DrumBeat: March 7, 2007
Posted by Leanan on March 7, 2007 - 10:04am
The Wide-Spread Use of Advanced Extraction Techniques are Killing the Mother of All Oil Fields...Ghawar’s obituary has already been written, but the Saudis have thus far prevented the appropriate authorities from entering the house to inspect the body. We have only second hand reports of her demise. Of these accounts, the most notable is investment banker Matthew Simmons’ book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. Simmons assembles a picture of declining Saudi production from publicly available technical reports written by Saudi-Aramco’s own reservoir engineers in recent decades. His portrayal of the situation is dire indeed. He claims that “When Saudi Arabia peaks (enters the unavoidable state of permanent production decline) the world, categorically, has peaked.” It looks like the 2006 numbers confirm Simmons’ 2005 prophecy.
The writers at the Oil Drum, a data driven oil analysis website, after assessing the production data from several independent reporting agencies, claim that Saudi production is down a whopping 8% in 2006 from 2005 numbers. The decline would have been closer to 14% without the addition of the Haradh III mega-project. They assert that Saudi Arabia has now officially peaked and that the pace of production decline there is likely to accelerate. Remember, Ghawar accounts for 60% of Saudi production.
Possible Rash Actions by New Congress Concern an Oil Industry Economist
Q: Everyone talks about "peak oil," the idea that the oil that is available to drill will start declining. Is that a problem?A: The problem is we actually know extremely little about how much oil is in the ground. And that is why we've had "peak oil" people since the 1880s saying we're going to run out of oil.
And they've been wrong. In the 1880s, they thought the only oil in the country was in the state of Pennsylvania, and once it ran out, we were out of oil.
Do you think gasoline prices are too high? Do you think illegal immigration is a problem? Well, get ready for more of both, because Mexico, the #3 supplier of imported fuel to the U.S., is spiraling into a quiet energy crisis that could interrupt our oil supplies, send shockwaves through our economy, and force a million or more Mexicans to migrate across our border.
Industries Urge EU to Reconsider Renewables Policy
European margarine, paper, wood, furniture and some chemical industries urged the European Union on Tuesday not to adopt a plan to introduce binding targets for renewable energy and biofuels.The industries are concerned about the potential impact "of current shortages and price increases of their raw material, as a result of the European Commission's narrow focus on targets for renewable energies," they said in a joint statement.
Skills shortage threatens to stall oil and gas boom
DUBAI — A significant skills shortage in the oil and gas industry is threatening to stall the oil and gas boom that is occurring. The industry has stretched its resources to breaking point, say consultants at Booz Allen Hamilton.
Proposed second nuclear plant is called dangerous and a burden
The Maryland Public Interest Research Group launched a grass-roots campaign yesterday to stop Constellation Energy from building a new nuclear reactor on the shores of Chesapeake Bay, saying the technology will burden ratepayers and provide a dangerous solution to the state's energy crisis.
2 NREL scientists take share of Dan David prize
Two solar-power innovators at the National Renewable Energy Laboratory in Golden will share this year's $1 million Dan David Future Prize with a NASA climate scientist, according to the prize's website.
Energy companies are proving the environmentalists right
All around the GTA, gas stations were running low on fuel. Many even had to turn people away as they ran out. This drove prices up and has screwed us consumers. If we don’t act now, the oil companies are going to take us for all we’re worth. Duping us with fake stories of "fires" and “refinement capacity reductions.” We may be stupid enough to become wholly dependent on buying gas as an essential part of our lives, but do they really think we are stupid enough to buy that supplies are low?
Indonesia: Minister says rising water threatens airport
State Minister for the Environment Rachmat Witoelar warned Tuesday that Jakarta's Soekarno-Hatta airport would be swamped by 2050 due to human-induced global warming."We will need to move the airport as it will be underwater that year because of rising sea levels. We will also say goodbye to Taman Impian Jaya Ancol and the Kelapa Gading housing complex," the minister said Tuesday.
Preserving finite energy sources for future generations
We are all painfully aware that our energy sources, such as oil and natural gas, are a finite resource that we as a society have neglectfully abused and taken for granted over the decades.
Romania to increase use of nuclear power
Romanian Prime Minister Calin Popescu Tariceanu called Tuesday for the building of two more nuclear reactors to be speeded up."Due to the world energy crisis and rising prices, nuclear energy is being reconsidered," said Tariceanu, adding that Romania's economy was growing rapidly and needed to diversify its energy resources.
Uganda: Fuel Supply Low in City
Fuel companies are grappling with reduced supplies of petroleum products, resulting from "logistical" problems in the supply chain on the Kenyan side. Shell Uganda Managing Director Ivan Kyayonka told Daily Monitor this week that there has been a general scarcity in the industry for over a week.
Portland striving to cut fuel consumption in half by 2030
Portland commissioners are expected to pass a resolution today that requires the city to adopt a goal of cutting oil and natural gas consumption in half by 2030 to head off predictions of a looming oil shortage.
North Sea under Fire from Peak Oil
The North Sea peaked more than eight years ago. And peak oil has disrupted the North Sea's oil production to the point that the UK is scrambling to exploit its vast reserves. But will they abandon their aging fields for greener arctic oil pastures?
Palm oil looks for new high on India, U.S. demand
Palm oil prices are holding on to last year's strong gains, despite a global flight from risky assets, and when industry analysts gather in Malaysia next week they are likely to say that the rally is far from over.Bullish demand from India to the United States and dry weather hurting supplies in Indonesia could push prices to new highs for the product widely used as a cooking oil but also for cosmetics, soaps and, increasingly, for fuel.
U.S. Iran Policy: It’s All About the Oil
When discussing “peak oil”, it is also important to mention that over the past 35 years, we have discovered just one gigantic oil field anywhere in the world. For sure, there have been some discoveries in different parts of the world, but only a single world-class oil-field has been discovered in over three decades; Kazakhstan’s Kashagan Oil Field in the Caspian Sea. This is despite all the technological achievements over the same period. In other words, unless we have been incredibly unlucky and there is indeed a jackpot waiting to be found, this is not a healthy sign.
Chinese Scientists Make Future Energy Suggestions
As the conventional petroleum shortage becomes increasingly acute and the crude oil prices keep soaring, the markets for non-conventional petroleum (referring only to extra-heavy oil, and the petroleum from oil sands and oil-shale) are expected to constantly expand, partly making up for the shortfall. Resources of coal and natural gas are relatively abundant in this country, and their conversion into the fuel driving transport vehicles is now technologically viable and could be competitive when prices of conventional fuels are at the high end of the range. During the period of the world's transition to a post-petroleum economy, increased use of coal and natural gas as a substitute of conventional fuel should be possible. Other optional substitutes include biomass-based ethanol, carbinol, dimethyl ether, bio-diesel, synthetic oil and hydrogen, which are also internationally seen as a direction for development. Equally significant are technological innovations with regard to transport vehicles. There is a need to develop energy-efficient vehicles, vehicles using substitute fuels or powered by electricity, as road transport is a most important part of the transport and communication industry. Rail transit system is a major approach for public transportation and a main way of energy conservation.
Sound waves turn natural gas into liquid
Worldwide, 100 billion cubic meters of natural gas is wasted every year. Now, the Denver-based company Swift LNG aims to turn that gas into a usable liquid fuel with a thermoacoustic natural gas liquefaction technology just licensed from Los Alamos National Laboratory.
Bank of America Announces $20 Billion Environmental Initiative
Bank of America Corporation announced today a $20 billion initiative to support the growth of environmentally sustainable business activity to address global climate change. Bank of America's ten-year initiative encourages development of environmentally sustainable business practices through lending, investing, philanthropy and the creation of new products and services.
Solar Energy Conversion Offers A Solution To Help Mitigate Global Warming
Solar energy has the power to reduce greenhouse gases and provide increased energy efficiency, says a scientist at the U.S. Department of Energy's Argonne National Laboratory, in a report published in the March issue of Physics Today.
Study: Renewable Energy, Efficiency Pay Off In Long Term
A study released Tuesday on energy said renewable energy and energy efficiency can buy enough time to create power sources of the future, without falling back on polluting programs of the past.
As warnings grow more dire, Nobelist emerges as leader
Steve Chu keeps up with all the latest news on climate change, and he knows it's bad.The Nobel-winning physicist can tell you the projected meltdown rates for the snowpacks of Tibet and the Sierra Nevada. Rivers drying up and millions of people on the move looking for a drink of water? That future, a fantasy just a few years ago, has entered the realm of the possible.
But Chu isn't just talking.
As head of Lawrence Berkeley National Laboratory, he is focusing all divisions of the most intellectually diverse of the U.S. Energy Department's national labs on a campaign to stand and fight.
Miliband outlines 'post-oil' future
The environment secretary David Miliband will today outline the case for a post-oil economy, arguing that the UK needs to move away from "oil dependence".
China abandons annual energy saving targets
China has abandoned annual energy saving targets because not all its efforts to boost efficiency will bear fruit immediately, but it is still sticking to a five-year goal, a top official said on Wednesday.
A switch to biofuels will not save the planet
Ethanol may sound like the kind of "friendly" energy the world has been waiting for. But for ethanol production to rise to the levels Mr Bush is hoping for, huge amounts of the world's remaining forests will have to be cut down and turned over to corn or sugar cane.
EU faces test in fight to curb climate change
European Union leaders will seek to make history this week with a new pact to cut greenhouse gas emissions, but a row over renewable energy threatens to taint the bloc's credentials in fighting climate change.
A Call to Action: Climate Change, extraction and energy production in the Western United States
When gas prices doubled in 2005 and never came back down it caused widespread concern about peak oil, and awareness that oil is not a reliable source of fuel into the future. The nation watched as Al Gore won two Oscars for his global warming documentary film, An Inconvenient Truth. The scientific community has verified that our energy and transportation habits accelerate global warming.
Massachusetts: Deep Green Resistance Gathering
From April 6-8, in Deerfield Massachusetts, join us for a weekend of exploring long range strategy, direct action, oppression, peak oil, natural living, and the deep questions of how to mend our hearts and sustain our spirits in these hard times. Good fun, great food, and the quiet woods also included.
No War for Oil, No Oil for War
Combine the strengths of the environmental and anti-war movements to defeat U.S. Middle East policy, end the Iraq War, and join the global community in the common struggle for a sustainable future.
Saudi Arabia mulls Dominican refinery
Saudi Aramco already has refineries in the United States, but Saudi officials see a Caribbean refinery as a means of accessing the U.S. market while avoiding the decades of environmental impact studies and other regulations needed to build a refinery in the United States, Nail Al-Jubeir, spokesman for the Saudi embassy in Washington, told The Associated Press by telephone.
Announcing the CERA News Center Archive
Cambridge Energy Research Associates (CERA) is introducing an information and news archive where readers can find current energy-related articles and media postings.Compiled articles cover topics such as energy security measures, oil-related economics and utility research. One archive citation by Industrial Manufacturing reveals that recent CERA research analysis suggests that the remaining global oil resource base is actually three times as large as the "Peak Oil" theory suggests.
Byron W. King: False Reporting of Peak Oil
As is the case with much of what gets published in The New York Times, some of the information in the article is true. But then again, to the well-trained and highly polished Peak Oil mind, the article has a lot of disinformation in it about what is the long-term state of the oil patch. In a not-so-subtle manner, the Times article appears to diminish the credibility of the Peak Oil argument. Specifically, the Times article focuses on allaying any Manhattanite fears of future scarcity of conventional oil by suggesting that "new technology" will locate and extract immense volumes of oil with which mankind will, to all intents and purposes, power its way into a brighter future. It is as if we can now all kick back, pop a beer, wipe the sweat from our collective brow, and say, "Whew, we dodged that Peak Oil bullet."
Uncertainties plague global gas industry
Growing nationalism in major gas producing countries, lack of progress on key pipeline projects in Asia and uncertainties surrounding gas-handling and internal transmission issues in China and India overall paint a disturbing picture for the global natural gas industry.
Chavez wants to prove that Venezuela — not Saudi Arabia — holds the largest oil reserves in the world.
Success derails biofuels bandwagon
A global, government policy-fuelled rush to produce biofuels is backfiring as it pushes up costs and makes the environmentally-friendly alternative fuel far less competitive.
Calls for OPEC-style gas cartel become louder
Gas exporting countries meeting in Doha in April will discuss forming an OPEC-like group Iran's oil minister Kazem Vazeri-Hamaneh says. This follows calls by Iranian leader Ayatollah Ali Khameni for Russia and other natural gas producers to establish a gas cartel.
The Disastrous Local and Global Impacts of Tropical Biofuel Production
As ADM, one of the world’s largest food companies, seeks to increase profits, the continuing push into the tropics by it and other biofuel producers will only accelerate a potential ecological catastrophe. Vast tracts of Malaysian and Indonesian forest have already been lost, and the increasing demand for palm oil for biodiesel will cause further losses of tropical forests in these and other equatorial countries.This deforestation will likely be devastating. And yet, despite the global push for biofuels, the potential damage – increased soil erosion, huge carbon dioxide emissions, biodiversity loss, and desertification – is largely being ignored.
Canada will stay top U.S. oil supplier for 20 years
Canada - which in 2005 replaced Saudi Arabia as the single-largest supplier of energy to the U.S. - will continue that position over at least the next two decades, thanks to the multi-billion dollar oilsands developments in Alberta.
Report: Oil sands costs up 55 percent
Capital costs per peak flowing barrel of Canada's oil sands are up 55 percent, squeezing returns on investments, a report released Tuesday said.
Like eternal sunshine or perpetual motion, a world beyond oil is something that sounds delightful but implausible. Society has become so addicted to the black stuff that the habit seems permanent. But if that turns out to be true then all the bold talk about tackling change means little. Technologies such as carbon capture and fuel efficiency may reduce the harm that oil use causes - but any gains will be wiped out by economic growth around the world.
Reserves are depleted, except in Russia
BP suffered a one billion barrel decline in its oil and gas reserves last year, according to figures in its annual report, a loss only partially made up by its Russian arm, the joint venture TNK-BP which was the only oil province in which BP added substantial fuel to its tank.
Has the theory of peak oil peaked?
Sure looks that way from the available evidence. It's comforting that, yet again, the doom and gloom crowd gets it wrong. Now, onto dealing with carbon emissions ...
World Oil Outlook: Markets Tighten, Consumption To Increase
World oil markets have tightened in recent weeks in response to a series of production cuts by members of OPEC, as well as the return of cold winter weather in North America. Although some OPEC members advocated additional cuts when prices had not firmed by January, Saudi Arabia noted that oil inventories had been falling.
In California, It Pays To Go Green
The builders at a California subdivision aren't just putting up homes; they're building little power plants. Solar panels are standard on every roof.
Contact
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The author of this article, http://earthobservatory.nasa.gov/Newsroom/NasaNews/2007/2007030524470.html is what I dislike about Global warming advocates as opposed to global warming scholars. A global warming advocate wrote the article and professional climate specialists did the study. The study is not connected to global warming, although it is connected to possible climate change.
The glacier does not drain 8% of the ice sheet into the ocean, a little misleading. The ice stream is similar to a river and the drainage basin is similar to a rivers watershed.
35 billion tons of ice is equivalent 7cubic miles of ice and if that 7 cubic miles is distributed over an area the size of the US it would be about 4 mill-meters thick 5/32". Is there an annual snowfall equivalent to 4 mm of water?
If the movement of this glacier were to break loose or carry enough bedrock with it, it could provide a means for the free flow of an enormous amount of liquid water to the ocean and this could effect climate change by altering the ocean currents.
The East Antarctic Ice Sheet is about the size of the continental USA. According to this the Recovery Glacier ice stream drains about 8% of the East Antarctic Ice Sheet. The 35 billion tons of ice is thus equivalent to 50 mm of water per year (4mm x 12.5) in the drainage area.
This article indicates that average annual snowfall in the central area of the East Antarctic Ice Sheet is about 50 mm per year, water equivalent.
Poor wording could indeed allow readers to believe the area drained, rather than the entire ice sheet, is as large as the continental USA.
Thanks for the link: I shall say it again that's what laziness gets you. I had the data right beside me. Antarctica, the entire continent is 5.4 million sq. miles.
4mm was based on 3 million sq miles. Should have been about 240 thousand. Need to read slower.
I realise this comment is misplaced. However, a huge possible find needs to be known. I would appreciate any feedback on this.
http://www.rigzone.com/news/article.asp?a_id=42208
I have a very vested interest in an oil company exploring in this basin.
The company I am concerned with is called verenex energy. I own a sizable amount of stock in this. If this discovery is true, it will add some 10% to the world's known oil reserves. In short, it is a potential Ghawar (in that league anyway). I agree completely with the concerns about resource depletion. That's why I dumped a bunch of money into this young company in the first place. I've been in a cold sweat since I first read the anouncement. The next few days will tell the tale.
Hoping for a stay of execution on the energy front.
Best,
Jim
Hello James_Benison,
Thxs for this info. If 100 billion barrels is truly recoverable.....to the shores of Tripoli......expect US Marines to bring freedom and democracy to this geography soon.
EDIT: I am not a geologist, but I hope this PDF link helps:
http://energy.cr.usgs.gov/WEcont/regions/reg2/p2/tps/AU/au205431.pdf
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Dear Sir,
I am every bit as skeptical as you are. One glaring omission in this report is whether these "100 billion barrels" are proven, probable, possible, or original oil in place. Secondly, given the language barrier, questions arise as to whether the anouncement might have skipped a decimal point or two (ie million--billion etc...)
In terms of the scope of the discovery, the Libyan National Oil Company stated today that: "This may just increase the availability of oil worldwide which may eventually have an impact on oil prices." That would suggest to me that the discovery is major. My modus operandi is to simply define what is the truth.....not to create it.
Best,
Jim
"RESERVES ARE BELIEVED TO BE WELL OVER 100 BILLION BARRELS, POSSIBLY THE LARGEST IN AFRICA."
This does not need to be played up by me. This is HUGE!!! I'm not just working this for a stock price. The fields I'm vested in are probably 100km away from this discovery, albiet in the same basin. This discovery possibly holds global significance.
I think you misread the article - Libya's reserves are estimated to be 100 billion barrels, not this find alone. And at current consumption rates of 85 million barrels per day, 100 billion barrels is good for about 1176 days. That's right, finding 100 billion barrels means about 3 more years of living like we do right now, in terms of gross amounts. Just because a planet is finite doesn't mean it isn't large.
Respectfully, I must disgree, but I see your point.
Estimated resrves for Libya are/were approximately 39 billion barrels. You are correct in pointing out that the 100 billion barrel figure could include previous discoveries. Unfortunatelty, it is unclear at this point whether the recent Ghadames disovery is an addition to currently known reserves or an estimate of new reserves that have been recently discovered. Regardless, the size and scope of the recent Ghadames discovery will at the very least, if proven to be true, double Libya's reserves. The actual figure could be much more.
On another note,
given the current depletion rate of the world's oil fields, I do not suggest that new discoveries will offset current declines. Simply because I offer evidence that new production will be seen in the future does not prove that the earth will be able to satiate the needs of the global population.
If you want to stay in the scientific camp, argument against arguments (like you do in the later part of your message), not against vaguely identified group of people (global warming advocates).
I know many scientifically trained anti-gw advocates (against continued severe global warming as a trend, not as fact).
Then again, we must remember that the daily discussion and the hearts and minds of people isn't won over by scientific facts, although decisions on what to advocate should be based on those.
http://www.cnbc.com/id/15840232?video=202857707
yergin on CNBC
The debunkers are working hard these days
Once again, in the SAME breath, Yergin says that there is lots of oil, only we have to pay more for it. End of cheap oil is not being disputed.
Couple that with the "receding horizons" posted on below, and you can get very frustrated with how the facts are being presented.
I've got the same problem. I go to the store, there is plenty of stuff for me to buy but I just can't afford all of it. Looks like we need to work on the peak money problem.
street, just get yourself another credit card. That's what everyone else does.
...and remember: it isn't how much you have in the bank or your current income that is important. It's how much you will have once you win the lottery.
'Dollar discount' is something which occurs to me could explain a bit in terms of oil pricing, better than the oft stated 'risk premium.'
Maybe the 'natural' price of oil is $40 - that is, 40 'real' dollars, but since no one exporting oil today honestly expects 40 dollars to be worth anywhere near that amount in the future, a dollar discount applies.
I realize this is just a thrown out idea, utterly casual, but it certainly changes the meaning of risk premium to something that the exporters take into account, and not the America-centric commentators who come up with the buzz words which now pass for informed discussion.
And it just might provide a reason why the price of oil stays so stubbornly high at around $60, without referencing either economic conditions or peak oil.
There is a decades old blood-pact between the US and KSA: the latter accepts only dollars for its oil and the former guarantees that the dollar will keep its position as the main global reserve currency, i.e. it maintains its global purchasing power at a reasonable level. This is also the reason why KSA's currency, the Saudi riyal, is hard pegged to the US dollar.
There is a symbiotic relationship between the US and KSA: oil powers America and backs the dollar (much as gold used to in the past) and America keeps the Sauds in power via its military might. Just about everything else is derived.
Peak Oil is, therefore, anathema to both.
No question about KSA - but while a major market player, they aren't the only one. For example, what is the risk premium that the Norwegians are willing to accept? The Russians? The Iranians (a special case, admittedly)? Algeria? Libya? Various former Soviet republics? Or is it noteworthy that none of those exporters are really that American oriented?
If you are such a country you fall into line with KSA because oil is fungible and:
a) They are the swing producer
b) They have huge reserves and can outlast you
They can ruin you economically by opening the taps to maximum.
However, if those conditions no longer apply, (i.e. Peak Saudi Oil) the world is a VERY different place. Twilight in the Desert is equivalent to Twilight of the Dollar, Twilight of America, Twilight of the Sauds. Unacceptable - period.
The US is sitting on top of Iraq, ~#3 in global oil reserves and just a hop skip and jump from Iran, itself #2.
Why?
Because the US way of life (=dollar supremacy) is non-negotiable. If KSA cannot guarantee it, then Iraq and Iran will. Willingly or not.
It's that simple.
"It's that simple."
But the devil is in the details. Those Iranians don't seem to be interested in cooperating. And the Iraqis are quite obviously opposed.
Hell: What's simple is that currently you are getting your butt kicked by a bunch of guys running around the desert with no tanks, no planes, no military hardware of any kind.
You misunderstand. The connection is that simple.
The supreme stupidity of continuing such a scheme comes from the same team that brought us the response to Katrina. Pathetic, incompetent failures with grand designs for re-shaping the Middle East instead of re-shaping the US energy regime.
And no PXs, no coolers stocked with chilled drinks, no ice cream makers, no private accomodations, no 3 squares a day, no pension or education funding, limited medical treatment, no security for spouse and children and any other extended family members, no protection from airstrikes and random "collateral damage."
The only thing they do have is a fierce determination to remove the occupation army from their lands. This is the same motivation that drve the maquis in France, the FLN in Algeria, the colonial rebels in 18th century New England and in countless other conflicts.
Americans need to study their own history and reflect on how a rag tag band of colonial rebels defeated the worlds only superpower.
New: You left out the Vietnamese. The home field advantage is often huge in these conflicts.
Yup. For the obvious reason: the natives have nowhere else to go, while the occupiers do.
It seems to me that Tim McVeigh came back from the First Gulf War with the same impression. He seemed to empathize with the plight of the occupied and implied that collateral damage was a acceptable in the larger scope. I wonder how many Tim McVeighs will be returning from this engagement?
THAT ought to bring out the gold bugs!
Hopefully not, but my attempt was simply to reframe the idea of risk premium - maybe the true risk premium is that dollars will be worth less into the future - obviously, 'worth' is an open invitation to the heavy metal crowd (well, maybe not that heavy), but it wasn't really meant that way.
For example, high quality Russian weapons seem to be selling pretty well, and Japanese consumer electronics are still considered the finest, and it remains hard to beat the appeal of European luxury cars - are the various oil export magnates weighing their future with such things in mind, or do they think US T-bills remain their best bet?
What risk premium are we really talking about it, in the eyes of the oil exporters? Apart from being invaded, of course, though these days, invading an oil exporter seems like a good way to reduce oil exports, not increase them.
The currency risk can be hedged in the market to almost any other currency, if they desired. They don't have to take any single currency risk. And that kind of hedge isn't going to produce a $40/$60 spread.
Yes they could - but at this time, not very well, as the dollar does maintain a world reserve currency function. Swiss francs are pretty solid, for example, but being tied to physical reserves, they can't simply be printed to match demand. The euro is much less constrained, but the Bundesbank component of the currency system hates and fears inflation.
Unfortunately, likely because the idea isn't really that good, there wasn't much discussion looking at the world through the eyes of various oil exporters - we are pretty much fixed in our views as oil consumers, without recognizing the exporters' framework.
Probably the best way to judge the "real" worth of the US dollar is against a barrel of oil.
In 1960 it took $1 to buy a barrel, today it takes $60. That's a crude measure of the drop in the dollar's purchasing power, but it is better than comparing it against gold or other currencies. After all, what better measure of "worth" than energy?
Thus, if the dollar devalues too much against oil, it could lose its global reserve status. The higher the dollar price of oil, the worse for the US currency and the US economy, from a monetary perspective alone.
But in 1960, the US was still using silver for its coins - 90% silver - which means that using the idea that a silver dollar weighed roughly one ounce, a barrel of oil today is worth roughly 15 dollars measured by those theoretically uninflated dollars.
Or there is no coupling between the price of silver and the price of oil, of course.
The US went completely off the gold standard in 1971. In any case, money in circulation (coins or even dollar bills) was and is a tiny portion of total money supply.
Try another "hard" asset, the average house. It, too, has gone up tremendously in dollar price. It is not that the house has gotten more "valuable" - after all it is more or less the same thing: wood, tiles, etc. It's the dollar that has depreciated against it.
In 1963 the median price of a house in the US was $17.000. Today it is $240.000.
For what it is worth, a standard bag [$1000 face] of circulated pre 1965 U.S. silver halves, quarters and dimes contains 715 ounces of silver.
The silver dollar contains a wee bit more silver than even the uncirculated smaller coins which were based on $1.39 per ounce of silver. The silver dollar contained the full silver content of a dollar which was officially pegged at $1.29 per ounce of silver.
I think the weight of U.S. silver coinage originally had something to do with the Spanish pieces of eight with the U.S. dollar weighing slightly less ... which resulted in the U.S. Trade Dollar a slightly heavier coin that was mostly exported to China.
By 1965 when the mint stopped making 90 percent coins for cirulation, the dollar had already been dramatically debased, it just took a while to burn through the U.S. stockpiles of silver.
Your main point is well taken, the dollar ain't what it used to be.
expat,
It seems, as pointed out in one of Marc Fabers's recent letters, that higher oil prices have supported higher asset prices due perhaps to the propensity of certain oil exporters to save their oil proceeds. The only part that they would have to actively hedge via, say, out of the money puts, is much smaller than their total financial reserves.
I've started a wikipedia article on the Hubbert Linearization:
http://en.wikipedia.org/wiki/Hubbert_Linearization
any help is welcomed.
It might be good for TOD to consider a counterweight to CERA's new information news archive. If played well, that could be a huge attention booster.
You can just follow their model and categories, and slam them down one by one. Think of it as getting a look in their kitchen, and their recipes.
A thorough HL inventory, laid out in simple terms, would be a very useful addition.
A while back, I put this together: Links to tutorial material on Hubbert Linearization. It might be useful.
Khebab, Could you explain the concept of logistic growth rate? On first reading, I was thinking when I first saw the term that logistic was a synonym for logarithmic, but I don't think that is actually the case. My dictionary isn't much help.
well, I called it "logistic growth rate" to mark the difference with an exponential growth rate.
If you have an exponential growth, you get the following differential equation:
(dQ/dt)/Q= r
r is the usual constant exponential growth rate.
In the logistic case, r is linearly dependent on the cumulative production:
r= K(1-Q/URR)
so a the beginning, the growth will be equivalent to a exponential growth with a growth rate of K that will slow down to K/2 at peak production to then decrease to zero.
Instead of calling P "data" in the wiki intro, you should call it "extraction rate"
Also, I think it would be fair to declare some intial assumptions, namely, that extraction behavior is assumed to be of a monotonic and continuous logistic kind of behavior with no radical changes in extraction technology along the way.
Human beings can behave in different ways. It is the profit motive of our Adam Smithian society coupled with our bounded intelligence which probably creates the logistic shaped driving function. Had political regulators stepped in and shut down production at arbitrary times in the lower 48 for example, you wouldn't have had the same extraction behavior. It is the open market system and expanding growth in demand which drove it to be the way it was in the lower 48. Hubbert was merely making an observation about human behavior and how it is bounded by geological and technological limits.
thanks khebab. i'll keep an eye on it and see if it tells me what i need to know to start doing some of my own. i haven't had to think about this kind of maths for a long time - now my head hurts.
where do you get the really long data series that you need for HL? BP goes back to 1965 but you obviously are using even more than that? eg. especially for OPEC members?
cheers
phil.
You can get long data series for the US on the EIA website.
Also, I have a public spreadsheet that contains most of the countries (1860-2005):
http://www.editgrid.com/user/graphoilogy/Roberto
The Law of Receding Horizons.
As per the key posts above, a trend is shaping up that was long coming, and could be far more significant than usually acknowledged.
We can call this the Law of Receding Horizons.
Both ethanol (US version) and the tarsands suffer from rapidly increasing costs. The more you want to produce, the more expensive it gets to do that. This is an apparent contradiction of multiple economic laws. But it's no less true.
Has anyone ever charted the cost trends in both industries? Say, in the past ten years. It could be very illuminating.
NB: there may be a connection with the rate of expansion, but that doesn't seem to be 100% proven.
If oil prices rise, both products may SEEM to become more economically attractive, BUT then we notice that their production costs will rise accordingly. Receding horizons.
Deffeyes talks about this with regards to oilshale: whenever it starts to look viable, it no longer is.
The fact that for many people food will recede on the horizon as well, is the bitterest of all this, of course.
For now though, it might be good to see if there is data that would allow for the definition of the Law of Receding Horizons.
For example: At what grain price does the ethanol industry collapse? No, supply and demand will NOT take care of this. Ask the Mexican government. They have sweaty palms as we speak.
There are tipping points in this model. It's just a matter of figuring out where they are. But there can be no doubt that neither ethanol nor bitumen have infinite price flexibility.
Like reaching the pot of gold at the end of the rainbow.
Sorry for the off topic, but I couldn't resist myself!
I saw this yesterday and had to get out and take a picture, I think is the closest rainbow I have ever seen.
The closest one I saw was on a film of oil,
floating on a puddle of water :-)
The energy of the future...and always will be.
My point exactly. A much more realistic, and close, possibility, than people seem to think. Both ethanol and bitumen may be on the doorstep towards pricing themselves out of the market.
Forget about supply and demand, that doesn't do it.
And now my question is, obviously, how do we quantify that?
As a first primer, I'd say you can expect severe civil unrest in quite a few parts of the world, not the least of which is directly south from here, if grain prices double again in 2007. Not such a crazy assumption (neither of the two).
Also: tarsands projected investments stand at some $150 billion. That can no more be doubled than grain prices without system breakdown.
There are a few exceptions to this - both Nazi Germany and South Africa did not really think in purely economic terms when creating their 'oil industry.'
I would assume that this will remain true in terms of such resources as oil shale - they likely will be exploited when there is no other alternative for the entity that possesses them. Economics are not the only measure of why people do things.
War has its own accounting system, and it does not necessarily involve the invisible hand - look at Europe over a couple of thousand years.
1/ Right now, well, except for ridiculous levels of subsidies (which are not endless either), it's still private capital that drives both industries, and it seeks profit. Well, so did Hitler, but not in direct sales.
2/ We're still thinking and arguing from an energy surplus point of view, it's all we've ever known. Once that is gone, producing energy with negative EROI will be a thing of the past as well.
That said, on a for-profit basis, I see a real danger of these alternative energy forms killing themselves, and soon too.
I'm just looking for the mechanism that can predict when that will happen.
Tarsands costs went up 55% on one year, and it's not the first year a similar rise has happened.
Like 'complexity,' the idea of 'negative EROEI' is a bit deceptive, I think, though you have talked about surplus energy, which is certainly something else.
For example, I can easily imagine solar powered stripper wells in many regions of the U.S. in the future (Pennsylvania, for example). It is quite possible that they would have a negative EROI, but since the oil is being used for lubrication or to make tires, and not energy per se, there is no 'EROEI' in the equation, as the value of the lubricants is higher than the value of energy used to acquire them.
This is also what makes so much of the American based debates somewhat incomprehensible in Germany - if you can't use a car (surplus energy), why not take the train? Ride a bicycle? Walk? Except in America, in most places, you can't (weather doesn't count - Germany is no less cold or hot than most of America, in general), and Americans don't want to.
And that is the crux - over most of human existence, there really hasn't been that much in the way of surplus energy. A restraint which really didn't play much role in the growth of America's society, especially since the later half of the nineteenth century.
There is no question that something like biodiesel will be part of the mix of farming in the future - 100 years ago, the horses ate part of the crop, and in the future, the machines will. A balance will be struck again. And the poor will starve, just like they do today.
In a sense, what is receding into the future is any attempt to keep suburbia functioning - but oil shale rock was apparently used in Utah 100 years ago to power locomotives - I'm pretty sure that such surplus energy will remain 'economical' - it just won't resemble what Americans think is normal life.
Germany is no less cold or hot than most of America, in general
Sure it is.
Ever been to Atlanta in the summer, or Minneapolis in the winter?
In the 1996 Summer Olympics in Atlanta, there were many members of African athletics teams astonished at the heat and humidity.
January Average:
Minneapolis, -5.6/-15.6 C
Berlin, 2.0/-3.0
July average:
Atlanta, 31.7/21.7 C
Munich, 23.0/12.0 C
The humidity is horrible in Atlanta and almost all the South in the summer, and much of the use of air conditioning is for dehumidification.
I won't argue that Germany as a whole is more energy efficient and aware than the USA, to its credit, but there are intrinsic geographical differences as well as attitude differences.
The Gulf Stream makes a very big and free air conditioner.
Even in southern Canada the humidity can be cruel.
Here is an example of averages - Richmond VA and San Francisco CA have about the same average precipitation, if memory from an old meteorology class is still correct. However, San Francisco never has hurricanes, and rarely has snow, and in Richmond, fog isn't all that common. As a matter of fact, the weather is very different, except for average precipitation (and if flawed memory is right, the temperatures are also similar - as averages).
I grew up in Northern Virginia (and on vacation a couple of time, it was interesting to note how New Smyrna, Florida was cooler and less humid than where I lived in August), and last summer, the weather in Northern Virginia was definitely hotter and more humid than summer around Karlruhe - but then, 100 degree F isn't exactly rare here, and neither is fairly high humidity. Some of the fairly major crops harvested here include apples, tobacco, and corn - just like in Virginia. Even the mountains are pretty similar.
America's extremes are much larger than Germany's, no question, and there is no argument about New Orleans or Winnipeg or Phoenix being far outside of anything considered normal in Germany (though not Europe) - but averages aren't necessarily the best measure. I have experienced a couple of weeks at -20 centigrade at a stretch here, as well as a couple of weeks over 40 centigrade - just like where I grew up. And yes, I have been to Atlanta in the summer (on a motorcycle, several times), which didn't strike me as anything but normal - though my experience of North American winter has been limited to the East Coast and Denver.
And these days, the averages are no longer functioning well in Germany - last August was the coldest ever recorded, and the winter was by far the warmest.
What is really different is the amount of light in the summer and winter - essentially, Germany is farther north than all of the U.S. except Alaska. I have been sunburned in Florida, and in Virginia - but nothing compared to the sunburn I got at Lake Constance in June, as the sun didn't set until much later than expected - it was a real lesson in practical orbital mechanics.
I might add, the one major difference in the summer is that the temperature does generally sink at night to something acceptable - the sort of awful 85 degree F nights you get in Virginia for days at a stretch are not really known here.
"At what grain price does the ethanol industry collapse? No, supply and demand will NOT take care of this. Ask the Mexican government. They have sweaty palms as we speak."
I'd love to see a good workup of this also, it must be out somewhere.
Will depend on the price of gas.
I ballpark with $2.50-3.00 gas, the max for corn/bu around 4.50-5.00. With current yields around 2.2 gal etoh/bu, prices much above $5 corn will make corn cost more than the gas is worth. But a workup including all the costs and subsidies would be great.
I don't believe that the ethanol industry can collapse in the US because its use is mandated in many states as a gasoline oxygenator. But soon enough, the folly of using corn will cause more movement to sugar beets instead.
I didn't mean to imply that the industry was to collapse, at least not soon.
Rather, the price of corn will rise with gas and is constrained by it at present. I'd like to see an in depth analysis, even a graphical format would be great, one that incorporates the present variables of corn costs and subsidies.
I am slowly coming to the conclusion that unless subsidies are removed, or legislation curtailing the problem enacted, corn etoh is here for long while. We are developing quite an industry and physical plant for corn etoh, I don't know if it could shift to beet that easy. Plus, the market for sugar beet is still granulated sugar. At present, beet growers get about 2x for table sugar as they might for etoh. Could quickly change though. That higher price is based on table sugar subsidy at .18/lb, which cane growers want.
I have seen a simple graph which plots the ethanol price against corn prices. A straight line is used to determine profitability. (Above the line=profit; below the line=loss) With ethanol prices in the current range, $4.75-$5 corn negates any profit. A couple months ago, I saw a 2cent/gall. ethanol profit stated (when gas prices were low which is their biggest fear). This graph is well known to the ethanol industry, although it doesn't account for farm fuel costs, fertilizers, seed, pesticides/herbicides, and natural gas costs at the distilleries. I do believe this industry will be showing diminishing returns as early as next year which could threaten abandonment and failure unless the government intervenes (again).
"This is an apparent contradiction of multiple economic laws." ???
On the contrary, this just confirms a basic economic law that costs increase as production goes up. Combine that with the EROI close to 1 for ethanol, and it is easy to see that corn ethanol will never have a price advantage over oil. If tar sands have an EROI between 3 and 7, then the current deposits will become more profitable as the price of oil goes up. But as the industry tries to increase production, it will get into lower quality, lower EROI deposits and eventually reach a point where additional production is not profitable.
1/ Mass production contradicts your statement that costs increase as production goes up. The cost per unit should go down, as predicted by economic law. But that doesn't happen here.
2/ You miss the receding horizon point: it's not lower quality or EROI, it's costs rising just as you think you can make a profit, even though quality and basic EROI are still the same.
It's perhaps a bit like driving a car: fuel efficiency may be nice at 50-70 m/h, but when you go over 75 m/h, it goes awfully astray. You meet a resistance that was not there at a lower pace.
Regarding production costs per item should decrease, with ethanol, there's also the law of supply and demand regarding corn. Sure, the capital costs per unit of ethanol might be lower for a large factory than a small one, but the many refineries competing for feedstock is driving up the base price of the unit. As well, energy is needed to make ethanol, and ... do I need to address that point?
Regarding the tarsands, it's similar - one needs water and an energy source, and as well, there's the law of supply and demand, both with the energy sources (currently nat. gas), but also for the steel and skilled labor to produce the capital upgrades. As well, just as with oil, the cheap stuff goes first. Currently the giant harvesting trucks will have to move further out to collect tar sand, which takes more fuel, and takes more time to move there and back, so one needs even more capital upgrades. As well, I'm sure some areas have more tar than others, and guess which ones got hit first.
"Mass production contradicts your statement that costs increase as production goes up. The cost per unit should go down, as predicted by economic law."
"You miss the receding horizon point: it's not lower quality or EROI, it's costs rising just as you think you can make a profit, even though quality and basic EROI are still the same"
At the margin, i.e. the last increment of production, costs are always rising. A rational producer sets the production level past the point of maximum efficiencies of scale, to the point at which the next increment of production would lose money. As prices increase, less efficient producers enter the market until there are no more that can make a profit. This is basic Econ 1 stuff.
Costs and EROI are not the same thing, but they have a very close relationship if most of your costs are related to the use of fossil fuels. If your EROI is good, then most of your costs are not directly related to fossil fuel costs. In that case, your revenues for your oil substitute will increase more than your costs when the price of oil goes up. I haven't seen Encana's balance sheet, but I suspect they are doing OK in spite of their whining. Like any business, they are competing for limited amounts of skilled labor, heavy equipment and natural gas. The more they try to hire, the more their marginal cost is. This will limit the extent that they can profitably expand production.
Cost go down if you can build a large factory to replace a number of smaller plants because the fixed overhead is split between more units.
However cost go up if you are trying to build a number of competing plants as you have to compete for labour, steel, etc and everyone feels free to raise prices against you.
I've noticed that Shell has been using $30 to $35 a barrel as their projected cost for oil shale development for at least 5 years. Perhaps when they calculated this in 2002, they really could have produced it for $35. Of course, oil was $25 at the time. Now that oil, and gas, and coal, and steel are all up considerably, how do they still maintain $35 as the cost to develop oil shale? My hunch is that when oil is $25, it will take at least $40 to develop oil shale (assuming the 2002 prediction of $30-35 was optimistic). When oil is $60, it will take at least $75 to develop oil shale, and when oil is $100, it will cost at least $110 to develop oil shale.
Oil shale costs are highly dependent on coal. If coal prices remained low while oil increased, then it would conceivably be possible to make a profit on shale even with a very low EROI (probably less than one). However, coal prices tend to go up when oil goes up. http://www.casperstartribune.net/articles/2006/01/16/news/wyoming/e0f61f...
Leanan, great stuff(as always) The Bryon King article you mention is great primer for a flat-lander Ag guy like me.
Thanks,
Leanan...I think you are really a human/machine hybrid...the way you pump out the news is amazing.
There's more news over at TOD:Canada on the Round-Up.
Agree on the King article. Good piece on OOIP, porosity, permeablity and debunking of myths and the NYT article.
My message2
Is this your way of bookmarking threads?
My message2
Holy Crap Batman. 15.8 million barrel drop in inventories!
Third week in a row of 10 million plus!!
Summary of Weekly Petroleum Data for the Week Ending March 2, 2007
Read across as 3/2/07,2/23/07,2/23/06
Total Stocks (Excl SPR) (7)984.6 1,000.4 1,038.6 -1.6 -5.2
Crude Oil in SPR (11) 688.6 688.6 684.8 0.0 0.6
Total Stocks (Incl SPR) (7) 1,673.2 1,689.0 1,723.4 -0.9 -2.9
Scary drawdown maybe a bit mitigated by the Houston Channel being slowed down due to fog.... MSM don't worry as tremendous amounts of new supply just around the bend! Total Stocks now 5.7% below a year ago.
Just a reminder on net oil exports.
Even if world oil production stays flat, we will see declining net oil exports, because of rising consumption in exporting countries.
But we are seeing a combination of declining production (in aggregate) by the top exporters combined with rapidly rising consumption. This means rapidly declining oil exports.
Talked to each of my four sons who commute around the Houston area early each morning. They have not seen any fog here the previous week.
It's not that kind of fog.
What kind of "fog" is it then, if it's not "that" kind of fog?
It's a mental fog that infects EIA employees brains. Also known as "blowing smoke".
Rumor has it that it has spread beyond EIA to CERA and IEA.
OMG...it's the acronymic flu.
Old soviet era type "fog" - Don't ask too many questions you might spook the herd.
fog of oil
I live in southeast Houston, and I don't remember any fog either. Maybe there was some other kind of problem at the ship channel.
The EIA numbers are very good news for US health, because millions of people are going to be walking and using bicycles to get around.
A glimpse of our future, the WSJ article on forced energy conservation in Africa: http://www.energybulletin.net/22775.html
My continuing prediction, you have two choices: (1) Voluntarily reduce your consumption now or (2) You will be forced to reduce your consumption in perhaps the very near future.
Yeah your right I'm starting to think a little more about that fancy knee replacement they featured in the WSJ yesterday. Imports down close to 1.0 million/bpd in the last 2 weeks. What is the spin explanation on that? Would sure like to see a chart on whats going on with those nums
Sorry made a mistake inventories 2007 vs 2006 down 5.2% vs 5.7%
If memory serves, it turned out that the Houston ship channel fog was kind of a non-issue last time. In any case, even if we had zero drawdown in crude oil inventories, the product drawdown was huge.
As I have said about ten thousand times since January, 2006, to me the math is--and remains--clear, we have a rapidly developing net petroleum export crisis.
EXACTLY what I was thinking about that excuse.
The last time they said it was the fog fault, they added that 2 weeks after the drop, the crude stocks would rise. It didn't happen, it was in november I think..
And that export crisis doesn't currently include the ugliness of the "new world oil order" (excellent transcript on Financial Sense for 2 Saturdays ago), where oil producing countries are nationalizing their resources and they are none too friendly to us.
The speakers expect the export crisis due to nationalization and withholding of energy resources to have a major impact on the US even before the ramifications of peak oil are truly awful. They think it will be a crisis by the time the presidential elections roll around, and they use Gazprom and its energy issues with Europe/Ukraine as a prime example.
So in addition to an export led crisis from declining production and increasing internal demand, we could get screwed much sooner than even the most "doomer" amongst us believes.
The chances of an export led crisis probably approach 100%, especially when you throw in the geopolitics. I am truly worried and can't get that solar PV installed fast enough. I figure we could help feed a few people from our orchards and vege gardens, but they need to help us compost -- no matter how disgusting they think it is.
Another thing I keep wondering about is all of these dogs. Now, this isn't intended to piss any dog lovers off. But where we are, lots of the welfare folks own 5 to 10 dogs. When one dies of heartworms or some tropical infection because they don't take care of them, they just go get a few more. I wonder how they are going to feed these animals when they likely won't be able to feed themselves when things get really bad??? Or worse....
Not exactly. From 02/16 to 02/23, it was "only" 8,877 mbpd less. But it is the 5th week in a row that total oil products stocks excl. spr go down of 10mbpd or more.
If you look at the imports for the current week, not the 4 week average, there was a significant drop in crude imports and conventional gasoline imports. Conventional gasoline dropped from 0.409 a week ago to 0.219 and crude oil dropped from 9.522 a week ago to 8.872. Seems like an awfully steep drop from simply increasing consumption in oil producing countries.
The "peak oil crackpots" comment by the oil company mouthpiece is classic. I have not researched the origins of the "peak oil wackos", however it is my understanding that if there were many of them in the 1880s, they died out to a certain extent and by the 1950s there were so few to be found that Hubbert's views were extremely unpopular when he presented them. Fast forward to the 80s and the gang grew, now in 2007 it is a pretty full room. She makes it sound as if for the last 125 years there has been this fraternity of peak oil wackos meeting at some lodge somewhere.
This is, IMO, an attempt to ward off punitive taxes. I actually agree that we should not tax energy production (I'm in the business), but I think that we should tax energy consumption to fund Social Security/Medicare.
The problem is that ExxonMobil, et al, are trying to ward off higher taxes by telling us that we have trillions and trillions of barrels of oil. In other words, go ahead and buy the Hummer and the McMansion. Formerly middle and upper income Americans are not going to be happy campers when they are kicked out of the suburban homes and their SUV's are repossessed.
Any idea how much the houston shipping channel delay contributes to this?
I don't know, but as I noted up the thread, last time the ship channel thing turned out to be pretty minor.
A key macro point: three of the four top suppliers of crude oil to the US--Mexico; Saudi Arabia and Venezuela--are showing lower production, and thus much lower oil exports.
Remember, Pemex is canceling outright and/or reducing crude oil deliveries to refineries on the Gulf Coast.
I think that we may be able to bid the price up enough to get our Total Petroleum Imports up, but I think that it will be much tougher than last time, when we were bidding against Africa. This time, it's the EU and China.
The problem is that the US Personal Saving Rate has been negative since 5/05. We can't keep going into debt forever. If I am correct that $3 gasoline will soon be a fond memory, the suburban meltdown is only going to accelerate.
The DOE doesn't count imports until they are actually offloaded. Therefore even though the Ship Channel was cleared of a shipping backlog, that delay may have caused an offloading backup further upstream.
While I have no statitics to support my position, I believe that oil imports at the most should have been at about 9.4 mbpd (perhaps less), as compared to reported figures of 8.85 mbpd. So optimistically we have a delay of 4 million barrels.
I'm further guessing that, due to reports that some gasoline shipments were re-routed to Canada, that the gasoline import figure is about right - although possibly also depressed by the same problem above by a million barrels.
right on westexas -- tax energy consumption, and tax it hard to pay for the "war." Any general consumption tax will just be grabbed by corrupt politicians. Congress must make proceeds of the tax specific to funding military and veterans' hospitals and health programs (not Medicare) and to paying the $trillion$ that are being spent on the war.
If war brings "us" freedom, and "we" value freedom, then all of us should be paying for this directly -- and suffering accordingly. As the War Party is fond of saying, "freedom is not free."
Middle class will not be moved out of their McMansions -- but they might need to move in together to make the payments. And they might have to ride-share in their Hummers.
LOL!
Exxon mobil's conference call says that they are gonna increase oil production from 4 million barrels to 5 million by 2010. In your face Westexas. Thats 25%. If only the world could do that we would have 105 million barrels per day by 2010. All those buying that get your head out of the sand and raise your hand.
Well over the last three years ExxonMobil managed to get the following numbers daily out of the ground:
(*) Barrels of oil equivalent
Despite the high oil price during those years, 2006 showed a lower production then 2004. So tell us where ExxonMobil will get this increase of 20 % before 2010.
It's unbelievably easy. A three-part process:
1) You only talk about the future, never re-hashing the past (e.g., about Exxon's prediction made in 2001 that production would grow by 3% per year that just hasn't come true).
2) Ignore the fact that your resource base is declining at a 10% rate per year, and that you need to add 400 kbbl/d each year in new projects just to maintain production - after all, declines are so depressing to talk about.
http://www.theoildrum.com/story/2005/11/16/182053/32
3) Keep buying someone else's oil fields, because over the past 3 years you've only found 500 million barrels organically while producing 2.5 billion barrels.
Its 25% NOT 20% lmao. I think there is only one way. The new barrel. Convinient, smaller and more easily transportable. Even cuter some would say. At 30 gallons per barrel our barrels now look awesome and by most measures contribute less to global warming per barrel.
Yes, the new hedonic barrels will solve the problem!
Coming from 4,2 to 5 million barrels a day is for me still an increase of 20%. (Still counted in old barrels)
My bad. Did not mean to be nitpicking. Thats what I heard on The land of the blind TV or CNBC as it is called. 4 million to 5 million. Rex Tiller was saying there is soooo much opportunity to develop new oil.
Assume that "BOE" is ethanol that in turn used a lot of gas and/or oil to produce. Is then the real intersting fact, namely "energy content", counted twice in those figures?
BOE = Barrels of Oil Equivalent
Converts the nat gas back to barrels...I believe the rule of thumb is 6.0 mmscf of nat gas is equal to 1000 BOE.
On November 17, 2005, Stuart Staniford analyzed XOM's prior "promises" to increase production in an article entitled Exxon, and the Implications of 8%. The net result was that year after year from 2001 forward to 2005, XOM had continually promised to increase production by 500,000 bpd. Yet year after year their production was flat. In other words, XOM was experiencing an approximately 8% rate of decline and the new fields were only keeping them flat, not growing production.
I've read the press release from XOM and they are promising 1.0 mbpd increased production from 2007 to 2010, or, an average of 0.333 mbpd increase annually. Yet as others have noted, XOM is currently (and has been for 6 straight years now) experiencing a decline rate of around 8% or about 0.320 mbpd of their annual 4 mbpd production of oil and "oil equivalent liquids". So the net effect by 2010, if everything goes perfectly right with no mistakes, is continued flat production. Yet even one single bump along that road means XOM's production will decline.
Your assumption that XOM is going to increase production is naive at the very least given that XOM has made this same promise for 6 straight years and failed to meet that promise ever.
Finally, if you read the XOM annual summary (PDF WARNING!) in detail, you will see that increasingly XOM no longer talks about "oil" but about "oil equivalents" instead. Further reading shows them making heavy investment in natural gas. Thus XOM may be counting on a larger market for LPG. What happens if that market fails to materialize?
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
Castro's revenge: The Cuban oil rush
Exxon plans 25 new projects in next three years
There's those weasel words again: oil equivalent. Could be gas or it could be tar, they don't know.
Thanks for the link Leanan as always! I always get the salt shaker out when they use Barrel of Oil Equivalent (BOE) as I suspect that means a lot of natty gas and lesser amounts of oil.
CNBC gals are really tittering on the inventory reduction they seem a bit more upset than usual maybe they are getting a little nervous.
Oil Sands or Tar Sands?
There were, at least, two articles above that mentioned Oil Sands
May I make a suggestion?
Why does not theoildrum.com sell samples of the above substance on its website? That way readers can find out for themselves what this substance is really like.
Perhaps some enterprising readers will then enlighten the writers of these articles by sending them these samples so that they can make up their own minds on the matter!
Alfred: Just a matter of time until coal undergoes an important name change. "Oil rock" is not the best, I am sure the iron triangle will come up with something better.
Coal, yes, our future. With apologies to the National Pork Board for borrowing their blurb, I suggest the following:
Coal, the other Black Gold.
I'm with George Bush: tar pits.
Just for the record, Canadian bitumen was referred to as "tar sands" until the Canadian Gov't insisted on the label "Oil Sands". Spin.
(This is my first comment to the oil drum).
The article on solar energy conversion from Argonne
reminds me of an idea I had a few weeks ago. I don't
know enough about it to know if it makes sense, but
I bet there are people here who do.
The idea is that there's all this extra CO2 in the
atmosphere, caused by burning fuels. Why not use
solar energy to suck that back out of the air,
and turn it back into fuel? If it could be done
on a massive enough scale, we could presumably
arrive at a steady state where we burn the fuel,
sending it into the atmosphere, then suck the
combusted stuff back out, and turn it back into
fuel, and repeat. Sort of like the water cycle,
except with fuels.
Any chance of this working? It'd be pretty slick
if it did. :-)
The technology already exists. I call it algae farming. The Bureau of Land Management has more than enough acreage to meet 100% of our country's energy needs. It is all a matter of capital investment. But before capital will go that way a few rules of the energy game need to change.
I was thinking huge man-made solar plants in
the deserts, not tiny nature-made solar plants
in the sea. But, whatever works. :-)
But, is it feasible to suck in air, water and
maybe a few other things (catalysts or whatever),
apply sunlight in just the right way, and get
methane (or whatever) for an output? On a massive
enough scale to make a difference for both global
warming and the impending fuel crunch?
In other words, instead of sequestering the CO2
deep into the ground, why not sequester it back
into fuel? Draw down the CO2 (etc) content of the
air and store it in fuel tanks, and then reuse
it (but keeping airborne emissions at relatively
benign levels, once under control).
Could, of course, be nuclear powered, too.
(I expect to hear that nature -- trees, oceans,
etc -- is already many orders of magnitude better
at this than we could hope to do in any near-term
time scales, but I don't know enough to know. Hence,
the question(s)).
Thanks!
Bob :
The most comprehensive scheme along those lines that I have seen, which ties together a number of technologies to produce energy AND sequester carbon, using sunlight, is a modest proposal, from TOD contributor Engineer Poet
I'm really in love with his plan. Biomass to charcoal, principally. Return the charcoal to the soil. Produce energy as a by-product!
The biomass->pyrolysis->etoh & Terra Preta concept was outlined here in August.
http://www.theoildrum.com/story/2006/8/15/13634/6716
However, where we intend to make liquid fuels, EP prefers the production of DCFCs and although he does a good job at pointing out the related efficiencies, he admits -correctly- that we will still need 64 billion gallons of LTFs.
But EP's wider point is difficult to refute :
anything-to-liquids is not sustainable as a primary source of transport fuel, most notably because of the inherent inefficiencies of the internal combustion engine.
Electric vehicles = 7 times the miles for the same input, on his numbers. The sooner we go electric, the better the future looks.
True an electric car is much more effcient than an ICE vehicle, but you are hiding the ineffiencies of making the electricity.
Your average thermal electric plant is only about 30% efficient. This is better than a car (about 20% efficient) but not as great as it looks at first glance.
EP has pointed out that gas turbine plants get around 50% effciency. And there is always nukes, hydro etc. But you still take a loss generating/trasporting the electrcity for those electic cars.
Electric cars are better, but not 7 times better.
Methanol can be produced from CO2 by catalytic hydrogenation (react with H2 over a catalyst) or electrochemical reduction with water. With the former, you need to obtain the hydrogen from somewhere, and with the latter one has to provide the electrochemical cell with more energy than is released by burning the methanol again.
Chemist George Olah (Nobel laurate) has a book out on this:
Beyond Oil and Gas: The Methanol Economy
CO2 is too diffuse in the atmosphere to make either method useful, so collecting the output from a CO2 producer is the only way to go right now (unless you let nature do the work by growing something). Also, the energy has to come from somewhere (solar, wind), so the methanol becomes a storage medium for the energy. One has to compare the advantages (liquid fuel) with the disadvantages (energy losses making the methanol).
In the end, this approach to C sequestration suffers from the same problems as putting it in deep wells or under the seabed: the overall process is not carbon-neutral; carbon is going to end up in the atmosphere that is not there now.
I am encouraged by a different approach inspired by the studies on Terra Preta:
BIO-CHAR SEQUESTRATION IN TERRESTRIAL ECOSYSTEMS – A REVIEW
Bobsh, it would not work. CO2 is spent fuel! Just as water is spent hydrogen fuel, and it takes far more energy to "unspend" it than you get back when you spend it a second time, the same is true with carbon.
CO2 is spent carbon fuel. When carbon is burned, it bonds with two oxygen atoms and energy is released. If you wish to separate the oxygen from the carbon, so you can burn the carbon again, it would take far more energy to do that than you would gain when you burned it a second time.
Ron Patterson
That is not a bad idea at all --the concept of using excess wind energy for example to separate CO2 out of the atmosphere and sequester it in some way.
Thank you for contributing to TOD.
Many ideas do seem great on the surface, just as one I has many years ago as a high school student. I designed a perpetual motion car that ran on hydrogen. The hydrogen was burned and the car moved, the motor turned a generator that created electricity, and the electrodes were immersed in salty water. Presto! Hydrogen is created which is fed into the motor and the cycle goes on.
And such a car would work, but somewhere you would need to top up either the hydrogen or the electricity - it's a losing game.
That was 40 years ago - and today people are talking again about hydrogen cars and cells to split the H2O, or using solar to split the molecules and it is just a losing proposition.
In the same way any man-made system to capture or recycle CO2 has to be a losing proposition. It will cost more (and not necessarily money cost) than is gained.
CO2 may be a short-term problem - but I think the planet has tackled this problem before and probably more than once and has come up a clear winner. I'm backing Planet Earth to win this battle - there'll be a buffer system somewhere we don't know about. Our efforts won't matter a damn.
Sorry Ian mate -- unless you can come up with a palaeoclimatological reference, that's just plain blind dumb optimism.
There is no precedent for sudden massive release of sequestered carbon in the atmosphere. CO2 has always been a trailing indicator of rising temperature, never a forcing. One exception : the volcanic episode that brought the world out of a stable iceball state at glacial maximum. Increasing photosynthesis then brought the CO2 down again.
The problem is, we are now at a high point of the temperature scale (world temperature has rarely been higher), and photosynthesis is also taking a hammering due to human degradation of the biosphere. It is entirely possible that we'll go into a runaway greenhouse phase, à la Venus. There is no known natural mechanism to stop us, on our current trajectory. And no way out once we're there, because temperatures will be too high for plants to reduce the CO2.
My logic is simple - the Carbon in the Earth as fossil fuels all came from the surface at some point. Perhaps 63 Million years ago?
At some time in the past it was all available in the atmosphere or in bio-mass.
The Earth used it. It became fossilised.
Logically life started and evolved with much higher ratios of carbon to O2/N2 than today.
The simple logic is that Earth is now running on a carbon deficit - not a surplus. Logically, all fossil fuels could be burnt and the Earth will be simply returning to a prior state.
Where we are is not a new situation at all.
There is a buffer. What is it? I don't know, but it must be there since Earth is still a very viable concern after the far higher carbon levels that must have existed in past epochs.
I lost the link, but there was a planetologist at a University lecturing on the life and death of planets.
Sorry to let you know this. There will be a moment of "Peak Earth" and then a slow (hopefully) or fast decline to oblivion after that best-of-all-worlds day. The Earth is not forever. The Earth is not here to "buffer" and protect us. Earth is a hostile planet. And we're just one more delusional species who thinks Earth was made for us by some deity, just before the extinction hits.
Entropy Always Rises, unfortunately.
Best to use the solar energy directly.
CERA's starting a Peak Oil news blog? LMFAO!!!
and if Cuba actually develops their off-shore oil reserve? Oh the irony . . .
And after they did all that work to replace the Soviet tractors ...
Matt Simmons has four new presentations posted on his web site:
http://www.simmonsco-intl.com/research.aspx?Type=msspeeches
thanks.
Matt was on CNBC this afternoon, in rebuttal to ExxonMobil. Matt reiterated that we peaked last year. Interestingly enough, Matt said that he personally owns no major oil company stocks--his investments are in smaller independent oil companies and service companies. He said that major oil companies won't be able to replace their reserves, whereas smaller companies can make a lot of money from the smaller fields that are still to be found (I agree).
He said that the problem is that almost everyone assumes that we are going from 85 mbpd to 120 mbpd (he didn't specify Total Liquids or C + C + NGL), when in reality we are going to 70 mbpd.
As I have said, everything is great for energy producers--until the angry soccer moms start rioting at the gates of the mansions of the energy producers.
PO on CNBC today
Maria interviewed Rex Tillerson, followed by Simmons. She used the word "peak" a few times. Her questions to Tillerson were pointed. She asked him "How do we quiet the critics that say oil is peaking?" When she asked him if Exxon should be spending more to insure future production, he said "our investment is to make sure it'll reward our shareholders--just throwing money at a problem doesn't solve it." (I didn't find his answer very reassuring. What problem???)
Hello Kalpa,
http://blogs.wsj.com/energy/
has two entries on the Bartiromo-Tillerson-Simmons coverage. I would ask fellow TODers to respond in the comments section please.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
"How do we quiet the critics that say oil is peaking?"
I think says EVERYTHING we need to know about the MSM getting "The Word" out.
They ARE on point. They DO have a strategy. They DO have a goal (Fog, Keep the Consumer cows in the Stalls).
If they are sucessful, all the passengers will be asleep when we hit the wall. (Of course the pilots and Crews will have jumped with Golden Parachutes long ago, maybe to Paraguay).
Now would be a good time to Plug Sharon's(of Sharondownonthefarm) piece about getting the message out.
How to change the world in 10 easy steps
A snippet;
http://www.energybulletin.net/26860.html
Some (not-exactly) related info regarding natural gas production came out in the Chesapeake Energy conference call where CEO McClendon said that the 5 "majors" were losing about 1 Bcf per day of production in the US, or about 5% to 10% per year. He predicted natural gas prices will exhibit "excitement to the upside" going forward.
Mortgage Defaults Start to Spread
Seems like these folks won't be retirees for long...
Tom A-B
Cue JAWS theme music montage.
If you want to see what the Default Insurance rates for are for the ALT-A and others (BBB) here's a good link.
http://www.markit.com/information/affiliations/cmbx
Think things are getting expensive for the holders of the loan?
That the CDS spreads for commericial mortgages, ABX is residential and there has been a bounceback (dead cat bounce?) over the past week
Need some help....
Does anyone know where on the EIA website they have quarter data on consumption? I've been rooting around there for a while and I can't find world demand anywhere in there.
http://thefinancedude.blogspot.com
Try the far right hand column about 1/2 way down
http://www.eia.doe.gov/emeu/steo/pub/contents.html
Somewhere I read something about meters not being replaced on the Saudi Arabian-Iraqi pipeline. Hmmm, unmetered oil flowing from Iraq to Saudi Arabia. The connection in my mind should have triggered when I read the article. Don't know where I saw it, but if anybody else does please let us know. Do you think the Peak Oil attack was a preemptive move ahead of the inventory numbers, maybe a reaction to Stuart's article, some other news that hasn't broke yet?
Hmm, more unmetered oil flowing out of Iraq.
http://www.iraqdirectory.com/DisplayNews.aspx?id=2892
More on Saudi-Iraq pipeline
This says it was repaired and ready to go in 2002.
http://www.menewsline.com/stories/2002/june/06_18_3.html
Something is not right here. The above article says it was repaired and ready to go in 2002. Yet in 2003 there appears to have been a media campaign to state that the pipeline was unusable as it had not been touched since since 1990 when it was closed and had massive corrosion.
http://www.gasandoil.com/goc/news/ntm34663.htm
Is this one of those things you don't want to touch or you'll die like in "Syriana"?
Is it possible that stolen Iraqi Oil is being pumped to and laundered through Saudi Arabia?
The unmetered oil article is about oil going to tanker terminals in the south, not to Saudi Arabia, and it says they are using the draft line to estimate oil levels - not precise but it's something. It also says that there are no other operable pipelines going out of the country. I sure wouldn't put stealing it past the Saudis, but i think you're jumping to unfounded speculation based on the sources you've listed.
Ah...so KSA does have some spare capacity...just not from their own fields...that explains much.
Cheap Fuel Dictates US Automarket - Detnews.com
http://www.detnews.com/apps/pbcs.dll/article?AID=/20070307/AUTO02/703070326
My small contribution as a former Michigander.
Hello TODers,
from south of the Border:
----------------------------------
Summary
With allegations surfacing in the Mexican press this week that state-owned oil and gas monopoly Pemex overestimated its much-touted deepwater and ultra-deepwater reserves, analysts and oil professionals are once again casting heavy scrutiny on the validity of the company's assertions.
----------------------------------------
http://www.energyintel.com/DocumentDetail.asp?document_id=198292
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Deep Water Reserve Estimate Reduced by 60%, I guess you might say the prior figure was 'overestimated' - but I'd call that a lie. Plus the rising K-M-Z fields (extra heavy oil) will fall into permanent decline as early as 2010. And you thought this year's tortilla crisis was bad?
Pemex Experts Adjust Statistics on Crude Oil Reserves -- Mexico City El Universal on 5 March reports from Campeche where Pemex experts in charge of evaluating the petroleum resources potential in the Gulf of Mexico deep waters disclosed that the area known as Coatzacoalcos Profundo that covers 10,000 square km only has 40% of the equivalent 10 billion barrels of crude oil that were originally estimated. In this manner, the federal government adjusted and decreased 60% of the prospective petroleum resources in the area where Pemex has drilled over 900 meters deep to find only 4 billion barrels. These findings are in sharp contract with former President Vicente Fox's announcement in June 2006 after it was estimated that the well Noxal 1 would produce 10 billion barrels. PEP Director Morales Gil said that probably on 18 March he will make a more precise announcement on the reserves. He added that it would take six to seven years to develop these wells.
Pemex Reports on Cantarell 'Replacement' -- Mexico City El Universal on 3 March reports from Campeche Sound where high-ranking Mexican Petroleum (Pemex) officials announced that the Ku-Maloob-Zaap (KMZ) oil deposit only has sufficient hydrocarbons to last three years and that its decline will begin as of 2010. Carlos Morales Gil, director of Pemex Exploration and Production Division (PEP), reported that strong investments will be allotted to reinforce crude oil production at this oil deposit that is considered the "replacement" for Cantarell. Pemex Director General Jesus Reyes Heroles explained that RMZ "is a gigantic oilfield that is already producing 500,000 barrels of crude oil per day, and it is scheduled to produce a maximum of 800,000 barrels per day late in 2009." Reyes Heroles added that this deposit will only "partially replace" the drop in production at Cantarell, the largest oilfield in the country. He went on to say that 110.556 billion pesos will be invested within the next 35 years in KMZ. President Felipe Calderon
[Mexico City El Universal in Spanish -- http://www.eluniversal.com.mx/]
Check this out
http://members.aol.com/vrex/oil/price_forecast.htm
??
Korg,
The little essay you found there is actually dammed insightful!
If it was actually written in 1999, it is better than insightful, and I hope the guy who wrote it has a job in the statistics and forecasting business, hopefully in the energy industry.
It was an interesting read for me for a couple of reasons:
First, if one looks at his "maximum" production scenario, we get a picture very close to what CERA talks about with the peak around 2025 to 2030 and the "undulating plateau".
But if you take his minimum case scenario, you get a picture about like Campbell/Simmons.
Can we say that the whole firefight between TOD partisans and CERA clients is the fight between that measurement "error" window, projected min to projected max production? Much ado about nothing?
More interestingly is Mr. Ramirez longer range projection of a price stabilization around $60 per barrel in year 2025 to 2028 approx., due to the introduction of coal based liquid synthetic fuels. Notice that for this time period, (2007) Ramirez is projecting a nominal amount per barrel of $35 to $38 dollars. He must mean this in 1997 dollars, because his projected price move in percent upward and his call on direction were pretty much dead on.
Taking a peak of $70+ as the real 2006 top, we would assume that his corrected number in the future would be double the nominal numbers we see in his chart....thus, we would cross above $60 per barrel for good roughly now to 2009, and ride a steady spike upward to $100 per barrel in 2018 to 2020, and on to $120 to $130 range in 2030, stabilizing in that range in the 2030's due to the coal based syn fuel. If we factor in added inflationary pressure and compounding, the number at stability point could be more around $150 per barrel.
This picture does not seem all that unrealistic to me. In fact, and this is the second reason this essay fascinates me, I wrote a somewhat similiar essay (although without the fancy charts) for a continuing education class in early 2001 (research on that essay was how I discovered Matthew Simmons, and by extension "depletion" and "peak" were back in the news for the first time since 1982, and by further extension, how I found TOD :-).
My essay however gave much more credit to the technical advances involving advanced batteries and electricity from PV solar instead of coal synthetic fuel, thus using the grid in transportation and electric power production, and freeing up natural gas and propane as possible transportation fuels, (I notice Ramirez points to natural gas being used to slow the oil price increase). But I, like everyone else, including Rameriz, underestimated the effect of the North American natural gas peak. However, I still hold to my theory on batteries and solar, and well applied (NOT ethanol) bio-fuel (butanol, algae, and methane recapture) to hold the price of crude oil to $140 inflation adjusted, and believe that crude oil will never be able to sustain a price much above $140 dollars in the future.
In the period post 2020, it has been and still is my contention that hydrogen direct from solar (either PV or giant concentrating thermal plants) will become the "status" energy of the modern world, and end the "hydrocarbon age" and bring in the "hydrogen age". It may happen even faster, as solar film developments are moving much faster and costs are coming down much steeper than was priorly expected.
All in all, damm good reading, and only one question remains: How did you find this little nugget? :-)
Roger Conner Jr.
Remember, we are only one cubic mile from freedom
The author's resume shows a sound oil geology background.
Hello TODers,
Killing Them Softly--The other African Genocide:
---------------------------------------------------
Cleophus Masxigora digs for mice. On a good day, he told me, he can find 100 to 200. To capture the vermin, he burns brush to immobilize them, then kills them with several thumps of a shovel. This practice has become so widespread in Zimbabwe that, as a Zimbabwean journalist informed me, state-run television has broadcast warnings against citizens setting brush fires.
Masxigora tells me that each mouse nets $30 Zim dollars, about 12 cents, which makes him a wealthy man in Zimbabwe. "This is beef to us," he told me in August.
The genocide in Zimbabwe is not as stark as others. There are no cattle cars and gas chambers. There are no machete-wielding gangs roaming the countryside. There are no helicopter gunships or Janjaweed. The killing in Zimbabwe is slow, oftentimes indirect, and not particularly bloody.
--------------------------------------------------------
http://www.tnr.com/doc.mhtml?i=w070305&s=kirchick030807
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Colin Campbell's position is that decline in Saudi Arabia commences in 2025. He has increased his URR Estimate by 50-Gb. This moves his Peak Date to 2011 in agreement with the Skrebowski change in December.
This will paste big grins on the editorial team at the New York Times!
Freddy, are you just posting this lie on all the threads?
The chart on page 6 of the The ASPO Newsletter 75 - March 2007 has Saudi production plateauing before 2010 and remaining flat until about 2025.
The text accompanying the figure states:
Regarding SA's production, the March newsletter also states:
I can't imagine why any of this should make the NYT editorial staff happy.