Transterrestrial Musings

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It's just stupid. Obviously written by some socialist who can't fathom the concept that there might be enterprising individuals or companies who might invest in more production and exploration or new extraction techniques or some other clever alternative that no government has thought of yet. Nope, it's not an economic or business opportunity; it's a political crisis requiring government intervention.

Posted by Jardinero1 at October 22, 2007 07:36 AM

Obviously oil did peak in the US, so what is to keep it from peaking in the rest of the world? Solar is beside the point, since the prediction is that oil production has peaked, not that oil prices necessarily have to be low or high. Yes, the oil sands are there, but they are already included in the production estimates.

But one other source of theoretical extra capacity is a wildcard. Historically Iraq has produced more oil than Kuwait. But not when it was hit with sanctions in the 1990s and not now that it has been hit with the Iraq war. Now Kuwait pumps more oil than Iraq. Kuwait, Iran, and Saudi Arabia ramped up production in response to high prices, while Iraq has only returned to its average in 2002. (Which was less than 1999-2001.)

Not to mention that several of Iraq's pipelines go to Iran, Syria, and Turkey. Two of which are on the US enemies list, while the third is on the verge of war with Kurdistan.

http://www.eia.doe.gov/emeu/ipsr/supply.html

Posted by Jim Harris at October 22, 2007 08:40 AM

There is enough kerogen locked in oil shale to supply us for hundreds of years and the technology to efficiently extract it is at hand.

"Obviously oil did peak in the US, so what is to keep it from peaking in the rest of the world? Solar is beside the point, since the prediction is that oil production has peaked, not that oil prices necessarily have to be low or high. Yes, the oil sands are there, but they are already included in the production estimates."

Generally, oil sands are not included in those estimates.

As to world wide production peaking. I ask a simple question: Since we can now drill the seabed down to 10,000 feet below sea level, how much of the ocean is above that depth? I suspect more than two thirds.

I also suspect that the amount of untapped oil reserves beneath the ocean floor dwarfs what we have tapped to date.

Posted by Mike Puckett at October 22, 2007 08:46 AM

I ask a simple question: Since we can now drill the seabed down to 10,000 feet below sea level, how much of the ocean is above that depth? I suspect more than two thirds.

Unlike the Gulf of Mexico, most of the ocean floor is far from continents, and does not receive much sediment, which is the carrier (and protector) of the organic materials that ultimately form petroleum.

Solar becoming competitive in a decade is rather beside the point, since solar and oil are in substantially disjoint markets. One could power cars with electricity, sort of, but having that electricity come from solar isn't what's holding things back, or even particularly helpful.

Posted by Paul Dietz at October 22, 2007 08:53 AM

Well with a 7% decline per year, we should see the effects of declining oil production almost immediately. But last I checked, oil hasn't gone up that much. Most of the increase in US oil prices was due to the dollar's decline (as seen versus other currencies).

Posted by Karl Hallowell at October 22, 2007 08:55 AM

http://reddit.com/info/5ytas/comments/

More info on the German group that issued the report.

Posted by Mike Puckett at October 22, 2007 09:00 AM

Obviously oil did peak in the US, so what is to keep it from peaking in the rest of the world?

It didn't peak in the US. We just quit using it because it was cheaper elsewhere. All that peaked in the US was cheap oil (which is also peaking in the rest of the world) but there is no oil peak, per se. The price goes up, we find new sources, or alternatives, and life goes on. The price is already much higher than is sustainable over the long term as we ramp up production from other sources that are profitable at higher prices than historically, but lower than today's.

Posted by Rand Simberg at October 22, 2007 09:07 AM

Generally, oil sands are not included in those estimates.

Okay, fine, they are included in some estimates and not others. It doesn't change the qualitative point, since the oil sands certainly are included in total existing oil production.

The Wikipedia article on peak oil has this interesting statement (referenced to a reliable source): Oil production per capita peaked in 1979. So with the correct denominator --- per person rather than per planet --- production really has peaked. The allotment of oil per person has only been going down and the oil sands and so forth won't reverse that.

It was hard to notice while the Indians and Chinese were destitute, but that is changing. If they even used half as much oil per person as Americans do, then they would be using all of the world's oil production.

Posted by Jim Harris at October 22, 2007 09:14 AM

Oil production per capita peaked in 1979. So with the correct denominator --- per person rather than per planet --- production really has peaked.

There's no way to know that. It could go back up again.

The allotment of oil per person has only been going down and the oil sands and so forth won't reverse that.

Why not? If they're cheap enough, as the world grows wealthier, demand will grow to use them. If oil usage peaked in 1979, it was because the supply per capita outran demand at the current price, not because we were running out of oil.

Posted by Rand Simberg at October 22, 2007 09:21 AM

Peak oil has always been about cheap oil, at least in my opinion.

Alberta oil sands (all by themselves) assure we will not actually run out of oil for a long, long time, it is just that the price shall stay closer to $100 a barrel than $50 a barrel.

I would be very, very surprised if we see oil at $40 a barrel absent some global financial meltdown that crashes demand.

Now this is a pretty five year price chart (even if the rise of the loonie has much to do with it.

Also of note, valued in euros the S&P 500 is DOWN between Dubya taking office in 2001 and today. So much for the economic collapse of Europe.

Posted by Bill White at October 22, 2007 09:21 AM

All that peaked in the US was cheap oil

In other words, you actually can squeeze blood from a turnip, you just might not like the price. Well, duh, but the price is the whole question.

The price goes up, we find new sources, or alternatives, and life goes on.

Of course we'll find alternatives. That is what those darned greenies are saying that we should do. Solar, by the way, would be an alternative to coal, not auto fuel.

The price is already much higher than is sustainable over the long term

I am not sure what you mean by the "long term" and "much higher". But if you mean 8 years and twice too high, then you can make a lot of money from your wisdom by selling short the Dec 2015 oil contract. It is selling for $75 per barrel.

Posted by Jim Harris at October 22, 2007 09:23 AM

I would suggest that what truly is close to peaking is the global mining of platinum.

But there may be some on the Moon (Hi Dennis!)

Anyway IF Mars was once warm and wet and host to a planet wide thriving biosphere about a billion years ago, I'd betcha there is petroleum on Mars.

Export to Earth? Heh! Not likely, but a cool feature for a Marsian sci-fi novel. The oil derricks of Barsoom?

Posted by Bill White at October 22, 2007 09:27 AM

Thank you for validating my point.

Posted by Rand Simberg at October 22, 2007 09:29 AM

Actually Jim, $75 a barrel (today) for 2015 delivery kinda argues against the "we will run our of oil" meme.

But, it also suggests we will stay north of $50 per barrel pretty much permanently.

Posted by Bill White at October 22, 2007 09:29 AM

If you can lock in $75/barrel oil in 2015, then FT diesel from coal is a no-brainer. At that petroleum price the IRR for a PRB mine-mouth CTL plant would approach 100%/year.

Posted by Paul Dietz at October 22, 2007 09:43 AM

The most outrageous part is the comment about coal.

After all the oil, oil shale, oil sands and similar deposits, there will _still_ be the conversion of coal to syngas as we did in WWII.

We (and Russia) are a mind-boggling distance away from running out of coal. We are cutting production - because we aren't _using_ coal as much.

Posted by Al at October 22, 2007 09:43 AM

Al: you have to be a bit careful with those coal estimates, since much of the coal is difficult to extract (thin seams spread over large areas, for example much of the state of Illinois).

The enabling technology is probably in situ gasification, which would couple well with FT fuel production, perhaps even save money since a separate gasifier would not be needed.

Posted by Paul Dietz at October 22, 2007 09:46 AM

$75 a barrel is the price NOW therefore that predicts a higher price in 2015 after you factor in ~7 years of interest.

FT plants, however are capital intensive and require massive amounts of water and fresh water is anotyer problem. Montana coal was to be a silver bullet solution until the lack of water to run the plants was factored in.

Posted by Bill White at October 22, 2007 09:47 AM

Actually Jim, $75 a barrel (today) for 2015 delivery kinda argues against the "we will run out of oil" meme.

But that is slipping in a straw man, because peaking is not the same as running out.

$75 per barrel was considered unpalatable as recently as the Clinton years. Meanwhile Rupert Murdoch infamously bragged that the Iraq war would give us $20 per barrel oil. If the market says $75 eight years out, then the market has more-or-less accepted a peak.

Posted by Jim Harris at October 22, 2007 09:53 AM

FT plants, however are capital intensive and require massive amounts of water and fresh water is anotyer problem

FT plants using dry cooling systems -- as are already used in some coal-burning thermal powerplants in Wyoming -- require very little water. They can probably get by on just the water in the mined coal itself. This is slightly more expensive than a wet cooling system, but not so large a cost delta as to change the point being made.

Capital cost is certainly an issue, but if you can get a 100%/year IRR, then that just means the investment opportunities are enormous and can absorb huge amounts of capital while still giving gargantuan profits. The world economy has trillions of dollars of available capital sloshing around.

Posted by Paul Dietz at October 22, 2007 09:55 AM

I think solar will become competitive quicker than that. Companies like Solar City are trying to reduce costs to the individual consumer by purchasing in bulk...many companies like this, or Solar City going national has an positive effect in the supply chain allowing manufacturers to produce and sell more efficiently. I write more about this in this article: "Solar Energy Consolidation Outlook"

I comment regularly on the business/investor side of alternative energy on Energy Spin: Alternative Energy Blog for Investors-Served Daily
Cheers,
Francesco DeParis

Posted by Francesco DeParis at October 22, 2007 10:04 AM

Jim, I agree "peak oil" has always been about "cheap oil" rather than running out of oil and to move those goalposts has been part of the political spin.

As I said, I do not believe we are going below $50 per barrel anytime soon (if ever) but on the other hand that simply does make other alternatives more "affordable"

= = =

Clean coal is currently a huge political football with people demanding government subsidies and therefore it is kinda hard for me to assess the viability of financial projections.

Are those plants truly viable and the owners merely looking for some extra sugar from Uncle?

I dunno.

Posted by Bill White at October 22, 2007 10:05 AM

Oil for electricity and transportation is falling as a percent as natural gas and electric regain favor for transport (and alcohol and grease!), but petroleum's still pretty economical for transportation. Oil for electricity and heating is probably going to be speed it's disappearance with high prices in favor of a resurgence of nukes and more wind. Peak oil is moot if vehicle passenger miles keep going up. Solar will continue to not be competitive except for sunny places remote from coal mines because the price of coal will fall if solar starts to take over in a big way. The total cost of the solar has to beat the marginal cost of the coal to get people to turn off coal plants without a court order (or a steep carbon tax). The cost of the coal is about 10% of the cost of the capital which will be depreciated to zero if solar makes inroads.

Posted by Sam Dinkin at October 22, 2007 12:01 PM

"FT plants, however are capital intensive and require massive amounts of water and fresh water is anotyer problem. Montana coal was to be a silver bullet solution until the lack of water to run the plants was factored in."

Plenty of water in West Virginia and Eastern Kentucky.

Posted by Mike Puckett at October 22, 2007 02:44 PM

Jim, I agree "peak oil" has always been about "cheap oil" rather than running out of oil and to move those goalposts has been part of the political spin.

The spin is entirely on your end, Bill.

When did the Left say "peak oil" was "only about cheap oil," Bill? Can you provide a link ti back up that statement?

The article Rand linked to says just the opposite. The German politicians who did that study not only claim that oil will be used up by 2030 but gas, coal, and even uranium.

The "goalposts" are right where the Left put them. I would like to hear you defend those goalposts instead of constantly changing the argument. Please tell us how we are going to use up 20 million tons of uranium reserves by 2030? Who's using that much uranium?

If you think Apollo on Steroids is going to mine significant amounts of platinum by 2030, you're dreaming. NASA can't support a full-scale mining operation by launching two or three Saturn-class rockets a year.

Lunar mining won't become practical until we develop low-cost launch systems that support frequent launches and enable us to send large amounts of mining equipment, supplies, and personnel. Four astronauts in a hut cannot build and operate a mine by themselves. Robots alone won't save you. Even Dennis acknowledges that.

It's strange that Moonies insist on opposing the transportation advances that would make their lunar development schemes possible and supporting an ESAS system that makes lunar development completely impossible. It's almost as if you want to fail.

Posted by Edward Wright at October 24, 2007 12:07 PM

I partially agree with Edward here. "Peak oil" has always been about major social and economic disruptions due to a major decline in the supply of oil and correlating rise in the price of oil. But I don't see it as a liberal belief. For example, the Oil Drum people have been pushing "peak oil" for years and they don't have a liberal leaning to me.

OTOH, I think the carbon emission reduction crowd downplays the possibility of "peak oil" because that tends to imply future declines in carbon emissions (since most transportation, some heating, and a bit of global electricity production depend on oil) no matter if carbon emission restrictions are adopted or not.

Posted by Karl Hallowell at October 24, 2007 02:56 PM

Yes, the Oil Drum people have been at it for years. How many years do they have to be at it for us to ignore them?

I guess there are two parts to the "doomer" narrative. One is that we are at Peak Oil - not in 20-40 years but right now, 2007, are maybe it happened on 2004-2006 - and it is all downhill from here, and no one is listening to us. The second part to it that there is nothing to save us -- all of the alternatives, coal to liquids, nuclear, solar, ethanol, oil shale have bad environmental effects or poor EROI (energy you get out for what you put in) and it is mass social chaos and starvation and suffering the ravages of colds by having to ride the bus with sniffling, coughing people.

Suppose it is 2017 and the price of oil has declines because there no longer is an active war in the Middle East. Do we get to state that the Peak Oil people are silly, or do they get to move the goal posts (again).

I guess my gripe with The Oil Drum is that the place is an echo chamber of people who already know the answer to the questions they are posing, but worst yet, they sound so happy -- I don't think I can stand going over there when oil is $90 per barrel -- I think I will wait for oil to come back into the $60 range first.

Posted by Paul Milenkovic at October 24, 2007 07:35 PM

I think the carbon emission reduction crowd downplays the possibility of "peak oil"

In particular, it means that favorite actions, like driving less, more efficient cars, or use of mass transit, have essentially no long term effect on CO2 levels, since they just push back a bit the time by which all the oil has been burned. Limiting CO2 release means leaving fuel in the ground, unconsumed, or sequestering the CO2 after the fuel is used.

(If you delay by more than the time constant for absorption of atmospheric CO2 into the oceans and other large sinks, then it could be effective, but that requires radical not incremental reductions in the rate of consumption.)

Posted by Paul Dietz at October 25, 2007 06:43 AM

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