I have a friend who works in a lumber yard. He regularly threatens to "start eating sawdust and crapping 2x4's" but I don't plan on building a house from his "output"

SW

If you read his articles closely, Stuart Staniford does not believe that Saudi Arabia has any spare capacity.

Do you understand what I just said?

Stuart's view has become the mainstream view on TOD. Nobody else's view really counts. I see that PG believes Stuart's conjectures. HO, who I respect, does not. Look, if you want to deal with reality, read my columns over at ASPO-USA. If you want the doomer "end of the world" view, keep reading The Oil Drum.

Why do you think I resigned?

The news made it quite clear that they are raising the quota by 1.4 million, and raising production by 500,000 to meet the new quota. So no, they are not just raising the quota and keeping production flat. I sense that they don't intend to raise production by this amount, however.

Moe - the role of OPEC is a price fixing cartell. For much of its history it existed in a world with over-supply of oil. Quotas were set and members cheated and the oil price bumbed along bottom for decades.

Now the rules have changed - but only recently - and I think OPEC are still playing catch up. I presume they are in favour of as high a price as the world economy can sustain without causing a crash that would reduce demand. They are trying to second guess what demand is in a rapidly changing world (BRIC etc). Some of their members import oil, others are pumping flat out, others want to mess with guest OECD companies (Venezuela) others are being messed up by invading armies (Iraq) and civil / tribal unrest (Nigeria). This is a complex tapestry.

Khursaniyah is indeed due onstream - and yes I'd bet that Saudi production may rise by around 250,000 bpd. Their heritage supergiants are tired and will benefit from rest. But remmeber that Khursaniyah is just the first in a line of new developments.

I think you have hit the nail on the head BMCNETT.

Given a limitless amount of free Energy Q would tend to zero for most extracted commodities...

This would explain the long term commodity downtrend even as demand has risen.

There are metals that should be more highly correlated to underlying energy costs: Aluminium and Lithium come to mind.

Regards, Nick

Prices and Production over a complete Hubbert Cycle: the Case of the American Whale Fisheries in 19th Century
http://www.energybulletin.net/3338.html

What's your reasoning to apply HL to metals?

A few reasons. Firstly to demonstrate the limits of the HL method. You can can't use HL to predict URR and the peak production time if a large fraction of the resource has not been produced.

Secondly there is a second order theme on this site that we're close to peak production of various other resources.

The data above suggest we're nowhere near close to this.

Thirdly because a lot of economists confuse Oil with other mineral commodities. The four metals I showed have been mined for over 5000 years. Some economists appear to confuse metals with Oil and think that if we just keep trying harder we'll find more Oil, like we have for copper, gold, silver and tin for the past 5000 years.

So I'm also trying to demonstrate that there is a fundamental difference between fossil Oil and minerals.

I respectfully disagree. HL works best where exploitation of the resource is so cheap that it is limited by factors that can be modeled with simple math, such as geology in the case of oil.

All primary energy sources are cheap to exploit by definition, because they provide the net energy for exploitation of all resources, including themselves.

Hubbert predicted global peak oil in 1956 not because we'd consumed a large fraction by then, but because oil exploitation was so cheap as to be limited by geology alone. Geology is big enough and old enough to be describable by relatively simple math.

Sorry KSA production rate changes a lot over time as they play swing producer. You can smooth the graph by combining the total production for a number of years to be effectively the production for on year. Its just accounting work.

Using this approach they should have peaked in the 1990 early 2000 but the delayed production seems to have delayed their peak by a few years. A better example is Russia they suffered a similar but smoother delay in production and are now back on curve.

The second part of the argument is that non of the production numbers show a clear technology effect even though we have had major advances in technology. So using the simple vertical well no water drive as the standard then technology have given us a boost which causes HL to over estimate the remaining URR. The increased ability to maintain extraction rates over time reduces the amount of real spare capacity even if you try and limit production.

Finally since the 1980's most of the new production has been offshore which has a different production profile and cost ratio vs onshore. We treat offshore production the same in HL. In general recoveries are lower for offshore production.

In fact we are also facing the collapse of what is collectively our other giant field which is all the shallow offshore fields that where developed since the 1980's. Collectively this group is going into a steep decline and represents a sort of giant field. I call it the swarm effect.

Put everything together and attempting to adjust HL for the concept of producing below capacity is probably not the right approach. It makes sense to smooth the graph yes but only to the point of balancing already produced oil. The assumption that future production is available from previous periods of below capacity production for more then say 4-5 years is probably not true. Look at Russia for example.

KSA did delay peak by several years but this is past.

''and then in the off-shore setting, they are decomissioned and abandoned. That maybe is a birth-death model. This is one reason that in the offshore setting decline rates are much faster,''.

Remember the business case for offshore production , especially in demanding environments such as the North Sea.

The very high cost of installations demanded that production was ramped up as quickly as possible in order to recoup the very significant costs of investment. Ramping up production was also of course encouraged by UKGov in the 80's.

Hence the production profiles typically seen on Forties and all the other major fields.

Does an unrestrained profile for an offshore UK Field show a truer Hubbert curve? - Steep upward flank, brief plateau and gentle(r) downward flank with a residual and long tail.

I think so, because initial production was unrestrained by politics or economics, indeed both politics and economics encouraged a lack of restraint.

By and large, the porous and permeable clastic reservoirs offered no significant barrier to production.

The only significant intervention on the UKCS profile was around the time of Piper Alpha, causing the double peak.

Other than that, UKCS suggests an ideal and transparent example of unrestrained production profiles.

I've been reading comments like this for some time now and have been wondering what the Hell they mean. I think you have lost site of what happens in the real world. Oil fields are discovered, they get developed, and then in the off-shore setting, they are decomissioned and abandoned. That maybe is a birth-death model.

Okay, here is the only derivation for the logistic that has any kind of "real-world" physical basis (and questionable at that). The derivation starts with two assumptions, the birth and death rates:

B = B0 - B1*P
D = D0 + D1*P

We base the entire premise on the negative sign on the second term in the birth rate -- in the event of limited resources such as food, the birth rate can only decrease with size of population (and the death rate correspondingly increases).

The next step involves writing the equation for population dynamics as a function of time.

dP/dt = (B-D)*P

This provides the underpinnings for a form of exponential growth, however critically modulated by the individual birth and death functions. So if we expand the population growth rate, we get:

dP/dt = (B0-B1*P-D0-D1*P)*P = (B0-D0)*P - (B1+D1)*P2

which matches the classic Logistic equation formulation:

dP/dt = rP*(1-P/Pinfinity)

We need to look at the correspondence of this biological birth-death cycle to oil with a critical eye. First of all, P can only be linked to cumulative oil production for the equations to even start making sense -- so right there it raises a furrowed brow, as the carrying capacity for a bunch of dynamic biological entities (P_infinity) is not the same as the ultimate recovery of a static resource like oil (URR). Secondly, discovery is not the same thing as birth, and, in any case, why would the rate of discoveries initially be proportional to the cumulative number of discoveries? Most realistically, I would think that it would be proportional to the instantaneous rate of discoveries (i.e. the law of exponential growth). But if you chose this, you wouldn't get the same easily solvable equation.

So the set of equations is a marriage of convenience. The basis of the logistic maps to a completely unrelated physical concept that we only use because the form of the result heuristically fits the empirical observations. But then again, we can clearly show that other models can also fit the general form. We can conclude therefore that the reason we use the logistic and therefore HL, is because of laziness.

If we don't want to be lazy, and be truthful to the real-world, we should use the basis equations I wrote above, and come up with values for B0, B1, D0, and D1 to fit to. I contend that we don't because it would get us stuck in a logical conundrum, having to rationalize values for these questionable physical parameters as it relates to oil production.

If we want to meet halfway, perhaps we should talk about HL only in terms of the discovery curve? And we leave the production curve out of it? The question I would state is how can the logistic map to production and not to discovery if you state that discovery is like birth? Try as you might, you cannot deconvolve a single logistic curve into two curves, one discovery and one logistic, that are separated by a temporal shift. By laws of group theory, we have a problem right there.

I've never seen an HL of the discovery curve. You'd think that being well well past peak oil discovery, the HL of those numbers would point pretty definitively to a reliable UDR (ultimately discoverable resources?) number. Of course, I'm not sure it's valid to do so, since discovery of oil is not the same physical process as sucking an oil field dry, but hell, people are making HL's of copper and silver extraction, so why not?

If you have constant production like you had the last few years in Saudi you simple get a straight line at 0. What do you conclude from that? Can you be certain that’s the final peak? Can it go into the positive again?

Very good point. At least you can make sense out of this with my "First Derivative Linearization" (FDL). Compare this to the nonsense of the "dog-leg up" -- no one knows what to make of the crink in this curve because it destroys all of our mathematical intuition, mainly because the entire HL is a contrived construct which holds very little intuitive power after the HL transformation occurs.

So I hold FDL in higher regard than HL.

Nate - I think you are on the money here in more ways than one. I've been thinking about peak oil like climbing a mountain recently. The higher you get the harder it gets. I was up Kilimanjaro a few years ago. I climbed to around 18,000 ft until a combination of altitude, cold and terrain got the better of me. I couldn't take another step going up.

Back in 1971, global oil production was around 50 mmbpd. In 1986, it was 60 mmbpd. In 1996, 70 mmbpd and in 2004 it was 80 mmbpd.

Assuming annual agregate decline of 4.5%, that means new capacity of 2.25, 2.7, 3.15 and 3.6 mmbpd per annum for each increment. Simply put, the higher you get the more new capacity is required each year just to compensate for decline.

Whats more, as time passes, your ability to add new capacit is eroded - as all the best fields get used up. So every year you need to add more new capacity from a resource base of diminishing quality. At some point you just can't do it, either because you lose the will, can't afford it or lack human and engineering resources to do so.

The chart you show is astonishing. I've not seen this before. It presents the peril we are in in a new light. Whilst the scale is tricky to read it looks like the aggregate energy profit for Lousiana now stands at around 7. How do they measure these numbers? So the energy bounty / profit that once existed in being spewed away in spending a vast amount on recovering the tail end.

This is unlikley to happen in offshore areas where it becomes plain uneconomic to keep platforms running - they begin to fall to bits - and ar eventually decomissioned. This draws a line between what's sensible and what's not.

Nate your right on. And this fits with what I've been saying that HL is modeling the creation and "death" of wells or the means of production. This happens to be related to the overall amount of oil in place.

One important point you don't need to produce flat out thats a myth you need to consistently develop the resource until its no longer economic. I think your 100% right on except that constrained or unconstrained is not important its more important that the development/production program is consistent. Only if external factors cause a major change in production collapse of the Soviet Union for example will you need to adjust HL.

Western oil fields were developed and produced close to the maximum but thats not important the key is they where systematically exploited.

I'd wish there was less focus on EROI. While it holds great merit when dealing with the decline (and new deployment) of energy sources, it's not very helpful when we deal with Peak Oil.

Let me explain. While oil is a very important source of primary energy, the really important part is that it is the almost exclusive source of liquid fuel, and hence also the almost exlusive source for transportation fuel.

This is by the way the one thing Bob Hirsch constantly pounds into your head at his lectures. It's not an energy crisis, it's a liquid fuel crisis.

Even if the EROI of an oil well falls under 1 it might still make sense to keep pumping, just to get hold of the precious liquid fuel. This oil would then not be an energy source but an energy negative "manufactured" energy carrier, like hydrogen (except it would be about 100 times as convenient).

Consider that we produce vast amounts of useful things which are not energy sources, but which still create great utility for it's consumers and great profits for it's manufacturers.

Like computers, steel, toothbrushes and industrial chemicals.

This entire argument is built on the belief that oil as an energy source can be replaced by other energy sources (including in the extraction of the oil itself), something I fervently believe considering the experiences of for example France, Switzerland and Sweden.

I hope this argument is not completely unintelligble.

I've read both of Deffeye's books, I heard him speak on two seperate occasions. I've spent a few Winter evenings playing with HL models. Personally, I think that the HL is probably the best approximating tool we have for the money.
However, I (meaning, me) would be a little cautious about making asumptions with below capacity production if URR isn't 'comfortably' known.

It'd probably be educational if someone can write a post on the methods that Hubbert and Deffeyes used in coming up with their URR numbers... which aren't that far apart.

That's the point though, isn't it? The HL URR prediction was validated by other URR estimates, not that he took the HL prediction in isolation at all.

Hubbert's math and Deffeye's simplification of that math both rely on external URR estimates as ways to gauge the validity of the estimate.

I take exception to anyone who claims that we can always predict URR solely by HL. But when used with other tools, and understanding the production profile of a producing region, we can know whether applying HL matters or not.

"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone

The same way that geologists do today! Hubbert simply took the sum of those existing estimates made by geologists and which he apparently had access to during his time at Shell. Deffeyes got his estimated data from somewhere else (I forget where now as I'd have to re-read that book to find out). You folks go out to new fields and produce 5%, 50% and 95% estimates of reserves (and a few others as I recall) using geology and seismic data, core samples, etc. Those are the estimates that Hubbert added up, from regular geologists produced on a field by field basis for the US.

But note that Hubbert never, ever tries to do anything like HL and never ever tries to predict URR. Hubbert started with prior URR estimates and then fitted production (and consequently consumption) against discovery (as the original URR) as a simple curve fitting exercise. He even did two different estimates, as WT is fond of noting. Increasing the URR by 33% changed the peak date in the US by 5 years.

Note: He used the 150 GB and 200 GB estimates in the 1956 paper. We now have a pretty good picture that US URR is going to be in the 230 GB barrel range and even this stretching of the tail did not change the peak date.

This is the power of an exponential function (and hence my constant reference to Dr. Bartlett's quote) - humans just do not at all intuitively understand what the hell is happening when a system has gone exponential. Our brains have been trained by natural selection to recognize and understand linear changes but not exponential ones. That was another point that Deffeyes has made - if you grow URR by 1000 GB but consumption continues to grow at current rates you shove peak back by a whopping 15 or so years because in short order you are eating 120 mbpd (or more) or 43.8 GB per year (we use 30GB per year right now).

And that's the crux of every human problem right now - exponential growth on a finite planet. Exponential growth of human population, of human food consumption, of human waste excretion, of human damage to the environment, and on and on. Until we realize that we have to control all of these things, we are just shooting ourselves in the foot, over and over.

"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone

I agree. You probably CAN find URR working backward with the HL method, BUT YOU WOULD NEED TO KNOW AN AWFUL LOT OF ACCURATE PRODUCTION NUMBERS and the infrastructural details of the producing fields; including small things as to whether your flow is driven by a gas-cap or water injection.