Ripples in the tide

(For racing fans - a correction - the University of Minnesota (not MIT) appears to have the lead as they head into North Dakota with about six cars within 40 miles of the lead, the tightest race so far, I believe).

Some time ago, while trying to find better ways of teaching, I found Edward Tufte's work on preparing graphics that present information honestly. His advice has remained with me, and I was reminded of it this week in some of the discussion on the progress towards Peak Oil.

The particular passage I was thinking of dealt with the fact that if you magnify the variations in data to a large enough scale it might appear as though events are wildly fluctuating, while, if you were to plot them at true scale, the variations are seen to be relatively small changes that have little overall effect on the longer term trend. And that seems appropriate advice.

There is the news today that oil prices fell because there was not as large a drop in inventory this month as traders had imagined. While last week I posted about prices going up because more tankers were being hired to ship oil, following the reverse news the week before. These sorts of events, and the good news that the hurricanes to date have not done as much damage as expected are all relatively minor perturbations on the overall situation. Though they do not really change the much larger overall picture, they are often given too much credence and prominence, particularly by those who do not want to face the reality that is going to happen. Seizing on the small increase in domestic production of gasoline, for example, does not recognize that the domestic refineries are at about maximum production, and as a result increases are coming from imports of refined product. And as Mike Watkins points out at Trendview demand continues to exceed expected numbers.

That longer term situation is, sadly, no more encouraging than it has been for a while. Production from the North Sea, on both the British and Norwegian side is falling faster than anticipated. The promise of increased Russian production appears to be fading. And the new projects that are the hope for sustaining at least close to current levels of production are being increasingly delayed.

I would note a different sentence from Chairman Greenspan's remarks, the one that says
Major advances in recovery rates from existing reservoirs have enhanced proved reserves despite ever fewer discoveries of major oil fields.
The problem with that otherwise encouraging word is that it conveys the intent to use an accelerated rate of removal, which means that the operational life of the reserve is shortened, and for geotechnical reasons the overall recovery is also reduced.

And in the UK, the public are again being told not to worry (from Powerswitch).
Malcolm Wicks (Minister of State (Energy), Department of Trade and Industry) responded:

The Government's assessment of the remaining lifespan of global oil reserves is set out in the Energy White Paper 2003 "Our energy future"creating a low carbon economy" ( Paragraph 6.15 of the White Paper notes that

"Globally, conventional oil reserves are sufficient to meet projected demand for around 30 years, although new discoveries will be needed to renew reserves. Together with non-conventional reserves such as oil shales and improvements in technology, there is the potential for oil reserves to last twice as long".

This is consistent with the latest assessment by the International Energy Agency (IEA) in its 2004 World Energy Outlook. The IEA concludes that

". . . global production of conventional oil will not peak before 2030 if the necessary investments are made.")
Both of which statements would be a lot more encouraging if there really was a significant oil shale program. Promising a glorious future and that there is no reason to worry is akin to those listed earlier this week that were promising us last year that by this time we would be back to paying $30 for a barrel of oil.
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Excellent advice about focusing on daily fluctuations at the expense of the big picture. This is a good link that I check daily:

This charts the price of crude oil futures for July 2006 delivery over five months. You can see clearly how the drop in prices over the last week fit into the big picture.

The word "enhanced" does not mean "increase", but it does connote and infer "improved". By using this term in conjunction with the word "reserves", Greenspan spins the facts so that increases in extraction rates are mentally congruent to "improved reserves". This is spin at its finest.

ALWAYS - repeat - ALWAYS parse Greenspan. He will put you to sleep with his tortuous elocutions in hopes of slipping one by you, but if you parse his words carefully, you can see what he is obfuscating.

Just do this in the section where he talks about inflation, for a grin....

Re: Oil Shale Extraction

"Both of which statements would be a lot more encouraging if there really was a significant oil shale program." Statements by Malcolm Wicks or anyone for that matter talking about oil shales for meeting future energy needs are irresponsible nonsense. At least the Canadian tars sands are in production, speaking of non-conventiona sources. But oil shales? This is a cruel hoax on the public.

From an article on Oil Shale at the World Energy Council:

There are two conventional approaches to oil shale processing. In one, the shale is fractured in-situ and heated to obtain gases and liquids by wells. The second is by mining, transporting, and heating the shale to about 450 degrees C, adding hydrogen to the resulting product, and disposing of and stabilising the waste. Both processes use considerable water. The total energy and water requirements together with environmental and monetary costs (to produce shale oil in significant quantities) have so far made production uneconomic. During and following the oil crisis of the 1970's, major oil companies, working on some of the richest oil shale deposits in the world in western United States, spent several billion dollars in various unsuccessful attempts to commercially extract shale oil.

More about the "in-situ" method from wikipedia:

Royal Dutch/Shell has been developing a method using electrical heating in Colorado, some 200 miles (320 km) west of Denver. A heating element is lowered into the well and allowed to heat the kerogen over time, slowly converting it into oils and gases, which are then pumped to the surface. This greatly reduces the footprint of extraction operations - to no more than a conventional oil well. It could also potentially extract more oil from a given area of land, as the wells can reach much deeper than surface strip-mines can.

Gven the energy required for heating and the requirments for hydrogen and water, oil shale will never be a factor in meeting our energy requirements. Here in the US, these shales are located here in the Rocky Mountain regions. With regard to the water requirement, as the climate changes it is expected that these regions will face permanent drought conditions within 20 years or so.

The best thing we can do with oil shale is forget about it - even when it is left in place underground and rock is squezing and heating it naturally, it only produces NON-COMMERCIAL amounts of oil!!! This is the source rock for oil, yes, but it takes time for it to percolate, just like coffee. And it takes MILES of it to burble oil out naturally to collect elsewhere.

This is the natural process for making oil. Speeding it up requires one of two things - massive energy inputs or massive time inputs. We have neither to spare.


For those interested in the impact of petrochemicals in the food supply, this has some numbers to look at. And some good books referenced for reading....

Michael, that chart has expired, the July contract is finished. The August one is available at but that will finish soon, and the next one is September at . They all show pretty much the same thing though. is the screen for selecting the month you want to view.

It also has a poll for whether readers are bullish or bearish on oil prices, i.e. whether they expect them to go up or down in the near future. It's about equal (as you would expect) but the bears have a slight edge.

Why does everyone pick on Greenspan?

He's such lovable old dude.

You just don't understand him.

Check out

I highly recommend Edward Tufte's work.

I had the good fortune to attend one of his seminars in Washington, DC, and it completely changed how I look at all kinds of data. I believe that single day really helped elevate my critical thinking to a higher level. I'm completely serious.

And his books are exquisite, truly works of art.

Still not the right "Dave"

Re: Still not the right "Dave"

I would prefer you not use my name "Dave" as established here on the Oil Drum but if that's your preference, I can't interfere. You could change it to "The Other Dave" or something. Otherwise, if you insist on using that name, please don't say anything I wouldn't say. 8)

Fair enough!

We Daves have to stick together...