"Peak Oil" - Why Smart Folks Disagree - Part II

There continues to be considerable disagreement on both the timing and the magnitude of Peak Oil, though last week's GAO report(pdf) should be helpful in shrinking that gap. Part I of this 3 part series summarized some of the recent discussion of why some are very concerned about Peak Oil and others are relatively unconcerned. We also discussed why there needs to be a clear definition of Peak Oil so that policymakers discuss 'apples and apples'. This post will continue to examine areas of disagreement between the two camps, and will particularly focus on what I perceive to be the largest disconnect in energy, financial and government circles - that of the difference between gross and net production of finite resources.

Decline in Net Energy on US Oil Production
A Hypothetical Sensitivity Analysis on EIA Projections (mbpd)(click to enlarge)

If you ask 100 people about Peak Oil, you will get a few shrugs of disdain, a few vehement diatribes and about 90 blank stares. Its not a subject easily talked about, easily understood, or easily internalized. This post points out some major areas of why people either disagree about or don't comprehend the magnitude of this human problem. These issues have been thoroughly discussed on this site for the past 2 years, but for new readers I will attempt to briefly summarize some of these major areas of disagreement - for old readers (err..seasoned readers), please jump down to Reason #6, where begins some new analysis. This post will be followed by Part III, which will discuss the more interesting and controversial social and psychological reasons why there exists such a polarization of opinion on this important topic.


"Dear, shouldnt we stop for gas soon?" "Nah- the gauge is broken - theres plenty left. Go back to sleep"

Neither the concerned nor the unconcerned camp can have any great confidence in reserve or future production data due to the fact that 85-90% of the worlds oil is owned or controlled by nations or national oil companies. Furthermore, estimates on the dollar and energy costs to produce this oil are all but nonexistent. The unconcerned camp leans heavily on forecasts from the USGS and EIA, both of which have in recent years been overly optimistic. (The US government Energy Information Agency has a $60 median forecast for oil for 2030!!(1) While there is a (very slight) chance they could be right, the prediction is based on not only a paucity of data, but (at least historically) has been comprised of economic as opposed to scientific analysis:

"..These adjustments to the USGS and MMS estimates are based on non-technical considerations that support domestic supply growth to the levels necessary to meet projected demand levels."(2)

In other words, the figures were rearranged to show that we will always have enough. Yet these pronouncements and predictions are received by corporate America as carrying the weight of certainty (more on this in part III).

The concerned camp at least uses the data that we DO have - that of past and current production. 50 countries have already peaked in production and many more could peak in the very near future based on logistical and hubbert linearization methods discussed on this website. While its possible these countries could rebound and see new peaks, that has not been the pattern. The USA peaked in production in 1970 and has since been in terminal decline with the exception of the blip up from the North Slope in Alaska. Yet the EIA ccurrently continues to forecast increased US production from now until 2016 in their latest report.

The basic point here is: we don't know, so isn't it better to use the precautionary principle than keep driving and hoping we're not on fumes?


CERA forecasts some 3.7 trillion barrels of (notional) oil remaining while most in the concerned camp estimate remaining recoverable reserves of about 1 trillion barrels. We currently produce around 85 million barrels per day which is over 30 billion per year.


Imagine for the moment that a large group of apple orchards represents the worlds oil fields (apples being the oil). As frugivores, we care about the rate at which apples can be picked in one orchard (and all orchards) and delivered to the grocer. CERA type analysis is focused on counting how many total apples are in all the orchards, including the wormy ones (heavy oil), the ones on top of trees requiring heavy equipment to pick (oil sands) and the ones on farmers land they have never been allowed onto, but take the word of the farmer how many apples he has (middle east). They also are including oranges (coal-to liquids), pears (oil shale) and kumquats (ethanol) to come up with their 'apple resource'. Even if we can and should count all these fruits as apples, the rate at which our apple picking resources can extract the apples and get them to the supermarket is a far more limiting statistic than the number of apples in the orchards. Plus many of our recipes just don't taste as good using kumquats.

The first half of oil The second half of oil
The first half of oil The second half of oil

The second half of oil(or even 3/4 according to CERA) will follow vastly different rules than the first half. Deeper wells in more remote, sensitive locations, heavier, sourer oil, growing populations and internal consumption in exporting countries, lack of skilled oil personnel and geologists, geopolitical conflict, hurricanes in new exploration areas, expensive rigs, environmental limitations, first nation disputes, lack of upstream capital expenditures, etc will all contribute to actual production being unlikely to match 'productive capacity'. Again, maybe it will. But maybe it won't. And the flow rate of liquid fuels is what makes the world economy run, not how much is conceivably underground.

A prime example of the risk of these type of projections was pointed out by our resident water cut sleuth" last week. Cambridge Energy (CERA) expects Saudi Arabia to grow to 14.3 million barrels a day in 2015 from 12.7 mbpd in 2005 (actual production in 2005 was under 9.5 mbpd). So, sometimes productive capacity is even higher than actual production in the past.


The worlds transportation (and therefore food) system is utterly dependent on oil. In the DOE funded Hirsch Report, the economist authors made it very clear that the Peaking of global oil production was a monumental task and would require 20 years! lead time to effectively mitigate (noticeably absent from the report were environmental consequences of the choices of mitigation). Even at 10 year lead time they predicted liquid fuel shortfalls. In other words, this is not a problem that we can solve overnight.

Last weeks release of the much anticipated GAO Report on Peak Oil echoes the urgency with which to change policy due to long lead times and the pervasivness of oil services in our society.


In Part III of this article I will discuss our penchant for believing confident authority figures. For now lets address the most embedded theme among the unconcerned - that the market will automatically solve the energy problem via advanced price signals that will lead to new energy technology that replaces fossil fuels.

Neoclassical economic theory has as a core assumption perfect information. But, as we have seen above, we actually have very little good information on future oil supplies and flows. The worlds major oil exporters mostly have below investment grade sovereign credit ratings, and the market is priced at the marginal barrel. As long as the market is reasonably supplied over the short term, and the major media focus on the government forecast for oil prices to remain constant for the next 25 years (the EIA has two forecasts a high of $90 in 2030 and a low of $28), the classic Hotelling model of resource extraction, where resource owners charge increasing rents and withhold production to maximize rents, has not yet started to kick in. From the above referenced TOD post:

The authors (Gowdy et al) conclude that temporary incremental production gains are offset by later steeper decline rates in the tail end of production without increasing the overall URR. Their main conclusions are essentially that 1) oil is not being treated as a finite resource as oil field analyses predict and 2) temporary production gains mask real scarcity and result in misleading low oil prices.

This is consistent with the thesis that parts of Ghawar are mostly watered out and there will not be a gradual decline when they quit but more of an abrupt crash. How many of the worlds productive fields will show this pattern due to horizontal drilling and advanced techniques getting out as much as possible as soon as possible? As 'John' said in the introductory interview, people may believe in the concept of peak oil, but they are trying to make money and live for today - the market probably wont give us a strong signal until we are well past peak oil - and that may even be masked by demand destruction due to recession/depression. Following the precautionary principle is not a strong suit of a market based economy. Without good information on 90% of the worlds oil, and decades needed to properly adapt, it is likely the market will be in for some surprises that don't have easy invisible hand fixes.

Briefly regarding alternative energy, we a)have to replace the total liquid fuels lost by a source or sources that give us the same or higher energy gain and can scale/grow at the same or higher rate than oil and gas deplete and b) do so without running into limitations of other finite resources such as water, land, soil, etc.(3) A colleague and I have just completed a paper showing that global bio-energy growth will be severely limited by water constraints by 2025, as one example.


There will still be oil in the ground 100 years from now, and even 1 million years from now. Peak oil has never been about it 'running out'. But society has become accustomed to growth. The embodied energy in fossil fuels generates this growth (aided and leveraged by human labor and ingenuity, but the vast majority due to the energy capacity of oil to do work). Remember one barrel of oil has the amount of BTUs it would take an average man 12.5 years of 40 hours a week of labor to produce.

Our debt based capitalist society is based on the ability of everyone to climb the ladder. If it becomes apparent that there is a ceiling, all the rules of the system breakdown. Growth is based on the ability of people to get loans, grow businesses and repay the loans with interest. If there is less and less energy available each year thats one thing - it might just show up as recession/belt-tightening. However, if peoples PERCEPTION is that less and less energy will be available then why would banks give out loans, why would people go to work, etc? The economy can only grow if the Energy Return on Investment from oil is replaced with something as high or higher. (more on that below)

Largely because oil is finite and dollars are not, King Hubbert concluded we would have either a zero interest rate, or (very high) inflation(5).


Most oil analysts focus on the gross amount of oil produced. This will be increasingly misleading, for many reasons. First of all, the different liquids called 'oil' in the EIA and CERA forecasts differ in their BTU content.

Gross Heat Content of 42 Gallons (1 US Barrel) of different fuels (Source EIA -ConversionFactors and Gross Heat Contents and the DEO (BiomassEnergy Book, Appendix A).

Gross World Oil Production (mbpd) and Gross World Oil Production Adjusted For BTU Content (Click to Enlarge)

Natural Gas Plant Liquids(NGPL) and "Other Liquids" (primarily ethanol) are taking up a larger share of world production (the relative width of the two lighter gray areas is growing on left graph). These liquids have much less BTU content than crude oil and we need more of these products to accomplish the same amount of work as with straight crude oil. 42 gallons of Ethanol equals 0.61 barrel of crude oil. One barrel of NGPL only equates to 0.64 barrel of crude oil. The graph on the top is what is reported by the EIA as 'total oil production'. The graph on the bottom is adjusted for the lower BTU content of NGPL and ethanol. As you can see - there is about a 5mpbd drop in BTU content available to do economic work.

We need oil for the energy services it provides. Though we notionally have 85mbpd, we only get to use 80mbpd of 'oil' BTU content. So other than convenience, using gross figures in projecting supply, especially when an increasing % of the liquids will be coming from lower BTU sources is overly optimistic.


EIA Forecast US Production (gross)in mbpd EIA BTU Adjusted US Production in mbpd

Above are the EIA oil production forecasts through 2030 for domestic US production. As can be seen the lower BTU content in NGPL and ethanol cause our governments gross production to be about 12% too high by BTU content.

But wait. It gets worse. Potentially much worse.


Net energy analysis is little used and much misunderstood. Essentially, the economy is 100% dependent on energy to do work. The first law of thermodynamics states there is a finite amount of energy in a closed system - that capital, labor and technology cannot create more energy. Available energy must be used to transform existing resources (e.g., oil), or to divert existing energy flows (e.g., wind or solar) into more available energy.

The second law of thermodynamics posits that there is an energy loss at every step in the economic process. (for example - about 30% of the BTUs in internal combustion engines are 'utilized' the rest is dissipated as heat loss). An energy resource has to produce more energy than it uses, otherwise it becomes an energy sink. It takes about 735 joules of energy to lift 15 kg of oil 5 meters out of the ground just to overcome gravity -imagine how much energy is required to lift oil from 27,000 feet beneath the ocean (Jack II). The most concentrated and easiest accessible oil is produced as soon as technology and scale can access it; thereafter, more and more energy is required to locate, harvest, refine and and distribute oil. At some unknown point in the future, more energy will be required to find and procure oil than the energy recovered in the oil-- and the "resource" will become a "sink", irrespective of oil prices. I wrote a specific example of how declines in net energy would take away from productive sectors of society here.

This is theoretically illustrated in the below graphic from an upcoming paper in AMBIO.

Graphic from Energy Return on Investment - Towards a Consistent Framework Mulder, K. and Hagens, N. forthcoming (Click to Enlarge)

The total 'resource' in the above graphic is the area A+B+C+D. It directly requires D energy to extract A+B+C+D energy. Extraction and distribution also requires indirect costs (like employees driving to work, health insurance, steel for the drillpipes, sandwich meat, etc.) This is energy cost C. As the scale of resource extraction increases, the ratio of A/(C+D) declines. Though conventional economics might not have done so, we also included cost B, which is the environmental externality costs of increased extraction. Once the scale of extraction reaches the point between A and B on the X axis, it takes more energy to produce the marginal unit than the marginal unit is worth. The 'resource' is still in the ground but is energetically unprofitable to produce. If at this point, (assuming one values the environmental tier B), an energy company uses its own stocks of energy to continue production, they do so at an energy loss, and would be better of selling or using their stored energy for other purposes.

As Richard Heinberg recently wrote about, an upcoming report from Energy Watch Group called “Coal: Resources and Future Production,” notes that:

Each coal class has a different energy content:

anthracite 30 MJ/kg
bituminous coal 18.8–29.3 MJ/kg
sub-bitiminous coal 8.3–25 MJ/kg
lignite 5.5–14.3 MJ/kg


"the authors of the report conclude that growth in total volumes (in USA) can continue for 10 to 15 years. However, in terms of energy content U.S. coal production peaked in 1998 at 598 million tons of oil equivalents (Mtoe); by 2005 this had fallen to 576 Mtoe."

In other words, we can continue to grow the gross amount of resource, but the amount of BTUs available to do work has declined since 1998. (Ive not yet seen this report so dont know what to make of it, but illustrate the concept here so as to make declining net energy on oil and gas more easy to grasp.


Where does the oil 'resource' fall on this scale? It is difficult to say for certain. Analysis by Cutler Cleveland suggests that the net energy of oil (EROI-1) was over 100:1 in the 1930s when discovery peaked in the US. It dropped to 30:1 in the 1970s and has since fallen to 10-15:1. Once you account for refining the EROI declines to 5-10:1 Why does this matter? Well lets put it in its simplest terms. Lets for the moment assume that the energy inputs in oil extraction are completely oil and gas. This is actually not far from the truth:

Source Cutler ClevelandClick to Enlarge

In this example, if the world oil and gas industry is averaging a 10:1 energy gain, that means 10% of the worlds oil and gas is needed to procure the rest. If the net energy drops to 4:1, then 20% of the worlds oil and gas is needed to procure the other 80%. If the net energy drops to 3:1, which it eventually could, 25% of the worlds oil and gas will be needed to get the other 75% used by society. So clearly 85 million barrels a day doesn't tell us the whole picture. Perhaps 50 million bpd at 20:1 net energy generates more 'wealth' for the world than 120mbpd of 5:1 oil - because an increasing part of the 'gross resource' will be required by oil companies before non-energy society ever sees it.

Most people think of net energy as some esoteric topic that has fleeting relevance to our energy predicament. However, as Joseph Tainter outlined, energy gain (or lack thereof) is critical to the functioning and expansion of society.(3) Many in the investment community are confused as to why energy prices are so high, yet many energy companies (particularly exploration) are struggling to show profits. One reason is their own higher energy use coupled with higher prices for everything in the last few years.

I dont have accurate net energy figures for current oil and gas exploration. (No one does, but it is sorely needed). If we use Professor Clevelands' net energy figures for US exploration and production and linearly extrapolate the average EROI decline over the last 3 decades forward in time and then overlay it with the EIA forecast for US production, you'd get a graph that would look something like this!:

Total domestic oil projection (EIA)(1) in mbpd with sensitivity on net available to society (green)

The total area of black and green is total US liquids EIA production forecast whereas the green is what is left over for non-energy company society under a linear declining net energy assumptions above. As can be seen, an energy break even point is reached within 20 years - at which point it makes no sense to drill/extract any more resource because it takes as much energy to do so as you get out. The resource has become a sink. Of important note, is WELL before that date, a significant amount of energy is removed from productive society and allocated towards energy production. This graph is probably unrealistic as new technology and demand/credit issues will impact extraction in next decade or so, making the net closer to the gross than the graph shows. But as a hypothetical exercise, it calls attention to a critical issue. At some point, declining net energy will mean the end of economic growth, unless it's replaced with equally high or higher energy gain systems. (*cautionary note - an energy source that DOES replace the energy gain from fossil fuels will still contribute to planetary waste absorption limits)

As natural gas prices increase, the costs of petroleum extraction will also increase (which at least partially explains the higher cost numbers from E&P last year). If North America doesn't get off the natural gas treadmill, there will start to be a strong positive feedback loop as natural gas is the largest energy input into petroleum extraction. More and more gas will be needed for exploration and production leaving less for plastic bags, fertilizers, and furnaces.


Another aspect of net energy that is missed by most wall street analysts (in my opinion) is indirect costs. In addition to the direct electricity, natural gas, etc needed for E&P, there are also pipes, machinery, cement, lumber, steel, wires, tools, etc. As much energy that is used directly in the discovery and harvesting process, the indirect energy is even greater:

Source: Cleveland, CJ, "Net Energy from the Extraction of Oil and Gas in the United States"

There are even wider boundary costs not included here but are part of the global closed economy. Part of the 85 million bpd goes to highways, insurance, wheels for employees cars, schools, medicine, dogfood, etc. A wide boundary energy analysis such as this, as you might imagine, is difficult to accurately model in a world of dollar data. Yet its important - because this is how our interconnected world really works.

What does this all mean? It has two important implications. First, it suggests that the 'total resource' that gives CERA its confidence to delay the timing of Peak Oil, is not an apples and apples comparison of energy-many of the resources that make up their 'stacked resource' are not equivalent in terms of how much energy is left over for society. Second, and more worrisome, is the fact that as net energy of each fossil resource declines, a greater and greater % of its productive flows, will have to be used by the oil and gas companies themselves. This at a minimum robs economic growth and energy services from the rest of society and at a maximum, robs from both the economy and the environment, as energy companies seek out resources that have not yet become sinks (think Florida coast, ANWAR, etc)


There is some compelling and concerning pieces of evidence that tie together the last several paragraphs. Much of the expected growth in 'oil' in the coming decades comes from unconventional sources. The net energy of shale oil, tar sands, ethanol, etc is a fraction of that of historical crude production. Though a credible net energy study has yet to be done on tar sands, equity research on SUNCOR from John S Herold suggests it costs $30 a barrel to upgrade bitumen to oil. This presumably covers direct costs of the easier mining of bitumen as opposed to the in-situ production. If oil goes to $150 per barrel, will it still cost $30 to produce? Or do costs keep up with or outpace the commodity price? What happens if there is a cost blowout in Fort McMurray for housing, helicopters, services, raw materials, transportation, water, etc?

Before you look at the next graph, imagine how the above net energy information might translate into dollars, as net energy declines. As depleted regions require more energy to be productive, the costs should increase, and if we are approaching energy break even they should increase more than the commodity itself.

Finding and Development Costs per Barrel Oil Equivalent - Source - John S. Herold, IncClick to Enlarge

Though this is only a two year sample and comprises about half of the industry, the implications of extreme increases in finding and development costs in a country like the US which peaked 37 years ago, suggests that energy break even may not be science fiction. First of all, the % increase in costs from 2005 to 2006 far outpaces the % increase in oil prices for both US and Worldwide projects. Furthermore, consistent with the 'best-first' principle, costs of development went up much higher in the US, which relative to the rest of the world as a whole, is more fully depleted.


Net energy analysis is not a purely physical principle, as the economy dictates how much energy it takes to make and deliver products that are used to procure energy. More efficient methods will result in higher net energy and vice versa. If the markets were perfectly functioning, devoid of subsidies and inclusive of environmental externalities, then in theory energy return would equate to financial return. But since the market is focused on the marginal barrel, if enough dollars exist to pay for production at a profit then those dollars will be printed. Net energy analysis holds moving pieces more constant than financial analysis (though the two can never totally be separated)

In sum, net energy analysis is important not only for comparing alternative energy technologies, but for determining how much energy out of our fixed pie is used by the energy sector. Since its the 'net' that we care about, it's important that the energy data agencies move towards 'net liquid fuel available to non-energy producing sectors' as a measure of Peak Oil. Oil production and cost to society will increasingly be obfuscated as debt and credit become more significant drivers of growth. As such, we are highly likely to grow gross production, while net energy declines. The unawares will be focused on the gross, as usual.

As an important future exercise, I would like to analyze how much of the worlds 85 million barrels per day of oil (which we now know has a BTU content equal to 80 million) is used by the energy and utility companies finding and delivering the energy services to the rest of society. Is it 20%, 25%? Whatever % this is, I expect it to increase. If it increases, some other economic sectors use will decrease - hospitals? shopping centers? individual drivers? airplanes? Disneyland?


In the era of fossil fuel use and depletion, much uncertainty and confusion still exists in policy circles and the general public as to the urgency of the situation. CERA, historically respected in oil supply analysis, is in my opinion providing detailed maps to the wrong destinations. In the only category that really matters in the Peak Oil debate, net liquid fuel availability and cost to non-energy producing society, there is ample evidence suggesting that the peak in cheap oil, which society and institutions are built around, is already behind us. This is not a binomial equation. An imminent peak or a peak of affordable oil in 2040 (CERAs projection) have dramatically different risk profiles for society. The best case scenario brewed by conflating reserves with resources, net energy with gross energy, capacity with flow-rates and ignoring the environment makes for a sweet tasting drink. But should we be drinking it?

(**I admit the possibility that although I am looking 2 steps ahead CERA might be looking 3 steps ahead, meaning they are part of an intentional effort to make the 2040 peak message take hold, so that societal uncertainty and pell-mell policy doesn't disrupt needed upstream investment. But I think it more likely they, and others, are just too narrowly focused in the boundaries of their analysis.)

Actual production can and will differ dramatically from productive capacity. To base decade lag time decisions (like changing transportation infrastructure to more electric, and relocalizing certain basic goods manufacturing) on best case scenarios is foolhardy. What is the risk reward scenario of such decisions? If CERA is right and we get to some 120 mbpd (net)of oil, all the better to use it for an early transition. If they are wrong or potentially WAY wrong, then the complacency in corporate circles from CERA and EIA optimism will mean we have missed our chance to prepare. To focus on a particular productive capacity or even flow rate are the wrong goals, because at 120 mpbd of lower quality/much more expensive oil, we will be stealing from both the environment and the economy. Using dollars to forecast costs is using a moving target. If tar sands are profitable at $32 with oil at $55, will the cost be $132 when oil is $155? Or even higher given wide boundary costs? Money, research and effort needs to go towards a better accounting and estimation of the energy costs of extracting our remaining fossil fuels.

This is the most important issue facing the 3 generations sharing the planet today. We are at a critical time for our nation and our world. Whether we make no changes, small changes or huge paradigm shifts in the direction of our policies and priorities is an open question, but one that will affect not only the environment and our children, but us as well.


1. Flow rates of liquid fuels available to non-energy society matter. Productive capacity means little.

2. Better technology is in a race with depletion, and so far is losing (declining net energy).

3. Focusing on energy return (gross minus energy cost) bypasses many of the moving pieces in project decision criteria inherent in financial analysis which increasingly includes debt/credit.

4. Modern society has been built around high energy density infrastructure. Declines in net energy, if not replaced, will have serious economic implications.

5. Declines in net energy, if replaced, must adhere to increasing limitations on other resources, particularly water, food, and waste absorption.

6. During the last 150 years, the market treated oil as a 'near infinite resource'. Increasing awareness of many of the issues raised above means classic Hotelling analysis of resource owners acting to maximize rents may soon become a reality (e.g. Opec permanently restraining production, knowing they will get higher prices in the future)

7. The window to address these issues at a societal level is before net energy declines so much that half of us are working for Exxon. Oil at $80, $100, $120, etc. will increasingly price out sectors of the global economy, and eventually population.

To conclude, here is a hypothetical conversation between the head of an oil analysis company and the president of the United States circa 2020. It is one of many such possible conversations for a decade hence. As a citizen of the US or of the planet, how would you want to change it?


P: Come on in Mr Zergin

Z: Thanks Mr President - you may call me Dan.

P: I understand your shop is one of the most respected in energy analysis, a lot of mensas on your staff.

Z: Yes. Thank you sir. We have long believed that there is plenty of oil in the ground and that above ground factors will be much more important than the amount of below ground resource. The world has supposedly been about to run out of oil 5 times in the past and obviously it never happened. Could I have some of that crumbcake?

P: Please. Thats good to know, but how come oil is $200 a barrel and we are on the verge of a depression and my approval ratings are plummeting? And were there 7 billion of us the last time we were supposed to run out of oil?

Z: This is a natural cycle sir. These high prices will bring about much needed investment in the oil industry. At $200 even corn ethanol will probably be profitable this year.

P: What is the time lag for this 'much needed investment'? Our importing ability has been drastically reduced due to the slow development of tar sands, first nation disputes, fighting in the middle east, militia in Nigeria, growing populations in the countries that still sell us oil, etc. Furthermore, Im sure youre aware of the statute I just passed disallowing home heating above 40 degree local weather, as we need the natural gas for exploration and corn fertilizer.

Z: Technology is getting better and eventually the benefits from more efficient extraction methods will overcome the effect of depletion of the giant fields you hear about.

P: Im curious. How much energy does the whole energy sector use in order to provide energy to the rest of us?

Z: Well, economically sir, thats not a relevant question. The incentive to procure more oil from older fields is now here. I always say 'Oil producers long term strategy is short term profits'! HA! And at $200 oil, you should be worried about the backlash from obscene profits from Microsoft-Mobil.

P: What if youre wrong?

Z: Well, our field by field analysis is among the most detailed in the business, so I really doubt we are wrong on how much oil there is. But above ground factors will continue to dictate the end of the age of oil. If Im wrong we can begin intense conservation and do odd/even driving days and such -theres lots of cool things as President you could implement. But Im not wrong - theres a whole world of affordable oil. We're yet to even pump half of it. The productive capacity today is well over 100 million barrels a day. And costs are not important. Gross production is!

P: Well the productive capacity of the First Lady when I met her was 15-16 children but we had only 3. Mr Zergin - Thank you for your time. On your way out please ask Vice President Schwarzenegger to send in my science team - and have him bring wheat grass shots for the lot.


"I have it from high authority that there is plenty of Oil Resource"


(1) EIA Annual Energy Outlook 2007
(2) US Department of Energy: Annual Energy Outlook, 1998 pg. 217
(3) Tainter, Joseph Resource Transitions and Energy Gain: Contexts of Organization Ecology and Society 2003
(4) Cleveland, CJ, "Net Energy from the Extraction of Oil and Gas in the United States
(5) Hubbert, M King. "On the Nature of Growth - Testimony on Hearing for National Energy Conservation Policy Act 1974" June 6, 1974

remember to hit those buttons a la Professor Goose!

thanks for beating me to it Philip. :)

let's get Nate as many new eyes today as we can, eh? I can tell you he spent the entire weekend working on this...in fact, you wouldn't believe the amount of work the contributors put into their work to make it the best it can be.

Dear Nate,

Thanks for your lucid and informative presentations. I alwasy look forwrard to reading your pieces.

Here are just a couple of general points that occured to me.

You mentioned some of the indirect costs relating to oil production. One really big one that currently costs billions and is rising almost exponentially, is, the military costs of ensuring US access to the world's remaining oil reserves. If one factors in these "indirect costs" one could easily argue that oil already, roughly, costs over a hundred dollars a barrel! However, this is a pretty radical way of looking at the situation and controversial.

I operate with something I call "internal" and "external" costs. The internal is the "price" the oil/energy costs to produce and what "we" pay for it directly. The external costs are everything else! That is, the "price we pay" that we don't see or choose to recognise. It's the price society pays collectively, but which somehow doesn't figure in the everyday price we pay for a product. Capitalism has a tendancy to "hide" the true costs of a product, transfering the real "price" from the individual producer to society, often with a substantial time-lag which means that most of us don't even register that it's happening.

Two examples of this are atomic power, which has enormous "hidden" costs; the massive outlay for de-commisioning reactors and the problem of waste-management.

The second, an more controversial, is the gigantic cost of health care for the thousands of wounded, maimed and injured US soldiers coming home from Iraq. Over a fify years period were talking about several trillion dollars.

Leaving that aside, is "growth", with all that concept implies, part of the solution or part of the problem? Aren't we set for some collosal political problems is growth begins to slows down? Yes, we are! If the cake isn't getting bigger and bigger all the time, will we be satisfied with the size of our slice in relation to other social groups?

Looking at the twin problems of Peak Oil and Climate Change, it would appear that in the future "economic growth" will/should occur in the developing world and Not in ours. How will we grow then? I would contend that all our "growth" should/must come not from increased consumption of energy, but from a massive, root and branch, fundamental, re-configuration of how we use energy. Put simply, we have to stop wasting energy on crap and save energy to use on what's really essential for our society. Now, this is easy to write and understand in theory, but far more difficult to figure out how it could actually be implimented in practice.

It means, as far as I can see, that we have to start asking fundamental and rather scary questions about the structure and nature of our society and how and why and who makes the choices. Do we let the "market" choose for us or do we take control?

If we are living in a "market democracy" do we change that system? Is a "market democracy" in fact "democratic"? If it isn't how and what do we replace/modify it with?

Sorry there are so many questions and no real answers. I'm still working on them!

Why do smart people disagree on peak oil- from what I've seen they're not even arguing about the right things.

I would venture to guess that 90% of today's oil production stream is subject to a displacement process- principally water either natural or artificial.

The science is to focus on what is going in (water) and not what is coming out (oil) -- and the action is what is happening in between (under the ground). By the time the outlet gives you useful info, it is too late.

Stuart's "water in the gas tank"- is the seminal work on what is actually important... and the fundamental physics are applicable to all crude oil being displaced.

The geologists including but not limited to- West Texas, Colin Campbell, Pickens, Deffeyes have done a marvelous job of bringing this issue to light. Their focus should be on what is yet to discover.

The petroleum engineering community has done a lousy job of steering this discussion in the right area. That the right questions are being asked, pressuring Aramco for the right data. Their focus should be on what is on production.

Daniel Yergin has no more idea about what makes a barrel of oil come out of the ground than my kindergarten son... but he is not supposed to.

It is a shame that the engineering community has been so silent- only once in history will your knowledge play such a critical role in society.

In terms of leading, following, or getting out of the way, I would say the petroleum engineering profession has chosen the latter.

I don't want to get into a 30 post thread about why this is the case.... it just appears to be this way to me.

Fractional_flow - do you have any estimations of how energy intensive your area of industry is now vs 5-10 years ago, given that '90% of today's oil production stream is subject to a displacement process"? Thanks for your comments- I agree with you about engineers - engineers dont like politics, and this looks like a political rats nest.

They have to pipe seawater hundreds of miles and then pump it up to several thousand psi. Pretty power intensive.

Thanks, Nate for your excellent article!

Your Zergin epilogue was very good and funny!!!

"The age of easy oil is over" says Schlumberger chief executive Andrew Gould. How much longer do we have to wait until Zergin and Zillerson make similar statements?


Global oil and gas investment 'insufficient'

By Upstream staff

Investment in new oil and gas projects is not enough to boost needed global energy capacity, Schlumberger chief executive Andrew Gould today.

Gould told investment bank Howard Weil's annual energy conference that low investment and project delays, as well as rapid decline in existing fields were slowing the growth of energy capacity worldwide, MarketWatch reported.

"Supply response to create a cushion of spare production capacity will take longer than we originally thought," Gould said.

He said that while producers were coming to terms with higher costs, spare capacity remained below historical levels. He said only a recession could bring short-term relief to the situation by temprarily slowing demand.

"The age of easy oil is over," he said.

Nevertheless, Gould said he expected demand for the oilfield services offered by his company to increase over the next few years.

Schlumberger is the world's largest oilfield services company.

02 April 2007 17:12 GMT | last updated: 02 April 2007 17:58 GMT

The discussions here at TOD -- and this one is a great example -- show technical folks taking the public dialogue where it needs to go!

I doubt that we'll bring about a utopian outcome, but policy formed on such discussion will be better policy.

We face tough conflicts. Some "solutions" for climate change may mess with mitigation plans for peak oil, just as some "solutions" for peak oil will mess with mitigation plans for climate change.

I do not think we ought to focus our technical prowess on evaluating too much more about "how much is left" but rather need to focus entirely on transforming patterns of human settlement to be sustainable without heavy inputs from fossil fuels.

I think we have passed the stage where we can pour too much of our remaining limited resources into finding and extrcting more oil.

I think we need to focus on the radical changes needed to cut fossil fuel use and emmissions by 90% in 20 or 30 years -- no matter what resources are still in the ground.

Is that "radical change in patterns of human settelment" a good focus for engineers and technical folks?

I know that petroleum engineers will be working on the problem of what is left and where and "how to extract" to some degree, but I think we need to refocus on changing "us" very quickly and very radically.

Did I just get into the political morass now.....?

I think what's needed is one picture, immediately understandable by the non-expert, that brings everything together in one place.

It needs to include:

  • Predicted future production levels
  • Fake reserves
  • Net energy concerns
  • Exportland concerns
  • Geographical dependence
  • Technological levels and potential improvements
  • Alternatives

One image, preferably not just a graph. Concentration would probably be on the 'gap' between demand and supply - not absolute barrels of oil.

There is relatively little chance that most people will read complex arguments or seriously consider what will happen in 5 years time - unless they grasp it implicitly from the beginning. That goes double for engineers in the thick of it - they have a track record of not being able to see the wood for the trees.

My Oil Quiz is intended to be a step in this direction.

I posted this a week or so ago, so quite a few have already seen this.

FF: "Their focus should be on what is yet to discover."

Does anyone have a feel for how well the earth has been explored for oil? I've read various viewpoints that hit the extreme ends of the spectrum; from we've plotted every inch of the earth with 3D/4D all the way to we have vast areas left to explore.

Since I know zippo about the exploration process, it is hard to even imagine where the truth really lies. But if big oil companies are having a hard time replacing depleted reserves every year, it does seem obvious that significant finds are getting scarcer and further apart in time.


Yours is actually a very good question, and I am in agreement with you, that one hears estimates all over the place. And, as you described yourself, I too know little about exploration. Some themes seem to be recurrent however:

--The independent oil companies of the West have less and less area that they are allowed to explore firsthand, due to the energy nationalism of various state controlled oil companies, and other prohibitions. They are trying to look for more and more oil in a smaller and smaller area of the planet. This is most pronounced in the OPEC/Persian Gulf region, and in Russia, places that the oil companies had hoped in years gone by to be included, but are now being excluded. One can presume a similiar fate in Latin America for many of the Western oil companies, as these nations become more and more nationalistic

---There are areas in which the oil companies have done no real exploration for a very long time, because they have not been allowed to drill, and if they found oil there, they would not be allowed to harvest. Various areas in the U.S. West and the OCS (Outer Continental Shelf) of the U.S. come to mind. Again, the estimates of how much oil is there are widely varied, from barely a couple of years worth of production up to the hopes for a new North Sea. No one really knows, and only drilling at least in selected spots can tell.

---Of great interest are (a) Offshore Africa and (b) Arctic. Efforts now seem underway, but there are large areas in each region that have had little real exploration. Why?

It is easy to forget that after 1982, and for a subsequent 20 years or so, no one spent money in the oil business doing much exploration, because they were too busy fighting for their financial lives. This was the period of the greatest price collapse in oil from it's prior top in history, and most effort was expended on mergers in the oil business, as the remaining oil companies in the U.S. tried to survive. People now seem absolutely astounded that exploration and discovery dropped off! With cheap oil flowing from the Persian Gulf and the North Sea, who was willing to pull money off the table to explore oil that would then be sold at a givaway price? Would you have endorsed exploration in that environment as an oil company shareholder?

I do want to mention one more thing: Many have mentioned the move by the oil companies into very deep offshore ocean drilling as proof that they simply cannot find oil onshore. There may well be some truth in that, but it is not the whole story. The private oil companies are being driven offshore by lack of anywhere to even look onshore. Once you take out the areas forbidden to drill for environmental reasons (and I am not faulting that, but it is simply a fact of life for them) and take out the areas onshore controlled by nationalist or hostile parties, you see a smaller and smaller piece of the Earth available onshore for the oil companies to drill. There is some debate as to whether the major private oil companies of the West can survive into the future given the situation as it is, and it will surely become more difficult for them with each passing year. Going out to deep water is becoming the only game in town.

What the above situation means to the world is that it is becoming more and more dependent on the willingness and the competence of the state owned oil companies to explore for oil and gas, and find it if it is there.

But, do we know how much is left to be discovered? No. We certainly do not.

Roger Conner Jr.

Remember, we are only one cubic mile from freedom, and that cubic mile could be hiding just about anywhere!

you seem to suggest that nationalized oil reserves are not being exploited. take saudi aramco as an example. imo they are and have done an excellent job of extracting oil.

Fractional_flow - let me phrase the question directly:
Oil extraction uses Ein energy to get out Eout oil.
What is the relationship on the fields you are familiar with between the following variables?


As %W increases what happens to Esociety?

you pose an impossible question. the Ein would depend mainly on the depth of the oil. hypothetical examples could be examined.
i know of one field (natural water drive with produced water reinjection) producing about 97% water from a depth of 4800 ft that is making a fair profit. i dont see how that field is an energy sink, although i havent actually made a calculation.
another waterflood at 10000 ft is producing 70% water, which is making a profit on a monthly basis but has not paid out the initial investment in 2 1/2 yrs(and doesnt seen likely to in the immediate future). the operator keeps spending money on one problem well.
you make some very good points about the energy needed to produce oil from ever increasing depths. for many fields, 10000 feet is the practical limit for rod pumping and the practical limit for electrical submersibles as well (these wells were developed with relatively small 5 1/2 inch casing).

"..has not paid out the initial investment in 2 1/2 yrs"
Well, I don't know how to calculate for such a deep well, but how fast should it pay itself off? How does it work that it won't pay itself off in the near future but is profitable per month??

Like I wrote below, if it doesn't pay itself off in two years then it never will - or was our production curve so much different?

My grandfather pumped oil with an engine-house,
my father pumped oil with a 20 lb. electric motor,
can't I just pump it online?

the investment i am talking about was conversion to waterflood for which the estimated cost (100%) was $600k, actual cost $ 1,200k the wells in the unit have averaged just about $ 40k net after taxes royalties and operating expenses so they are profitable on a monthly operating basis but payout has not occured. the cumulative net revenue revenue is just under the $1,200k and now an afe has been issued for another $ 188k . incidentally the oil price for this unit was $ 36.22 for january.

i read your post "down below" and yes the answer is apparently that the production curve must be very different. give me a two year payout on long lived reserves and i will buy as much of it as i can afford. the going rate for existing oil and gas acquisition is about 36 months current revenue for working interests and 48 months for royalties. although if you follow the auctions on www/energynet.com, there is sometimes a pissing match between two or more rams in rut and the price can go way up.

Wow. Outstanding work Nate! I had never thought about the differing energy densities inherent in the "all liquids" category. Seems that things are, indeed, more dire than I had thought.

Maybe this is why the USA's political leadership is so unbendingly focused on resource war?

"Did I just get into the political morass now.....?"

No, but you obviously want to.

Even a troll can usually reply to the correct post...drunk on that ethanol you love so much?

What an undulating plateau means

Nate hits the nail on the head with this post - there's so much language out there that you need a magic decoder ring to figure out what people are saying. Myself, I have finally figured out the CERA "undulating plateau:"

US natural gas reserves:
1995 - 165 Tcf
2000 - 177 Tcf
2005 - 204 Tcf

All's right with the world, look at how much our reserves are rising. Oh, wait a minute...

US natural gas production:
1995 - 18.6 Tcf
2000 - 19.2 Tcf
2005 - 18.5 Tcf

No worries, though, we're on the undulating plateau. But what exactly does that mean?

US natural gas wells drilled:
1995 - 8454
2000 - 16242
2005 - 27397

Cost per well (2005 dollars):
1995 - $535,000
2000 - $750,000
2005 - $1,534,000

Putting the above together, the real outlay for natural gas wells in this country has gone from roughly $4 billion in 1995 to $40 billion in 2005, with no gain in production (but reserves have gone up!!!). One might think that the next factor of 10 might start to hurt the economy at some point. At any rate, the magic decoder ring says: Undulating plateau = factor of 10 price increase each decade. Of course, until Nate's net energy kills us...

My own net energy wouldnt likely kill anyone - I take naps every afternoon.

As to net energy analysis, Ive just updated the dot-connecting of many who have worked on this decades ago, starting with Howard Odum in 1974 who pointed out that stripper oil wells were mathematically energy sinks and not sources. Net energy analysis was very popular in the 1970s and even got passed into law at one point.

With the bull market of the 1980s and increased imports and overcapacity in energy sector, net energy analysis largely fell by the wayside - Cutler Clevelands ecological economic group has always worked in this area. The past decade or so, this concept has (kind of) been subsumed into LCA (Life Cycle Analysis), though that is more a project by project basis and not a global macro pie-sharing exercise.

I know Cutler and a group at Boston U, Syracuse, etc are working on a global energy systems modeling project that addresses some of these issues - but their monetary and academic support list is not long.

I know that two of my own papers on this topic have been rejected (but since accepted) due to 'not enough attention to economic factors'. I am becoming increasingly wary that academia is slowly being eaten by the giant economic growth machine...

thanks for your natural gas analysis and comments- its clear that this theme is starting to happen. Nat gas companies are saying they wont drill new gas unless the commodity is over $7.25 per mcf in order to attain their 20% IRR - this implies a cost of at least $5. Tells me higher nat gas and lower economic growth will be a core theme ahead.

One problem I have with EROI estimates is that a lot of infrastructure is long lived. A good way to look at it is that replacement costs for roads and bridges built in the 1970's are much higher today. So I think EROI is a decreasing quantity and capitol costs are increased via construction of new infrastructure using low EROI energy sources. So we should see a delay between when EROI starts decreasing and EROI effects begin. The same problems are effecting all oil extraction technologies we at least until recently where able to leverage pipelines drilling rigs ships etc built with cheap oil. But depending on replacement schedules all this infrastructure will face significant cost increases as new infrastructure is built with expensive inputs.

This would show as a rapid escalation in the cost for oil production for one. Also it would show as corn/ethanol rapidly becoming unprofitable and more corn/ethanol as used as input for production. In general a lot of fixed equipment has a replacement time at around 10-15 years so one would expect EROI increases to start having and effect 10 years after peak EROI. Which is right about now.

There are cornucopian economists, but economices is not fundamentally a cornucopian discipline.
In the 6th edition of Samuelson's textbook, the introductory chapter subheadings include, "The Law of Scarcity," "The Law of Diminishing Returns," and "The Malthus Theory of Population." Although this text, written in 1964, was pretty optimistic, it still phrased the fundamental economic question as how to allocate scarce resources among a population with unlimited desires.

Not a economist but its seems fairly obvious that capitol will concentrate to attempt to relieve the scarcity at least initially. The problem with oil is that it is a major input into the production of producing equipment. To me it looks like a strange attractor problem.


So your faced with a declining EROI scenario. So for example corn/ethanol may be positive now because of both low NG prices and use of equipment and infrastructure developed with cheap oil but as more capitol goods are developed using ethanol you get in this vicious feedback loop that must decline. So it is impossible to grow a economy when you move down the EROI slope it must contract and in fact its contraction is self reinforcing.

So the only import point is EROI is decreasing that actual rate of decrease is determined by the details but the outcome is certain once you move negative on the energy production side.

Great article Nate - net energy is a crucial part of how peak oil will play out and you explain it really well here.


Another way of putting one of your main points: there is a pyramid of capital intensity. Energy exploration, development, distribution etc is near the apex. But this pyramid is bound to become much narrower and steeper. At some point the narrow base can no longer carry the apex.

One point in regard to Part III: we live in an exceptional time, the age of oil, and an exceptional place, the middle class of a first world (I'm not going to muddy the waters with adjectives like 'imperialist') country. Most of us have no idea of history, no idea of how exceptional these conditions are, and therefore no idea that it might be coming to an end. I am working real hard on adjusting MY head to it. In other words, the key lies in Egypt: denial.

Go ahead and clear the waters: we are imperialists, and our underlings pay us tribute in the form of cheap resources, cheap labor, and cannon fodder.

More alternative fruit. If it can work then it should count. It is a matter of scaling up net highly positive energy approaches. Some recent tech.

Plasma burning of garbage generates 6 times the energy consumed. There's enough energy in U.S. munici­pal and other waste to replace as much as a quarter of the gasoline the country uses, says ­Daniel Cohn, cofounder of IET and senior research scientist at the MIT center.


Waste water fuel cell produce 18 watts per 260 gallons of water and achieved a charge efficiency of more than 70 percent.


Lesser developed countries discharge approximately (the equivalent of) 100 trillion gallons (380×109 m³) of untreated sewage per annum. This could potentially generate 7 Terawatts of power for them and clean up their waste water.

These kinds of approaches plus a lot more nuclear power and shifting to more electrical transportation (hybrids and all electric.)



Definitely cool technology, but it's only going to help at the margin. The efficiencies, EROI, and potential amounts of energy from these technologies are far lower than what their advocates claim. The main benefits are the combination of disposing of waste and generating some energy.

But if you start adding up all the potential renewable energy sources along with a revival of nuclear, we might really have something.

And many municipalities are *paying* to have their garbage hauled away -- they'll end up buying back the energy later. This is just precious.

I question how you can count "employees driving to work, health insurance, steel for the drillpipes, sandwich meat, etc." as an indirect extraction cost, and still require a net energy yield. Ultimately, we could transition to an energy extraction economy, where everyone is directly or indirectly employed in the oil patch. No Hollywood, latte, personal trainers, ..everyone would have a "real job", kind of like Alberta. In that scenario, "region A" on your graphic would disappear, yet we still have an economy.

Of course, the oil would continue to deplete, and then everyone is caught offside. I think a better metric than dollars would be to look at employment by sector, or post-secondary education-years by sector, to get an idea of how over-committed we are to oil, and how quickly a transition can be made to alternatives.

the point of the indirect costs is that without those things, no one could get to work to produce oil. If the entire economy was directly or indirectly employed in the oilpatch, how many industries would disappear? certainly nascars disappearance wouldnt hurt oil production, but prozacs disappearance might.

Ultimately it gets down to as the net high quality resources deplete faster, extraneous and luxury sectors of economy (arts, gee-gaws, entertainment, financial services) will at the margin be replaced by more and more basic goods (energy, food and necessities)

"No Hollywood, latte, personal trainers, ..everyone would have a "real job", kind of like Alberta. In that scenario, "region A" on your graphic would disappear, yet we still have an economy."

Try again.

There are about 2 million people in Alberta's labour force. About 125,000 are directly employed in the energy industry. Using multipliers, about 18% of Albertans can attribute their jobs directly and indirectly to the energy industry. Indirectly includes people selling lattes and personal training.

I think the personal trainer issue depends on the disposable income generated by the oil industry and of course its concentration or distribution. I'd say that the oil patch workers would see their real purchasing power decline while the owners see their purchasing power increase. So when your in a decline situation the net effect is to increase the transfer of wealth to the top where it can be invested in further energy production. So the economy should naturally favor wealth concentration over distribution as core resources become scarce. So you would see a increase in personal trainers and a decrease in health clubs for the average citizen. At some point the faltering economy would cause labor costs to decrease and probably force the energy producers to take on a more vertical business model as profits are squeezed out of the system.

Although the wealthiest look flashy they actually spend a much smaller percentage of their overall wealth on luxury items than the average consumer. So concentration of wealth leads to natural economic contraction.

OK.. so even Alberta is not yet an example of a totally committed energy economy. There are still people to staff all the planned expansion.

In 1905, 50% of the NA workforce was direct farm labour. The development of the tractor and fertilizers made many of these people redundant (one of the causes of the depression), and they eventually went into manufacturing, aided by demand for WWII. In 1948, 40% of the workforce were in manufacturing. The trend since then has been one of increasing diversification into the service sector, and only 4% of workers are now farmers.

My point was that the economy shifts (albeit painfully) to where the lowest efficiency lies, and there improves that efficiency. We are entering the era of the energy economy, and the best way to track this will be to follow where the people and skills are going, not $

I don't think so since its the amount of disposable income generated that allows a economy to grow either via the purchase of additional goods or investment for economic expansion. These capitol flows are what keeps our economy growing. If it stops growing we are basically toast.

To put it bluntly where the rats congregate on the sinking ship does not change the fact the ship is sinking.

The social effects of a shrinking economy will likely overwhelm the base economic effect.

I dont think an economy much like todays require growth but it must have change. Growing somewhere and shrinking elsewhere or going thru overall boom and bust cycles. Withouth such we will have litte technological change and it will become very hard for young generations to establish themsleves and for people to change their field of work and way of living.

Thats basically the style of economy we had for thousands of years slow technical advances with the rise and fall of empires as they overreached the local resources.

On big difference today is that in the past we always had access to lands controlled by barbarians which were basically fallow. Or you could invade the neighboring empire.

With even the hand weapons we have today this sort of economic warfare is tough to win. I think your mixing local economics with the macro economics. Its overall growth or decline on the macro level that has always been important. Rome took four hundred years to fall I'm sure that many regions experienced growth during this time.
That does not change the fact that Rome was on a long fatal downward spiral. It could well be hundreds of years before we know if we have a sustainable high tech civilization or if we end with some sort of ruined post tech world.

One reason It makes sense to start looking past trying to duct tape todays society and thinking about how if possible we can build a sustainable high tech civilization.
It may well prove impossible in the long run. I'm convinced it will require a basic changes in human society.

I think it means moving to a society where information is the corner stone for wealth not material goods. This would mean wealth would be focused on high tech items such as smart homes and electronics and a more electronic lifestyle over material goods. It would probably also include more interest in plans to create goods via automated synthesizers over the central manufacture of these goods. Hand made would be both hight quality and durable goods a art form. Synthetic goods would be designed for easy recycling and low production costs so the starting materials could be used for new goods. Obviously population control would be built into the society this is probably the biggest difference from today although it seems our wealthy countries seem to adopt population control naturally.

As far as growth goes the only place to go now is into space or the ocean so you would have to guess the society would eventually expand for real past the earth.

I was thinking about shorter boom and bust cycles then hundreds of years.

Making information the corner stone for wealth has the problem with information being easy and cheap to copy. Its not realy a problem since information both need to be widely distributed and interpreted. It would be good if information handling ability gave status. Hackers, teachers, librarians, moviemakers, etc.

Valuing quality over quantity and being happy with having smaller well though out homes, fewer long lasting toys, well made and repairable bikes, cars, computers, fridges, etc would be extremely good.

I dont see such changes as moving to another society. If they get trendy over 20-30 years it would be a smooth change that would save what is good with the culture I live in and its old traditions. People would not even have to feel poor. Its like a smooth urbanization and changing to bicycling, train riding and occasional care use. Everything essential can continue, its only a little different in how it is done.

There is a bit more to it. The change is not to accept this but to reject the throw away society of today. And long term I think there is a lot to it culturally. And of course the whole idea hinges on keeping populations low. Your right living within your means is not a completely foreign concept thank god.

As far as data wanting to be free I honestly don't know. I am a open source developer so I think about this. Right now our computer software is so incredibly primitive that I think its hard to grasp what a real computer based society would look like. Microsoft is certainly a culprit here but in general the vast majority of people cannot value software correctly much less support advances. Only the youngest children are growing up surrounded by reasonably usable software. Assuming at some point the monopolies holding back advances are broken imagine what software will be like in 50-100 years. I'm working on some fairly advanced concepts that fully integrate compiler theory into the final product.
We have never had self compiling adaptable software before so who knows what it can do. Sounds cool but this is a very basic concept and gives you some idea how primitive todays software is and its just the tip of the iceberg of things that don't tend happen when you have monopolies.

Since we have barely begun to build out the infrastructure for evolvable software that should be free so we have no idea what happens next. Right now its a matter of figuring out evolution then we can worry about revolution.

I dont think data wants anything. Its usually more usefull and influential on the future if spread around giving benefits to those who share data.

I agree that there are lots and lots left to do within the software field. I think this can help with making some and perhaps a lot of people happier and it can aid technological breakthrus but I can not count on such happening.

I'd like to repeat a comment I made on the drumbeat starting with

Why Cry Wolf ?

If you consider Nates post and WT bidding war model we are approaching a time when the remaining oil production will be bid on by the countries with advanced economies as they struggle to keep their economies functioning and hopefully growing.

This lead me to consider what if anything on earth is worth more than oil ?

The answer to this question turns out to be nuclear weapons and advanced conventional weapons system. It seems reasonable to assume that at some point nations will consider providing both nuclear and advanced conventional weapons to the oil producing nations in exchange for exclusive contracts.

This type of exchange makes sense because it accomplishes few things.
1.) It gives the country that makes the exchange more oil than its competitors.
2.) The competition's economies may fail soon ala demand destruction leaving more oil for the survivors. Esp since oil would not be equably distributed as would happen in a open market.
3.) The Oil producing economy is now armed against a attack by one of the other advanced economies or neighbors so they greatly increased security in this arrangement.

So a resurrection of the threat of nuclear war this time at least starting as a regional war or as warheads smuggled into countries threatening a oil producer is very high.
All out war or MAD is less likely at least initially in a sense this would be nuclear war by proxy.

So consider this possibility as we move into a time of constrained oil and high prices we will face our old enemy nuclear war again.

It seems reasonable to assume that at some point nations will consider providing both nuclear and advanced conventional weapons to the oil producing nations in exchange for exclusive contracts.

I think its much more reasonable to assume that nuclear-armed countries would be loathe to spread such technology around without remaining completely in control of it. If, for example, an oil-producing nation is "provided" nuclear technology for "exclusive contract" rights, what's to stop that country from reneging on the deal, and then daring the sucker of a country who provided it to do something about it?

No, I think the predictable response will be to dig out the old colonialism playbook -- as in Iraq -- where either an oil-producing nation will be outright invaded and controlled, or enough military advisers and troops are stationed in said country "for their own safety," to assure the same result. That being: the only way that another competitor can gain access to the oil is by militarily challenging the oil-producing nations nuclear-armed "patron."

The nuclear proxy option effectively checkmates the colonial approach. To give a concrete example if China strikes a deal with Iran to give them nuclear weapons in exchange for exclusive access to their oil it effectively stops the US from using the colonial gambit. If you want to take the traditional colonial approach its important to move fast and get your troops in place before someone changes the game.
For the western nations that are adverse to the cost and losses associated with a colonial style approach given that the other side will almost certainly receive high tech arms from other interested parties nuclear weapons are a great way to gain cost effective control of oil resources.

The US could take say the same approach with KSA. If we arm them first then Iran even if they obtained nuclear weapons would be effectively at a stalemate for some time.

Its easy enough to reject this today but I don't think it will be rejected forever. Maintain a traditional fighting force is horribly expensive a few well placed nukes are a lot cheaper and nuclear war via proxy makes a lot more sense than the old cold war. Its even technically winnable. One big reason we never had a nuclear war is it was tough to figure out a way to fight one and win. Not that anyone had any qualms on using nuclear weapons. With peak oil we get both the chance to use nuclear arms and a reason to use them.

As long as a limited exchange does not damage the oil fields it helps a lot in destroying demand in the producing countries.

Basically tactical nuclear weapons are the number one choice for causing needed demand destruction they can really make a difference if used in a semi-controlled manner.

In total your talking about killing less than a 100 million people we might lose a few American cities to smuggled weapons but this demand destruction will really help the rest of us since its a easy way to create a lot of very poor Americans that won't be using oil.

We get to keep our SUV's and more important its the cheapest why to power down and keep our oil based economy rolling.
You just don't want to many nukes getting into circulation.

There has been exactly one nuclear war. Two weapons were used and the other side surrendered. There were clear winners and losers in that war. It was called WWII.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

I'd assume if a nuclear resource wars occurred you would have more weapons used but of lower yield. I think you would be almost certain to have some collateral damage from smuggled weapons but you have to take demand destruction where you get it. As long as we can keep it to low yield weapons most of the demand destruction will be caused by the associated famine and conventional war not from the direct effects of the nuclear weapons. They just make a ideal way to initiate demand destruction and make it a lot easier to engage in aggressive occupation methods to control the oil resources.

I could easily see the US if it withdraws from Iraq giving a few low yield weapons to the Sunni faction to bomb Iran and key Shiite populations inside Iraq. And I'd say we would try to keep the score even. This would allow us to reenter with a more international force and be in a better position to control the country. I would think we would be able to fake the technology so it looks Russian or Chinese if we don't have low yield Russian or Chinese weapons. Russia or China could even be the culprits the beauty of a proxy nuclear war with low yield weapons is its almost impossible to place the blame.

This is just one scenario you can come up with when Pandora's box is opened hundreds are possible.

If its any consolation I don't think we will attempt to use biological weapons unless we can get a lot better at controlling them and normal famine is more than enough to accomplish the demand destruction we need to maintain the non-negotiable American lifestyle.

Lower yield? My gosh, man! The weapons used on Japan are considered tactical today! We're talking a 15KT and a 20KT nuclear warhead each for Japan. Tactical warheads vary in size from about 1KT to about 50KT (though a few can go higher still). Classic sizes are in the 5-20KT range. Strategic warheads are the ones in the hundreds of KT to MT range.

Exactly how much lower do you think they will go? 0.3KT? At what point is it even useful to use a nuke then? You DO understand how nuclear weapons work, right? You've read Glasstone and understand the basics? Once upon a time in another life I worked on nuclear weapons, both directly (handling/assembly) and indirectly (programming simulations).

The weapon of choice in the Middle East will be the B61 bunker buster for a huge variety of reasons. It comes in dialable yields from 0.3, 1.5, 5, 10, 60, 80, or 170 KT. I am expecting any B61 usage against Iran to be in the 5 and 10 KT range though they might try 1.5. I don't see the 0.3 yield as doing the damage needed for the targets currently under consideration, and frankly, given the hardened nature of the targets, I am not sure I'd trust a 1.5 to do the trick either.

And if you move beyond Iran to general usage, you want larger yields but you want air burst weapons instead of surface or sub-surface bursts. The way to take out refineries is via air burst, but for that you'd take the 10 or even the 60 KT choices (or maybe even the 170 KT choice). Against "soft" targets like a refinery, you want blast and overpressure and for that you want air burst.

P.S. You cannot fake a weapon unless you can get material from specific reactors. Each reactor has a signature that makes it unique and the weapons material for each major nation comes from a handful of reactors so you can tell who made it. The only way to keep your hands completely clean is to build a separate weapon in your black budget that is specifically to be used for this purpose and this purpose alone and which gets its material from a reactor that is not tracked or even acknowledged in any way, shape or form.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

Its my understanding that the US helped Russia dispose of some of its plutonium. I'd think that Russian plutonium would make the best choice for deniable nuclear weapons. Also I'd have to think the US if it wished and needed to could acquire Russian plutonium if it wished potentially posing as third world dealers. I'd assume China could do the same. Russia makes a handy source of deniable nuclear material.

Its not so important but even the use of misdirection is I believe possible. As far as air burst goes a simple airplane or helicopter could be used to hold the weapon so you don't need a sophisticated delivery. Simply dirty bombs also accomplish the same purpose.

I'm not trying to create strange scenarios on purpose just posing some ways you could create conditions that allow you to engage in limited nuclear war via proxies.

I would think that misdirection and plausible denials are important for waging nuclear war via proxy. Once you get past the first bombing its a lot easier to use mutual escalation as a reason to disperse more weapons and deterrents. If a few are used too bad.

If the US and China and other economies are facing the economic problems that may occur after peak oil I don't see that nuclear war by proxy is impossible.

I know they can detect a weapons plutonium source but is it also possible to determine the exact nature of the weapon from its explosion i.e can you distinguish if its one of these B61's ?

"Against "soft" targets like a refinery, you want blast and overpressure and for that you want air burst."

Actually you would want to go with non-nuclear fuel-air ordinance for these targets. You want to get back in there, right?

Right I can't see nuclear being that useful for these targets.
Outside of shear spite. Basically outside of using nuclear weapons for heavily fortified sites they are pretty usless as pure military weapons. We have better conventional arms.

Although seem to be very useful for balance of power games post peak via the proxy war scenario. This is of course simply using them as sanctioned weapons of terror.

I can walk back into an air bursted target in days and have near zero radiation issues. Only the people who were there during the burst are directly affected. About 2 weeks max and its more than clean enough to begin decontamination operations. Witness Hiroshima and Nagasaki. Our teams were in there within a few weeks. There was minimal fallout. Most of the radiation damage came from initial burst effects, not fallout. Fallout is only a significant problem in surface or sub-surface bursts.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

Ouch so Nuclear is more versatile than I give it credit.
This just makes the argument to use them in in a resource grab all the stronger.

Fallout is a byproduct of solid matter being involved inside the fireball (the area of actual nuclear reactions). In an air burst, you burst the weapon sufficiently high that you get maximum overpressure/blast effects. One side effect of this is the fireball never touches the ground directly. Some material does get sucked up into the fireball so it's not fallout neutral but it's not horrendous either. Heck, we helped Japan rebuild Hiroshima and Nagasaki right where they were nuked and there is no long lasting radiation effects. The medical effects were almost completely isolated to the people directly exposed to the blast. Those people had lots of medical issues, but the invading US forces didn't, nor did Japanese coming in afterwards to help clean up and rebuild.

People forget these things or just don't know them. The myths around nuclear weapons are horrible. The notion that you will die in a bright flash of light is true for probably a few million people total worldwide in a global thermonuclear war. Even people close to the blast center are usually killed by blast, slower burning, etc.

P.S. An older man and his daughter were in a home made bomb shelter 150 yards from ground zero at Hiroshima. (Note that "ground zero" at Hiroshima was actually the point on the ground underneath the actual point of the explosion much higher in the air.) They survived with no known ill effects. Yes, nuclear is very versatile. The fallout even from 400 subsurface burst weapons in Iran would be so little for most of the rest of the world that it would amount to living at 5000 feet elevation versus sea level, in terms of lifetime total exposure. This would not be true for Pakistan, India, or other nations directly downwind of Iran but for most of the rest of the world it would be.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

Why wouldn't conventional weapons be enough ?
Nukes can be faster but conventional will work pretty fast. It is not like the US air dominance would be threatened. Dismantle air defences and use good old B52s and C130s and destroy whatever with conventional bombs. No need to open the nuclear door.


The lethal blast radius is surmised to be approximately 400 feet (though the overall blast radius is a mile). Pound for pound, it is far less effective than cluster bombs.


For bunkers, Deep diggers would seem to be better than nuclear weapons. Defence tech provides the latest on Deep digger and arrays of Deep diggers that can reach hardened bunkers down to 300 feet

Thats good for the US when it has command of the Air. Nukes can be delivered very simply. Via small aircraft or helicopter for a air burst or any ground transport and in general you only need to use a few for the desired effect. So having Nuclear weapons effectively makes a country equal to the entire conventional abilities of the US. This level playing field forces big countries to treat you as a equal.

Exactly! This is why so many players want nuclear weapons! You don't need a $400 billion defense budget when you can equip 50 missiles with 150 warheads. You could, for an initial outlay of $20-$40 billion total (maybe less, and not per year) build an effective deterrent force that the other guy has to take seriously. Your annual maintenance cost for that force might come in under $1 billion per year.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

But for countries like North Korea and Iran. They are not able to quickly produce a lot of nuclear weapons and deliver them against the US via planes or missiles.

North Korea has a couple of bombs and is having some trouble getting them to work.

Iran has 3000 centrifuges and is taking until 2009 to get their first one.

The US and USSR and other major powers are developing defences and detection.

High Power Microwaves for frying electronics of vehicles and missiles from a distance.

For sneaking a bomb in the ports and borders are getting fairly effective detection equipment from now through 2010.


also, put effective detectors onto UAVs and the US could actually find weapons and nuclear material. Another option.

Having a few nuclear weapons does not make a third rate country like Iran or fourth rate like North Korea the equal of the US military. In spite of how bad the US military is at occupation. the response would be what the US military is good at destruction.

Use a few nukes and say the third rate power gets a body count of a hundred thousand per weapon. Then the US hits backs and destroys your country. You might say but the US is stretched now. The US is stretched with its volunteer system. With a nuke hit, then regular air campaign (like rolling thunder in Vietnam but against cities not jungle. 860,000 tons of conventional bombs over a little over a year. 2 days and 1700 tons of bombs killed 100,000 in the tokyo firebombing) and institute a draft and fire up the war bombs and an actual mobilization (you know like World War 2).

The leverage of the nuclear weapons is only in not using them. Force a cost benefit analysis to not go to the cost of crushing you. but use them and the cost benefit analysis changes and it is worthwhile to utterly crush you.


If you think that nuclear armed countries would be loathe to spread the technology then you are misinformed. The classic listing of "nuclear powers" includes the US, Russia, China, France, Great Britain, India, Pakistan, and probably Israel.

Nowhere on that list do you find Spain, Germany, Italy, Greece, or Turkey yet all of these are nuclear armed states with control over their nuclear weapons. They have received their arms from the US. They have been granted exclusively B61 bunker busters but these are nasty weapons regardless.

In short, there is precedent for the US arming client states with certain types of nukes. It has been done before and will be done again.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

"Nowhere on that list do you find Spain, Germany, Italy, Greece, or Turkey yet all of these are nuclear armed states with control over their nuclear weapons."

Huh? They have ability to order and deliver nuclear weapons outside a NATO order? No way.

They have the codes and ability to reprogram the Permissive Action Links independently of the US supplied weapons?

Exeedingly unlikely.

I stand corrected. Replace Spain and Greece with Belgium and The Netherlands.

Yes they have ground control of these weapons pursuant to overall NATO objectives and for self-defense purposes. However, self-defense purposes don't mean a hell of a lot anymore do they? Look at Iraq, for example.

P.S. Germany produces nuclear warheads for France. Germany stockpiles its own nuclear warheads yet is considered a non-nuclear country. The European Aeronautic Defense and Space Company - EADS , a Franco-German-Spanish joint venture, controlled by Deutsche Aerospace and the powerful Daimler Group is Europe's second largest military producer, supplying France's M51 nuclear missile.

Believe what let's you sleep at night. It won't change reality.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

The missle is not the warhead. They have ground control, but they would have to disassemble the warheads and redo the electronics to make then go "BOOOM". A week to several weeks if they started from scratch in an emergency (my guess). With prior planning, a day or two.

No one thinks that Germany would have great difficulty becoming a nuclear power if they chose to do so. Just not there today.

Best Hopes,


Alan, I know this. Aside from producing the missiles, German firms produce France's warheads.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

If by a "German" firm you mean EADS, you are wrong.

EADS is a Frenco-German firm; with co-CEOs (one from each nation) but the French influence is stronger. And the warhead manufacture is being done on French soil by Frenchmen & women.

Not something the Federal Republic can easily grab.

Best Hopes,


The fascination with this sort of scenario is bizarre. Must be some sort of American imperialist notion.

The world market for oil is basically an open one, in which anyone who pays up can get oil. If one country were to monopolize (colonize?) a certain petroleum source, then the price internally would be different than the price externally. There are some examples of this among the oil exporters domestically but none among two countries in differing locales.

Just imagine, for example, if the US government dragooned Iraqi production entirely for US use, in such a way as US prices were effectively lower than ex-US prices. If any other country decided they didn't like this situation, halting US shipments of oil from the Gulf to Louisiana would be child's play. If the cruise missile at the Straits of Hormuz didn't get the tanker, the one based off of Cuba would. The record of governments that have tried this sort of maneuver -- Germany going after Caspian Sea fields in WWII, or Japan going after the fields of Borneo and the Netherlands East Indies -- is one of universal failure.

People still haven't figured out what's going on in Iraq. Of course it's a war for oil. Of course it's a matter of stealing oil. But who is doing the stealing? It's a matter of certain individuals stealing the oil, using the US military, so they can sell it on the world market. Don't follow the oil, follow the money that comes from selling the oil! From this you can see that spending $1 trillion of US taxpayer money to steal oil that produces $100 billion in personal profit is a perfectly reasonable strategy.

OK, I'll bite, if the thread is not already dead. Following the money, most of the money is going to Russia and Saudi Arabia. Does that mean you are saying that King Fahd and Vladimir Putin planned the Iraq war? Seems doubtful.

As I've said before, in my opinion it's entirely reasonable to think that KSA was involved in this whole mess from the very beginning. As goes Ghawar, so goes the world. We now know Ghawar is toast. When did the Saudis and their patrons in the Bush administration know that? Where did 15 of those 19 hijackers come from? It's not unreasonable to speculate that the current situation in the Middle East started as a joint Saudi-US venture.

Hi econguy,

Thanks, and is there any chance (if you're still reading) -

re: "Don't follow the oil, follow the money that comes from selling the oil! From this you can see that spending $1 trillion of US taxpayer money to steal oil that produces $100 billion in personal profit is a perfectly reasonable strategy."

Do you know of anyone who's written anything in detail on any of this? (i.e., I'm looking for further references, in other words. Thanks.)

Looks like you are experiencing the Preference for the Familiar Story Effect. Toddlers love to hear the same story over and over and this carries over to an adult's ability to understand new concepts or to let go of old world views.
Most of us grew up during the Cold War believing the end of the world is only 20 minutes away. It didn't happen and we are stuck imagining terrorists using nukes against us. We are also stuck with a fixation on immediate gratification. Eat, drink, and be merry for tommorrow we evaporate in a thermonuclear plasma. Run up debts because there will be no bill collectors tomorrow. Don't worry about GHGs ruining our descendants' lives because there will be no descendants. Such a simple world view.
Resource depletion is the greatest story never told. It's why so few can accept its existence. Believing China, Russia, or even the French will give nuclear weapons to oil producers in exchange for exclusive rights is absurd. These countries and our's have minorities who could reimport these devices and use them against the donor nation. What is more likely is a formal protective umbrella will be entered into. For instance China agrees to protect Iran against American or European military actions in exchange for its oil. France could offer Venesuala protection. America could offer Kuwait protection. Maybe it already did? Maybe this is what's got the neocon's undies all in a knot?
A world of international cooperation not under the dictates of a Moscow politburo or a Wall St boardroom is a very strange world view indeed. I hope we are not too old to learn new stories.

Looks like you are experiencing the Preference for the Familiar Story Effect. Toddlers love to hear the same story over and over and this carries over to an adult's ability to understand new concepts or to let go of old world views.

Im experiencing the same phenomenon. Except these particular toddlers have 'digg bury' buttons.

One of the sad things about nuclear war by proxy for a declining resource is that the destruction of a few of your own cities is not a bad thing.

1.) Immediately removes demand from the effected region.
2.) Allows suspension of the normal government and martial law.
3.) Allows you to openly strike the target you choose to blame for the weapon without automatic condemnation from the rest of the world.
4.) With the new governments your free to enact resource management for the good of the nation not the people ala Zimbabwe

So a few loose nukes are not the end of the world in a proxy war in fact they make it a lot easier to wage.

About the only event thats bad news is a nuclear attack on the oil fields themselves but I'm sure in this climate they can find a few poor Nigerians or Americans willing to work the radioactive fields wearing respirators.

Nate, good post. One quick criticism....some of the graphs could use some labels (particularly the first one), and all of them should have figure numbers for easier reference.

For me personally, when that World Production in terms of BTU content graph (reproduced here) appeared at TOD a few weeks back, a light-bulb went off, and at that moment, I pretty much became convinced that peak-oil is upon us now as opposed to a problem a decade or two away still. The vast majority of posts since then have only added to the evidence (I bow before you Stuart!).

For clarification, regarding your World Production figure (number 7?!), that plot only includes the relative BTU content, correct? Is there any correction for the net-energy issue, particularly with respect to ethanol? I'm guessing not.

From a net available energy perspective, it would appear that, instead of a plateau yours and Khebab's figures would indicate, the cross-use between the different fossil components (oil, ng, coal) would put us into decline at present. Is there a way to present such information in a clear and concise graph? What I'm thinking of is a graph of net-energy production available for use. This would subtract out the fossil components in generation of ethanol, etc. It can't be an easy thing to generate, clearly, but it would be interesting to see. There is also the issue of end-use, but a start could be to take the available thermal energy and just see what the production values give for that theoretical quantity. A guestimate would suggest a peak around 2003-5, given the decline in available energy from coal and the ramping up of ethanol.

First off - I apologize re: graphics. It is not my comparative advantage but im better than I was a year ago. Stuart and Khebab set high bars. I wish I had a secretary to make that all look purty but I dont - so it is what it is.

Regarding your question:

For clarification, regarding your World Production figure (number 7?!), that plot only includes the relative BTU content, correct? Is there any correction for the net-energy issue, particularly with respect to ethanol? I'm guessing not.

You are correct. The reason its not simple to do a net-net BTU analysis is then you cross the bridge into energy quality analysis - clearly a BTU of electricity is worth more than a BTU of coal. What we are concerned about on this topic is how much liquid fuels are used to create liquid fuels - ethanol, though currently an energy break even prospect DOES have a positive liquid fuel return, as most of its inputs are natural gas or coal for steam.

No one has done, nor is it easy to do - a net-net analysis of all these fuels (and a triple-net, including environmental externalities would be even better, though in the end energy will likely win out over the environment). Thats kind of a main point of this post - resources should be going towards that sort of analysis and policymakers should be given those results

You do not need a secretary to label graphs. It is laziness, pure and simple. Perhaps that sounds harsh, but it is nonetheless true. It doesn't need to look pretty, but it does need to be self-explanatory.

What are the units on the vertical axis in your first graph?

Wow, considering the amount of time it takes to write one of these posts, "laziness" is probably the worst possible descriptor.

Yes, a bit harsh, but labeling graphs is just something that one must do. There is no excuse.

once the graphs were in the post I didnt have time to go back into Excel to recreate them - i thought the bottom label was sufficient - EIA numbers are typically in millions of barrels per day for both US and world production. sorry - I'll try harder next time. But youre right - I am lazy (aka steep discount rate)


Great job on the article. You shouldn't be expected to produce professional charts as an amatuer blog contributor.

However, Excel charts are fairly easy once you get through the basics. There are several very good reference books that explain almost everything. I use the Excel Bible.

I also recommend taking abit of time, when you are not doing a story or if you need to procrastinate, to just go through all of the dialogue boxes and try to figure out what each one does. Labelling is a discipline, but well worth it.

The learning curve is fairly short and gets much easier once you are up and running. I bet if you buy a book and then spend a few hours playing around, you'll shut all the chart critic up quickly.

Thanks again for your contributions.

Well said. Jack, I wish I had your tact.

There is probably a book on that too. :-)

Excellent post Nate! Plese keep up the great work. This tends to point toward a law of dimenishing returns.

I find it interesting that there is such faith by many that new technologies will reveal solutions. What many who are unfamiliar with the oil field do not appreciate is the tremendous level of advancements and technology which has been increasingly utilized over the last couple of decades. It is not as if The oil industry has been sitting on it's arse not developing new tech. And if we are pushing things to our limits now, what new solutions will be left to deploy that will make a difference? Same could be said for Automobile efficiencies and numerous other areas for discussion.

Thanks for an excellent, thought-provoking article Nate.

Here's just one press report that gives support to your key point (emphasis mine):

Alfa Bank Gives Oil Cos. Big Thumbs Down

Alfa Bank released a report yesterday [Mar 16th] with a critic evaluation of the perspectives of oil producing companies in Russia. In the report, analysts lower their recommendations for securities from all leading companies in that sector and lowered target prices 15-30 percent. The bank says that oil companies' capital outlay for production and the taxes they pay offset their profit even with high oil prices and make the development of most new deposits unprofitable. This comes after a reconsideration of the accounting model to calculate long-term outlays from oil production.


"The key is that the rapid and seemingly costless growth of production in 1999-2004 was never real," the report reads. "From the very beginning, it was understood that an extremely critical situation would follow, in which the only possible way to maintain the existing level of production (regardless of the pace of growth) would be to raise capital outlay sharply."


Alfa bank analyzed 45 projects to develop new deposits and found only eight that were profitable in the model. Only large deposits and those with tax benefit attached were promising. In Western Siberia, the analysts calculated, wells would be profitable only if the price of oil exceeded $100 per barrel.

Even analysts who oppose Alfa's view don't paint a rosy picture:

Oil companies contacted by Kommersant confirmed that their capital outlays would be rising in coming years. Other analysts differ in opinion with Alfa's conclusion, however. Renaissance Capital analyst Roman Elagin estimates that Russian oil production will remain profitable as long as oil prices remain above $40 per barrel.

The taxes on oil production in Russia are quite high. There was a period around 2000-2004 when Russian production was increased using low-cost methods on existing fields but to increase/maintain it from here requires much higher capex per barrel. The taxes do not allow the companies to recoup this cost. This renders Russian crude essentially unprofitable at any price. The companies are making most of their money on refining -- oddly enough, the taxes have the effect of increasing refining margins so they make a bit of it back here. So, as integrated producers they remain profitable but the upstream business is dead. Or, at least that's the Alfa argument.

Wind energy, which should have a very high EROI, has had an interesting last decade.

1995 installed cost/kW: $1,300
2003 installed cost/kW: $1,000
2007 installed cost/kW: $1,500

The reasons for the price increase are several:

- higher cost for steel, copper, cement
- higher cost for financing
- decreased value of U.S. dollar.
- increased demand / constrained supply of materials and for installation.

It takes a 500 ton (1 million) pound crane to install a big wind turbine. The parts come from all around the world and are shipped across the country to project sites. How sustainable will this be in a post-peak world?

very good point. Societal infrastructure itself affects the net energy (or EROI) on various energy schemes. Since transportation is 99% oil based - any input not produced locally decreases the EROI of an alternative fuel technology - if oil prices go up high enough then there will be a positive feedback mechanism (in a negative way) as 'trucking' certain parts may just not be available - then there are time delays, manufacturing bottlenecks etc. Thats why energy return on investment is not a completely physical measure.

I believe it's currently even higher than that - WE Energies (my utility) just announced a new wind farm - 88 turbines, 1.65 MW rated each, $300 million. That works out to just a hair over $2000/kW.

Where's Moore's Law when you need it? Seriously, I just finished giving a month long series of lectures on energy issues, and virtually every lecture someone would say that technology would bring the cost of wind down going forward. My response was basically what you pointed out above - look at recent history!

Cutlers research showed a high wind EROI of about 20-1 energy gain. But this is over 20-30 years.

Do you have a link for those figures?


My capital cost estimates came from these sources:

1995 $1,300/kW

SMUD 5.0 MW project in Solano County.
Page 33 of this report http://eetd.lbl.gov/ea/emp/reports/38921.pdf (what did we do before Google?).

2003 $1,000/kW

FPL Energy 204 MW, $200 million New Mexico Wind Energy Center

2007 $1,875/kW
We Energies 160 MW, $300 million. As Kyle said, this was in Sunday's paper.

The $1,500/kW number was really a 2005 number.
For example, SMUD and Solano County again (this time 150 MW) for $235 million.


I don't know how far off topic this is going to get, but my son in third year Math/Physics whom I consider pretty smart has been unsure what to use a degree in these for. I had suggested there was lots of scope in alternate/renewable energy. His attitude, briefly, was that that would merely extend the time we will have to produce more CO2 and other greenhouse gases by extending the time we will be able to use the rest of the coal oil etc., and will as well radically reduce the productive capacity of the earth doing more damage than we would do by doing nothing.

Thanks to all the knowledge and presenters on TOD I have been coming to agree with what I first considered an untenable position, especially in one so young and full of life. He has decided to take a course or two in journalism as he feels explaining science better than doing it. In this way he hopes that if he can do no good at least he will do less damage.

Thats my position also. I don't see alternatives as that important in saving us. And I think that the investments will be for the most part misguided since we would need to move and rebuild our cities around a low EROI economy. And to me the negative EROI spiral looks pretty tight having a lot bigger effect than peak oil.

Since almost everyone that is proposing alternative sources are looking at them as a way to extend our current economy I don't really pay a lot of attention to the proposals since they will fail.

Assuming we keep it somewhat together I would say that a new economy will eventually emerge based on these alternative sources but thats a different issue and it may be a long time before we reach this point. I think we would basically be rebuilding using solar/wind nuclear etc.

I could easily see us build new cities or rebuild our old ones that are located in the best places so they work in a sustainable manner but as far as I can tell no-one is really looking at the issue. If we are serious about peak oil one of the first things we would need to do is simply figure out the sustainable carrying capacity of various regions/cities so we know what population level can be supported.

Needless to say a realistic conversion to sustainable approaches does not seem to be possible since it requires a sort of communist style five year plan just to repartition the population into sustainable groups.

We are over sustainable carrying capacity almost everywhere. What do you propose we do about it, memmel? Do you understand now why this question can never even be asked in serious political circles?

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

I was finishing a draft on post-peak enducation this morning but decided not to post it since Nate had this excellent essay. In any case, one of my assmptions is that there is an 80% dieoff. To me, this is the only logical result of inadequate resources, a possible nuke war, etc., etc.

Well, I wish you would post it; if not now, then in the near future.

Hi GreyZone,

You might be more familiar than I am of Vandana Shiva.


India is being led into the oil trap through the Green Revolution and Global Corporatism. Vandana is a spokeswoman speaking clearly on this. If we were to go in the direction of the old Indian system of sustainable agriculture as a first priority we might have a chance to at least temporarily feed our 6 billion. What chance of this is there if our attention is, for the main, directed to alternative/sustainable energy rather than sustainable agriculture? As far as reducing population one can't argue with hunger when promoting birth control. 'To govern the state one must first fill the belly.' (I don't know if that was Lao Tzu or Mao Tse-tung that said that, but somewhere along the way it got said . . . maybe Bob Dylan?)

I would appreciate any comment to this.

False statement. Even the "old Indian" system of sustainable agriculture cannot save anything. India is drawing down their aquifer at frightening rates, even as moisture in the Himilayas is drying up. India is using thousands of years of aquifer buildup in a very short period of time. So are most other areas of the world, including the US.

You are NOT going to save billions of people. It is not going to happen. You can moan, complain, get irrational and disagree, hope for a techno fix, or whatever, but it won't change the fact that we are way over carrying capacity and most of that excess has to die before you can even begin to discuss "sustainable" practices.

Peak oil is just one symptom of a species in vast vast overshoot.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

I know this is no answer to the eco-problem aquifer loss but it might be a part of the reason for the problem, that of inappropriate use of resources by Corporate interests. One doesn't shit down one's own well. See:


Thanks for your response, though I am not moaning merely bemoaning as you so often and appropriately do by quoting Dr. Albert Bartlett:

'The greatest shortcoming of the human race is our inability to understand the exponential function.'

(BTW After I get to 16 by 16 I sort of peg out too).

India started its fossil fuel dependent Green Revolution during the late sixties. So it is kind of late to lament India being led into the oil trap. It was the Indian government's decision to modernize agriculture and make it fossil fuel dependent. They had no choice because the old Indian system of sustainable agriculture couldn't feed its large and growing population.

Setting up rubber plantations probably would have been a wiser choice.

We are over sustainable carrying capacity almost everywhere. What do you propose we do about it, memmel? Do you understand now why this question can never even be asked in serious political circles?

One reason I feel its reasonable to discuss limited or proxy nuclear war as being possible in the near future is for this reason. Its the cheapest way to reduce our population. The Nazis were limited by the cost of running the gas chambers with nuclear weapons and the fact that many regions no longer grow enough food to support their population we are in a lot better position to use genocide as a means of demand destruction.

Also of course the western populations are so buried in chasing the American way of life I'm sure most people will be willing to accept the spin used to justify such methods.
As long as the SUV has gas I'm sure people will be quite willing to look the other way. Few countries get a chance to commit genocide on such a scale and get away with it.

As to a real answer I think that we do just barely have enough food and resources to sustain our current population if you reduced consumption significantly in the western nations and of course people increased local food production via victory gardens and reversing suburban growth.
So I think done correctly we could make it without requiring
drastic population reduction. Of course this means vigorous campaigns in third world countries supporting birth control and providing the economic conditions which allow people to move away from large families. This is really a religious issue.

Also we could continue the green revolution hopefully making it more sustainable. The issues here basically water supply and global warming but maybe more areas of the northern parts of the world will be open allowing migration.

So all and all if we worked really hard we could I think just make it even with the worlds current population via redistribution of wealth. And of course we can redirect our technical research to create sustainable technology so technology can help in the right political economic climate.

To see if this is true you would have to determine the minimum land/housing/medical/energy requirements for a basic but healthy life and see if we have enough.
I think we do.

"and providing the economic conditions which allow people to move away from large families." Posted by Memmel

But that would mean more or less the economic conditions of Western Europe/USA. How is this possible without lots of economic growth in the third world, which in turn requires the very thing that will cause economic growth to grind to a halt: cheap and abundant energy, just what we soon won't have.

Antoinetta III

Good question. I think the important part is to focus on what I call core energy for a decent life style. At least 90% of the energy use in the west is not for the basic lifestyle but for extras. Also consider a more cooperative lifestyle.

What do you need.
1.) Electricity
2.) Refrigeration this can be a central low energy whole village unit
3.) Clean water
4.) Cooking fuel
5.) Information access
6.) Medical care
7.) Reasonable transportation
8.) Secure food supplies

To me this is the core of a modern lifestyle I think all the above can be accomplished with much lower energy inputs.
First and foremost the unit you should work with is a village of at least a hundred people or so.

I think you will be surprised at how little we actually need to do to support our population today and allow them to live with dignity.

You forgot 0.) Proper thermal environment.

That is a big one presently taking a significant amount of our fossil fuel usage.

Hi goinggreen,

Thanks. This is a great point. It would be interesting to get into more detail on this, in regard to both the housing/building and industrial sectors. (As industrial processes also require "proper thermal enviroment" - sometimes for humans, and sometimes for the machines.)
Example of effect on humans: http://www.medicinenet.com/script/main/art.asp?articlekey=63171

Well, we are moving in that direction, but probably much too slowly.

Hey BBG,

I would strongly encourage him to look at horticulture and animal husbandry. I suggested that to my kids. At least their looks of disbelief were amusing.



Ha Ha

Thanks a lot. I have already done that. He was not amused.

I see parts of (and essential parts of) an alternative path that can be developed piecemeal. I do NOT claim that this should be the totality of the response !

The specific ideas that this Physics Major, Math Minor undergrad :-) has come up with include:

1) Electrifying and expanding (mainly more tracks/better signals on existing ROW) our freight RRs.

2) Building out Urban Rail as fast as possible and try to reform our Urban form as we did (the other direction) from ~1950 to ~1970.

3) Creating a semi-High Speed Rail system on the West Coast, Midwest, South and East Coast for both passengers and high value freight.

4) Start on a non-Greenhouse Gas North American grid; with LOTS of wind power, a good amount of nuke, more hydro, LOTS of HV DC transmission and pumped storage. Maybe 90% non-GHG in 20 or 25 years.

And if we run out of oil; look at what we once did with Coal, Mules and Sweat !

Some old photos of streetcar construction in Toronto. Still feasible post-Peak Oil (with some changes in construction).

Keele and Dundas, August 22, 1912


Queen and Victoria, July 26, 1911


Dundas west to Royce, August 2, 1912



Please note that this was in the era of Peak Streetcar (~1887-1916) when 500 US cities, towns and villages built everything from subways to short streetcar lines.

Best Hopes,


In my opinion, Alan "gets it". He understands that the only possible future route is electric and the sooner we get there the better. But even all of that is for naught if we do not also reform our entire way of life from the consumption monster it now is to something far more sustainable.

The problems besetting the human race are and always have been technically solvable. The problem is that they may not be politically or socially solvable.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

Better links




I also get that the social isolation built into modern suburbia appears (to me) to create a need for consumption of goods rather than consuming, say, good live music, great food, talking & socializing, attending parades and all the other largely sustainable activities that I love to do in New Orleans.

Best Hopes for Sustainable Live Music and Great Food :-)


Good one! Makes me more of a doomer though.

Nate, there are 4 dead links:
A prime example of the risk of these type of projections was pointed out by our resident water cut sleuth
In the DOE funded Hirsch Report, .....
The economy can only grow if the Energy Return on Investment from oil is replaced with something as high or higher. (more on that below)
Indeed, some respected sources say we have peaked already.

thank you! they are now fixed. (tho they worked last night. strange...)

The US went into decline in 70. The costs of recovering the oil went up after that. BUT, the world had not gone into decline yet. So the energy used to get energy was paid for at world prices. When the world declines, however, the energy used to get energy will be at market prices, i.e. prices which reflect (at least) decline. So in all likelihood, for that reason alone, world decline will be far steeper than US decline.

What IS of relevance about the US decline is the increase in the physical quantities, not only of energy, but water, metals, etc. There will undoubtedly be an interplay with these too -- all tending to accelerate decline. Technology can only postpone but steepen the ultimate decline as has been often pointed out.

As a geologist married to a geologist in the energy industry, I say that Peak Oil is exaggerated. The USA makes up about 1/49th of the world's surface and it's one of the few '49ths of the world where oil has been explored for extensively..and still produces millions of barrels/day. We are going to have a lot of oil for many decades to come. Oil, like most commodities is not rare and the issue is more one of cost of production. Not a millioth of all the gold or a billionth (and even that's that's an underestimate) of the diamonds have been mined...but a high percent of those 'affordable' sources of those two have been mined. Oil is no different. It's a matter of cost and not one of whether the oil is 'there' or not.

However, NOBODY knows for sure. Anyone who claims to have some inside knowledge from some cabal of secret petroleum geologists is whistling baloney. We can surf around the Internet and find lots of 'proof' of alien abduction and Sasquatch. Hit one's Control/c keys and 'prove' anything. Go to the actual petroleum gologists who do the field resevoir exploration and studies and the only answer I respect is 'damn if I know'. Carbon energy is about science and not ideology. We don't know how much is 'out there' and believe it or not the answer hasn't been magically placed on the Internet to be found by the right amount of googling.

Hello Jellyologist,

I anxiously await your highly detailed, technical refutations of the postings by Stuart Staniford, Phd., and Fractional_Flow, Reservoir Engineer and owner of his own waterflood engineering company.

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

So where's the beef, a lot of talk and no data. As far as the
Sasquatch goes, we here at TOD have met The LastSasquatch, you should know that.

Not a millioth of all the gold or a billionth (and even that's that's an underestimate) of the diamonds have been mined...but a high percent of those 'affordable' sources of those two have been mined

Thats PRECISELY the point. Has a high % of the affordable oil been extracted? We don't KNOW. Yet we do know the net energy left over for non-energy companies is about 1/10 of what it was 70 years ago. We used to use hematite ore from Minnesota that had 60% iron content - but when that got too expensive to separate out from the rock, we had to use more of the taconite ore that only had 25% iron. We are now using sub-bituminous coal instead of anthracite - higher volumes - lower BTU.

What is your salary? The answer means very little as a predictor of how much you can spend unless you tell me where you live and what your tax rate is.

Jelly, give Royal Dutch Shell a call - they produced 2 billion barrels of oil last year, and only added 370 million barrels to their reserves. Proved developed liquid reserves were down 17% year on year. I'm sure they wouldn't turn down any good ideas you might have...

"We don't know how much is out there?"

True, but we do know that the amount of it discovered each decade keeps falling. Discovery peaked in the 60s. So if there were huge volumes still to find, seems like you smart geologists would have been finding more and more, not less and less...

We may not know with absolute certainty that we have passed Peak Oil (PO) but TOD has reduced the error bar to the point that we can move on to Post Peak Oil (PPO). Anyone singing "NOBODY knows for sure" today is a lonely soul. Mexico is crashing. Kuwait has admitted that it has peaked. The North Sea has peaked. Shell Oil falsified its reserve records. My local gas station is telling me we have peaked. How much proof is needed? If Peak Oil is exaggerated please provide some proof.

I was almost convinced...because how could a "geologist married to a geologist" be wrong? And really, isn't Peak Oil just like alien abductions and Sasquatch (apologies to Nate)? But then I woke up...

I'm married to two geologists and an economist. I'll take a poll and get a consensus opinion.

As someone who owns some production, who is not married to anyone --- particularly someone who owns a lot more production [damn!] I know that:

1.) We are exploring & producing in very hostile and expensive environments. Take a look at the much promoted Jack 2 "discovery" and ask yourself who in their right mind would even be looking there if most of the prospective portions of the other 49ths of the globe hadn't already been looked over.

2.) We have gone deep to the point that although natural gas exists at greater depths, oil apparently does not. Between tight formations and very deep potential, there is almost undoubtedly a lot of gas that has not been discovered. But don't expect this gas to be cheap, or produced at the flip of a switch.

3.) The peak in discoveries using old technologies occured decades ago. Discoveries occur every day in the U.S. but onshore elephants are apparently extinct. New technology is very helpful in finding small fields and infill prospects in existing fields.

4.) We are using 1000 bbls per second. To sustain the game a while longer we need more elephants. Herds of elephants.

5.) The world is short on the number of rigs needed to transition the KSA [and a lot of other major exporters] from the land of 10,000 bbl per day wells to the land of a million stripper wells. The stippers wells, steam floods, water floods and deep water GOM are the reason the U.S. still produces millions of bbls per day. This is nowhere near as much fun as punching 5,000 foot 10,000 bbl per day flowing onshore wells.

6.) We don't know [about the only point we agree on] and not knowing is not reassuring.

Finally, you missed the point on peak oil. At peak there will still be a lot of oil left to be produced.

There is probably a million years worth of liquid hydrocarbons on Titan.

As you say, "It's a matter of cost and not one of whether the oil is 'there' or not."

But seriously the matter of 'cost' is entirely tied to the geology of how nice it is to get out, and what we consider to be an "oil field".

As Stuart noted, you "smart" petroleum geologists are not doing your job then, because total discoveries is in near constant decline since a peak back in the 1960s. If all this oil exists, where is it?

You make stupendous claims, yet the industry has 40 years of track record refuting your claims. I think you are kidding yourself, whistling as you walk past the graveyard at night, hoping beyond hope that the reality before you is not real. But the data says it is. Where is your data proving otherwise? Are we supposed to hope for the next 20 years while you geologists fail every year to find even what we are consuming?

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

I think jellyologist is in on the secret - the working geologists and oil engineers have a conspiracy to hide the locatins of the elephants until enough money has been extracted from us. I'm sure our elected representatives would love to hear about this conapiracy [so they can get a cut, of course].

James Gervais

Maybe there's an elephant sized oil field on Mars.

Here's NASA's drilling rig on Mars.

Once oil is discovered, we just have to find a way to transport it to Earth. Ahhh, but instead we could transport the people to the oil. And here's a home on Mars for some people. Note how the nearby location for growing vegetables fits in with the ELP strategy.

The real question is are we producing more net value from a given resource?

The answer appears to be yes.


With more and more people becoming educated and looking at issues, there will be more and higher quality solutions to problems.

extrapolate that trend forward and youll find us someday producing only 1 million barrels a day (instead of 85 million) but have 6.6 billion REALLY smart people. This would become a major problem way before this hypothetical day.

Point being, depletion has trumped technology so far -how can really smart people overcome less resource, less quality resource and more energy required to obtain the less quality resource?

Knowledge does not equal BTUS (the ability to do work) nor do BTUS equal happiness. By the transitive property, knowledge does not equal happiness...;)

Austin is caught in the fallacy of "there must be a solution" which is what usually produces statements like that. I'm not saying there is not a solution but you must recognize that some problems will not be solved, at least in anything approaching "acceptable" terms to homo sapiens.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

GreyZone said,
" I'm not saying there is not a solution but you must recognize that some problems will not be solved, at least in anything approaching "acceptable" terms to homo sapiens."

Well, then, that's good news....because if the lack of a solution is nothing "approaching "acceptable" to hom sapiens", there can be no harm in trying to find a better one, can there?

Of course, we are in the realm of speculation here, so I will speculate: If the so called "energy" crisis, which is not an energy crisis, but a liquid fuels crisis can not be solved, homo sapiens have little to no hope of solving even bigger problems that will come our way in the future.

Roger Conner Jr.
Remember, we are only one cubic mile from freedom

If that upcoming report I referred to in #6 from the Energy group in germany is true (that US has peaked in coal production on BTU basis), we have much more than a liquid fuels problem

Nate, I would take the Energy Working Group's reports with several grains of sun-dried organic sea salt. They sound like a bunch of anti-nuclear, anti-coal German Greens who probably don't like wind "asparagus" turbines if they are located near their universities either.

If I were to guess, the coal miners' threatening to strike, as described in the next post down, are looking for information about how the coal mines are about to become very profitable again, and soon. These mines have been waiting until our desire for clean air cools down (or someone figures out how to take out the impurities and deal with them cost-effectively).

It is this Illinois/Appalachian energy-dense, impurity-dense coal that is well suited to the IGCC plants that many people are pinning our hopes on to keep our lifestyles without wrecking our environment any further. Reports are that there is plenty of it left. It simply isn't as fashionable as Wyoming coal right at the moment.


Hi Nate,

re: "...much more than a liquid fuels problem."

I agree, based simply on the idea - (you or someone else might have stated w. greater eloquence) - of how one energy/fuel source depends on another.

And how any particular aspect of providing necessities is tied to the use of liquid fuels. In other words, take away liquid fuels...takes away from total energy, just as a percentage (to begin with) and also takes away from any other fuel source tied to the use of liquid fuels (for it's production/extraction/existence/consumption).

To me, this phrase of Hirsch's and Bezdek (I noted it's in Bezdeks talk - I believe at the ASPO conference?) - is very misleading. I've seen other researchers echo it, and this ends up also being misleading. It (perhaps inadvertently, with real consequence nonetheless) negates the scope and urgency of the problem. It creates a type of confusion I see as avoidable.

It makes me wonder what Bezdek is/(or was) thinking when he chose it.

Coal Strike Possible, UMWA Will Rally In Illinois Thursday -


By Jesse Russell

With a possible strike on the horizon at three coal mines, the President of the United Mine Workers plans to lead a major rally. The rally will take place at 10 a.m. on Thursday in Princeton Illinois. The UMWA has already filed an unfair labor practice complaint against Foundation Coal for failing to provide information needed to bargain. The April 4 strike would impact 1300 miners in Pennsylvania and Illinois.

Nate, can you post your EROI assumption curve along with the Cleveland data? From what I can see from Cleveland, if you stretch you get a factor of 10 reduction in 30 years, and that does seem like a stretch. With an EROI eyeballed at 10 in 2004, that gives EROI of 1 at 2034, or, another decade and a half from where you have it (around 2020). I also can't quite recocile the drop-off, so I'd love to see your numbers. A graph of historical and assumed EROI over time would be sufficient.

Clearly at some point the backstops come in. For instance, the space heating component of crude could/should be switching over in the next decade to solar and solar-related techniques. The sliver of oil going into the power sector (only about 3%) could/should be backstopped by solar around EROI of 3-5, if geopolitical factors don't make it sooner.

The big problem of course is that the transportation sector is presently all oil, and here the nature of that drop-off becomes critical, for the ramp-up of PHEVs or just plain EVs can sure be bumpy depending upon that oil depletion tail.

EROI of gas and oil went from 30:1 to a range of 10:1 - 17:1 (depending on if it is quality corrected by the thermal divisia -I wrote about and linked to this in the Net Energy Parable post)

So it declined between 13:1 and 20:1 over 30 years. For ease of calculation I assumed 15:1 in the middle - that way the decline is 1/2 per year. So at 10:1 in 2004 in the graph, we go to 9.5:1 in 2005, 9:1 in 2006 etc. The accuracy here is not the point, as its very difficult to do these numbers because no one has done them other than Cleveland and Hall. The general trend is down. Anecdotal evidence from reading wall st investment reports suggests my little analysis is overly conservative

The main point here is academics, policy people, energy investors and the media need to start thinking more in these terms. My example was just that - I wish I had more data to do more detailed analysis.

The accuracy here is crucial. It is definitely a very important point. You have us falling off a cliff here in about 10 years, and I just have to challenge you on that now that you've admitted that you made up the data.

At some point there should be plateaus, say for instance when tar sands are being processed and the EROI should be relatively stable or at least the rate of decline in EROI is less steep whilst that resource is exhausted or whilst other factors (water, for instance) prohibits further processing growth. In that case, EROI is not the issue.

Further, there are backstops such as the proposal for nuclear in Western Canada to be used for the extraction from tar sands. There the EROI is not relevant, because you are not using fossil fuels to get fossil fuels.

I did not 'make up' the data. I extrapolated forward the trend of the last 35 years. It could be worse or better. I was very clear in saying that NO ONE has this data but it needs to be addressed somehow.

Actually, for those who abhor looking at things in energy terms look at the John S Herold data in the graph showing finding and developing costs for US are over $30 a barrel. Ceteris paribus, that would imply an EROI of 2:1 (no, everything else isnt equal), but if that trend continues, much of the oil expected to be found in US might never come out at a profit.

I think this is what underlies Hubbert method - some oil is just energetically and financially too much effort to get out.

And how do you know there should be a plateau? I could equally argue that water will soon be a limiting factor to tar sands scaling and the EROI of tar sands is between 1:1 and 3:1 in any case. (again, no credible study but we can back into in financial terms). Society cannot run on an EROI of 3:1 unless we make MAJOR changes.

Hey Nate, I'm guessing I'm starting to piss you off. Just to repeat, it was you and Khebab that have convinced me personally that the problem is now as opposed to 20 years from now. And, you are correct, you made up a model and not data. The latter assertion is tantamount to treason in academic circles, and I did not meant to imply such, so "thank you" and "I'm sorry."

With regards to your extrapolation, I'd post Cleveland's data if I could figure out how to add a figure here to make a point. From my eye, yours seems a bit more speculative than the extrapolations done in the hubbert linearizations that caused so much infighting recently.

With respect to a plateau, I don't know that there should be one. However, if we get to the point where backstops are economical, via EROI or financially, my prediction would be then that the oil production would fall as the substitute comes in. That part not produced would be the less economical and hence most likely the lower EROI, thereby causing a break in your extrapolation. Using wind or nuclear doesn't seem an unreasonable possibility for oil production energy sources.

To the untrained eye, your plot suggests die-off, and in part I'm reacting to that.

remember, my graph is US only - its not altogether different than a historical production chart showing we've produced 190 billion out of an expected 215 or so. The presumption is that we will get that oil from imports. To draw the net energy graph on world data would even take further assumptions and graphs and charts are only as good as their weakest link.

It is a truism that deeper, harder to find and process oil requires more energy however, so the main point is we need to focus on the NET, not the gross.

The EROI of certain alternatives is already much higher than oil and gas - especially in US (take wind for an example). But then you get into questions of timing of the flows and fixed vs marginal EROI. We have a system thirsty for oil, not windpower, as of yet.

And your first guess was not far off base...;)

Small note: Gas is currently about 2$ on the Nymex. Oil is about 65$ per barrel. If oil would go to 200$, that would mean gas goes to 6.25 $/gallon, more or less. Expensive, but not really. Let's not forget that gas in the Netherlands is currently 1.40 euro per liter. That's more than 7$ per gallon.

In the long run, it is true that oil depletion will limit growth and even shrink the economy. But 7$ per gallon is nowhere near enough to do that. You will just reduce oil consumption by half and still grow the economy with a nice 2% per year.

Even with oil at 7$ a gallon, the Netherlands can easily reduce oil usage. So I would say oil has to go much, much higher before growth stops and shrinking starts.

It all depends on how fast you get to $6.25/gallon. Comparisons between the US and Europe regarding price assume that all other cost structures (including wages) are the same such that gas price increases would be easily absorbed. But they're not--it's similar to just comparing income tax rates while ignoring salaries.

If the gas price goes up fast, the disruption would be tremendous. All wages and prices would eventually change to reflect this, but it would take time.

I dont necessarily disagree with you, however the main point is not about price per se. Its about the amount of energy NEEDED by the energy companies, irrespective of price. It doesnt matter if oil is $200 or $20 or $2000 - if it takes as much energy to procure, harvest and deliver a gallon of gas that is in the gas itself, we are effectively out of gas.

As increasing amounts of energy are needed by energy sector (again, irrespective of price), less energy is available to hospitals and shopping centers, etc. At that point there is a policy bidding war between social priorities. I could guess what those might be like..

Great post, Nate.

I especially enjoyed your apple tree vision...
I've noticed the little e&p's are seeing much higher costs, cutting their earnings... owners do not necessarily do that well, sometimes the workers with their stock options do better.

We may be at peak now, but imo the decline will be manageable for many years... price to force 2-3%/y lower consumption will be high but bearable as people reluctantly car pool, move closer to work, telecomute, and switch to more efficient vehicles, just a 70's repeat. IMO 200/b by 2010 will get us moving in the right direction.

We may be closer to a solar revolution than many think... I will probably invest in a print version startup that claims their second plant will get to $.5/w, and this price is low enough to replace ng peaking plants, especially if you assume much higher ng soon. Meanwhile, conventional nukes and/or breeders can replace coal base loaded plants over time.


You are correct. I have no argument with your analysis.

But it does tell us that you can "easily" cut your oil usage with 30% without any significant impact on your lifestyle and another 30% with only moderate effect.

So to expand your analysis a bit: Peak Oil would actually be a non-event, if we could manage people into a sustained conservation regime. Our current technology level is more than enough to do that. A car that does better than 50 mpg was available in the '50 and it sold in large numbers. (*)

So if you think like this: The problem is not peak oil, the problem is that we are unable to do 'the right thing'. Maybe we should talk a bit more about that. (Or do I sound like an old hippie by now ;-)

(*) It's a french car, to add insult to injury ;-)

actually if its a french car it would be adding injury to insult.

your point is well taken - more time needs to be spent discussing the human aspects of PO - Im sure some people will adjust and be happy about it - others will fight it with everything theyve got. ive got some posts coming up on this.

But the Netherlands has a large tax component in their price -- this tax money is spent elsewhere helping their economy. A doubling of US gas with oil going to $200 will have far less of this benefit so there will be problems. The Dutch might ameliorate the price increase through lowering taxes but that will leave them short in where the current taxes are used --- so their gas pump prices will likewise need to increase but roughly by only 40% as opposed to the over 100% in the USA. You can't just compare the two countries on 'pump' prices and say the Netherlands does just fine with $7/gallon so therefor the US can manage with $6.25 gasoline.


You are correct. Just copying the numbers is not really a fair analysis. But on the other hand, it does tell us something.

It tells me that a $4/gallon tax should lower demand but nothing about the effect of a doubled price on the economy ... except that a doubled price in the raw ingredient would be far less destructive in a country already having that $4 tax :-)


So we are back to the old energy balance/EROEI bugbear. That's a painful one, because there can be nothing about energy harder to understand or explain to the public. Even those directly involved in energy research often come to widely different conclusions. A look at the rhetorical combat over whether ethanol can ever be produced at a net gain of energy is a perfect example, in which statistical studies by people with impressive credentials come up with such widely varying results as to be of no practical use in a policy debate, and certainly completely useless in swaying the public perception.

The issue is at least as confused when it comes to alternatives. If we assume, as the article by Nate does, that EROEI of crude oil and natural gas is dropping in some type of very threatening fashion (and I accept that possibility readily), and that energy return on coal has already fallen considerably, we must assume then that the EROEI of renewables would be up in comparison. At some point, the lines would cross, and the EROEI of locally produced energy (solar, wind, and possibly hydrogen extracted from them) would be as cheap or cheaper than oil/nat gas/coal.
We are often assured however, that this will not happen, as it requires energy to make windmills and or solar panels. And yet the sun still shines and the wind still blows.

The balance is always given in lock step, as though the amount of energy put into building an X size solar panel will rise exactly in a one to one balance with the energy that comes out of it, no matter the advances in design, the streamlining of other costs, and the avoidence in energy consumed in transporting the oil halfway around the world, providing a military system to protect the supply routes, refining the oil, again transporting the finished product to retail, the costs of the retail operations.....somehow, no matter how bad oil gets on EROEI it always comes out ahead of all alternatives.

If a person were to be prone to conspiracy theories, they could get the mistaken impression that the "EROEI" discussion is simply a way to stop all alternatives to oil and natural gas, on the basis that if the investments can be stopped at the front end due to it being a futile exercise. Thus the resulting alternative energy will never have an opportunity to demonstrate equal or better EROEI balance to oil or gas....essentially, kill the alternatives in the crib.

One tries to imagine how this would have worked at the birth of the oil age:
"I am not going to waste perfectly valuable steel, coal and manpower trying to get oil when these valuable materials can be used to build bridges or locomotives? Using coal and iron to extract oil is using an outside energy source to subsidize oil, proving that it is a net energy loser."

"What"? Oil has to be refined? And how much more money, material, and manpower will that take? How many tons of steel, pumps, boilers and destilling units will have to be in one of these refineries to get anything useful? How much heat to refine this oil?"

"This is INSANE! I can bring coal right out of the ground, and put it in a boiler or locomotive! Why would I waste it to build derricks and drills to extract oil, and then have to build refineries and pipelines and ships to carry it around, and have to build a massive new generation of engines to burn it? How much steel in these engines, and not just easily produced steel, but some kind of new alloy to withstand the speed and stress of this oil combustion?
This cannot possibly be economical or sensible."
"This is nothing but a fuel substitution plan, attempting to substitute oil for coal, at the consumption of valuable coal, and an added loss of steel and iron." "And I have not even began to talk about the water consumed and labor needed to make this scheme work. I will have nothing to do with such a hair brained scheme, and will advise other bankers likewise."

Of course, we now know that the "sunk" costs were worth it, in that more energy came from the oil than went in to get the ball rolling in iron, steel, and coal. And that once these industries were established, and processes began to be refined, the efficiency of the conversion went higher and higher.

We now seem to assume, however, that any efficiency gain in process is almost completely impossible. What was true for oil and gas can be true for no other energy industry. Expenditure in alternatives will make no difference. Step by step confluence of technical development will have no real effect.

I look again at the charts in Nate's article. Can it be true that BioDiesel is almost a one for one match with gasoline on BTU per barrel? Interesting.
Has anyone bothered to look at bio-butanol, the 4 carbon alcohol, and note that it is also a one to one match for gasoline on heat content? Interesting.

A fascinating article by Nate Hagens, great graphics, interesting and thought provoking content. But, this game is far from over, and we only have one cubic mile of oil per year (or a reasonable replacement for that, BTU wise) to go to freedom! Don't count humans out just yet...:-)

Roger Conner Jr.

"So we are back to the old energy balance/EROEI bugbear. That's a painful one, because there can be nothing about energy harder to understand or explain to the public."

Explaining it to the public is the problem, now, isn't it? Well, I think Return on Investment is the more accepted term, and it plays to the economist's drums.

Comparing oil to wind, for instance, doesn't work because oil gives a "quick" return on investment. My dad always said a well (stripper in Ohio, which was probably an energy sink even in the '70s) had to pay for itself in 2 years to make it profitable. After 2 years you have your money back!!!

Now who's gonna tell the public that Chevron ain't never gonna get its money back by producing Jack 2?

Now for the correlary in regards to renewables:
How long do you have to let your solar panel bake in the sun before you get you money back (plus interest costs, of course) - or for your wind farm?

THAT, my friends, is the real comparison.
EROEI is perhaps an indication for technical minds...


My grandfather pumped oil with an engine-house,
my father pumped oil with a 20 lb. electric motor,
can't I just pump it online?

The issue is at least as confused when it comes to alternatives. If we assume, as the article by Nate does, that EROEI of crude oil and natural gas is dropping in some type of very threatening fashion (and I accept that possibility readily), and that energy return on coal has already fallen considerably, we must assume then that the EROEI of renewables would be up in comparison. At some point, the lines would cross, and the EROEI of locally produced energy (solar, wind, and possibly hydrogen extracted from them) would be as cheap or cheaper than oil/nat gas/coal.
We are often assured however, that this will not happen, as it requires energy to make windmills and or solar panels. And yet the sun still shines and the wind still blows.

The EROEI of renewables is a constant. It won't be "up" at all. If a renewable is not positive EROEI now, it won't be positive when oil goes below 1.0.

Either an EROEI is positive or it is not. It's that simple. And the folks who think windmills cannot do the job have been refuted. Windmills can output way more than enough energy to build another windmill from its own outputs plus provide usable energy to human beings.

Likewise with solar. The total number of joules produced is apparently more than sufficient to account for mining, transport, and production of more solar cells with some energy left over for human consumption.

The key difference in these technologies from today is the amount of energy left over for human consumption. It is not anywhere near as large as what we currently have. This means, in order to move to a solar/wind based economy, we must give up the profligate consumption society. In other words it is the total and absolute end of our existing culture as we know it.

Our culture is based upon the massive waste of cheap energy. Our housing forms, our transportation forms, our entertainment forms, and our working forms are all built around this concept. To adapt to a world of less energy means totally dismantling society.

But dismantling the consumption society means economic collapse. The Ponzi scheme has to come to a halt. But what do you do when the Ponzi scheme is no more? Get back to me when you have a serious answer to that question.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

As Aramco's upstream business of oil production experiences higher decline rates, expect that Aramco further develops its downstream businesses of petrochemicals and refineries.

In a April 1, 2007 press release regarding petrochemicals from http://www.saudiaramco.com

Saudi Aramco's senior vice president of Engineering and Operations Services, Salim S. Al-Aydh said that "By 2020, we will be the center of the global petrochemical industry."

Al-Aydh also said in the press release that "Today we are the center of the global oil industry." Does this imply that Aramco won't be the center of the global oil industry in the future?

Aramco already has a well developed refinery business, as described on their website:

Saudi Aramco Refining

Meeting demand requires extensive, integrated manufacturing and transportation systems. A kingdom-wide network of refining, supply, and distribution facilities, staffed by highly trained personnel, maintains this continual supply of refined products.

Saudi Aramco's five domestic refineries, at Riyadh, Ras Tanura, Rabigh, Yanbu' and Jiddah, have a combined capacity of approx. 1.4 million barrels per day. Adding the company's two domestic joint-venture refineries, with ExxonMobil in Yanbu' and Shell in Jubail, brings in-Kingdom refining capacity to more than 1.9 million barrels daily, making Saudi Aramco one of the largest refiners in the world.

As Aramco uses session IDs here is the full text of the petrochemical news release:

MANAMA, Bahrain, April 01, 2007 -- In an address here at the 7th International Conference and Exhibition on Chemistry in Industry (Chemindix 2007), Saudi Aramco's senior vice president of Engineering and Operations Services, Salim S. Al-Aydh, presented the company's prominent role in Saudi Arabia's growing chemicals industry as representing a balanced, intelligent approach to leveraging natural resources.

One of the centerpieces of this role is Saudi Aramco's spearheading of the King Abdullah University of Science and Technology (KAUST) development. The university, to be located in Rabigh on the Kingdom's west coast, is envisioned to be a global center of excellence in research and education.

Universities, Al-Aydh said in his address on Monday, are centers of both academic and social understanding, creating new and better generations of ideas and people.

"These institutions blend students and teachers from diverse cultures in a common cause, which is the furtherment of human knowledge," he said. "Science, being knowledge without prejudice, can be the basis of understanding at the core of our common humanity."

Al-Aydh also noted, however, that academics cannot stand alone, and hence Saudi Aramco continues to focus on its role in expanding Saudi Arabia's economy through leveraging the Kingdom's natural resources. "Today we are the center of the global oil industry," he said. "By 2020, we will be the center of the global petrochemical industry."

Al-Aydh cited the multi-billion PetroRabigh joint venture with Sumitomo Chemical of Japan, as well as the Ras Tanura integrated refining and petrochemicals plant being discussed with Dow Chemical, as examples of its strategy going forward. Each project, he pointed out, will include the construction of adjacent industrial complexes that will add further downstream value to the industry.

But in addition to leveraging oil for maximum value through these industrial developments, Al-Aydh said that the development of KAUST will leverage an even more valuable resource: the 56 percent of the Saudi population under 20 years old.

"I firmly believe that youth, not oil, is the real wealth of Saudi Arabia," he said. "It is our intention to give our young people the opportunity to grow and develop."

Thus, KAUST will focus on areas of opportunity for the chemicals industry, including:

Resources, energy and the environment
Biosciences and engineering
Applied mathematics and computer science
Materials science and engineering

The vision is clear, Al-Aydh concluded: "A confluence of humanity, a confluence of learning and a confluence of industry, underpinned by the Kingdom's abundance of hydrocarbons and bright young minds."

If Salim S. Al-Aydh means what he says...

""I firmly believe that youth, not oil, is the real wealth of Saudi Arabia," he said. "It is our intention to give our young people the opportunity to grow and develop.""

That sounds like the thought of a real human being! :-)

Oh, what a blessing it would be to have ONE AMERICAN thinker feel this way!
Well we can dream of the day that such returns to America..., think about the sound of it....youth, not oil, will be the real wealth of America...does that sound like the real America or what!! What has happened to us? :-(

Roger Conner Jr.
Remember, we are only one cubic mile from freedom


Pimentel and Patzek can find no liquid biofuel they can abide, least of all ethanol,

""Ethanol production in the United States does not benefit the nation's energy security, its agriculture, economy or the environment," says Pimentel. "Ethanol production requires large fossil energy input, and therefore, it is contributing to oil and natural gas imports and U.S. deficits." He says the country should instead focus its efforts on producing electrical energy from photovoltaic cells, wind power and burning biomass and producing fuel from hydrogen conversion."

However, they seem to be able to tolerate the thought of skipping over the multiple conversions (I once referred to it as the "land of 1000 conversions") and going direct to hydrogen. It is interesting that this last sentiment is not often quoted by those who so frequently quote Pimentel and Patzek.

Roger Conner Jr.
Remember, we are only one cubic mile from freedom

Nate, Professor Cleveland has oil usable for the public starting to fall off a cliff in 10 years and down to 0 in 15 years! I'm referring to your chart "Total domestic oil projection (EIA)(1) in mbpd with sensitivity on net available to society (green)".

On Robert's blog, he recently had a discussion about how doomers had more or less taken over the Oil Drum. I don't want to drag him into this (much as I'd like to hear his opinion on this piece), but if Hirsch is right and we need 20 years to mitigate a peak, and if Prof. Cleveland is right and in 15 years we essentially won't have any of our 40% of current BTUs available for societal use, doesn't that mean the doomers are right?

Please, Doomers, I understand your position on this topic and you don't need to spell it out again. I have two kids I need to get through whatever is coming, and it would be extremely helpful to have Nate's opinion on what this means. If Prof. Cleveland is most likely wrong, why did Nate use the information? I can't see any reason to believe that Hirsch is wrong. If Prof. Cleveland is even close to right, I don't see how Stuart can be right in saying that 4% improvements in fuel economy will deal with the problem.

Come on Nate, you dropped the bomb, what does it mean in context?


Professor Cleveland does energy research and writes peer-reviewed academic papers on energy. He had nothing to do with this post (though I did send him a link). The only data points of his I used was US oil and gas production energy return historically:

a)1930s was over 100:1
b) 1970 was 30:1
c) 2000 was between 10:1 and 17:1, depending on if quality corrected.

He would admit one can take the accuracy of these numbers only so far because of the many moving pieces, but he would also admit that depletion has gradually trumped technology leading to lower EROIs for oil and gas. (there were also periods in that 70 years when EROI actually INCREASED).

The analysis above was a hypothetical one done by me alone, The point is to show that if depletion (meaning harder to find oil) continues to outpace technological improvements of getting and distributing this oil, we will eventually hit an energy break-even point when we are effectively 'out of gas'.

Since this type of data is not readily available I made gross assumptions about what it might look like (though given the historical trend, my assumptions are about as central as one might choose to make - might be better might be worse - but the trend is right).

I dont remember Stuart saying that - but I dont think 4% improvements will deal with the decline in gross energy, the decline in imports AND the decline in net energy.

The bottom lin is greater minds than my own need to start addressing this particular aspect and soon. Thanks for the question.

Fair enough, I see that you were extrapolating from Prof. Cleveland's data. Still, as you write, "If depletion ... continues to outpace technological improvements of getting and distributing this oil, we will eventually hit an energy break-even point when we are effectively 'out of gas'." You indicated that you extrapolated a linear trend which ends with no oil usable for society by 2022. I.e. unless there is a significant improvement in extraction efficiency, by historical measures we are headed to no net usable oil for society within 15 years. That sure seems like a problem to me. I appreciate your bringing it up.

Stuart concluded in "The Auto Efficiency Wedge" that a 4% annual improvement in automobile efficiency was probably the maximum sustainable rate of increase. In "Why We Drive" he concluded that this level of efficiency improvement would probably be the primary form of mitigation in the US, and that transit and land use changes probably wouldn't help much. I believe we're still waiting for a post from Stuart that discusses what else might work. However, if you're even close to being right with that graph, it's a little hard to imagine what we could get in place by 2022. A 4% reduction per year in fuel use gets us to 54% of current use, not 0%.

Again, thanks for raising the issue. I certainly hope that extrapolation is off by a large amount.

I think the point here is that "US oil and gas production" will go negative in 2022 (with the extrapolation, of course), as Nate posted abovem, just like US oil production peaked in 1971. The US is still using more oil as back then. By 2022 I doubt we will have become oil-independent, meaning that we won't have stopped imports (which will probably be still energy positive)...

That means that the US actually HAD 50 years time for mitigation. And this half-century is coming to an end under the sign of Exurbia!

My grandfather pumped oil with an engine-house,
my father pumped oil with a 20 lb. electric motor,
can't I just pump it online?

"and if Prof. Cleveland is right and in 15 years we essentially won't have any of our 40% of current BTUs available for societal use, doesn't that mean the doomers are right?"

This is of course the problem with taking a time period, especially a bad one, and then extropolating to infinitiy.

I will give you an example: I have seen periods where the stock market went down for 2% or more for three days in a row: Looking forward I could clearly see that if this continued for even as much as a third of a year, the stock market would be 0! And even if we could cut the rate of drop in half, it would only be maybe 100 extra days, and the stock market would be.....zero, gone!

Does that really make sense?
This is why "peak" will always be a hard sell....with a little math, a person can take a small drop of a percent or two, and with a flick of the equation, all oil, gas and coal on Earth simply vanishes!

Remember, we are only one cubic mile from freedom

um - the time period was not chosen at random - it is the 75 years since discovery peaked in USA. i could make arguments net energy will decline faster now than it did last 30 years just as easily as someone could say technology will slow the decline.

Hi Nate,

Finally read your article more or less completely last night in hard copy. (I find lengthy 'attempted thoughtful' reading on computer screens give me pain in the gulliver).

First I would like to thank you for answering (massively and clearly) filling out a question I asked in forum re. an article by Kabab about total energy from 'oil' production.

Here I would like to ask you a question about Tomatoes.

The question is, if a suburbanite or a cliff dweller were to grow a tomato and eat it, how much difference in EROEI would there be between an imported tomato that was purchased from the super market and eaten.

This question is part of a larger question which is: Where does the energy go and is it's trip necessary, or: Is it better to ration and redirect or not to ration and redirect that is the question... and also, I guess a bit of a rub, eh?

Looking forward to your third part, maybe you will answer the above there?

Even if the EROI of producing oil were slightly negative, might it still be worth doing if you were using a less desirable source of energy to create a more desirable form?

I know essentially nothing about what constitutes the energy demands for getting oil from the ground, but I would guess that it is pumps to extract oil, pumps to inject water. Do they heat the water and inject steam? Whatever they do.

So lets say the Saudi's have more natural gas than there is a world market for, but there is still plenty of unfilled demand for oil. Couldn't they use the natural gas energy (or potentially wind, nuclear, or solar energy as well) to produce the oil?

It's my impression from my readings here that while North America has tight natural gas supplies, much of the rest of the world has more than they know what to do with at the moment.

Of course, over the longer term we'd be better off using the original energy sources themselves as opposed to using them to produce oil. But might this type of energy transfer buy us some time to switch over to non-oil based energy sources?

Even if the EROI of producing oil were slightly negative, might it still be worth doing if you were using a less desirable source of energy to create a more desirable form?

yes - that gets to the energy quality issue.

Remember -there are two ways to look at net energy analysis

1) the entire world runs on a certain amount of energy - what is the gross and what is the net that delivers this and where is it heading?

2) to compare different energy technologies using something more stable than dollar analysis, one can compare their EROIs (or, we have an upcoming paper on EROWI - energy return on water invested).

But if you have abundance of one energy source and lack of another - it would (at least in the short run) make sense to 'create' the second, even at an energy break even or loss.

Hi Earthworm,

Love your question (if I understand it)

An analogy: If one desperately needed to make a shovel to stave off starvation by growing a garden it would require a form of energy suitable for smelting. If oil production had a large negative EROI and one had only electricity from Nuclear (our only hope - my opinion)to use as power to pump oil it would be worth doing (at least from that individual's point of view...maybe from the point of view of someone with an old pottery kiln it wouldn't and maybe even if that person didn't have a kiln it wouldn't, I guess then it would depend on whether they were buddies or not?)

A good question is worth a thousand pat answers (whatever that means)

apologies if this has already been mentioned, and it's only quibbling really, but i think that at a 2:1 ratio, you'll be using 33% of the energy to get the other 67%. you'll be using half to get the other half at a ratio of 1:1.

yes - sometimes this gets confusing - though EROI and net energy basically measure the same thing, EROI is the return FOR one unit of energy and net energy is the return TO one unit

so EROI of 2:1 equals net energy of 1:1.

At EROI of 2:1 you need 50% of energy to get other 50%.
At net energy of 2:1 you are correct - youll be using 33% of the energy to get the other 67%.

If all other inputs were negligible, we COULD get by on a low EROI system of 2:1 - the problem is that energy is accompanied by labor, land, water, soil, etc and most of these things scale to various degrees - I have to write another post on that - this one getting long in the tooth..

Thanks for a very fine post!

I didn't notice many (if any) comments on


The financial aspect of peak oil can be difficult to see. Our whole monetary system depends on growth, and the perception that there is a reasonable likelihood that people will be able to pay back loans with interest. If the economy is growing, loans can likely be paid back, since in most instances there will be sufficient funds available to cover interest as well as principal. If the economy is shrinking, paying back loans with interest is much less likely.

Once banks and other lenders figure out that the economy is shrinking rather than growing, the number of loans is going to drop precipitously - even for home mortgages. A person wonders if even US government bonds will run into problems. If the government decides to "print money" to prevent massive defaults on debt, then runaway inflation becomes likely.

It is very difficult to carry on the normal business transactions needed for energy production, agriculture, and other basics, if the monetary system is not functioning. Thus, Reason 5 can result in many businesses failing, and may make many of the technological solutions that would appear to be possible, impossible.


its all linked. if i had a son or daughter entering college now id tell them to study permaculture or ecological systems analysis. Or maybe Russian.

I spent 20 years in the oil and gas exploration business, 13 more in the environmental mitigation business and now its back in the oil and gas business.

When I was in grad school in the mid 70s we were told by the experts that we were obviously about to run out of hydrocarbon energy sources. Then we also found out that people loved to hate atomic energy. Then we found out we could have energy for free (cold fusion). Then we found out that was bogus. Then we were told that wind energy, solar energy and biomass fuel were the future. Then we were told that was true, for about 5% of it. "WOLF, WOLF, WOLF" at every turn.

Several things I have learned from primary sources: Arabian oil is currently generating fast enough to keep the Saudi fields full at 1970's production rates. They have un-drilled reserves that may be greater than they are saying (Saddam thought so soon after they were drilled). We have gotten to the point where fusion reactions are increasing in duration beyond what could be thought of as a glimmer of hope.

Perhaps we just need to hang in there for 20 more years and we can spend time worrying about American Idol interference instead of Advocates for one direction or another who have horses in the race. If you look for what horse they are betting on, you can then begin to check their presuppositions more easily. I, for one, am tired of the myopic,dishonest pronouncements, on both sides. afs

AF Seeling

In the 70s the US was peaking not the world.

Please give us some links to the practical advancements in cold fusion.

And what horse am I betting on, if any? And what about this post was myopic or dishonest? It was certainly a pronouncement.

Thanks for your comments

First comment/post here although I've spent the last few weeks reading and digesting this series and other similar topics here. Fascinating articles, and comments, by a lot of very smart people. I'm not in the energy biz ( retired aerospace engr/statistician ) , but do have a minor investment/financial interest in the topic as well as a consumers interest.

Anyway, thanks and I certainly hope the right people are reading and paying attention to this info.