of barrels of oil that might exist somewhere, without also talking about the rate at which that oil can be produced, and when, is utterly meaningless.
You stated:
U.S. production is trending down again, but it's not because there's no oil. It's due to shortsighted policies that prevent the industry from drilling for the almost 100 billion barrels of crude known to be under Alaska's Arctic National Wildlife Refuge and beneath the oceans just off of America's coasts. It's because politics and political correctness block the development of Big Sky state oil shale fields, where as much as 2 trillion barrels of crude, by some estimates, sit idle.
Here's the reality.
Right now, the world is producing between 86 and 87 million barrels per day (mbpd) of oil, just 2 mbpd more than it did in 2005. The world has reached a bumpy production plateau, and will likely continue on it for another three to six years before beginning the terminal decline of global oil production.
Your numbers on oil are also questionable:
But the impact of those nations on crude prices in recent months is suspect. Global oil consumption grew 2% in the first quarter of this year over the first quarter of 2007, while production increased 2.5% over the same period. On a daily basis, roughly 85 million barrels of oil are consumed across the world, almost exactly matching the amount produced each day.
You don't state your sources, but according to the IEA Oil Market Report of May 13, the most recent publicly available global data I am aware of, the numbers are quite different:
- Global oil consumption grew 0.81%, not 2%, from 85.9 mbpd in Q1 2007 to 86.6 mbpd in Q1 2008.
- Global oil supply in the grew 1.81%, from 85.6 in Q1 2007 to 87.2 mbpd in Q2 2008. However, April supply fell 0.4 mbpd to 86.8 mbpd, due to declining output from OPEC and the FSU, plus North Sea outages.
- Average demand in 2008 is projected to be 1.2% higher than 2007.
- According to this data, supply is a scant 0.6 mbpd higher than demand.
If you will refer to "Figure 3 - US Oil Production 1900-2005," which shows the historical peaking of U.S. oil production, perhaps you can explain why you would dismiss the U.S. peak with a comment like "Yes, domestic output has peaked. But it peaked at a level 13% above what Hubbert predicted. And the peak wasn't followed by a falling-off-the-table decline. Output rose after a temporary slide."
Yes it did...and then resumed its downward course on a relentless, 38-year history of decline, as the chart clearly shows. Who are you trying to fool?
As for the fact that U.S. production peaked 13% above Hubbert's prediction, I say, "close enough." Hubbert also found that if the recoverable amount of oil in the U.S. were increased by one-third, it would only delay the Lower 48 production peak by five years. A similar calculation for world production would produce similar results. Again, when it comes to the question of peaking, flow rates are far more important than reserves.
The decline of U.S. oil production was not the result of politics, nor can any political decisions now significantly alter its future course. It is simply the nature of petroleum extraction that it ramps up to a peak and then declines, in a rough bell-curve shape. This observation has been made in thousands of oil fields (and oil producing nations) worldwide, which is why Hubbert's model continues to be respected.
If you will refer to item 2, "We are now at, or ‘close enough' to the peak," you will note that global oil production has plateaued. It may continue to rise at a negligible rate for the next couple of years, but no major increases are possible.
You seem to be among those who are laboring under the mistaken belief that the U.S. can somehow drill its way out of dependency on foreign oil, and that increased domestic production could the relieve today's "high" prices.
Nothing could be further from the truth.
In fact, the U.S. uses about 20 mbpd of petroleum, and produces about 7 of that. The other two-thirds is imported because there is no possible way that we could produce another 13 mbpd domestically, even if we drilled every single place that might have oil.
Regarding the potential of oil shale, please refer to item 4, "Oil shale: the fuel of the future...and it always will be." After four decades of fully authorized, commercial, even subsidized attempts to develop oil shale into a usable fuel, no one has ever been able to make it economically feasible. Part of the reason for that is that it's not even really oil-it's kerogen, an immature precursor to oil, and it takes an enormous amount of energy to turn it into something usable.
It remains to be seen if the energy returned on the energy invested (EROEI) for oil shale is high enough to even make its production worthwhile. Even if it does prove to be viable, it is unlikely to ever produce more than a modest flow (though perhaps a very long-lived one) of extremely expensive, synthetic oil. It is not some quickly available "two trillion barrels" of "crude," as you asserted, and it will require an enormous amount of energy, probably from coal, to produce.
As for the oil reserves of ANWR and the continental shelf, please refer to item 5, "ANWR and the continental shelf are no panacea." The flow rates from these resources cannot be known until they are produced, but we can make ballpark estimates.
Preliminary estimates by the USGS indicate that ANWR would likely only produce around 750,000 barrels per day at peak. More importantly, it would take 10-20 years to achieve that peak production level.
If all limits on domestic drilling were removed, including ANWR, it could only increase US oil production by a maximum of 2-3 mbpd. It would come online slowly, and given the loss in global oil production by the time it arrives, the additional production from these remaining domestic reserves will be underwhelming. Together, they could amount to perhaps 12-15% of our daily usage today, or about 3% of world production.
However, if we are currently on the peak/plateau of global oil production, and production starts to fall within the next five years, then 10 years from now, at a reasonable average 2.0% rate of net depletion, world oil production will be down 11 mbpd-about 12%-from where it stands today. Therefore any additional domestic production could only offset perhaps one-quarter of the global production that will be lost!
It should be obvious, after a close look at the data, that at the rate that the U.S. currently uses oil, the chance of producing all of our own needs domestically is zero.
The potential impact of increased domestic drilling on oil prices is also minimal. Since oil is traded globally, and the U.S. imports about two-thirds of the oil it consumes, the price of the oil we produce will always maintain parity with global prices. With the global supply and demand balance as tight as it is for oil, natural gas, and coal, increased production in the U.S. would make a negligible difference in U.S. gasoline prices.
The U.S. Department of Energy estimates that drilling in ANWR would only reduce the price of gasoline by less than four pennies per gallon-20 years from now!
The slight declines in petroleum consumption over the past year in the U.S. and Europe have been more than offset by the increasing consumption of countries in Asia, South America, Russia, and the Middle East. Net global consumption is expected to increase another 1 mbpd this year.
Indeed, we should recognize, as the Saudis have, that the oil we still have will only become more valuable as time goes on, and it makes sense to save some for future generations. Oil is incredibly useful and energy dense, and we use it altogether too profligately today. Burning every last bit of what remains as quickly as we can makes no sense at all. I further submit that it is irresponsible and immoral to attempt it.
One of the most glaring errors in your analysis was in misunderstanding depletion. I refer your attention to item 7, "Depletion is relentless."
The concept is simple: Oil production first must make up for the depletion of mature fields before any net additional oil can be counted. It's like pouring water into a bucket with a hole in it. The background global decline rate is generally accepted to be 4.5 - 5%.
Anyone familiar with a balance sheet should understand this concept, but you missed it when you said:
Production over the next two quarters is projected to continue rising (3.3% and 4.1%, according to estimates from Citigroup), while demand is expected to grow at a slower 1.6% pace over the next six months.
A net global production increase of 3-4% has not occurred in several decades, nor is it conceivably possible in the future, let alone the next six months, given what we know about the projects that are under way.
Clearly, you confused "production" with net production. The world's net production over the next six months would be lucky to manage a 0.6% increase, after accounting for the background decline rate.
You point out: "World output is expected to rise from 85 million barrels a day today to 110 million barrels by 2015, according to the International Energy Agency," but your information is out of date.
Surely you are aware of the Wall Street Journal's article, "Energy Watchdog Warns of Oil-Production Crunch," published on May 23, 2008, about a week before yours? It previewed the IEA's upcoming report in November, which will announce the results of their first detailed study of the depletion rates of the world's top 400 oil fields. That study has prompted them to reduce their estimate to 100 mbpd by 2015.
I should also point out that the IEA has lagged well behind other knowledgeable analysts who have consistently demonstrated why the IEA's past projections could not be obtained, and who are now of the opinion that global oil production is unlikely to ever exceed 90 mbpd.
I must emphasize that no political considerations, or faith-based economics, are needed to understand the available data and the models. The mathematics are quite clear.
Finally, I must address your quote from Peter Jackson of CERA, who said, "The 'peak oil' argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions and cloud the debate over the energy future."
I respond that CERA's projections of future oil production have been far off the mark for about the last five years straight. If anyone's analysis is faulty, it is theirs. The ASPO's has come much closer to reality. ASPO-USA has directly challenged CERA to back their projections with real money; so far, they have declined to respond.
CERA is correct, however, that faulty analysis could "distort critical policy and investment decisions and cloud the debate over the energy future." I beg you to consult more reliable authorities than CERA for that very reason. They have a lovely story to tell; unfortunately, it's wrong.
I hope you will explore the information I have provided here, and avoid making such fundamental errors in your future coverage of the oil markets, and of the study of peak oil.
Sincerely,
Chris Nelder
Energy Journalist
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The average American is appalled at the ever escalating price of gasoline/transportation costs and the impact that these costs are having on the family budget. Further, as we're well aware, transportation costs ripple through the entire American economy on every essential commodity that we're required to purchase such as food. The latter being accentuated by an erroneous emphasis on an inefficient petroleum substitute, ethanol, which actually inhibits our attempts to achieve higher mileage standards. Although, it must be noted that the replacement of lead via the 10% ethanol blend was certainly a positive step. In an America with POTENTIALLY vast energy resources, why have we allowed ourselves to become willing victims of cartel energy piracy from highly unstable, unfriendly fanatical regimes, from whom we now import a substantial segment of our petroleum needs? Imports which continuously drain wealth from America in the form of an unfavorable balance of trade; and, conversely flow petro-dollars into the coffers of Islamofacists and others who would destroy America given the opportunity. For a sobering example Iran, with the 3rd largest oil reserves in the world, has been stockpiling huge quantities of excess oil; has converted it's oil trading currency to the Euro; has withdrawn its financial assets from Europe; and, could precipitously dump these oil reserves on the world market in an effort to collapse the dollar as a world currency. SPECULATORS BEWARE. Were it not for America's dependence on these Middle-East petroleum imports, we could conveniently extricate ourselves from this cauldron of fanaticism; and, allow the fanatics to wallow in their self imposed misery and virulent hatred for Western culture.
The fundamental question is WHO do we blame for this self-imposed dilemma?
America originated nuclear power; and yet, we produce only 20% of our domestic electrical energy from the nuclear option while countries such as France produce 78%, and have programmed significantly more, dramatically reducing their dependence on fossil fuels. The safety issue on nuclear power is a non-sequitur given the hundreds of thousands of operating hours on U.S. Naval nuclear propulsion systems without incident. But yet, LEFT-WING FRINGE ELEMENTS in our society THAT COMPRISE A SIGNIFICANT PORTION OF THE BASE OF THE DEMOCRAT PARTY have for 30yrs. managed to bring America's nuclear industry to a standstill.
Our Nation possesses an abundance of untapped petroleum reserves; off our coastlines; in the Alaskan wilderness; in the Bakken formation; and, in the form of hi-quality shale oil in the Rocky Mountain region where we have the equivalent of ten(10) Saudi Arabia's in recoverable reserves. And yet, we have permitted LEFT-WING FRINGE ELEMENTS to inhibit our access to such deposits. The incredible irony is that the CHICOM are exploring for oil 45miles South of Key West, while we have prohibited ourselves from exploiting the same resources. Had Bill Clinton, in '95, not vetoed the Republican controlled Senate approval of drilling in ANWAR, exploration which has been previously proven to be beneficial to the Alaskan Caribou herds, we would have had an additional one million barrels of domestic oil production on-line TODAY; and, a concurrent reduction in the at-pump price of gasoline of $1/gallon. Further, there is an inherent synergy to be exploited between Nuclear Power and Shale Oil Extraction. Concurrently, Hillary Clinton and Barrack Obama, ensconced in their own vision of scuttling fossil fuels, have both pledged to confiscate the profits of America's Energy Companies. A move that would cripple our capacity to explore/develop additional petroleum reserves; greatly exacerbate our dependence on foreign sources; and, dramatically further increase the price of fuel at the pump. Granted that the commitment to drill would experience a lag before additional petroleum products could be brought to market; but, the mitigation on speculative factors on price would be immediate. To note; an increase in margin requirements to further dampen speculation woud be a positive step.
America has the largest reserves of coal in the world; and, a full 50% of our domestic electrical energy generation is dependent on this resource; and yet, LEFT-WING FRINGE ELEMENTS continuously attempt to restrict the use of these coal reserves; and, to impede attempts to develop technologies/facilities for the gasification of coal. Bill Clinton struck a major blow to America's accessible coal reserves when he unilaterally, over the objection of State officials, placed the Red Hills of Utah with an estimated Four(4) Trillion $s worth of high quality coal assets off-limits. Fearful of mass protests, Clinton wouldn't even go to Utah to announce his heinous restriction; but, rather chose to make his proclamation from the relative security of Arizona. Clinton's actions represented a major financial windfall for his Riady Bros. bankrollers who were in competition with Utah to sell their Indonesian coal holdings to the CHICOM. Ever wonder why Clinton refuses to release the Donor list for his "Foundation"!
Even our Hydro-Electric potential has been brought to a standstill by LEFT-WING FRINGE ELEMENTS over such nonsense as the Snail-Darter. Water resources which could as well now be playing a major role in mitigating the effects of the drought that has recently griped the SouthEast.
Much of the hype over fossil fuels has again been exploited by LEFT-WING FRINGE ELEMENTS over the mythical impact of MAN MADE CO2 emissions on Global Warming. Such proclamations totally disregard the complete lack of correlation between recorded atmospheric CO2 levels and recorded Global temperatures. On Earth as on Mars, where no controversy of Man Made Global Warming factors exist, surface temperature variations precisely track the recorded fluctuations in Solar irradiance. Further, satellite observations, which are NOT influenced by proximity to ground based heat-sources, have confirmed that there has been NO global temperature increase over the last ten years. Ask our self-inflicted dyslexic friend, Al Gore, to explain these recorded contradictions to his Man Made Global Warming hype. The silence is deafening Albert!
Imposition of overly burdensome regulatory criteria and an application morass principally sponsored by LEFT-WING FRINGE ELEMENTS, have made the expense and reduced profitability of investing in additional refinery installations prohibitive. The inevitable result being that a new refinery has not been built in the U.S. since 1976 as corporations have shunned such capital projects creating a restrictive "choke point" in the availability of gasoline products. This "choke point" where refineries are continuously required to operate at peak capacities makes the availability/distribution of refined products within our Nation readily vulnerable to supply disruptions. Further, the dictated multiple blends of gasoline, frequently multiple blends within the same metropolis, have seriously complicated and inflated the time factor in the refinery task. Our entire Nation should express our gratitude and admiration to Union County, South Dakota for stepping forward to rescue America from such myopia with the programmed construction of the first refinery in 32 years; but, the LEFT is already circling the wagons, and looking for a liberal Federal Judge to obstruct.
To be certain, we CAN and we MUST achieve total energy independence; but, our Nation can only extricate ourselves from this self imposed dilemma by a broad-based, comprehensive NATIONAL ENERGY STRATEGY that BLENDS all of the elements of: conservation; major increases in transportation efficiencies, such as increased mileage standards; exploitation of our indigenous petroleum resources; fast-tracking of regulatory criteria; a significant expansion of our refinery facilities; major investments in nuclear energy; supplementation of our electrical grid with solar, wind, geo-thermal, and hydro technologies; and, a major investment in Research and Development to bring a Hydrogen and Fusion based economy to fruition. Unfortunately, to dig ourselves out of this self-created coffin-corner will require TIME. Time which simply means that, in the interim, we must protect our access to unstable Middle East suppliers until we bring our own assets on line. The latter exigency which could readily be scuttled by the Cut-And-Run crowd on Iraq. The regional chaos which would be precipitated by an Iranian regional hegemony subsequent to a precipitous American withdrawal from Iraq would make the current cost-escalation in energy supplies from the Middle East seem like the Golden Age of Yesteryear by comparison; and, most certainly would induce a much wider conflict/conflagration. The myopia of the Left on these circumstances is astounding. As history has repeatedly taught with grim consequences, PEACE and STABILITY are won only THRU STRENGTH; and, NOT THRU the nebulous psychosis of HOPE.
The ability of a LEFT-WING minority, that has repeatedly demonstrated the ability to whiplash the Democrat Party, to dictate such onerous/debilitating restrictions in the energy sector of the American economy has been made possible ONLY by the passive acceptance of these militant's demands by the more rational majority of the American electorate. The RATIONAL MAJORITY: that believes in the 2nd Amendment to our Constitution; that is proud of our Country; that daily expresses such pride by the furling of an American flag on their property, or the wearing of an American Flag lapel pin on their chest; that proudly places their hand over their heart at the singing of our National Anthem while even shedding a tear or two; that is unashamed to actively recognize the Judeo/Christian heritage of America; that believe that Judges should NOT legislate from the bench; and, that proudly proclaims the unparallel contribution of America to the protection and sustenance of democratic values throughout the pages of world history, as opposed to LEFT-WING FRINGE ELEMENTS that believe America to be the greatest EVIL in the world. As the Pope so eloquently proclaimed on his recent visit to our homeland, "God Bless America".
However, with the current composition of the U.S. Senate that believes we can TAX our way out of our energy crisis, our Nation doesn't stand a prayer of extricating ourselves from this self imposed dilemma. Simply review the recent Senate action on HR 3121 where Harry Reid and his minions such as Clinton and Obama, in sync with the Left-Wing Fringe Elements in our society, voted AGAINST the opening of a miniscule portion of ANWAR; AGAINST shale oil extraction of which America has the equivalent of ten Saudi Arabia's in recoverable reserves; and, AGAINST accelerated efforts to facilitate the gasification of America's abundant reserves of coal.
The task then for the RATIONAL MAJORITY in our Nation is SIMPLY to recognize the SOURCE that sustains and provides the base of support for the LEFT-WING FRINGE ELEMENTS in our society; and, to undertake a decisive role at the ballot box to isolate and relegate these FRINGE ELEMENTS THAT COMPRISE A SIGNIFICANT PORTION OF THE BASE OF THE DEMOCRAT PARTY to a decibel level that is barely audible. ANY TIME you vote for a Democrat, ANY DEMOCRAT, you're unmistakably multiplying the capacity of these LEFT-WING FRINGE ELEMENTS to continue to promote their radical agenda, and to bring our Nation to its knees. A circumstance that no external power ever could have accomplished.
The ability to restore our Nation's status; and, to sustain this Sacred Land that the RATIONAL MAJORITY so proudly calls AMERICA, resides in your hands at the ballot box.
GREG NEUBECK
hicles? Just keep transferring our wealth at an accelerating rate? It's going to take a crash program of coal, nuclear, and increased oil discovery and production to gain us time. Our dedication to new domestic oil recovery will help calm the futures market, which is run more by emotion than
facts, as well as keep money and jobs in this country. While you can make money in solar, wind, ocean currents, geothermal, etc., I don't believe these technologies will ever provide more than 15-18% of our needs because of fundamental limitations. And, neither do the oil companies which is why they are'nt investing big money into them.
is "Unlimited Oil" in the Very Deep Wells, ie. 30-40,000 feet
deep??"
Yes: I am not a believer in the abiotic oil theory, and as far as I have been able to tell, few geologists are. Until the alleged Russian results are replicated and supported by others, I remain unconvinced. I have seen numerous critiques of the Russian study asserting that the methodology was flawed and the results were misinterpreted.
But I'm sure it's a sastisfying notion for those who desperately want to believe that some new discovery is going to bail us out of this mess.
I am impressed by your understanding the subject. You have been doing your homework for a long time now and it clearly shows. Thank you! You just became my most trusted source of counsel on the matter of investing in oil.
Blake
My observation has been clearly two camps of "analysts" discussing peak oil:those that agree with the above and those that clearly want someone else to be the reason for the high prices(speculators).The two views with equal air time clearly lead to a confused public. The future oil price levels will tell us who is right. I'm with Chris and the facts that we know now.
For a commentary by a top climate change lawyer on the legal obligations of directors and executives in Australia in relation to climate change, and what funds managers need to consider, email me and I'll send you a copy of a 90 minute web seminar we conducted on the topic.
If a practical electric car was developed this year it would take 10-20 years to transition to an all electric ground transportation system. Oil will still be needed even then for airplanes, cargo ships, and the plastics, medicines, fertilizers, fabrics, and other products made with oil.
Though I agree we will never be oil independent, unless oil shale becomes practical to produce, we must, nevertheless, go after all the deposits that exist be they in ANWR, off shore, or in Canada.
You neglect to mention that there have been 43 billion barrels of new oil discovered world wide in the last two years.
Tupi (Brazil) 8
Jack Field (Gulf of Mexico) 15
Kashagan (Kazakhstan) 13
Jindong Nanbao (China) 7
Brazil has just announced another offshore discovery that is estimated at 30 billion barrels. I can only assume a lot of that Brazillian oil will be coming to our shores.
In addition it is a fact that Iraq, if they can get their act together has much more oil to be discovered. They may have more reserves than the Saudis when they finish drilling their prospective fields.
The Chinese and Indians have ewduced their subsidization of oil
products and that will cut demand in those countries.
The picture is not as gloomy as you seem to believe, though I doubt we will ever see $40 oil again.
Obviously peak oil will come or may already be here. Those who think they know all the answers like the author of this article only reveal how stupid they are.
Notwithstanding the above, we need to find alternative sources of liquid energy and new sources of non-fossil fuel energy and this needs to happen quickly. Ways to get more utility out of the same amount of energy are also badly needed. High prices will facilitate this transition so near- term high prices should be welcomed. Moderately high prices now may prevent exceedingly high prices later. Worse than high prices is International instability or worse so speeding up the transition to alternative energy sources is crucial for mankind's future.
Nuclear power developments will take a decade or more to deliver "new" power and hundreds of GW need to be built just to replace gas-fired capacity.
Renewable energy may make a small dent in our demands for hydrocarbons but probably will never contribute significantly towards transport energy.
Sorry! but I see almost unmitigated gloom far into the future.
The requirement that you had to write it highlights the fact that mainstream media are no longer fulfilling their primary obligation "to truthfully inform the public" but are influenced by "Big Brother" goals.
It seems more and more that the "news" we are fed daily about traffic death rates, uninformed world situations, titillating "gliterati" news, etc. (as if David and Victoria Beckham's doings would help us take rational individual decisions) is all part of the political correct self-censorship that the mainstream media is practising in order to keep us as uninformed as possible, whilst still giving the impression that they are still covering the news!
There is much more to write here about this subject, but thanks Chris for sending them one across their bows.
I live in the Scotland, where currently our highland communities are slowly being "strangled" by our Petrol and Diesel prices (£1.50+ per litre!).
This current situation together with the Credit Crunch will cost our current PM Gordon Brown his job and we will see New Labour fall from power.
I have been amazed at the lack of clarity and the miss information in the quality British Press about what is actually going on and a proper publication of Peak Oil and what it will mean to the local and Global economies.
I work in a leading Oil Service company, I live 8 miles form work and I am just about to buy and electric bicycle!
Keep at it!
I haven't read all of your articles so maybe you've dealt with this; if so please refer me to the right sources, if you can.
1. Why are we not now using the relentless undulating motion of the ocean's surface (and the recurring wind that causes this motion via the SUN'S energy) to generate electricity?
2. Why isn't that electrical power being used to to separate the molecules of our endless supply of sea-water (H2O) into its constituent elements HYDROGEN and OXYGEN?
3. Is the cost of compressing these two gases too great to make it practical? In other words: O2 and H2 must be compressed to make it portable or transportable and distributed much like natural gas so we can use it for cars and trucks = hydrogen based economy.
4. Is it better to recombine these two elements within a FUEL CELL thus reconverting it directly into electrical energy to drive cars etc. or is better to use it as fuel for inyernal combustion engines for motion energy?
5. What are the principles or factors guiding thies processes and who is working on them? What is the math? Where are the models?
Thank you very much, GF
Would this not have an impact ?
Do places like Mexico pay less for a liter of gas than the US, only because they cannot afford to pay more. If the price went too high the citizens would riot the economy colapse.
I am tired of infomercial style writing that blasts everything else but never gets to the point or in my case glazed my eyes over.
If you have a better idea or a better picture of better information, get it out at the start of the article.
And by the way nobody is as smart as everybody pretends to be. We are talking about stuff underground and I'll bet Peak oil gets delayed as long as the price stays up. (except when it gets so high that people reduce their consumption.)
And alternative energy gets more commercial.
And writers will give us more fluff to panic over.
In the meantime life goes on and compensates as it goes.
Governments lie and writers makes things up
Rick
I know you sent that letter to IBD, but why not also send it off to some of these pundits like Larry Kudlow who lately have been screaming from the top of their lungs "drill here! drill now!". They need to get their facts straight as well!
I think you hit the nail on the head when you stated that we should save some of our domestic oil for future generations instead of using it all up right now. It seems that no one wants to deal with long term solutions in this country, we just want a quick fix now, and that doesn't end up fixing anything!
As a subscriber to IBD, I would would describe their editorial position as located next to Dick Cheney's office. You information is not going to change their misinformation. So you need to send to someone else who can and will inform the great masses.
And that is exactly what the price mechanism will do. The drain stopper is tightened up as fuel becomes more costly -- thermostats are lowered in winter and raised in summer, more carpooling is done, gas guzzlers are replaced with minicars or even bicycles. And the price mechanism also opens up the tap by encouraging more drilling where it previously was uneconomic -- drilling to deeper horizons both on-and-offshore, and in barren places such as ANWR and Canada's Mackenzie River Delta.
If the price mechanism is allowed freedom to work, and no foolish environmental restrictions are imposed to limit access to yet-undiscovered or untested resources, and taboos are eliminated on the use of proven alternatives such as nuclear power, "peak oil" will continually be pushed further into the future. And the price mechanism will also make alternative energy sources such as wind and wave and who-knows-what other future technologies become cost-competitive, adding further delay to the advent of "peak oil".
These studies that say the price will only go down by a few cents are worth about as much.
The way to look at this is to answer this question. What would the price of oil do today if a million barrels per day of production were removed from the supply today? Surely, you would agree that oil would soar, even from these levels. Thus, the few cents a gallon studies are ridiculous. We need those million barrels now, but if it takes 3 to 5 years to get the additional production, then so be it. There are no other solutions that arrive in a shorter period. None!
We must do everything we can to attack the issue from all sides, and lay down our biases. To think that most other countries drill in sensitive areas without environmental issues, but the US, the largest consumer can't is foolish, and demonstrates just how upside down our country has become.
So many of us comment on how our CEOs think only about the short term, and yet, on such an important issue as energy, our Congress is refusing certain options, because they are long term solutions. It simply doesn't make sense.
I know you sent that letter to IBD, but why not also send it off to some of these pundits like Larry Kudlow who lately have been screaming from the top of their lungs "drill here! drill now!". They need to get their facts straight as well!
I think you hit the nail on the head when you stated that we should save some of our domestic oil for future generations instead of using it all up right now. It seems that no one wants to deal with long term solutions in this country, we just want a quick fix now, and that doesn't end up fixing anything!
It is unfortunate, but it appears to me that there is no way we can drill ourselves out of this crisis.
I have read and seem articles that stated the Bakken was alledgedly to free us from Middle Eastern Oil for at least a 40 year period. However, the Bakken wasn't even included in your Peak Oil article of late. Is the Bakken really the oil discovery that has been said to be or is it just hype?? From the looks of the situation as you have identified there is no way we can drill our way out. Is the alternate source of power that has been written about factual or is a mthe along with Bakken?? I am specifically speaking of Wind, Solar, Ocean, Sun/Solar, and alternate fuels types of power sources, will these eventually relieve us from fossil fuels???? There must be some constructive answers tha will give us a slight light of hope. Speaking of ANWR oil resources was supposed to be another big help but seems to be nothing more than a couple of cent reduction in the price per gallon of gas. Additionally off-shore drilling was also to alledgedly relieve some of the oil demand?? Why can the American people get the truth on what is really going on with oil/crude/gas and get some truthful facts on how to correct thedilema?????From wherr I sit we have no oil future, no solutions, only more demand challenges versus production challenges, and no way out. That is a very dark avenue to travel, with no light at the end of the tunnel, and only more gloom for the American People. We are talking 10-15 years for reolutions to take place for productions to increase so little it will be hardly noticed. I would really like to hear from other commentors on their thoughts of what we are up against and where our future lies.
Butchrgt
Regarding the price impacts of increased domestic drilling: I agree that additional drilling will help to dampen future costs somewhat, because oil production is largely priced at the margins. But those who assert that the additional production from undeveloped sources like ANWR and the continental shelf could come online in less than 10 years, or would have more than a few cents impact on the price of a gallon of gasoline, simply do not understand the realities of oil production and trade. They vastly overestimate the ability of market mechanisms to reduce price, and fail to realize that in many important ways, oil production is not like the production of other commodities, nor is it like mining. I won’t try to get into all the details of why that is here, because it’s a very deep and technical subject, but perhaps in a future article we can delve into that.
Regarding the wisdom of increased domestic drilling: I believe the most important thing about peak oil is not the peak itself, but the long downward slope on the other side. I think it’s critical that we start doing some long-range energy planning, and by that I mean 100 years, not 10 or 20. My assessment is that the next 10-20 years are going to be fraught with very tough energy challenges, whether we begin intensive additional drilling today or not, simply because of the time-to-market issue. It looks to me like we’re simply out of time for soft-landing scenarios; now it’s time to fasten our crash helmets and buckle up, which basically means intensive conservation.
But there is another issue, other than time: What are we going to leave future generations? We’ve got perhaps 1/3 of our original recoverable oil endowment (note: all of those terms are loaded) left, and we know that global supply is about to tail off permanently, even as the rest of the world’s consumption of oil continues to increase. What makes the most sense, from a strictly financial point of view? To draw down the rest of that account as quickly as possible so we can consume it as soon as possible, or to save some for a rainy day?
Regarding the Bakken Formation: One of the great things Angel Publishing is that I am given free rein to write whatever I want to write, with very little direction or oversight. As far as I know, that’s true for the rest of the editors as well. The company trusts us and doesn’t interfere with our work, even if we have different takes on things sometimes.
The Bakken play is one of those things. I wrote a fairly detailed assessment (behind the paywall) of the Bakken play for the $20 Trillion Report, in which I concluded that “When fully exploited, estimates for the maximum flow rate from the Bakken range from half a million to one million bpd.” Therefore, from a peak oil perspective, where flow rates are really all that matters, it’s not that significant. Like drilling in ANWR and the continental shelf, it will only slow the decline rate and extend the tail of domestic production. That is why I have not written about it much in my big picture articles for Energy and Capital.
For some of my other colleagues, the sheer amount of oil that remains in the Bakken and its high quality is exciting, so they choose to emphasize that. Some of them are not as concerned about the recoverability factor as I am, but as the saying goes, that’s what makes horse races. Hence the apparent mixed messages on the pages of Energy and Capital. That doesn’t bother me though, because if we all agreed on everything, it would get pretty boring. I wish you all could hear some of the great—and very congenial—debates I have had with Keith Kohl over beers.
I think that when you get down to it, all of us editors do agree on the basic premise that whether there are 4 billion or 400 billion barrels recoverable in the Bakken, it will be produced, it will sell for a pretty penny, and the companies that exploit it stand to profit from it handsomely. So I have no objection to promoting the companies we have selected for the $20 Trillion Report, because I think they are bona fide good investments, even if they can’t change the basic shape of things to come.
Regarding the role of renewables: I am as big a proponent of renewable energy as you’ll find anywhere, but I also try to be realistic about it. Renewable energy produces electricity, not liquid fuels. So in order to do something about peak oil by building renewable capacity, we also have to rebuild our transportation regime so that it can run on electricity. I think it’s the only way to go, but I also know it will be a decades-long effort. Right now, renewables contribute less than 2% of the global energy mix. The numbers are telling me that the energy loss from global oil depletion will be greater, and happen faster, than renewables can offset.
Regarding the hydrogen economy: See my previous article here: http://www.energyandcapital.com/articles/hydrogen-economy-fuel+cell/480
As for everything else: This article was entirely based on data, and not at all basec on politics, although I know that some would like to be able to dismiss what I say by hurling political accusations. I think those who can get past knee-jerk political reactions and look at my actual written history will see that although my positions on energy issues sometimes align with Democratic views, oftentimes they don’t. I try to applaud good ideas and raspberry the bad ones no matter who’s espousing them.
And for those who don’t understand:
- why flow rates are more important than reserves
- what different definitions of reserves mean
- how reliable (or unreliable) the reported reserves numbers are
- what the peak oil study is really about (no, it is not simply “the contention that the peak occurs when half the reserve has been depleted”)
- the true potential of each type of fuel in the energy mix of the future…
…I recommend picking up a copy of my book, Profit from the Peak, which explains all of that, and much more, in detail. I am fully aware of the “new” oil discoveries in the last several years, but I am also aware of the unreliability of some of those estimates, the many technical and geopolitical challenges that their production faces, and a host of other issues such as production cost, quality, reservoir characteristics, and more. Suffice to say that reality seldom turns out to be as advertised.
As a final point, I am always open to good data and new information, and I really do read it when my readers forward it. I try to cite my sources and back up my claims so that others can verify what I have said. Conversely, I ignore as a matter of policy those who just say I’m all wet and don’t offer any data to back up their claims.
There is more oil in the United States than in all of the middle east. This is such a contrived shortage that it makes me madder than hell. Crash the entire system and let bedlam reign. At the end of it we will at least achieve parity. What goes in is what goes out.