Oil Megaproject Update (July 2008)

This is an update on the Wikipedia Oil Megaproject Database maintained by  the Oil Megaprojects task force  (Ace, Stuart Staniford, myself and many others). The database contains now more than 425 separate entries and is growing everyday. Despite the database growth, the outcome seems to become more pessimistic with time. The derived net new capacity (i.e. once depletion from existing production is included) is around 1 mbpd until 2010 with a jump at 2 mbpd in 2008 after which depletion may dominate.

Possible future supply capacity scenario for crude oil and NGL based on the Wikipedia Oil Megaproject database. The resource base post-2002 decline rate is a linearly increasing rate from 0% to 4.5% between 2003 and  2008 then constant at 4.5% afterward. The decline rate for each annual addition is 4.5% after first year.

Below is the evolution of  the new supply additions since the beginning of the project compiled by year of first oil:

December 2007

January 2008

February 2008

March 2008

May 2008

June 2008

We can clearly see the initial 2008 and 2009 peaks wearing out with time due mainly to delays. Now the situation does not look so good:

Possible new gross and net new supply additions compiled by year of first oil. Crude oil + NGL monthly production from the EIA. The resource base post-2002 decline is a linearly increasing rate from 0% to 4.5% between 2003 and  2008 then constant at 4,5% afterward. The decline rate for each annual addition is 4.5% after first year.

Below is a possible scenario for future supply assuming a 4.5% decline rate.

Possible future supply scenario for crude oil and NGL based on the Wikipedia Oil Megaproject database. The resource base post-2002 decline is a linearly increasing decline rate from 0% to 4.5% between 2003 and  2008 then constant at 4.5% afterward. The decline rate for each annual addition is 4.5% after first year.

This scenario seems to agree with this recent statement from Ray Leonard:

“By 2010, the production of the fuel that has driven the world’s economy will start to rapidly decline. This will conflict with the steadily increasing demand for oil. The collision of these two trends will lead to shortages and increased prices, providing a strong incentive to shift to alternative fuel resources…Due to unequal distribution through the world of oil and gas supply and consumption, [the upcoming] transition will result in significant shifts in global power and wealth.”

Many thanks to Ace who has diligently updated the data and put more than 500 separate contributions.

Finally, maintaining this database is a lot of work and it is crucial to track delays, project final approval, etc., so I'd like to repeat our appeal: the more folks in the TOD community head over to the Wikipage and help, the faster we'll know what's really going on here.

Related stories:

Update on Megaproject Megaproject
Help us List Megaprojects

The IEA raised there estimate of the decline rate in there latest Medium Term Oil Market Report:

Since the 2007 MTOMR, significant downward revisions have been made to both non-OPEC supplies and OPEC capacity forecasts. Project delays averaging 12 months, coupled with global average decline of 5.2% - up from 4% last year – are the factors behind these revisions. Over 3.5 mb/d of new production will be needed each year just to hold global production steady.


I also reacted to this info yesterday!

The gloomy part : average decline of 5.2% - up from 4% last year ..

The equivalent to "All global bio-fules gone" - in the span of one year only !
That added 1,2% DECLINE rate "wiped out" almost the entire BIO-FUEL portion of the All-liquids charts .....

When crude oil really starts to decline we will all learn really fast what bio-fuels actually are. (I've seen it already)

I never think of decline rates, only in terms of extraction rates in proportion to the current reserve value. My current Oil Shock Model uses a value of 3.8% for the extraction rate value. The decline rate will only equal the extraction rate if discoveries stop tomorrow.

Historically, global extraction rates have been higher than 4%, but during the 1970's we started to get smart and stopped treating oil like water. If that number is going up again, the desperation measures might be starting to kick in.

Throttling back extraction be damned, turning the spigots full-on will create a plateau but then it will drop like a rock.

Here is a hypothetical example of what happens when you throttle up, the plateau can extend, but at a severe price and clearly it can't be sustained.

wht - I understand and share your concern about ramping up production at the cost of a larger future decline rate. But on your left graph, it looks like the 'choice' to scale up production using some sort of EOR circa 1995, keeping a plateau going until 2010, only crosses the 'original' trajectory after 2020. I suspect that almost all oil producers and consumers would be willing to get the upper wedge (above lower line between 1995 and 2020) at a cost of the post 2020 higher depletion....The real question (which I think is unanswerable)is when did this wedge, globally, begin and how close are we to the point where it crosses over on the downside...

Nate, I think you understand that the dates are all hypothetical as I placed them clearly in the past (just want to make sure everyone else realizes this).

And I do so agree that the real question is unanswerable. We may only see the crossover when it is upon us. When I first posted this graph a few years ago, I called it The Overshoot Point. Or TOP for short, as in TOP off the gas tank ... for the last time.

Funny my conclusion was the problem was unanswerable also.
But this does not mean its unbounded.

We have plenty of circumstantial evidence to indicate that we are in the TOP condition.

Exact some conclusion the only thing I disagree with is the drop date at 2020.
We have a host of evidence that the "easy" oil keeping us close to our current production level is exhausted.

Artsy or not the reason that production goes over a cliff is that the oil left to extract gets much harder to extract at high production rates vs remaining reserves.

A perfect extreme is the tar sands.

All you have to do to get the bounds is try and partition the oil into easy to extract group and a hard to extract group. When the easy group is gone production rates drop.

So unsolvable yes unbounded no.

When did we start turning the corner ?

November 2007.

Once you know what to look for then you know its in the past.
And this has absolutely nothing to do with the price of oil in fact
the reason we turned the corner has nothing to do with oil at all.

Since your not into artsy approaches you probably won't figure this one out.

Hi Memmel,

Thank you for taking the time to make this comment and all the other comments where you explain your scenario. Personally I appreciate it especially because I can't really fault your view. It is unfortunate that it is so bleak, I still hope you are wrong but I can't fault your logic.

I would also like to say thank you to all the other core members of theoildrum community that I feel you are at the heart of. Thanks a lot guys for all the good info.

Maybe it is just a phase but personally I am giving up hope on alternatives to oil like solar, wind, and wave (I already gave up on shale/tar awhile ago). Sure these alternatives will provide some power, but I am skeptical that they will allow us to preserve our way of life. (I'm still pro nuclear but I suspect we are running out of time/energy to build new plants).

That led me to look for more radical alternatives, which eventually led me to a device known as the Polywell, you can see a 3 minute video about the potential benefits here:

If anyone is interested I would gladly supply more links, the Polywell wikipedia page has some goods ones. (I realize even this still doesn't solve problems like running out of phosphorous).

Anyway to get to the point manufacturing net power gain products from this technology is expected to take 5-10 years. Do you think we have that long left, or do you think we would have descended into a descending spirals of energy wars by then?

Thanks again for all contributions.

Hello ICouldBeWrong,

I second your thoughts on memmel. One can only appreciate all his due diligence, his powerful insight and his willingness to share same. His contributions have helped my understanding of peak oil and its ramifications enormously.
Re: Dr Bussard. You probably know this but he passed away last October. I'm not sure if his "team" will be able to go forward without him or not.

Dr. Bussard

Hard to get a break these days isn't it?

Thanks for the article Khebab. You and Westexas have done great work.



And on one hand I'm sorry I've not been able to come up with some cool graphs. But the collapse of civilizations is a hard problem that the smartest people around at the time of collapse have been unable to solve time after time after time.

The first mistake they make is that its a solvable problem. I.e collapse can be prevented this is wrong.
It cannot be prevented but once you recognize this it can be controlled.

Collectively we are all going to get a lot poorer as the leverage provided by cheap oil disappears.
Like it or not McMansions and monster SUV's are tangible wealth given cheap oil and in a expensive oil
regime their value goes to zero. This wealth will be lost period it won't be spent on electric rail or on
a fuel efficient car etc.

As you expand this to include other assets who's value is upheld by cheap oil you realize that the US alone will lose trillion and trillions of dollars in paper wealth it makes the underlying cost of oil a small part of the problem. The reason its small is we have leveraged oil deleveraging regardless of if its a planned move to rail a panic move etc will result in a write down of the value of the far flung suburbs strip malls , road and parking lots that cannot be resurfaced etc. Next its a major contraction in the consumer economy as people become more focused on necessities. The world economy will naturally move over time to one driven by its yearly solar energy allotment this economy is only a fraction of our current one.

Thats the big picture problem and no reasonable alternative to oil can solve this problem.

And of course even knowing the right answer if you will that we need to undertake a controlled collapse
of our economy is not really all that useful since people refuse to believe that our only two choices are
controlled collapse or chaotic collapse. This refusal is in effect a vote for chaotic collapse.

If you still don't believe me let me put it this way. Peak oil theorist focusing on production completely missed the concept of export land and its implications we discovered this problem fairly late in the game.

How many other serious situations do we face that are not directly related to oil supply but have a significant impact on oil production and utilization ? How many other "export land" type problems are
lurking ? These are the types of problems which drive the solution chaotic and thus into collapse and
they are almost impossible to predict but require insight to recognize.

We know about a lot of them EROI, fiat currencies, growth economy etc etc.
And I believe I found another one that has a impact just as large as exportland.

Just enumerating the number of external factors that are causing problems as oil supplies decline is impossible and it seems that they are growing exponentially but this is exactly the conclusion I came
too and why you can't solve the problem.

I still have a academic or probably more correct forensic interest in peak oil and its effects.
I'd like to know what actually killed the victim. Are we dead yet ? yep.

Thanks for your reply Memmel!

I fully accept peak oil, Hubbert's 1953 'Nuclear energy and the fossil fuels' paper by itself convinced me. I also accept the export land model that shows exports to the oil consuming nations will peak before production does. Furthermore I find your hypothesis that improved technology that has allowed us to extract fossil fuels at an increased rate means that rather than oil production resembling a normal curve, it could instead resemble a drop off a cliff.

There are other problems too, e.g. with the global financial system. It's not in good shape for reasons discussed by luminaries like Jim Rogers, and Peter Schiff. Basically the financial system was due to collapse and a greater depression begin even without peak oil. Peak oil is simply the 1 ton boulder that has broken the camels back.

So I agree things look extremely bad, and agree we are rapidly running out of time. Maybe we no longer have time to build more nuclear reactors, let alone solar/wind/wave machinery.

Having said that I haven't given up all hope. We need a revolutionary energy production technology, and I've been searching for one. What I've found is the Polywell IEC fusion reactor. This technology is not 'reasonable', Farnsworth and Bussard were not reasonable people, they fought the odds and on Dec 17 2003 they appear to have hit pay dirt achieving fusion.

This technology has the promise of producing energy at 1/1000 the cost of anything we have today. It can run on boron which is the 10th most common element in seawater. So it can run on seawater producing fresh water and virtually free electricity as output. Potentially you can put one on a barge take it to a country like Brazil and produce ethanol from sugar at a cost of less than 35 cents a gallon.

(See around 1 hr 3 minutes into this long video for more info
http://video.google.com/videoplay?docid=1996321846673788606&ei=&hl=en )

Now obviously this is a speculative technology, maybe it won't work. And producing a working (net energy gain) product will take 5-8 years. I'm just wondering, that is my question to you is, do we have that long left or will civilization as we know it have fallen apart be then?

1observer: Thanks for your reply, yes I realize that Bussard has moved on, I'm also aware he got funding and a team together to continue his work before that. Obviously more money and more good people would be a great help.

Sorry I meant to say Hubbert's 1956 'Nuclear energy and the fossil fuels' paper.

Also Farnsworth, the inventor of electronic television, died before Bussard led the Polywell team to achieve fusion on Dec 17 2003. Bussard based his work on Farnsworth and some other people I'm vague on Hirsch, Elmore, Tuck, Watson. There was a publishing embargo for I think 11 years, due to the work being done for the Navy. So heaps of info has come out quickly. Current team is being led by Nebel I think.

I wish them good luck.

Actually fusion is not all that hard to create.


This one that uses crystals to create the intense electric fields needed is probably a better approach then the fusor. I used to work on the theoretical side of penning-paul traps and given a deep enough of a electric field you probably could generate fusion even with weak magnetic trapping.

I believe that some of the so called cold fusion experiments are actually seeing something similar to the piezo/pyro electric fusors. My best guess is that they might be forming platinum nitrides.
Or some other nitrides that then produce intense electric fields. Who knows for sure.

But at least with my work on traps you get a sort of intrinsic understanding of these fields and the energy it takes to make a strong electric field is pretty high and the amount of fusion possible in the small region
is pretty low. The net outcome is chances of break even generation simply because of physical constraints and volume issues is very low in my opinion.

Fission of course occurs naturally and room temperature and we already have nuclear batteries.


With some really neat new ones that use ionization and are much more efficient then the thermonic ones.


With most fusion routs you have to deal with a build up of radioactivity so long term fusion or fission is not as big a gap as most people think. Fusion is not "clean" cleaner than traditional reactors yes but not clean.

Nuclear reactors can be used to generate large quantities of isotopes and indeed we did this with plutonium.

The point is we already have nuclear batteries that can last basically forever. And of course we obviously have nuclear reactors and we can say use induction roadways to power cars. Very small nuclear reactors certainly small enough for a bus or truck and maybe even a car are possible. But fission also suffers from this volume constraint issue. I was once asked why we could not have nuclear bombs the size of a regular stick of dynamite a reasonable question but the answer is really the same as with break even fusion devices.
You need a certain amount of material to get a chain reaction and its actually fairly large.

You probably could generate fission using methods not all that different from a fusor but I can see you reaching break even. Its a cross-section thing and probability thing. Neither fission or fusion scale down it seems past a certain energy threshold thats actually fairly large. I won't say its not impossible but the problem of break even gets very hard past a certain size just like a "dynamite" size fission bomb is almost impossible to create. Your making a really hard problem we have not yet solved orders of magnitude harder with plasmas that small in some cases a few hundred atoms at the high energy state.

Now with all that said I've always felt that we could create much smaller fusion reactors then what we have attempted to create to date. For some reason we tried to go strait to one big enough to power a city. While smaller ones say capable of powering a submarine could have been prototyped much faster.

We kinda looked into this here.

And doh hmm maybe smaller is better.


More here.


Long run they are better and probably will eventually be commercially built but they really don't offer any advantage over using small nuclear reactors which we could build quickly if needed.

But backing up a little bit coal fired plants could be constructed even faster if we really needed the electricity.

Nuclear powered cars with either a fission or fusion plant thats cheap is probably not possible in the short term. Other solutions can produce stationary power and grid electricity. With the nuclear option any grid issues could be rectified easily within a fairly short period of time not to mention expansion of renewable or coal fired plants etc.

The only problem thats solved by desktop fusion is the potential for a "car" power plant.
Unless we have a break through very soon I don't think they will make it in time even if they are feasible.

I went through my own Farnsworth fusor phase myself I think its something everyone goes through that looks at the problem. But if you step back and think a bit about cross-section collision probabilities and energy densities you become a advocate for electric rail and renewable sources of electricity.

Assuming even todays PV cells and Wind energy and a bit of hydro electric generation of enough electricity to power a high tech civilization is readily feasible. Whats missing is good storage systems and thats what I'm actually working on.

I've chosen liquid nitrogen as a storage medium its not got the energy density to really power a car but its perfect for a diffuse network of renewable energy sources.


If your considering load leveling of a electric grid its a really good fit.
CO2 is another possibility either compressed to a liguid or in the form of dry ice.


This is the problem we need to solve along with better cheaper PV systems.

Hydroelectric or concentrated solar in the desert can be used for the small amount of high energy sources you need in a well planned electric/ low energy/ high information not high tech economy.

I'd say leave fusion for space rockets we don't actually need it on earth if we design our societies correctly. I'm not agianst it but its really not needed. We are better off living as peers with the rest of the ecology making use of our alloted photons like every other living organism in a sense as energy equals to other dumber forms of life. If we live this way we can be pretty certain we won't overstep our ecological niche and destroy the environment. Remember energy is but one resource we need and all the others are also effectively non-renewable. Coming up with a good small high energy source just means we will hit peak something else in the future. Given our population growth I'd guess it would be peak food.
Energy equality with the ecosystem forces us to solve our population problem which is the real problem we face peak oil is a symptom. So treat the real disease and start living within our means.

Wow what a great reply, I'm impressed.

You write "Actually fusion is not all that hard to create.", I concede not only are you correct, but this is an important point. The Dec 17 2003 fusion was the first fusion by a Polywell system, that's all.

You also write "I'd say leave fusion for space rockets we don't actually need it on earth if we design our societies correctly... We are better off living as peers with the rest of the ecology making use of our alloted photons like every other living organism in a sense as energy equals to other dumber forms of life. If we live this way we can be pretty certain we won't overstep our ecological niche and destroy the environment.... Coming up with a good small high energy source just means we will hit peak something else in the future. Given our population growth I'd guess it would be peak food."

I agree we don't need advanced technology to become happy, I suspect it doesn't even help. Also I agree 'good small high energy sources' could result in unparalleled environmental destruction, loss of life and suffering. Nevertheless, if such devices are built and work they will be used. Those who adapt most quickly will have an advantage over those who are slower to adapt. The genie can't be put back in the bottle.

Regarding the physics, unfortunately I'm no expert but I thank you for the links you have provided and will attempt to respond intelligently to the points your have raised.

You wrote: 'With most fusion routs you have to deal with a build up of radioactivity so long term fusion or fission is not as big a gap as most people think. Fusion is not "clean" cleaner than traditional reactors yes but not clean.'

Bussard designed Polywell devices to run on Boron11 fuel. According to Bussard reactions using this fuel produce only harmless Helium, that's it. The reactions are completely aneutronic, the reactions are radiation free. There can be no 3 mile islands or Chernobyls. This is covered in minutes 5-6 of the long video I linked to above. Or you can read page 3 of this paper http://askmar.com/ConferenceNotes/Should%20Google%20Go%20Nuclear.pdf

Memmel wrote "You probably could generate fission using methods not all that different from a fusor but I can [not] see you reaching break even. Its a cross-section thing and probability thing... I went through my own Farnsworth fusor phase myself I think its something everyone goes through that looks at the problem. But if you step back and think a bit about cross-section collision probabilities and energy densities you become a advocate for electric rail and renewable sources of electricity."

As I understand it cross-section probabilities are mainly a problem for Maxwellian systems like the Tokamak. The Fusor and Polywell systems solve this problem by mimicking fusion in stars. In a star gravitational forces cause particles to combine. In Fusor/Polywell systems a spherical electric field is used to combine fuel particles. Both gravity and electric fields have 1/(r^2) convergence. So rather than a Maxwellian distribution fuel particles are concentrated at the core. See page 5 of the above document.

The main problem with Fusor/Polywell systems is electron containment. In a Polywell magnets are used to contain electrons to create the spherical electric field. I believe that's the problem Bussard spent most time working on.

Memmel wrote: 'The only problem thats solved by desktop fusion is the potential for a "car" power plant.'

Unfortunately currently designed Boron11 fueled Polywell machines are too large to fit in cars. They are about 2.5 meters in diameter, hence the need to produce ethanol from sugar. Given the extreme cost it would seem desirable to avoid migrating the worlds transportation fleet from hydrocarbon based engines to something else (like liquid hydrogen) if we can avoid it.

The current Polywell machines are small in size because they are cheaper to build than full scale (net power gain) machines. Because they were large enough to solve the known physics problems. And I think because even small machines can be used to confirm that power gain scales with the fifth power of the radius of the device.

"backing up a little bit coal fired plants could be constructed even faster if we really needed the electricity...

Both Farnsworth and Bussard suffered from underestimating the work required to build commercially viable machines. Maybe 5-8 years and 250 million will not be enough. Possibly coal fired plants can be used in the interim.

Memmel wrote: "Energy equality with the ecosystem forces us to solve our population problem which is the real problem we face peak oil is a symptom. So treat the real disease and start living within our means."

I'm not willing to agree with you on this point. I'm not convinced that we have reach the carrying capacity of planet earth let alone the universe.

Thanks again for your great comments, and all your time.

No problem I like your responses also. And as you say you can't put the genie back in the bottle.
But I'd respond that if we are not careful we will smash the bottle and shoot the genie.
As far as crossections etc all I can say as showme :)
Like I said I actually worked on Penning Paul traps.
A number of variants exist.

I worked on this. In fact this link is too my professor.

In any case consider mechanically spinning both the electrodes and magnets with the electrodes
and magnets designed to produce a non-linear field say a double well.
This sets up all kinds of secondary fields and compression of the magnetic field lines.
I've never seen anyone spin the piss out of there 10 million dollar traps but its something
I'd love to see done.

So in short yes you can beat thermal cross sections. And I really supect if I'm alive when we
finally develop fusion that at least part of the machine will have a mechanically spinning magnet
or electrode that generates a non-homogeneous rotating field causing plasma oscillations.
Right now these are considered the problem but I think they are the solution the ions are
allowed to "escape" but if you can spin fast enough you capture them with the time varying field.

This paper off the first page is going in that direction.


Lara M, Salas JP.

Real Observatorio de la Armada, 11110 San Fernando, Spain.

Imperfections in the design or implementation of Penning traps may give rise to electrostatic perturbations that introduce nonlinearities in the dynamics. In this paper we investigate, from the point of view of classical mechanics, the dynamics of a single ion trapped in a Penning trap perturbed by an octupolar perturbation. Because of the axial symmetry of the problem, the system has two degrees of freedom. Hence, this model is ideal to be managed by numerical techniques like continuation of families of periodic orbits and Poincaré surfaces of section. We find that, through the variation of the two parameters controlling the dynamics, several periodic orbits emanate from two fundamental periodic orbits. This process produces important changes (bifurcations) in the phase space structure leading to chaotic behavior. Copyright 2004 American Institute of Physics

Enough on that I'll get sucked in again :)

The only point I disagree on is carrying capacity of the earth. Here I think we are in overshoot.
Just flying over the US and China shows that we have developed all the best places and a good bit of the marginal lands. Flood plain ecosystems have been destroyed for so long people don't realize it.

Natural rivers in the south used to have huge natural dams called snags that built up along the rivers the riparian environment has been destroyed etc.

What I mean by living within our means is only using a small portion of the best lands say less then 10% so that all the natural ecosystems remain intact and this means leaving many rivers untouched by man all along there route. I don't know exactly the density that we need to be at to support keeping large parts of the worlds ecosystems untouched but its a lot lower than today.

Now since we must always have some high energy sources if we are going to have a technical civilization done correctly fusion could replace the use of hydroelectric altogether and we could rip out all or dams.

But it has to be done at the right time and place and for the right reasons and the right level. We are not ready for another endless power source we screwed up big time with our first one (oil).

So I hope that if we do achieve fusion it won't be for a long time and it will be in a society that wants it to rip out dams.

As far as space goes the more the merrier plenty of room to expand and a society that lives within its means would only lightly touch the planets it settles before moving on to others.

If we had star flight now we would basically be a scourge on the universe. We make locust swarms look benign.

Who knows if aliens exist but if they did I'm sure they would not want use "escaping" :)

Memmel: "As far as crossections etc all I can say as showme :)"

Here is WB6 in a vacuum machine,

In page 14 of the should google go nuclear PDF linked to above, Bussard reports

"On November 9 and 10, 2005 they obtained DD fusion
at about 10 KV, with B fields of 1300 Gauss, in a 30 cm
diameter device. It produced a pulse of DD fusions at
109 fusions/second that was 200,000 times higher then
anything that Hirsch and Farnsworth had ever achieved
in any experiment they had ever done for similar well
depths and drive conditions."

According to emc2fusion.org this "agreed with rate predicted by theory" and "confined electrons as the computer models said it should".

When the funding was cut to the lab they decided to run WB6 with as much power as it could handle, that's how they got the above results. (On the last test run it was broken perhaps a magnet short circuited, they didn't get the results until they were computed a month later).

Now WB7 an improved version of and the same size as WB6 has been built to reproduce and verify the results obtained from WB6. Here it is achieving first plasma in January (a larger image is on emc2fusion.org):

Richard Nebel who is leading this project said "The initial analysis showed that Bussard's data on energy yields were consistent with expectations", according to a report here http://www.dailykos.com/story/2008/1/13/224458/454/929/436375

But I'm not sure that info is accurate, because they were reporting on first plasma, at the time of the report first fusion may not have yet been achieved.

Next they may build WB8 another device similar in scale to WB6 and WB7, but with an alternative (truncated icosahedron) topology which may more efficiently trap electrons. After that if the results are ok if funding can be obtained the plan is to build WB1000. The full scale net power gain model, that is if Bussard's prediction that power gain scales with the 5 power of the radius is correct.

Hopefully Nebel reports more results. But he may have to go under embargo publishing like Bussard.

Maybe fusion will help or maybe it will accelerate peak food and other problems as you suggest. Anyway thanks for the discussion about it, it has helped improve my understanding.

Regarding Penning Paul traps, I will look at the links you have provided. Your suggestion to consider mechanically spinning both the electrodes and magnets sounds interesting, thanks, I will think about it.

Regarding the carrying capacity of the earth, well you could be right. I hope for the best but I can see the logic in planning for the worst.

Memmel: "What I mean by living within our means is only using a small portion of the best lands say less then 10% so that all the natural ecosystems remain intact". This sounds nice but I don't know how it can be achieved in practice it's difficult to get people to practice population control. I could see the planet getting more crowded with cheap power. We might irrigate the deserts and colonize them and also build colonies in the oceans.

Thanks again for the discussion.

I don't know if you have mentioned it in any of your links, but the next reactor is likely to be 100MW:
Next Big Future: The next Bussard IEC fusion reactor could be 100MW size producing net energy

Hi Dave!,

I'm not sure if that blog is correct. Perhaps it is a misinterpretation of something Nebel said. I think he said 'We might as well go ahead and build the next one'. Which I would have thought meant WB8. The author of the blog may have jumped the gun thinking it meant the 100MW machine.

If they are going to start work on the 100MW version that would be great. I'm interested in a link to a direct quote by Nebel making that clear.

Another gee whiz technology that will be forgotten in ten years as a curiousity in plasma physics when they finally realize they aren't getting useful energy out of it. Maybe in 100 years something similar will be used for caulatron refining.

So far I've seen no conclusive data from these guys, just press releases to get more grant funding. I'm sure they're not being dishonest and believe in the concept, but I just don't see them overcoming braking radiation losses.

I'm not willing to agree with you on this point. I'm not convinced that we have reach the carrying capacity of planet earth let alone the universe.

If you accept that global warming is occurring, then by definition we have exceeded the carrying capacity of the Earth.

If that number [extraction rate] is going up again, the desperation measures might be starting to kick in.

Refer to our article
The Disconnect Between Oil Reserves and Production

I have just updated the graphs there with the new BP data. The group "reserves and production declining" (Fig 6) has now an extraction rate of 9% pa, but a low decline rate year on year of 1.7%. It is important to understand what's going on in this group with a global production share of around 30%

That chart seems to jive with my extraction rate plot, if OPEC is a significant fraction of the overall output. Opec only started to drop around 1980.

Nate said:

I suspect that almost all oil producers and consumers would be willing to get the upper wedge (above lower line between 1995 and 2020) at a cost of the post 2020 higher depletion

Really? Do you not think such a rapid decline rate would ultimately have worse effects, at that cutover point, than the original likely decline? There'd be a larger world population at the time the cliff hits and some economies may be starting to use energy more efficiently, in that longer plateau. They may be starting to switch, a little, to alternatives, only to be hit by that calamitous decline rate. Then gas and coal peaks would follow more quickly than they would otherwise.


Really? Do you not think such a rapid decline rate would ultimately have worse effects, at that cutover point, than the original likely decline?

I don't know about Nate, but I do. Without a blatantly obvious signal to TPTB, nothing will change. Maintaining a production plateau for ten years won't encourage them to invest in alternatives etc.
While an extended plateau would buy us time to make a rapid transition (with all the attendent disruptions), no transition will be attempted until final decline sets in (and with a 'cliff' rather than a 'slope', any belated mitigation efforts would be for naught).

My 2.2c (inc GST).

Alan, fyi, "there" in the sentence

The IEA raised there estimate of the decline rate in there latest Medium Term Oil Market Report:

means in a non nearby position; the word you want is spelt "their".

Alan must be reading to many of my comments :)
Sometimes I wonder if I'm responsible for the destruction of the English language.

Your stream of conciousness posts are really cool, almost like listening to a Dylan song. Well intuited, if a little hard to follow sometimes. You seem to be trying harder with the grammar and punctuation recently. Don't let that get in the way of your intuition.

BTW--that's "too many" ;-)

Absolutely, if you want to go the arty way, this S.O.C. is OK. But I won't respond any more to his comments on mathematics modeling. I spend far too much time disentangling and discerning the meaning, and not enough getting insight. So don't get upset if I don't respond any longer. I already said I would shut up; this time I mean it.

'Taint destruction, Memm!

I'm a native English speaker (one of the several distinctive Brit flavours), and I revel in the proliferation of hundreds, if not thousands of different flavours of English.

Many are being created right now, as much by fairly fluent speakers for whom English is a foreign language, or a second language learned after the acquisition of their first language, as by the native speakers.

It's a world language. It's got away from its original owners. Anyway, all living languages change constantly, in unpredictable ways, under the constant inventive pressuir of all their current speakers. Great. isn't it! Don't apologise. Go at it with gusto! I love it!


No no no! If they want our English, they must give us their oil in return. If they don't have oil to give us, they should please stick with another language.

'Taint destruction, Memm!

I'm a native English speaker (one of the several distinctive Brit flavours), and I revel in the proliferation of hundreds, if not thousands of different flavours of English.

Many are being created right now, as much by fairly fluent speakers for whom English is a foreign language, or a second language learned after the acquisition of their first language, as by the native speakers.

It's a world language. It's got away from its original owners. Anyway, all living languages change constantly, in unpredictable ways, under the constant inventive pressuir of all their current speakers. Great. isn't it! Don't apologise. Go at it with gusto! I love it!

Don't mind him. Anyone who would use "spelt" instead of "spelled" has no room to talk! Those Brits, they have a little trouble updatin the language! "At" the weekend... criminy...


But, seriously, chastising a non-native speaker for errors/mistakes in a perfectly understandable sample of text is a little silly. Communication is the object, not accuracy. To wit:

I love cats. Oil is very expensive. The cat, however, is cheap, so cats are obviously better than oil. Also, you can't eat oil in an emergency, but a banana is surely edible.

I rest my case.

Carry on, memmel.


PS. I'd say a majority of Americans are dropping the -ly adverb endings. "Come here quick!"

Languages change. C'est la vie!

Thanks my wife is from Taiwan and I'm immersed often in the Chinese language which does not have tenses.

Nothing like a dyslexic American picking up chinglish writing patterns :)

Being dyslexic writing English and falling into Chinese speech patterns is not a good thing.

You get the picture :)

Be glad it's not German so we'd have to wait to the end of any dependent claus for the verb. :)

LOL I must tell a story.

I was in Kuala Lumpur meeting with the guy that bought the Malaysian stock exchange after it crashed.
The guys name was Mohamed something I can't remember he owns most of the banks in South East Asia.

Anyway after the meeting we go to a ultra high class party where yours truly gets a wee bit drunk.
So anyway in this condition I start hitting on this super hot German lady who is the wife of some CEO high muckty muck.
The problem was as I get drunker my southern accent becomes very strong so the lady finally says "Look I speak English I do not know what language your speaking".

Immediately my dream of getting laid evaporates and worse since the only language I know is English or at least I thought I knew I could not even respond.

My friends who where there still remember the event it was funny as hell she was all pissed off and I was doing my best to respond in a drunken southern accent.

The moto of the story is never try to pick up a German women in Malaysia if your from the South and drunk.

memmel :

As someone who is familer with Chinese dialects you will appreciate this. I was learning Cantoneese and at one time tried to tell a Cantoneese speaking women that she was very pretty, she looked at me and walked off in a huff, later a mutual friend spoke to me and asked me why I had insulted her, I said I thought that she "was very pretty" LeY Ho Laan; my friend told me I said "LeY Ho Lan", which means "you are very lazy",

Another motto, be careful when trying to speak Cantoneese especially when saddeled with a wicked severe non-rhotic rural New Hampshire dialect.


When I was living in Shanghai I asked my wife how to ask our maid if it was raining outside.

My wife is busy so she won't help me remember the mistake but in Mandrian.

I actually asked here exactly the same thing are you very lazy ?

Funny as hell.

Chinese languages have tones of these play on words and they can go one forever they have some very funny comedies based on making mistakes like this esp using people learning Chinese.

You can really get yourself in a lot of trouble :)

I stick to pi-jio which means beer :)

When I was in Vietnam one of the fist things I ask is how you say thank you and beer in the local language.
So I ask my friends how to say beer in Vietnamese.

They say umm beer.

Fell in love with the country right there :)

I know but estimations on the global decline rate have been all around the place for a long time so I have to check what are the new data behind this new estimate.

I've I'm reading MOTMR 2008 presentation right, the revision downwards in incremental supply for 2012 is 2.6 Mbpd, that's c. -28% revision downwards. No wonder they are pushing the alarm button.

Also, it remains worthwhile to notice that even in this scenario, IEA is assuming

"net global decline for existing assets masks fairly aggressive assumptions for parts of the OECD and for deepwater projects elsewhere. Development schedules for the latter can how rapid ramp-up followed by abrupt annual decline in a 5%-plus range." (MOTMR 6/2007).

As for reasons for decline changes, they said in 2007 the following:

"we believe that project slippage, weather, and unplanned production stoppages for technical, economic and geopolitical reasons, have been, and will continue to be in the next five years, the main risk factors. Put another way, while we continue to monitor and actively adjust for shifts in field and aggregate decline, we see above-ground risks more prevalent, for now, than below-ground risks."

It'll be interesting to see if they have adjusted this position in WEO 2008 or whether they still think it's mostly due to above ground factors.

PS Great work on the Megaprojects work!

It'll be interesting to see if they have adjusted this position in WEO 2008

I think the IEA will adjust their position in WEO 2008 if they can get third party audited production and reserves data from all of the OPEC countries. However, I doubt that countries like Saudi Arabia, Kuwait, UAE and Iran will provide this data.

If you want a more realistic position by the IEA, chapter 7 of their WEO 1998 is worth reading.

The 1998 WEO is significant because it was published prior to the IEA becoming heavily influenced by the USGS 2000 Petroleum Assessment study which stated that there were huge amounts of oil yet to be discovered.

The new study was awaited with anticipation in the hope that it would be a definitive assessment, based on a very through evaluation of every petroleum system, but the result has been a great disappointment. It is replete with contradictions and downright errors.

In short, the new USGS report is misleading. It is also unrepresentative of the normal standards of this highly respected organisation.

One is left to wonder if there is not a hidden agenda, given current US concerns regarding oil supply, price, and growing OPEC control. The timing of the USGS press release on the eve of a critical OPEC meeting would certainly be consistent with such an interpretation.

A realistic scenario in the WEO 1998 was shown by the chart below. It forecast about 90 mbd total liquids in 2008. There was one part of the chart which was overly optimistic: demand of 130 mbd in 2030 would be satisfied mainly by 90 mbd of unconventional oil and NGLs.

A few modifications to the chart above produces a more realistic chart below. The dashed blue line shows forecast total liquids production. Forecast unconventional oil and NGLs have been reduced and a demand supply gap added. I'm hoping that the IEA will show a chart, similar to the one below, in their WEO 2008, but I remain doubtful.

My total liquids forecast below is similar to the dashed blue line in the modified IEA total liquids forecast above.

click to enlarge

Today on the spot market some crudes were already trading consistently above $150. How does that affect your estimates?

I think right now there are way too many tea leaves to read, and we will just have to hold our breath and see what happens. Hopefully it will turn out that the continual price rises over the past several weeks have been anomalous. If this pace continues, I am not sure how the developed world is going to cope gracefully.

Consider air travel, not an insignificant part of our current way of life. The cost of a jetliner fillup has gone from around $12,000 to something like $22,000 just in the past year. If you are running an airline and you pass that increased cost through to the public, your volume goes down so much that you have to lay off thousands of people, and then you go broke anyway. Or you can just absorb the increased price of fuel and go broke around the same time.

I guess the airlines will have to merge, and cut down on flights, and mothball a lot of equipment. What alternative do they have?

Run your airplanes at higher capacity rates.
Charge higher prices to your passengers.
Lower the prices you pay for the airfield gates.
Lower the salaries of your employees.
Lower the salaries of your executives.
Lower the bonuses of the Board of Directors.
About in that order.
What do you think Reagan did when he broke the Air Controllers Union, also known as PATCO? He had to have fewer flights in the air to offset 1980's higher jet fuel prices with increased passenger capacity factors. He broke the union and spaced airplanes out in the flying patterns using untrained air traffic controllers as an excuse. Cut peak gate capacity in half and enabled the airlines to increase prices by reducing the supply of seats out of airports at peak times used by business travellers.
What else could he do?

Today on the spot market some crudes were already trading consistently above $150. How does that affect your estimates?

The price used in the chart above is "All Countries Spot Price FOB Weighted by Estimated Export Volume (Dollars per Barrel)" which was $131.41/barrel on June 27, 2008.

The long run oil price estimates are likely to be in an upward trend. However, in the short term prices may be rangebound.

If there are any serious supply shortages during the next few months, prices of some of the light sweet crudes, Tapis and Minas, could temporarily reach $200/barrel.

The price chart above shows a problematic forecast 4Q2008 supply demand gap of 1.5 mbd. Supply could struggle to meet the increased demand starting in October 2008, driving oil inventories down and pushing prices up.

Nevertheless, at oil prices of $150/barrel, demand destruction is continuing. From the latest June 2008 IEA OMR, OECD demand has been falling since 2005 at 49.7 mbd, 49.3 mbd in 2006, 49.1 mbd in 2007 and is estimated to be 48.6 mbd in 2008. On the other hand, the IEA forecast non-OECD demand to increase from 36.9 mbd in 2007 to 38.1 mbd in 2008.

My recent ‘top-down’ aggregated HL models(unlimited growth unconventional crude oil production model and capacity limited conventional crude oil production model, median URR estimate of 1979 Gb and upper URR estimate at 95% confidence of 2325 Gb) gave me a production plateau within 82-97 mb/d. My estimate of peak liquid production date is within 2nd quarter of 2009 and 3rd quarter of 2011 very close to the prediction of the 'bottom-up' model by Ace.


have you found out the alleged upgrades to the BP Azerbi projects? Steve Levine wrote about it in his blog:


It is a minor addition and may not increase flow rates, but perhaps worth checking if people have access to full Platt's archive:


BP to extend Azeri ACG 1 mil b/d output plateau 6 years to 2019

Schrader, after saying BP was on track to produce 1 million b/d at the field by the end of this year, outlined plans that included the installation of at least two new offshore platforms, the first to enter

Can you show me the link for those observed EIA data points?


For some reason I am perhaps missing, the graph looks a bit off with those observed EIA data points. The plateau looks like its at 81 mbpd yet the data shows the plateau at around 84 mbpd, whats the deal here? Is the Y axis messed up or am I just missing something simple.


I see,

I was looking at the world data from this.


I figured it was something like that, I believe this data contains Tar sands and bio-fuels and other stuff that shouldn't be called oil?


Tar sands are already in t11 as well as condensate.

I was wondering if you had seen this slide, from a recent IEA presentation.

It talks about average delays of 12 to 15 months and 1 mb/d loss due to slippage. Do you have any idea what kind of impact such delays would have on the model? I also notice they are using 5% decline, going forward.

Yeah, Kashagan is the real killer. I saw an MSM report the other day that said they'd be lucky to get 500kb/d by 2011

OTOH Brazil Petrobras was making big noises again today about rolling in oil. Their prez, Gabrelli, seems pretty level-headed tho. He gave several interviews in which he fell just short of saying peak oil. Then, again, they may just be looking for investment $$$.

Reuters today on Kashagan

Scaroni added that he was more optimistic of first oil in 2013 after a deal with the government.

(receding horizons, a work in progress)

It may be even after that, if they don't get pipeline work done. A recent article says:

CPC's shareholders are currently in talks to more than double the pipeline's current capacity to 1.34 million bpd by 2013, when the Tengiz oil field reaches its peak and the Kashagan oil field begins pumping oil. However, key differences among Russia and other shareholders over financing of the expansion and the unsolved issue of how to bypass the congested Bosporus Straits -- the link between the Black and the Mediterranean Seas -- do not bode well for quick conclusion of the negotiations.

Taleb would probably say that this is actually Extremistan and not Mediocristan - a single Black Swan like Kashagan can throw a monkey wrench in all sorts of models and projections.

This is a kind of positive feedback that is hard to predict but that could make things worst really quick, I think the rush to drill all over the globe is straining the industry capacity (both human and material). Also commodities are becoming more costly across the board and costs are rising fast potentially scaring investors away, some tar sand projects have been delayed because of that.

I saw that back 3 years ago, wanting to drill in the depleted fields of Ohio: most of the infrastructure was retired and the stuff you could get was much too expensive. Drilling just wasn't worth it like it was in the 70s.
Cheers, Dom

I'm not surprised to see increased cost overruns and time slippage. Nor will I be surprised to see this only worsen in the future. We've already picked all the low hanging fruit, the going only gets tougher from here on out.

Thanks for your work in keeping the megaprojects database up to date. I have two questions:

1. The "New Supply Additions" graphs show new supplies dropping off significantly around 2012. It seems to me that would be expected because of the time horizon for planning projects. For example, no one today is planning projects that will start producing in 2030, but that doesn't mean that no new fields will start producing then. Hence, could we not expect that as we get closer to 2012 and beyond, we'll see an increase in the expected new supply for those years?

2. To me, one of the most convincing (in terms of proving that peak oil is real and imminent) graphs I've seen shows historical oil discoveries over time as a bar graph. How would the recent announced discoveries in Brazil and elsewhere effect that graph? Or are the reserves estimates of recent discoveries too uncertain?


Yes thedean- agreed quite convincing : It's a "killer graph".
It's ugly and disturbing at the same time, going straight down in Bakhtiari land by 2020.

... and NO countries are planning for this graph ! That is the interesting part!

Adding to the excitement : IF the IEA is correct with their NEW underlying decline-rate at -5.2% per year, the whole thing will look even worse.In that case we all must start to pray to Thor and Odin for relieve.

Thanks are hereby directed to : The Oil Megaprojects task force, keep up this important work

Just a note on the increasing decline rate from 4% to 5.2%.
The although most of the large fields are in decline its reasonable to expect most of them to have a fairly stable decline rate for some time. As far as I know the status of most of the large fields has not changed substantially.

Therefore if we continue to see the global decline rate increase I suspect the culprit is that since we have not had replacement of reserves for some time the rapid decline of small fields 10%+ without replacement is starting to effect the total decline rate. We can expect that it will only increase overtime at first until enough of the small fields are no longer making a contribution.

They contribute about 14% or the worlds oil or about 11mbd so we can expect if this is the cause for the decline rate to steadily increase until we are down say 10-15 mbd before moderating and finally reducing. It will keep going up as the smaller fields get further past peak and decline faster and larger fields also begin to decline etc.

Time will tell of course but I don't see increases in global decline rate of this magnitude coming from the worlds large oil fields but from the small ones going in decline without replacement.

Regarding decline rates, I'm hoping most comments on being "surprised" are a bit of hyperbole for those posting them. There has been a lot of discussion about decline rates here and it was my impression that most thought as I did: 4.5% was a minimum, and highly unlikely, number. (After all, it's CERA's!) I'm doubting that even 5.2 is accurate given Russia falling down the other side of the hill.

Color me amazed...


All I care about is the first 5-10mpd drop after that I'm 100% post peak lifestyle or more likely during this initial drop.

This first drop is the most important one economically socially etc etc. The rest of the decline really does not matter.

I don't care about pretty curves that tail off in 2030. They are not relevant to me nor or they probably important to most of us.

By the time we are 15mbd down we will be living in a much different world with the chance of it being peaceful minimal.

What we lack is a good short term prediction thats real and fits the past data.
The flood of oil from the megaprojects trumpeted last year turned out to not happen. Decline rates are increasing and oil prices are much higher then I've seen predicted by any model.

Think about it this way over the next 2-3 years a major Hurricane in the Gulf of Mexico is pretty much a given and with the way the situation has unfolded it will have major repercussions. We are right now and for the foreseeable future one major event away from a serious oil crisis.

On the economic side its a train wreck any chance of spending serious money on alternatives such as electric rail are probably gone except for very local projects.

So for me at least its really about making the right decisions over the next year or two more realistic short term models would help.



What sort of preparations can you make given just a year or two??

Nick (One foot in the Pre-Peak Spend spend spend debt suburban sprawl World of today, one foot in the Chicken sh*t world of tomorrow...)

> eliminate your debt.
> plant a food garden.
> get to know your neighbors. Find common ground and avoid proselytizing about peak oil or doom.
> buy a shotgun and learn to use it. Best is short barrel with a pistol grip.
> get a job or retool for a new job on the non-discretionary side of the economy.
> if you can do it, move to a place where it's not too crowded, there's a good growing season, farmland nearby, a major railroad cloe by, access to green energy, and plenty of good water.

On the "eliminate your debt" entry. How?

I assume you mean run up your debt buying solar panels and disposable razors and then filing BK on the same day your bank fails?

If the end is within 5 years, one would be crazy to accelerate debt repayments. That's like having a death wish but still wearing a bicycle helmet. Better off paying your neighbor 5 cents for each aluminum can. Recycling rates are rising faster than inflation.

Bottom line. I think hiding assets by converting electronic assets into physical assets is the way to go. I mention disposable razors as I see a good barter potential in stuff like that.

I could be wrong, but if the banks collapse, having a high FICO won't be of much value.

On the "eliminate your debt" entry. How?

I sold my home in California and bought a much less expensive one in Oregon. Not only retired my mortage but all my outstanding credit card debt as well.

Another easy way to eliminate debate is to not run it up in the first place, like charging away on the old credit card. Or, pay off the balance IN TOTAL every month, which is what we do.

Stop buying anything you don't absolutely need. Instead get stuff freecycle. We have an amazing amount of furniture acquired from the streets of Sacramento, absolutely free. It is astonishing just how much stuff is available for free if you just ask and haul it away.

Spend less.

Work more and harder.

Invest with a lot more research work behind the choices.

All I care about is the first 5-10mpd drop after that I'm 100% post peak lifestyle or more likely during this initial drop.

Then isn't it all the more important to have a good guess on the true decline rate? If we're to mitigate, it's at the beginning that any actions taken will have the greatest effectiveness, no? If serious demand destruction and conservation occurs a la the 80's, that first 5 mb/d could be an extension of plateau and delay of the worst consequences, eh? A decline rate of 6 - 8% virtually guarantees the beginning strong declines within the next 24 months or so, so knowing that rate would be helpful in determining if an individual must take emergency steps or can still risk working towards setting up the ideal situation.

Of course, the cascading failures and feedbacks of oil, financial meltdown, political instability, warmongering and AGW probably make it unlikely that we will avoid serious consequences for much longer.


I like your reflections Memmel, you are prolly spot on. The initial plunge will be the mover and shaker, beyond that is planning stage "the what now?"-stage .... A delayed and ad hoc Hirsch-report-phase if you will.

I honestly don't know. My only recommendation is to not hold long term debts. Think like house have little value if the situation becomes unstable. How many loans where taken out for homes in Germany in 1944 ?

Your not going to be able to do things like this.


If mefo bills bear any resemblance to Federal Treasury Notes and T Bills I assure you its a pure coincidence.
Interstates are not the only thing we learned from WWII.

I think the question is when the financial impact will cause a US credit implosion and major drop in the dollar. I expect that the US will get substantially cut off from buying oil imports. Then the US will have a big drop-off in available oil, whether or not the world does. Some countries may be winners in this process.

When this happens doesn't really depend on a decline in production as much as it does other things--demand outstripping supply; oversight of US financial system; rest of world pulling back from holding dollars.

"I expect that the US will get substantially cut off from buying oil imports."

Thats when we simply move from buying to takeing.

First GREAT JOB AGAIN, Khebab and Ace

Thats when we simply move from buying to takeing.

The amount coming online after 2010... How easy would it have been to drill, pump, and distribute oil in 1942???

If we are considering that the ease of traveling to and working in remote countries will be the same in 2012-2015 as it is now, Well, I just think that is a optimistic assumption.

As Kunstler said "Many glasses on the table will be spilled by people reaching/fighting to get the last ones"

If we are considering that the ease of traveling to and working in remote countries will be the same in 2012-2015 as it is now....

And you thought we were maintaining all these ICBMs because we're afraid of the Russians? Boots on the ground just gets your guys shot up. Sending over a tanker with a note about how they'd better fill it or else - priceless.

Iran stopped working on their nuke in 2003. Word is that they bought some of the suitcase nukes wandering around since 1991 and modified them into basement bombs in our cities.
Basement bombs have no size limits. One per metropolitan area.
They'd since us back a bulk freighter and tell us to fill it with wheat or else. Maybe nuke a metropolitan district or two so we'd know they were serious.
Want to bet Milwaukee?

The one thing that we're not taking into account is the world food market. KSA needs to import their food and while the US retains capacity for exporting food and world markets remain tight, the US will be able to purchase some oil (or perhaps barter for oil). What is going to be interesting is whether KSA or other sovereign-nation funds begin to use their oil profits to purchase US or Brazilian farmland. And if not farmland then companies that directly support agricultural production.

It need not be Brazil or the US. Currently a few middle eastern nations are looking at investing in The Sudan to grow wheat and other crops.
Plenty of farmers available in Egypt if skilled labour required; Egypt has also threatened to bomb Ethiopia if the Nile is dammed at the source. The arab nations have plenty of weapons, men, money and oil to carry such schemes out.

The US will have to export a lot more and consume a lot less. But we still do have productive capacity and farm capacity.

Seems like interest rates will have to skyrocket as Asian cash inflows stop.

Seems also like retirement ages will need to be raised in an emergency fashion.

What I wonder: How adaptive will the political response be? Will President Obama and the Democrats in control of Congress be able to bring themselves to cut back on the welfare state and force people to work longer hours and more years and at more productive work? We need to cut way back on the parasite jobs.

All I care about is the first 5-10mpd drop after that I'm 100% post peak lifestyle or more likely during this initial drop... This first drop is the most important one economically socially etc etc. The rest of the decline really does not matter.

I suspect that the year the world only produces 80 Mbpd is the year the developed world panics. Up to that point, most of the price-induced "demand destruction" will have likely been absorbed by the poor economies of Africa, parts of Asia, the Caribbean, etc. Countries like Nigeria will be coming under intense regional pressure to stop exporting to the developed world in order to provide oil for their regional neighbors. The export-land model becomes even more extreme if it becomes regionalized -- that is, if producing countries satisfy domestic and regional demand first, and export only what remains after that. I'm in a small minority, but I believe that that situation also leads to the beginning of regionalization within the US -- areas with energy resources in excess of their local needs begin to have second thoughts about "exporting" energy to the energy-poor areas. Eg, Wyoming begins to think that perhaps it is in their long-term best interests to use that Powder River coal to keep the lights on in Denver, as opposed to Cleveland.

The countries around Nigeria have not got the economic or military clout to apply any pressure, and even dearer oil will weaken them further.

I suspect that in the coming economic crunch the states like Wyoming which have coal reserves will not worry about anything other than employment.

Hmmm... people here may not be keeping up on their military strategy reading, what with all the energy statistics, and the analysis by Khebab and team (thanks, people!). Try Rupert Smith, "The Utility of Force".

The sound-bite summary (of the part relevant here) is, "Economic and military power is so, like, nineteenth- and twentieth-century."

Small groups operating independently can disrupt static facilities (oil pipes, refineries, wells) for sustained periods of time. They don't need to co-operate, or even to have the same aims.

Gen. Smith describes one historical example of an insurgency being stopped successfully (i.e., with the outcome being a stable, semi-open, West-friendly society.) -- Malaya/Malaysia.

The method? Redistribute property (i.e a permanent source of food and income), and provide education and health-care so the lives of the people are improved to the point where they have a future. That cuts recruitment into "freedom fighter" ideologies.

Not an option for Nigeria, even if its leaders wanted to try. When the decline is well-established, various groups in and around Nigeria may take up the pastime of attacking oil facilities, just to deny others the use of the oil.

Mr. Kunstler (quoted in a post above) put it too weakly. Much "water" will be spilt in order to deny others the use of it, let alone by clumsy attempts to grab it first.

Re Wyoming: agreed. Doing their bit for global warming...

Coal- we got. Oil- we've got some but not much ( 6 mb/month), Uranium we got, Nat gas- we got. Good soil and adequate precipitation to raise food - We don't got. We in Wyoming could just as easily be the energy colony to a much larger region. Most of our soils are too alkaline to do much large scale agriculture owing to being sea bed until the late Cretaceous and low rainfall to leach to garbage out. Not nearly enough river water to irrigate much except right near the Nebraska border. We fight constantly with neighboring states about water allocations (North Platte, Bighorn, Snake and Green). We are the headwaters of three of the four mentioned above but we became a state so late the other states had claim to most of the water before irrigated agriculture could even begin here. We'd better hook up with some region that can produce more than their own share of foods if we in WY are going to keep "sending it (coal-oil-natgas,etc.) on down the line" to the rest of the neighbors.

Could the revised IEA underlying decline-rate at -5.2% per year be influenced by techniques such as the nitrogen injection in the Cantrell field and the horizontal drilling in Saudi. While these boost production for a time the evidence seems to be that sudden unexpected declines eventually set in. Could the effect of these techniques worldwide be one of the reasons for the revised decline rate?

This small fields etc etc. The averaging approaches taken by most of the data modelers on the oildrum and indeed pretty much most of the peak oil community suffer from a syndrome which I don't know the formal name for but have a graphic representation.

On the average all humans have one nut and one tit. This is not a useful average.

You get away with it in modeling oil depletion because 80% plus of the oil is coming from larger fields which have a fairly slow decline rate and initially a slow depletion rate.

However about 20% of our oil production is comming from 5% or less of our stated reserves and thus is being produced at a much higher depletion rate than the averaging approaches can show. This is the deadly if you will failure of these approaches as we hit the peak date. This noise at say a 5% level of production is really critical to our society and is completley missed by traditional approaches.

The short term success of almost all the peak oil models has been dismal at best.

The continued publishing of curves showing peak in 2010-2011 that are continually wrong is of increasingly limited usefulness as details of our oil production over the next 5-10 years become important.

Producing 11mbpd from 3% of your reserves ad a depletion rate close to 20% gives you 5 years before your screwed.

Thats one of the short term problems we face and others exist having nothing to do with oil production that make future production doubtful. Export land shows how world exports are in danger. I've found other issues of similar magnitude starting to happen which make it doubtful we will use a lot of the remaining oil.

I'm hoping that others knowning that we have at least one other problem we are facing now that just as bad as export land will wake up and figure it out.

I'm not going to explain what the problem is unless someone else on the oildrum hits it. Several have gotten amazingly close.

But once you figure it out you realize that in 1980 we not only shot our selves in the head but used a double barreled shot gun and pulled both triggers.

I bring enough doom and gloom to the discussion there are a lot of bright people out there if you can't figure out what we have done then eventually I'll relent and explain after it becomes obvious.

Given all we know now if your not making post peak prep then that your problem knowing that we are certainly toast does not change the issue. And its way way to late to fix.

Hint Please Memmel??
I know a few, but want to really know which one you're thinking of.



Now this is were transparency from OPEC is critical if we are really facing 8% decline rates then OPEC is killing more people then hitler or stalin could ever think to kill.

If I'm right I think the future will show the lack of transparency on the part of OPEC was the biggest crime commited in the 20th century.

In the 1980's OPEC's reserves doubled without finding any oil



Back in 2006

See throw something out to the collective and you get things you never thought about.

First wrong answer buut..

I never bought into this OPEC quota thing as the reason for the increases. OPEC is at best a loose federation which has never worked well.

However the right answer explains your answer something in 1980 scared the piss out of OPEC and caused them to claim gobs of oil more then they could ever pump in decades if not 100 years.

The same thing that scared the piss out of them is why we are 100% screwed today.

I don't want to give away the answer because insights like this show I don't think of everything.

Right now for me the site is running very slow and I'm sure what I have said will be lost in the thread.
Email me if you think you have the answer and we can post relavant bits on the board.

As a hint read the above and its Economics 101.


Arab oil embargo: Oct. 73 - March 74

1980, Iraq Iran conflict

early 80s OPEC reduces output

....> considerable demand destruction,

.....> > decrease in OPEC share or world market, sinks from about 50% to 30% in mid decade (rough)

1990 Gulf War I

Wiki give a timeline from 1980 I see: link

memmel wrote: caused them to claim gobs of oil more then they could ever pump in decades if not 100 years.

In many situations ppl, groups, and nations judge it advantageous to claim they have ‘more’, in store, in reserve, in the bank, in hidden locations, in potential leverage, in future brilliant actions, etc. than they actually do.

The stuff or projected actions in reserve - which only implies it will be available for use in the future - may be physical, monetary, or entirely intangible, such as favors owed, or projected novelty; potential threats; influencing predictions or manipulations of future behavior, possible forward developments, in one way or another.

“We” have money, ppl say, “we” can pay for future bills .., we have goods to sell, we have kudos and contacts, we have control, we will change the future with our X (biofuels, new rock star, better plants, groovy cars, etc.)

Ppl, and groups, position their status, their assets, in the present, with a view to setting the future, by affecting the calcs. made by other parties.. Duh.

I always took the OPEC jump in reserves as being in that line, with the ‘quotas’ in effect being detached from the ‘reserves’, as well as ostensibly justified by them, book keeping tricks to fiddle the numbers and keep everyone temporarily and dubiously happy.

I’m off the mark here, as memmel is referring to something very specific. (?)

No your spot on they are making the claim of more oil as you say because they fear something and they want people to think they have a LOT of oil gobs of oil.

Generally people make these claims because they are afraid of not being able to continue doing some sort of business transaction. Qualify for a debt etc. They don't do it because of fear of some quota from a loose knit cartel with no military power. That was not in your list.

But this is all a result of what happened not a cause.

To expand a bit maybe the situation really started in the 1980's and continued to this day its not one event
but a economic change and its a decision that has ruined our chances for a smooth ending for the oil era.

And its just a stupid simple Econ 101 problem so obvious in hind site that we have missed it.

I did not think about the quota stuff or other things you have mentioned when I realized what we had done
its simpler than that.

The hint is again its Econ 101 and its not oil. Oil is not our problem and running out of oil will not take out our civilization we face a bigger problem that we created.



See throw something out to the collective and you get things you never thought about.

First wrong answer buut..

I never bought into this OPEC quota thing as the reason for the increases. OPEC is at best a loose federation which has never worked well.

However the right answer explains your answer something in 1980 scared the piss out of OPEC and caused them to claim gobs of oil more then they could ever pump in decades if not 100 years.

The same thing that scared the piss out of them is why we are 100% screwed today.

I don't want to give away the answer because insights like this show I don't think of everything.

Right now for me the site is running very slow and I'm sure what I have said will be lost in the thread.
Email me if you think you have the answer and we can post relavant bits on the board.

As a hint read the above and its Economics 101.


Not sure what you are driving at but a couple of things come to mind:

1) Future production of drilling rigs in already committed years in advance, and it will take years just to build the factories to produce drill rigs at an increased rate. So as declines in offshore fields set in and an accelerating number of wells are required for infill drilling to reduce decline rates, we simply will not have the rigs available, or the capacity to produce extra rigs. We will struggle just to replace equipment nearing end of life.

So we will be effectively powerless to slow down decline rates once declines really set in. We won't have the rigs to do anything about it.

I can't really back this up, except to refer to Simmons. I suppose this is a consequence of under-investment during the 80s as we believed oil was super-abundant.

2) Discount rates. When interest rates are high - for example, 20% back in 1980 under Volker - investors will demand a risk-adjusted return on investment of at least 20%. This means that the value of all current income streams is marked down until you get a 20% return on investment. It means that the FUTURE is discounted at a rate of 20% - hardly any projects with a 5-10 year lead time are worth undertaking under those circumstances, because a risky project needs a COMPOUNDED risk-adjusted return of 20-30% to get off the ground.

If you announce that oil is in short supply, and prices are about to rise dramatically, this implies that growth in the world economy is about to stop or go into reverse. It implies that economies based on consumption and cheap energy such as the US and UK will see a drop in consumption, and reduced profits , and unemployment, etc. So it is negative for the stoock market and housing market. And it is negative for credit risk. And the for safe return of funds lent to the US goverment.

So once the end of cheap oil, and the fact of a declining supply, is publicly know, investors should demand a much higher return for lending funds - somewhere north of 15% - to compensate them for the risk of lending in an economy that is likely to be flat or declining in the long term.
Once a 15% return becomes the norm, all stocks, bnds, houses, projects etc must be discounted until returns match or exceed 15%. This implies a catastrophic revaluation of the stock market - down to DIVIDEND Yields of 15% and P/Es of about 7.

It also means that all future infrastructure projects must make sense even when funding costs are 15% or higher. And it means that the future is discounted at 15% or higher.
A project with a 5 year lead time, which then returns income for about 15 years before ending, must produce returns of better than 15% compounded over 20 years including the 5 year dead time.
So if the project costs $1 billion, it must return $16 billion by the time the well runs dry in 20 years just to break even. At least $20 billion to get funding.
So unless the value of the oil produced over the lifetime of the well is 20 times the initial cost of the project, it is never going to happen.

If interests rates go to 20%, the project must return 50 times the initial cost over 20 years in order to break even.

In other words, once you start discounting the future at 20%, there are , for all practical purposes, no long-term projects that make economic sense. None. Zero. Nada. We've already done everything with a 50 to 1 pay-off in the easy oil days.
So there will be no commercial funding for oil projects.

Why would rates go to 15-20%? Because investors realise that the party is over, they have to re-evaluate their understanding of risk and demand returns of that rate of loans because they are lending in a very dangerous economic environment.

Maybe memmel is insuating that the Saudi's saw what 20% interest rates did under Volker and figured that in a situation of permanent shortage those rates would be normal, which would kill the world economy. So they way out was to make oil abundant by opening the taps, and keep people from ever realising that shortgages would one day inevitably return.

Or maybe he was thinking of something else.

Anyway, if expensive oil tanks the US economy, and the stock market crashes down to P/E's of 7 as people realise growth is not coming back any time in the forseeable future, oil projects will have to make sense even with debt funding at 15% or 20%. Which means they won't make sense - deep water will be a loss-maker unless there is a 20-1 or even 50-1 payoff, thanks to the magic of compound interest.

Which means the western majors will be looking at 15% decline rates on offshore rigs, but won't be able to justify funding the projects to slow that decline.

In other words, the low interest rate environment of the last 20 years existed because investors believed growth could go on forever. The belief in growth led to low rates, which created growth. A self-fulfilling prophecy.

Once investors stop believing in growth, they will demand higher rates of return to compensate them for risk. Which means the future will be heavily discounted. Which means little or no funding for energy projects. Which kills growth stone dead. And worse than that, cuts off the funding for new projects which might slow the decline.

I want to say your touching on a lot of the other problems we face and I agree with you.
I've not even talked about the "peak rig" issue or Simmons concerns about the oil infrastructure.

Whats important to understand is that these secondary effects are larger and have a bigger impact
then the underlying simple decline in the oil supply.

The reason is because we have applied tremedous leverage to cheap oil. Financially and economically.
This leverage unwinding is ten if not hundred times bigger than the change in oil supply.

My substition problem that I've described for NG/Oil can also be viewed as a leverage play.

In my opinion if you accept the concept of general leveraging of cheap oil we are levered 100:1
anyone with a rudimentary understanding of leverage knows that this is not a good thing.

A simple example of leverage is to borrow money for 30 years for a house using your current salary to pay the loan you "lever" your money anywere from 3:1 to 10:1 these days. Playing this game with home loans tends to blow up at about 5:1 time and again.

Consider what happens if you managed to do 100:1 for a home loan :)

Volcker Shock? If I'm on the right track I'll regurgitate my thoughts...

I'm not going to explain what the problem is unless someone else on the oildrum hits it. Several have gotten amazingly close.

WTF? Does this make ANY sense? Seriously, what's the point? How clever you are? You're worried you'll panic everyone? Would that be worse than being blind-sided?

Don't get it. Usually love your stuff, but can we get on with this one, already?


Sorry wanted to see if someone else could follow my reasoning and figure out something else.
If someone else got it without aid its shows that the concept is rediscoverable.
This approach is actually a thing from Math most bright Mathematicians can recreate past theorems.

I was hoping that someone could recreate the theorem if you will without much help this would have
reinforced the validity of the the train of thought.

We did get the reason why OPEC raised its reserves out of the process I did not think of that
so it was not a wasted attempt we solved one more interesting problem from the past.
So this approach was not a waste of time by any means.

To many requests so here is the answer.

Here it is.

Westexas you introduced the export land model and your writings and
Nates has lead me to look for other serious feedback loops cropping up
peak oil progresses.

I've been working with Don Ross who has some incredible abilities at
technical analysis of the markets.
Using his technical approaches we where able to detect when the market
was moving for real fundamental reasons not related to
the overall market noise. This allowed us to pick out a dangerous new
feed back loop that started growing fall of last year.
One of the novel approaches is to be able to use the markets as a sort
of giant computer program its really cool.
And it allowed us to discover this problem even though its not really
been considered before.

Inline is from a email I sent out. I've not cleaned it up much but you
guys should be able to figure it out.

What happened during the 1980's was we subsititued Natural Gas for oil
in a lot of uses.
This lead to a permanent demand destruction for a number of uses for oil.
We credibly could have continued to substitute at the time using CNG
for cars instead of diesel and gasoline.

The Econ 101 part is simply when a product gets expensive a substitute
is used and this is what happened.

Because of this the oil producing nations in attempt to get back there
customers tried to show that they had
plenty of oil for all the myriad uses that we had previously used it
for. Showing massive reserves of oil that
where competitive with the known reserves of Natural Gas was one of
the parts of the problem. Remember
at the time the NG reserves where still quite large and in a lot of
ways dwarfed oil.

Price collapsed and we kept using gasoline/diesel instead of NG.

Fast foward to now and we don't have the NG esp in North America the
big news is not skyrocketing oil prices
but skyrocketing NG prices. Refining heavy high sulfur crudes
requires a significant amount of NG esp to make
ULSD. In fact since about 40% of the barrel is effectively asphalt or
tar the NG requirments are not all that different
from that of the Tar sands in alberta. I've figured roughly 1/3 of a
boe equivilent of NG per barrel of heavy sour crude.

Taking the standard caluclation of boe


Barrels of oil equivalent converting 6 Mcf of natural gas to one
barrel of oil equivalent and one barrel of natural gas liquids to one
barrel of oil equivalent. The factor used to convert natural gas and
natural gas liquids to oil equivalent is not based on either energy
content or prices but is a commonly used industry benchmark. BOEs may
be misleading, particularly if used in isolation. A BOE conversion
ratio of 6 Mcf:1 BOE is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead.

You come up using todays prices off the Nymex 13*6 == 78 dollars a
boe 33% == 25 dollar premium.

So the heavy sour oils need about a 25 dollar discount to be
reasonable fuels given the NG price.
The discounts are actually a lot less than this last I looked Arab
Heavy had a 7 dollar discount.
Even if my conversions are off you get the picture its a lose lose situation.

Obviously this calculation is dependent on local NG supplies etc but
the problem is the other markets for NG
are now well developed and where using most of the supply and of
course North America is facing something
of a shortage of NG. Certainly cheap NG is rapidly becoming unavailable.

Bottom line is its not worth refining the heavy sour crudes since we
burned up all the NG over the last decades
using substitution to keep the price of crude low.

Certainly you can just refine the heavy sour crudes using a simple
refining process but this result in about half the yield
of distillates vs light sweet and you would have to double the amount
of lower grade crudes produced. This is impossible.

Any way you can set up all the scenarios and you will see that as NG
becomes more dear the value of the heavy sour crudes
drop dramatically you cant give the stuff away and light sweet prices
go through the roof.

The only answer which is lost now would have been to not substiture NG
for oil back in the past but to move off oil based transport to
electric then substitute the use of both oil and NG in electric

By making the substitution early of NG for oil we burned up the NG we
need now to refine the heavy sour oils.

The last substitution made was using Chinese coal for production of
goods and of course lower wages but
from the energy standpoint as we moved to NG we also moved
manufacturing to China to take advantage
of the cheap coal and cheap labor.

We can certainly burn more coal esp in the US but this substitution
has also already been made.
NG and Coal both have robust markets outside of using them for transportation.

Attempts to substitute coal and NG now via GTL and CTL processes
simply drive up prices.

The net result is a continued overall price spiral.

Continued economic contraction aka demand destruction as price points
are crossed
limit the rate of increase in prices to some extent but non
transportation uses of coal
and NG are very inelastic also.

As long as coal and ng provide most of our electricity pricing
pressure will drive up the cost
of electricity so in time the cost to "fuel" your EV wont be all that
different from using gasoline.

Basically everything gets priced vs its value converted to liquid
diesel or gasoline vs direct usage.

Only non fossil fuel or carbon based sources of electricity are immune
from this price spiral.

Thats Hydro, Wind, Solar and Nuclear energy sources. NG/Coal/Oil get
locked in a tight spiral.

But the problem is a move to electric rail devalues most of our
infrastrure designed for cheap oil
and infinite growth so going electric really only causes even more
losses on the infrastructure side
as we have to rebuild our cities and towns for a rail/trolley
transportation network which reverses 70
years of now bad investments.

The faster we make the move the better but it does not eliminate the
losses just gets us headed
finally on the only solution that ever worked. Now if we had done
this back in the 1980's we would
have never hit our current situation and we would have had plenty of
oil/NG/coal for the limited
number of uses that are hard to substitute. And overtime increasing
use of renewables would
have lead to a slow decline in these use cases. And even better the
C02 emissions would not
have swamped our planets natural absorption mechanisms.

But that choice is no longer available.

Any way you can set up all the scenarios and you will see that as NG
becomes more dear the value of the heavy sour crudes drop dramatically you cant give the stuff away and light sweet prices go through the roof.

Saudi Aramco has probably realised that higher NG prices at the location of the receiving refinery will place downward pressure on heavy sour crude prices. Consequently, Aramco is introducing pre-refining processing technology.

In another technological development, Saudi Aramco is developing new pre-refining processes to desulfurize whole crude oil and produce sweetened oil. This step anticipates that less sweet crude will be available to global markets, and refiners will increasingly need to meet market requirements for lower sulfur-content clean fuels.

page 45 Saudi Aramco 2007 Annual Review

There might be a chance that ultrasound technology could be used to convert heavy sour crude into light sweet crude.

Houston-based SulphCo has developed a process employing ultrasound technology to desulfurize and hydrogenate crude oil and other oil related products. The company's technology is designed to upgrade sour heavy crude oils into sweeter, lighter crude oils, producing more gallons of usable oil per barrel.


SulphCo has some success with this technology in the United Arab Emirates:

In December 2005, FOT formally requested that we design, manufacture and install Sonocracking™ equipment capable of processing 210,000 barrels per day (bbl/day). Beginning in 2006 and continuing throughout the first half of 2007 SulphCo® constructed and installed 180,000 bbl/day Sonocracking™ capacity in Fujairah. In June 2007 we commissioned the first 30,000 bbl/day Sonocracking™ plant in Fujairah. We are currently utilizing the plant in Fujairah as a commercial validation facility for our Sonocracking™ process, capable of testing tanker truck quantities of crude oil and/or fuel oil. Results to date from the validation tests confirm, under certain conditions, API increases of up to 3 points and sulphur reduction of up to 40+wt%


SulphCo's share price has not been doing well lately. It's fallen from $9 in Oct 2007 to $2 last week.

However, SulphCo is in involved in development projects outside of the UAE, in Southeast Asia, Europe, South Korea and North America.

(I am not a shareholder in SulphCo.)

(I am not a shareholder in SulphCo.)

Probably a wise position looking at their recent history.

Exactly !

Cool see the collective is smart !

This is another piece that I had no knowledge of in postulating our current situation.
But it shows that the basic argument is sound and valid.

I suggest you buy shares in SulphCo :)

But you see how more information just makes the argument stronger.

Another result is that the market has not yet priced in peak oil. The current prices are simply a result
of export land coupled with lack of NG for processing the heavy sour crudes in the refining countries.
So far at least the market has not recognized peak oil. This means that our current price levels are not the result of a market regcongition of peak oil. Price can and will go a lot higher.

Understand that right now we have two resonably plausible secondary effects export land and my NG/Oil spiral
that together probably swamp the direct peak oil signal. Others are certain to increase in strength as we slide down the peak oil supply side. The secondary effects are at worst equals if not stronger then the primary cause. And more will start developing. I think my market as a computer approach can detect the growth of secondary effects but you need a lot of thought to figure out what the market is computing.

Its a incredibly powerful method that Don and I have developed for detecting and decoding what problem the market is solving but the other powerful result is we have yet to reach the real effects of peak oil.

Needless to say the market as a computer seems to blow the doors off any other computation engine we have developed despite our advanced technologies. Another result is that our ancient ancestors actually had access to this incredibly powerful computer they simply needed to interpret its results. We probably have not even reached the computational power that the ancients had assuming they understood how to use it.

And further more even with this powerful computer their civilizations still fell as it solved the wrong problem.

To bad that this understanding is probably lost during the collapse period. In the end the realize what happened but at that point its to late to pass on the information.

And the cycle repeats.

Sorry wanted to see if someone else could follow my reasoning and figure out something else.
If someone else got it without aid its shows that the concept is rediscoverable.
This approach is actually a thing from Math most bright Mathematicians can recreate past theorems.

I was hoping that someone could recreate the theorem if you will without much help this would have
reinforced the validity of the the train of thought.

We did get the reason why OPEC raised its reserves out of the process I did not think of that
so it was not a wasted attempt we solved one more interesting problem from the past.
So this approach was not a waste of time by any means.

Sorry, if I seemed harsh, but... if you had stated that position at the outset...

Thanks for the response.


Thanks Memmel

This is exactly why I read TOD daily now, with all the other work and journals essentially having a lower priority. It's like TOD is riding the wave and everything else is following somewhere back in the horizon.

Like you say "the collective is smart". You asked if someone else had figured out what you had to validate your reasoning.

Well, let me try to contribute something. I have for quite sometime now mentioned the principle of unsubstitutability in my postings to TOD, as a cause of collapse of complex societies (by Tainter). Now perhaps I have someone's attention if I elaborate it a bit...

The technocopian view of resource depletion is that it's no problem because the principle of substitutability always finds us a new resource base to replace the depleted one through the magic of technology. However as every engineer knows, this is bullshit!

Tainter proposed to explain this with a principle of unsubstitutability. This is where, at first you happily begin and grow your complex society by substituting depleting resources with remaining other kinds. However you eventually find out that even substitutes are also finite resources. In fact you find this out pretty soon with both materials and energy.

And what's even worse, naturally your society has already chosen to start depletion from the easiest and most convenient sources, picking the lowest hanging fruit first. And as the remaining choices are picked, they are also picked in this order: the easiest and nicest first (a bit like little children would do). As the remaining choices get worse and worse, they also aren't really substitutes anymore - in quality and/or in energy return - or because of the increased effort to obtain them. As Tainter would say, there is a decline in marginal return.

Now, unsubstitutability isnt just a straight forward quality/energy comparison issue - because - as you pointed out - we build our complex society to depend on a limited resource. This dependence also becomes an issue when choosing the substitutes. An example of this is the alternate way of running the world to oil: electricity. However we have already build our society, infrastructure and machinery to depend on just oil. And it is incompatible with a move to electricity. This then is a reason why electricity isn't really a substitute to oil in the current situation (like you suggested, it might have been 20 years ago with huge global WWII-like effort, maybe). However in this we see again the naive human unable to respond to predictions, prepare for the future, if there's an easier way out today - ie. using oil till the last drop.

So your description of NG use fits this principle very well. We have chosen not to respond to the warning of resource depletion of oil. This choice has along the way forced us into a situation where we waste huge amounts of valuable energy in the form of NG to produce more of the liquid fuel we have built our society to function with. This has erased from the menu of substitutes both NG and electricity - since we are now too far into our oil dependence - and time has ran out.

Substitution of oil at this point would require a major restructuring of our society, its infrastructure, food production, transportation, industry, social order etc. This would in turn require major sacrifices in the living standards of people, national policies and economy. Since we're clearly not in the mood for anything approaching such an enlightened project for the world, and frankly are into denial of the whole problem, I can see very little hope in our civilization not collapsing like all the previous ones have.

Therefore I propose that the principle of unsubstitutability is in fact the Sine Qua Non of why there is no way out of Peak Oil.

Almost right and in general this is the net result that you end up with no possible substitutes.

Tainter actually did not get it right. ( Ducks the lighting bolt )

It seems its slightly more complex then that.

Resource A gets scarce and you doe at least a partial substitution with B.
Price of A drops or is full substituted.
Both A and B deplete in parallel but prices are low for both.

Key part !
To maximize the remaining resource A you need resource B to be cheap and abundant.

But you have already depleted both A and B so you reach the point that both are neither cheap nor
abundant. Substitution does no good so you end up finally in your principal of unsubstitutability.
Its the parallel substitution Econ 101 that leads you into this trap.

For Oil/NG and Coal.

We for political reasons primarly hit a shortage of oil early on but where able to use abundant NG as a partial substitute and could have gone on to use if as a full substitute if the price of oil had not dropped.

We went for about 30 years with this substitution ability keeping prices low and life was good. Also we further substituted Chinese coal for North American natural gas by moving industry to china. Life for a time got really good.

Then it turns out that all oils are not created equal and as we are left processing sludge we need cheap natural gas but we don't have it since we made the earlier substitution.

Its this coupling that traps you in a trap you cannot escape. Certainly more natural gas finds etc may delay it but we have no way to escape. GTL and CTL simply hasten the collapse.

By making all these partial substitutions we have reduced oil usage to primarily the transportation industry
and further more demand for the substitutes are high we have no easy substitute for coal and NG as it used in critical industries attempts today to use them as substitutes in the transportation industry either directly or indirectly via upgrading of asphalt in the heavy sour crudes simply drives up prices in these other industries.

What you end up with is ever increasing prices but also that the prices of all energy resources becomes discounted vs the cost of conversion to liquid transportation fuels. And we have stupidly thrown food into this spiral of destruction. Being the brilliant people we are we managed to take a situation that is certain to lead to collapse and hastened to process.

Economic partitioning like exportland has exactly the same dynamics by growing the internal economies of exporters they are reducing the export amounts till at some point the path crosses and you get economic contraction or maybe even collapse in a world thats post peak. Earlier cases of countries moving from export land to import land are different since they had substitution via imported oil things will be much different with a world at global peak since they will then be competing with all the other importlands and no new exporter is created.

The neat thing is that at any point in time simple Econ 101 substitution seems to be the right thing to do and even if you recognize that it will trap you later the trap is far into the future and the expectation is that "technology" will save us.

Well the future is now the traps are being sprung three have sprung already export land and this Oil/NG spiral and biofuels. I'm sure we have more coming that we will have to detect as I said I "discovered" this Oil/NG trap working with Don Ross on market analysis I did not figure it out. Most people realize that something fundamental changed this year vs previous years. This NG/Oil problems seems to be the reason.

More are coming and the other monster trap we set up global warming has yet to really have a effect.

The only way out is a massive reduction in overall energy usage coupled with a balanced move to renewable energy sources. Certainly we may figure out a way to do one more substitution say with fusion and keep our energy levels climbing but this just changes the nature of the traps that will eventually trap us.

I'll keep looking for more traps developing given what we learned from this one and export land we probably can detect the new ones easier. I think the next one thats building up rapidly is bunker fuel. If you read bunker world just the headlines.


You can see that global trade is being threatened.

With Natural Gas becoming expensive we also have the NPK problem growing rapidly and its coupled with biofuels.

The list of potential serious traps springing up is endless more are added every day and we probably have not discovered all of them. This coupling phenomena from simple substitution ensures that we have selected for perfect traps. With this addition or modification of Tainters model you get almost 100% certainty of collapse with substitutions serving only to delay or change the nature of the traps.

So there is no way out of this at best we might delay collapse and force it on our children or grandchildren via simple substitutions leading to later coupling as our parents and grandparents did to us but one of the generations alive today is hosed.

I think the only way out is a switch to electric rail and parellal switch to renewable electric sources.
Coupled and this is important with a massive reduction in our overall economy and a humane program of reducing population growth. The easiest way to do that is via shared stable decent living standards.
We all voluntarily adopt a unified standard of living thats ok not great but ok.
I think a move to electric rail without coupling it to population stabilization and stabilization of the standard of living does not solve our problems.

Ohh well.

Brilliantly simple analysis, as usual. Thanks.

Regarding possible traps, another one from the news is the "rats in the wiring" problem of accelerated infrastructure decay related to poverty and desperation. A different way to phrase this might be incipient collapse --> shortages --> black markets --> accelerated infrastructure destruction --> accelerated collapse. Recent examples from the news: you put a locking gas cap on your truck so someone, instead of siphoning, drills a hole to drain your tank, rendering the entire truck disfunctional. Desperate people in Africa drill a hole in a gasoline pipeline, causing an explosion and rendering the entire pipeline disfunctional. A city park or unrented house or whatever has copper wiring stolen rendering it disfunctional without disproportionately expensive repairs. And on and on.

I agree and of course the classic with foreclosed homes and strapped homeowner is deferred maintenance of all types. I've talked about deferred road maintenance for example skipping sealing the road leading eventually to the need of major repairs. I think we will see most state and local governments defer a lot of maintainence on all of their facilites and even cars.

This of course will eventually make things even harder. I read somewhere that programs like meals on wheels cutting back because of gasoline costs. So overall a pretty big underlying decline in infrastructure and social services can be expected. Increased theft of stuff like copper etc will cause even more problems.

Also another aspect I just thought about is that a lot of companies will go out of business and people will find they can no longer get replacement parts for equipment or if the can the cost is exorbitant. So otherwise functional pieces of equipment may become unusable for lack of spare parts or to expensive parts.

Simmons of course has mentioned the problems in the oil industry.

This is a perfect example of the types of spirals we face in the short term this decay problem does not have a large effect but it grows and grows so ten years from now after having dealt with whatever is blowing up in the short term we will begin to face serious results from years of deferred maintenance.

Hopefully at some point people will realize we are in deep trouble and we are not going to get out of it and we better focus on making the best of it instead of proclaiming EV's and other technical saviours as the solution.

Hey hey Memmel,

The Meals on Wheels article was in a recent DrumBeat. Also, I wanted to post an excellent video clip by James Burke where he talks about technology traps. It's a nice piece on cascading failures in our complex world. Connections is a series on the evolution of technology, how we got all the stuff we have, and all the positive and negative feedback loops that fed into society and industry. He shows how a simple $20 part failing leads to a black out in all of New England for 5 days. Then back to rudimentary farming then full circle to Arabian oil brining nomadic people to skyscrapers in one generation. I highly recommend it.


Memmel, thank you for these insights. Having found out about Peak Oil last year and not being in the petroleum business, I would never have guessed some of the things you mentioned. So you think we will make it to 2011-2013 before we collapse? That should make life very interesting for our next President.

Maybe we should pick a theme song for the Apocalypse (I've got one running through my head already...)

Thanks I've covered this before but most of the deflation thats going on now is in the form of credit destructions and default on debt. This shakes the banking industry and will slow business and lead to layoffs.
But a bit part of it is a cascading of defaults starting with consumer debt defaults on house and car loans and credit cards generally ending in bankruptcy.

This debt default frees up a significant amount of cash flow for the consumer that he can use to stay alive.
Pay for rent,gasoline and food. In many cases they would even have extra cash for small items.

So for sometime its just the end of the world for bankers and industries like the housing and auto industry and luxury good manufactures. Basically anything over about 100 dollars. Eventually of course layoffs and taking lower paying jobs will put pressure on this but even then the consumer can move to cheaper living either a cheaper rental or roommates.

It pretty late here so I won't go into detail but you can see how the consumer can hang on longer then most people think before they finally have to give up buying stuff. Some might even save some money for the first time in thirty years.

What's the problem? Iran has huge reserves of natural gas that can be used to upgrade heavy Saudi crude. All that's needed is a bit of cooperation :^] .

LOL :)

Actually this is why I think that people will find the value of the hard to refine crudes dwindling rapidly.
As the value of NG esp LNG approaches that of Crude it becomes of no economic benefit to use it to refine crude.

The other uses of NG are in general very inelastic and you have a bidding war between individuals wanting to drive cars and keeping base industry including electricity running.

When it gets down to driving the SUV or keeping the lights on keeping the lights on wins hands down.

Certainly you can refine these crudes by burning the volatiles in the crude itself and some of the asphaltenes but then the refinery is basically producing about 50% of the product levels you would get buy using NG during the upgrade process. This means at the end you need a steep discount for the heavy sour.

I think the problem can be simplified by putting a value on oil and NG.

Light Sweet > Light Sour > Natural Gas > Heavy > Heavy Sour.

This is the value chain that develops and since complex refining depends on using a more valuable product to produce a less profitable product it becomes uneconomic to refine the have sour crudes.

I use value instead of price since regardless of price you cannot let the electricity network fail.

The movement of NG up the value chain is the heart of the problem it becomes more profitable and more important to sell LNG for its current critical uses then to use it to upgrade heavy sour crudes.

Se the new post on the NG situation in Europe and England NG's value world wide will explode over this winter. Our oil crisis has run smack into a NG crisis and oil looses this one.

Ok, let me see if I've got my ducks in a row.

Moving from sweet to sour crude won't happen because of the increasing value of natural gas, which is used, and needed, in other vital areas.

Refineries won't upgrade to handle the sour stuff because no one will invest the billions required against ever rising costs.

And then the markets fully realise peak oil is upon us.

Then, as an AGW climate change denier I factor in the hypothesis that we are in for a 30 year period of global cooling demand for NG / FF will increase even more.

So we're going to hit a wall and fall over a cliff into a frosty Olduvai gorge.

Well not quite the problem is your locked in a viscous cycle.

1.) Complex refineries are built
2.) Demand for NG goes up North American supplies strained world supplies strained NG prices go up.
3.) Demand for light sweet increases cheaper to refine light sweet goes up.
4.) Lower grade crudes indexed off light sweet go up making heavy sour even more unnatractive.
5.) Demand for NG slows NG goes down heavy sour crudes not selling at higher prices ( Remember customers are actually well supplied with too expensive heavy sour crudes finally have a profitable price spread. Its the spread that matters not absolute price.
6.) NG demand increases NG prices go up rinse and repeat.

As far as markets actually realizing peak oil I actually don't think it will be until we are down low enough that there is no hope of recovery even with the rosiest projections. I'd say this is something like 5-6mbd.
As the economies worsen the theme will be that demand will back off and prices will drop any day now.

It will be a tight race between collapse of our society because of these secondary factors and recognition of peak oil.

I personally don't think we will get there the two secondary factors we have going now this NG/Oil spiral and export land have driven prices well past most projections. I believe that NG will soon be more valuable then the heavy sour crudes i.e 1 boe of NG will be worth more than the crappiest crudes. They are already close in prices esp on the world LNG market.

Once this inversion takes place the expense of refining the crappy crudes and low yields if you don't use NG will result in them being left in the ground as unprofitable.

I don't know the distribution of heavy sour reserves vs light sweet but I'd take a guess that its close to 70% heavy sour crudes remaining given the historical preference for light sweet.

In any case this means 50%-70% of our supposed remaining reserves will probably not be extracted.

Given that exporters are now locked into a growth spiral of export land and most of the large ones only have significant reserves of heavy crudes the response will be to cut back on light sweet production to try and make up for the widening spread. Understand these countries will have significant inflation so they are on a treadmill needing ever higher returns. This will of course cause shortages.
Also of course if demand does drop resulting in falling prices we will see them cut production.

Given the above coupled with the financial condition of the world we probably will never make it to the point that the world actually recognizes peak oil. I think we will see confirmed declines in production that peak oilers real realize but us beyond the peak. I doubt seriously the world will ever come to this same conclusion.

We will die of secondary infections and complications before we die of the 20 deadly diseases we have given ourselves.

As far as your comment on AGW thats your belief and I disagree completely. But its worthwhile to explain
why the "evidence" you give indicates you don't even understand the basic principals. Its not your fault scientist should be chastised heavily for promoting the temperature changes associated with heating.
Its a red herring and they know it. Certainly temperature changes in the Arctic where your close to
the freezing and melting point of ice are important but this media blitz about average global temperature is a really stupid media campaign that hurts more than it helps.

The scientists know better but in their arrogance they assume your to stupid to understand whats really happening.

Understand that the stupidity is on there side I'm assuming that your just ignorant and can be educated.

Try to at least understand that as green house gases build such as CO2 and water vapor the earths atmosphere absorbs more energy. Think of a pot of boiling water no matter how much heat is applied the temperature stays at 100 C. Confusing heating with temperature is the fundamental mistake anti-global warming advocates make.

As a simple example Hurricanes from and are powered from heated water however once a hurricane passes the temperature in the region often drops substantially. A tremendous amount of heat has been cycled from the tropics and towards the arctic. Like boiling water a lot of the process associated with global heating are temperature neutral or can even lower the average temperature. I.e conversion of heat to wind.
Even cloud cover which blocks sunlight can result in overall heating as the cloud blanket prevent infrared radiation from reaching space. The perfect example of this is of course Venus on a tiny fraction of the suns light makes it very far into the cloud cover but its a furnace. In the cases of partial cloud cover and incomplete measurements you can easily make any claim based on temperature you wish.

By any measure global heating is taking place the fact that the average temperature seems to be increasing is even more worrisome.
I don't normally respond to global cooling advocates but you have to try and gain a rudimentary understanding of heat transport in the atmosphere and ocean before you can even begin to understand temperature variations.

Since people don't in general understand that heat and temperature are not the same thing scientist resort to talking about temperature which is simply wrong. They should have educated people about heat. If you can understand heating a good discussion of global heating and its local climate effects is stimulation since atmospheric temperature changes are not the primary result.

Finally as far as NG and warming or cooling. If it gets then average people use more AC if it gets colder they use more NG global HEATING predicts larger temperature swings from the mean or historical average these larger swings either way result in increased NG usage.

However I suspect that this like peak oil is not important our civilization will have collapsed well before global whatever is bad enough to cause serious problems.

Thanks Memmel, I appreciate your taking the time to write a well rounded reply.

I hope my ignorance isn't the death of me.

best regards

Hence, could we not expect that as we get closer to 2012 and beyond, we'll see an increase in the expected new supply for those years?

Yes, there should be an increase in expected new supply for 2013 and beyond as shown in the second chart.

According to the red line in the chart below, the recent average discovery rate has dropped to about 6 Gb/year since 2001. If an optimistic depletion rate of 6%/year is applied to this discovery rate of 6 Gb/yr, this implies that new project capacities should be 0.36 Gb/yr or about 1 mbd/yr for regular oil.

Source of original discovery graph is from Colin Campbell's monthly newsletter

It is further assumed that by the year 2022, almost all of the discoveries prior to 2001 will have been turned into production. This means that only 1 mbd/yr will be the gross annual capacity additions for regular oil. Being optimistic, another 0.25 mbd/yr could be added for tar sands and NGLs. This gives a forecast capacity addition of 1.25 mbd for 2022 shown in the chart below.

As there will probably be more project delays, some of the capacity additions for 2010 to 2012 will be pushed into 2013 and beyond. Consequently, an estimated forecast supply addition profile, shown by black line below, is a likely outcome. This profile includes yet to be sanctioned projects based on the discovery profile in the chart above.

Thanks Ace ! ( or should I say shut the f*** up Ace ? )

This added info here comes across as nerve wrecking to me. Obviously there are a few places around yet to be explored, but this PO-thing is about speed and capacity, receding horizons et al, so there it sits.
As I see it we must just hope there are more oil in ME than some believe AND that it reaches the marketplace in an orderly fashion in comming years. Brazil must have faith .... and stay at it.

If these Megaproject-surveys are in the vicinity of reality - I feel I have to adopt this Olduvai theory now rather than later. I mean this socalled Globalization is in for an abrupt end during few years and more with it ....

Ahh but 6GB per year does not do you a lot of good if a significant amount of this is coming from small fields.

Using the CERA report.


The CERA analysis found significantly different production patterns in large fields vs. small fields. Typically, large fields build up over an average of six years, produce on plateau for seven years at 93 percent of their maximum annual production rate, and decline on average for more than 20 years. In contrast, small fields build up over an average of three years, produce on plateau for five years, and decline on average over more than 14 years.

The problem is that the good production lifetime of a small field about 5 years is not all that different from the time needed to develop the field.

They give a 3 year build up time from the start of production you have to figure at least 2 years between initial discovery and new production at a minimum. Thus even with a optimistic schedule small fields can barely replace themselves.
If your finding less small fields then you did in the past probably in our case at least 50% less then at least 50% of your small field production will cease to contribute say about 10 years after initial discovery.

Taking 1995 as the first halving then this first drop is around 2005 and the second drop is around 2010 taking 2000 as the next big drop in discoveries.
This of course is more the center of a spread of values not a real peak.

The current plateau could easily be explained by the loss of small fields discovered and developed during the 1990's that where not replaced. Lost production from them has been somewhat covered by more intensive production of remaining fields.

In any case the short lifetimes of the small fields and the lack of new discoveries should result in steep decreases in production over the 2005-2020 time period. For the smaller fields you almost have to have two in development for every one thats in production to really keep production level. So new discoveries of smaller fields needs to be about twice the past discoveries just to stay about level. This for sure has not been true for some time. Certainly you could hold off developing about half your known smaller fields and produce at a lower rate and I'm sure that this has happened and has helped us up to now.

But eventually a lot of the small field development from the 80-90's will drop out practically any day now and this is on top of the decline of the giants.

The underlying problem is of course that 14% of the worlds production or 11mbpd is coming from 5% of its reserves this is not stable. Depending on how you do a the math up to 25% of the worlds production is coming from less than 10% of the worlds reserves so it does not get a lot better looking at larger fields.

We do have a bedrock slow decline production of 50%+ coming from the mega fields and of course new projects but this just means that eventually decline rates will slow but we stand a pretty good chance of steep initial decline rates over the next few years.

The backdated discovery profiles will drive anybody crazy that spends any time looking into it. I got to thinking what kind of qualitative thinking goes into deciding whether a reserve addition should be backdated versus being called a new discovery, and came to an absurd conclusion. At some point, some analyst might decide that we sit on one globally-connected reservoir, and the backdating should stretch way back to 1858. And then we will get a Delta discovery function situated at 1858 with a value of 2800 GB. That would really screw us up but it would give the cornucopians plenty of ammo for hyping up reserve growth :)

Actually, seriously :(

The reason I mention this is that looking at the numbers off the chart you may see 6 GB/year for recent discoveries, but reserve growth will likely make that number higher. Elsewhere in this thread http://www.theoildrum.com/node/3958#comment-373373, I show a chart value of 8 GB for 2010, which includes dispersive discovery reserve growth.

I have been wondering the same thing every time I see that famous graph of oil discoveries( back-dated to revisions). This graph just shows that most big fields have been discovered but doesn't say too much about possible reserve growth( due to more drilling in discovered field or to improved extraction methods). Of course could go the other way, may find that fields are smaller than initial estimates, so new finds (not backdated) would be negative due to downward revisions.

Good point, I have seen reserve addition plots that look like a scatter diagram. The numbers seem to go positive and negative, but the positive bias is usually there. The SEC has severe rules on making sure that reserves are never over-reported, so there is always more to be had .. but it follows the law of diminishing returns.

The recent discoveries in Brazil and elsewhere are included in the forecast supply addition profile chart above.

Brazil is an interesting case. Petrobras project capacities are shown in the chart below from their June 2008 presentation. (More accurately, the project capacities will be less because the Petrobras capacities are really the nameplate FPSO capacities)

click to enlarge

Tupi is supposed to be a big discovery but so far only a 0.1 mbd pilot project is shown in Petrobras project schedule, above in red outline boxes. Petrobras probably has to do a pilot before planning for full commercial production which might be after 2012.

A worrying observation from the above chart is that the recent projects are not increasing Brazilian oil production significantly. In 4Q2007, Petrobras shows four megaprojects Piranema, Golfinho, Roncador P52 and Roncador P54 with gross capacity of a large 0.49 mbd starting up.

According to the IEA, Brazil's production (incl NGL and increasing ethanol) was 2.15 mbd in 3Q07, 2.13 mbd in 4Q07 and 2.27 mbd in May 2008. The EIA says Brazil's production (crude and condensate only) was 1.75 mbd in 3Q07, 1.74 mbd in 4Q07 and 1.75 mbd in March 2008.

The EIA's March 2008 production of 1.75 mbd, after these four megaprojects started up with 0.49 mbd capacity, is exactly the same as the EIA's 3Q07 production. Why?

They are on a treadmill.Most of the rigs they have ordered are for reworks.Also,most of their fields are offshore which peak early.

ace...did you see this article in Bloomberg today? Not sure what to make of it. Pipe dream...ha, pun intended!!

Petrobras's Tupi Viable at Third of Current Oil Price

July 3 (Bloomberg) -- Petroleo Brasileiro SA's Tupi field is commercially viable at an oil price as low as $40 to $50 a barrel, according to the Brazilian state-controlled company's chief executive officer.

The field is viable ``in the range of one-third of the current price,'' Petrobras CEO Jose Sergio Gabrielli told reporters today at the World Petroleum Congress in Madrid. ``The field is viable at a very reasonable price.''

Oil was trading at $144.96 at 10:23 a.m. today in London.

Discoveries near Rio de Janeiro and Sao Paulo including Tupi will at least triple Brazil's oil reserves, Brazilian President Luiz Inacio Lula da Silva said in a June interview.

Rio de Janeiro-based Petrobras, holder of the Western Hemisphere's largest oil discovery since 1976, has about 13 billion barrels of proved reserves.

Tupi has as much as 8 billion barrels of recoverable oil equivalent, Petrobras said in November. The surrounding pre-salt region may contain as much as 50 billion barrels of oil, according to Peter Wells, director of U.K. research firm Neftex Petroleum Consultants Ltd.

Tupi, located in the Santos Basin southeast of Sao Paulo, may hold enough oil to supply every refinery on the U.S. East Coast for 15 years. The Santos Basin has the potential of ``very high production'' of hydrocarbons, Gabrielli said in a separate presentation earlier today.

Thats around the price that its profitable to do CTL. Once the big capital players start to realize that the new conventional oil plays they're investing in is the same price as doing CTL, I think you will see an avalanche of capital into CTL projects.

1. you are correct, there is probably an information horizon around 5 years forward in time beyond which it's hard to get information except maybe for tar ssands for which we have information till 2020.

2. hmmm... it's hard to tell, the average discovery rate since 2000 is around 11 Gb per year, I don't think the amount of current discoveries is above that level, it's just the MSM is paying more attention because of high oil prices.

According to the Dispersive Discovery Model, it was 10 GB in 2005. The profile shows that it is monotonically decreasing, with the occasional fluctuations up and down from statistical considerations.

it is monotonically decreasing, with the occasional fluctuations up and down

Nitpick: "monotonically decreasing" means it never increases, for statistical or any other reasons. What you're describing sounds like it's trending down.

It's a minor point, but using technical terminology incorrectly will tend to raise red "he doesn't know what he's talking about" flags for people who're familiar with that terminology. Accordingly, as a general principle it's worth either using technical terms correctly or rephrasing to avoid them.

No, you are entirely incorrect, because in probabilistic terms it is monotonically decreasing. In statistical terms, you can have fluctuations up and down.

I would suggest that when you use technical terminology the wrong way, it raises red flags that indicate you do not know what you are talking about.

No, you are entirely incorrect, because in probabilistic terms it is monotonically decreasing. In statistical terms, you can have fluctuations up and down.



mon·o·ton·ic (mŏn'ə-tŏn'ĭk) Mathematics. Designating sequences, the successive members of which either consistently increase or decrease but do not oscillate in relative value. Each member of a monotone increasing sequence is greater than or equal to the preceding member; each member of a monotone decreasing sequence is less than or equal to the preceding member.


Complaining doesn't make you any less wrong, but it does indicate that you're unlikely to be willing to update your beliefs in light of new information, and hence that anything you present should be taken with a grain of salt. As they say, if you're in a hole, stop digging.

I don't personally care all that much how you use the word; I was simply offering advice. If you don't care that most people who've done courses in formal mathematical analysis will think less of your credibility when they see the mis-use of terminology - and, in all honesty, that's quite a small group of people - then you're obviously quite free to ignore my advice.

It's sort of childish to get cranky about an honest attempt to help, though.

Apparently I have to draw a picture for you. I clearly said, in the context of the years around 2005, that the Dispersive Discovery Model is monotonically decreasing. Note that in that region, no way is the profile going to come back up.

However, statistically, all sorts of fluctuations can happen. In a previous TOD post (http://www.theoildrum.com/node/3287) I showed some Monte Carlo simulations driven by the stochastic model.

As you add more data (100x more points), the law of large numbers smooths out the simulation.

And in the limit, the statistical MC simulation and probabilistic model match

I guess that you understand the model better than I do (sarcasm intended). And about being cranky, you were the one that used an indirect reference to other people that would say "he doesn't know what he's talking about" . It's a sign of a childish coward who doesn't take responsibility for his own views and instead uses the "some would say" argument.

Apparently I have to draw a picture for you.

No, you just need to write more carefully.

You said:

"it is monotonically decreasing, with the occasional fluctuations up and down"

which is a self-contradictory statement according to the very definition of the word "monotonic".

If you meant to say that your model is monotonically decreasing in the ideal case but that statistical variations may make any particular run of that model fluctuate up or down (and, hence, be non-monotonic), then you should have said so, and it might be useful to make a mental note to write that point more clearly in the future.

This time, though, you used the wrong word, and no amount of complaining will change that. All it does is make you seem more interested in looking right than being right, which is enormously damaging to scientific credibility.

You used a word wrong; it's a very minor deal, so I don't know why this is so difficult for you to accept. Just learn from it and move on.

And here is the prime example of somebody that needs to be right, all the time, the general scold, the concern troll, I present Pitt the Elder.

I don't see why you're taking this so personally; it's not nearly so big a deal as you're making it out to be. You made a minor error that interfered with the presentation of your results, and I pointed it out in order to improve your presentation; I don't see what your problem is.

There's no shame in being wrong, but there is in refusing to admit and learn from it.

And here is the prime example of somebody that needs to be right, all the time

You just can't get enough of being wrong, can you?

Not only do I not feel I have to be right all the time, I have and will continue to thank people who point out an error I've made (and, of course, provide enough evidence to make it convincing that they're right). I have utterly no problem with being corrected; indeed, it means I've learned something, which is great.

A correction isn't a personal attack, it's an opportunity to learn. You'd do well to realize that.

I will not correct a convenient shorthand that I posted. Really, this whole discussion got silly immediately. A case in point. Say that I stated "global warming is a monotonically increasing function, with the occasional fluctuation up and down". Well informed people would immediately know that what we have here is a likely accelerating baseline situation that won't reverse course, notwithstanding the measured fluctuations that temperatures go through. Actually, this "language lawyerly" tactic has become a rather pinhead argument that many deniers have used to try to subvert climate change modelers.

Really, truly, the only thing that is monotonically increasing is the cumulative number of times that bulls have crapped through the ages. No bull has ever been able to unshit to reverse that tide of cumulative dumps. Moral of the story: BS keeps piling higher and higher and it is pointless to argue against someone trying to unload a bunch of it on us.

Thanks to Ace, Khebab, and others for thoughtful and thorough replies. I will read and digest!

Trying to delete (edit) my comment...is it possible?

Only if it has not attracted a reply - check the little icons at the top for 'Edit' - hover your mouse over them

Khebab, given there is a five year horizon, I suspect this cut off is not abrupt but somewhat gradual. Hence you might expect a gradual decrease in perceived projects running up to five years. How important is this? Have we all been as concerned as we are now regarding a past megaprojects forecasts that in the end did not justify such concern? This seems to me to be of extreme importance when interpreting this latest work.

I think this is an important point.

As a thought exercise, what would happen if we were to pretend that we were back in the year 2000. Let's say that we went through the publicly available data that was available at the time, and did a megaprojects forecast just like this. What would that show?

I realize that it wouldn't be an easy thing to do to cull through and work through the same sorts of analysis for a point in time in the past, but it could be useful and informative to compare the two sets of results...

I don't know if this is the place to ask but what do TOD contributors and readers think of the announced reduction in oil consumption in the US (-4.2%) for the EIA April figures?


Does this mean that the US might be capable of adapting to a reduction in oil supplies? I have looked but can't find comment on it here.

I interpret that as a drop in the bucket that will do little to offset production decline, increasing Asian demand, and rising prices. That's 882,000 barrels against daily use of 21.5 million while we're experiencing price increases of 5-10% per week. Demand needs to fall by 15%-20% before there will be any significant effect on price, in my opinion (no econometric modeling employed here).

Yeah, we could adapt if we'd get our collective head out of . . . the sand. But it seems that ostrichism is firmly entrenched.

People will "keep their heads in the sand" until they are rudely hurled head over heels by the approaching "freight train of economic destruction".

In other words there is a tipping point in public consciousness. At some point everybody gets it.
At some point a crashing housing market, a plunging stock market, and a falling dollar come face to face with $200 or $300 oil, at which point reality crashes through and eveybody "gets it".

15-20% demand destruction then becomes a realistic prospect.

And then some. We'll probably go from complacency to panic in the streets. Gas stations on fire, riots when the police show up to restore order and some idiot starts shooting, "fuel rage" murders in the queue to fill up.

Crude: Right now expenditures on oil products as a % of income is at an all time high in the USA (and rising)-somehow this is being spun as "adapting".

Graph/figures by any chance? Thanks

The products that seem to be declining most are the low valued products - asphalt and residual fuel oil. Gasoline is only off -1.2% for April, and -1.3% for year to date. The reduction in distillate fuel oil (diesel + home heating oil) on a year to date basis is -3.9%. Asphalt is off -13.1% year to date: residual fuel oil is off -21.6% year to date.

Refineries are refining what used to be low valued products into gasoline and distillate.

Gail: You are discussing volume purchased, not dollars spent. Dollars spent on gasoline in the USA is way up YOY. The economy cannot be said to be transitioning away from or adapting while a greater % of income and wealth is spent on oil products.

Agreed. My point is that not only is the price per product is rising, but also the lower priced products are disappearing.

Global demand is so high that as soon as we are down the curve in production (right now???), global demand will always be higher than production. Even if everyone in the U.S. stopped driving forever, it will have at first marginal impact on production decline, and soon it would have no impact.

We can't conserve our way out of this, nor can the globe in the long run. Soon enough, the remaining oil will be necessary just to keep things moving and institutions and people warm. Besides, if we can't control own behavior, how can we expect to control others. Right now there are numerous expand and extend state and Interstate highways projects in the U.S. Prolly many of those will continue in order to employee people, and with those pay checks they will consume more oil.

There was a news story posted in the DB just yesterday that 10 highway projects in the Raleigh NC area are being "postponed" (probably forever, IMHO), so maybe we will start to see some serious cutbacks in the highway expansions.

Possible, there is a lot of slack, particularly in the US, Canada and others, discretionary driving will go first. However, there will be increasing pressure on the US economy like a new form of taxation. As long as there is no supply shortages, people will adapt.

Do you think that the Federal Government will at some point ban the use of gasoline/diesel - liquid fuels for "recreational purposes" (boating, off roading and sport aviation)? And if so, at what point on the down slope might it happen?

Probably before my last motorhome payment if past luck is any indication.

Funny thing is, most RVs and boats in the US are made in the US. You'd be firing at least a million people overnight.

As each are personal property, and you would effectively be aquiring them, would I be entitled to an eminent domain compensation?

Lastly, as I doubt anyone pays cash for such purchases, would everyone simply stop making payments? What would that do to the banks?

If the choice is between feeding my neighbors and me going on vacation, I'd take the hit. I doubt, however, that everyone would go along so willingly.

I suspect we'll find out in the next decade what the answer is, if not sooner.

No, it is easier to limit the amount of gasoline that can be purchased while allowing the consumer to choose how to use it. The government could discourage the purchase of "undesirable" vehicles by placing a special tax on them. A boat with a diesel engine could have biodiesel in the fuel tank making identification of offenders difficult. Driving a boat is not proof that gasoline or diesel is in the fuel tank.

You should see how many boats are for sale right now. My marina is FULL of for sale signs, (Minnesota, land of 10,000 lakes, USA) and prices are sinking faster than a ski-boat under a grain barge on the Mississippi River.

I don't understand depletion rates: does it mean depletion rate of the total amount of oil? Does that imply you can use new oil projects to actually boost supply growth and pump more oil but if the growth is lower than depletion rates the oil will run out sooner if you keep using it at an increasing rate (i.e demand increases). I am having trouble explaining my confusion over the issue: in other words when the IEA says " the depletion Implies that over 3.5mb/d of new start-ups needed every year just to stand still" what does stand still mean? does it mean actual production that is possible or total amount of oil left in the ground (although you can still supply more or the same to the market but it just runs out sooner). In the IEA MTOMR it has world supply capacity growth ranging from 2.5 to about 0.25 in 2008-2013. Is that net of depletion and what is physically available or is it not taking depletion into account as (as I was wondering) it only affects how quickly oil runs out and not what you can pump for now.


The MTOMR was rather vague I think because Jerome took the info from the press release (which is definitely vague and without supporting data. You have to pay to get the full report.

If you reread what you wrote, it seems to me that you got it. We set off depletion rates against new production rates. Think of an oil field like a tank of gas. Its only got so much and the longer they pump the less is in the field. The time comes when the flow rate slows. Another term to use is production decline, which is the rate of decrease.

We look at depletion rates for individual fields and as a world total of all fields. IEA was referring to world total.

"Standing still" means depletion and new production are equal. We look at all existing fields and production and measure the net decline in production overall. This is then offset against the total net new production so we get either a net total production increase or decline.

Hang around here for a while and you'll learn fast.

I have to agree with hedgehog the term "depletion rate" is confusing and I consider it a misnomer. I think it has been shortened from "production rate decline as a result of field depletion". So the 3.5 Mb is required to offset the production rate decline of approx 5%, bearing in mind this only applies to oil coming out of fields (not tar sands or biofuels). As discussed here the "depletion rate" is an average and varies from field, depending on geology, production techniques used, and additional development done.

As an example of how scewed the concept of a global decline rate is Cantarell is crashing at a rate north of 20% so it alone will make a significant impact on the 'global decline rate'.

We can only wait for the IEA report at the end of the year.


Hey Hedgehog, Rate of depletion is the rate of reduction in the flow of oil. Thus from a hypothetical 100 million barrels of oil production per day to 90 mb/d in one year is an annual decline rate of 10/100 = 10%. FYI, global production is about 86 million barrels for all liquid fuels.

Another way to think about this is how many barrels per second is the flow. For example if the flow of oil is 1000 barrels per second this year and in a year later it is 900 b/sec, then the decline rate is 100/1000 = 10% rate of decline annually. The 1000 barrels per second is actually about what we are producing. This is a good way to think of things. If the flow is cut down a little, something will use less oil, like less driving, the end of commercial air travel, the end of automobile driving, the end of trucking, etc. Yikes! Terminal depletion is coming.

Finally, someone here pointed out that we don't "produce" oil, rather we "extract" oil from a one time endowment from Mother nature....she who must be obeyed, and we did not obey, and now we will see that we never really did control nature.

Rate of depletion is the rate of reduction in the flow of oil.

This has been gone over a number of times with the confustion between *decline* and *depletion*

An oil field begins depleting when the first oil is pumped and depletion continues until the last oil is pumped. The rate of production typically rises to a plateau, cruises along for a few years, then declines.

depletion <> decline

And this confusion will continue unless we agree to use a good yet simple model of oil production. The Oil Shock Model along with Dispersive Discovery provides a way to non-ambiguously specify all the parameters in the production cycle. Nothing else does the job because of the ambiguity in what decline and depletion actually mean and the fact that they act more like subjective, observational measures than anything else.


Though I agree depletion <> decline, The IEA report talks of 3.5 md/d to replace their "depletion rate" so they mean "decline rate" (as they state a rate not a reserve amount), So I think when the word "rate" is used they are interchangeable


It's unfortunate that these official agencies are so loose in their usage of terminology. IMO doesn't make it 'right' though to use the terms this way, at least from a scientific point of view.

I think it was Ron Patterson who pointed out that it is likely in the later stages of an oil field's life that depletion would be slowing down as decline is speeding up. Sounds paradoxical at first but makes complete sense from a petrology point of view. As less is coming out of the straw (decline increasing), the amount left in the reservoir would be reduced at a slower rate (depletion decreasing).

Don't worry HH, I am more confused than you!...

The top graph shows Possible future supply capacity, is this the same as "possible future production" if (as we can reasonably assume) demand >= supply capacity?

The new mega projects' supply capacities are projected to decline 4.5% after first year. Is this because the reserves are being "depleted" from the start?

More confusion... Why is depletion on a supply capacity or production graph, or conversely why predict that supply capacity decline starts so soon? If the above assumption is wrong, and demand < supply capacity, why is there any depletion or decline at all for some of the mega projects?


Possible future supply capacity, is this the same as "possible future production"

Supply Capacity= Amount Produced + Spare Capacity

It's basically the maximum you can produce at a given point in time, some production maybe down for political or geo-political reasons for instance (think Nigeria).

From the megaproject list, you can only forecast supply capacity (i.e. an upper bound on production).

The new mega projects' supply capacities are projected to decline 4.5% after first year. Is this because the reserves are being "depleted" from the start?

No, but because we don't know the exact shape of the production profile for each field, instead of having this:

we use this:

Now, if you have additional information (peak date, plateau duration, URR, etc.), you could use a more complex model such as the one used by Robelius in his PhD thesis:

I'm currently working on a more complex model.

First of all khebab, nice work and thanks for sharing.

What is interesting is that much of the good work here is based upon good assumptions, but real life contains some surprises. What I think will be interesting to see is the part shown in your last diagram in the comment above is when fields reach their economical limit (abandonment). If there is a price reduction of 50 % from todays levels, some capacity (based upon data from NCS suggests 2-3 % of total) will be taken out over night, other investments may face deferrals, all of these factors makes future forecasts a tough game.

I believe the better model for individual fields is the "maturation" + "extraction" damped exponentials convolved against each other. These give individual curves that look like "exp(-ax) - exp (-bx)" where a < b. Very handy to deal with and they fit into the Oil Shock model nicely.

First, I thank all of you for the ingenuity and painstaking work here.

LUIS DE SOUSA http://europe.theoildrum.com/node/4179#more shows about a 4% (my estimate off his graphic) for World Exports

How does this compare with the Megaprojects graphic posted here today?

How does this compare with ACE's post in a comment a few days ago,

located here: http://www.theoildrum.com/node/4001#more

Thanks again!!! Cliff Wirth

For export, you need to project future demand which is not easy considering the new price environment.

Ace used a different decline rate and his base year is 2007 (mine is 2002), I also believe that he smoothed the megaproject contributions with a 3 years averaging window.

Thanks Khebab, this helps. Thanks again to you and others for the ingenuity and hard work on this. I'm sure you all are read over at DOE, DOD, CIA, etc.

Also, it appears to me from making comparisons that Luis de Sousa's export production decline should be steeper, as it looks to me like it is 4%. If nations are reducing exports for their own consumption, his decline percentage should added to overall decline percentages. I know that you can't answer for him, but maybe Luis, you or someone can clarify.

This might be tricky to do, but I'd like to see a graph of world oil production showing the culmulative percentage for eroi. I think it might show that we our past peak energy return and that these mega projects such as the tars are pushing us off the cliff faster. To be so bold I think we're over the hill and maybe we will become wise on the descent.

A net energy curve is what you mean. Just a back of the napkin calculation of what that would look like would take the megaproject additions and consider that about half of it is tar sand, shale, and deepwater with EROI around 4. Comparing this with the conventional existing fields declining with EROI around 12 means that we actually get only about 1 net barrel of energy addition for every 3 new megaproject barrels pumped. So that takes a big chunk out of that "addition" charted - energy planned on that will show up missing.

How about an animation of the 'evolution of the projections'? Shouldn't be too hard.



great job, thanks!

OK, that is beautiful and quite scary at the same time!!

Late as always, but here's another

It looks like additions are also being backdated to earlier projects, if I'm not mistaken. If the data/graph is correct, there was still some upside in 2003/2005 as revisions are upward, but in 2007/2008 revisions are already turning downward (?).

I further assume that most of the additions going forward are actually current reductions being pushed forward in time as projects slip.

Subtracting current reductions from future assumed additions additions with the visibility horizon we have (c. 5 yrs) doesn't look very promising...

Part of this I believe was Ace's work in trying to assign multiple year projects to the individual years when production is expected to begin. When the spreadsheet was started, I don't think we realized how many of the projects really were very long term. As we got more data, we were able to disaggregate some projects into their expected annual components.

Can you superimpose the predicted demand increase on top of the first graph? I think highlighting not only the decline in supply but it's curve relative to expected demand would be interesting.

Or, if you can point me to the data source(s) behind the graph, I can probably tack it on myself.


Well, this is what I tried to do with this chart:

Demand is difficult to predict, probably more difficult than supply.

So 2010 might be the last year for net new capacity? That sounds like an extremely important metric, and indeed might be a good one to focus our attention upon.

Will someone please check me on the following "off the top of the head" numbers?
China imports 3 mb/d of oil at $140/b. China sells gasoline at $1.00/gal earning $25/b. Other products bring total revenue/b to $40./b. China loses $100./b or $300M.day or $2B/week. How long can China maintain its subsidies?
Only net exporters can maintain subsidies for long, and even for them the political presure to reduce subsidies will be strong because of the desire to fill the coffers.
Net effects - declining demand growth leading to declining demand soon, and some slowdown in the ELM declines.
Comments?? Murray

China sells gasoline at $1.00/gal


At 42 gal/bbl, that's $142/bbl, or pretty much the market price for oil. China may be subsidizing the refining costs, but at this point they're not subsidizing much else.

According to Oil Watch Monthly for June 2008, China currently produces about 3.8 Mb/d of crude oil (C&C?). It does not cost China $140 / barrel to produce and refine this crude oil. They probably produce and refine their domestic crude oil for a profit which helps pay for the subsidy.

This is a great chart, hope you can update it from time to time. Why not use a 5.2% depletion rate? In any event the depletion rate should be accelerating on account of horizontals, deep water etc.

Is there some way to look at past project delays and extrapolate to projects announced for the coming years?

Could supply be reduced to incorporate expected reduced exports?

It would also be useful to see a three year moving average curve to smooth out the net bars, easier to compare with the demand curves.

Great work, TIA for anything you have time for.

Gee, what happened to the 7 or 8 mbpd of new production for 2008 that the cornucopians screamed about last year? The year is half over and almost all of it had vanished. And if the year continues this way, there will be next to no increases.

This is the same story we got in 2005, then in 2006, then in 2007. More oil is always coming online "next year". Well let me give the cornucopians a clue - next year is always coming and it never gets here.

Khebab et al,

As many have already said: "GREAT JOB!!!!"

So I hate to ask for more but you have a data base unmatched out here in the hinterland. It deals with ownership of the future mega projects. Can you generate a subset of these projects owned/controled by China? Most are aware of the investments made by the Chinese gov't and it's companies. Much of this new production (and perhaps all of it during the initial payout phase) will be owned by China and thus not on the world market. While this volume would represent crude the Chinese won't have to buy on the spot market, it also reduces the net increase in production available to the market. If this volume is significant it could reduce the crude on the market to the point of China becoming a much greater pricing factor then just competing on a bid basis.

Perhaps an even more difficult assessment would be estimating how much crude China might eliminate from the spot market through long term contract arrangements with countries like Venezuela.

In essence I asking if you can modify the latest production curves to represent "net crude" available to the market place vs. net increase in production.

With one exception: Iraq. I'm pretty sure, that production there is going to rise approx. 4mbpd within the next 4 years. Thanks of Exxon, Chevron, BP, Shell and Total.

This oil is of course to be shipped to the US. Even with conservative reserve figures, the case Iraq is going to turn out one of the best investments, the US has ever done. Thanks to Bush and Cheney et al.

Next target is Iran. This county will be occupied in a form by the US within the next 2 years. Up to date the same preparations. In the case of Iran it is the prospective nuclear arsenal. In Iraq was is the mass destruction arsenal, which obvisiouly not existed at all.

Nigeria seems to be having terrorist activity is form of negative two million per day.

With one exception: Iraq. I'm pretty sure, that production there is going to rise approx. 4mbpd within the next 4 years.

On June 30, 2008, Iraq Oil Minister Shahristani hoped that Iraq's production will reach "4.5 mbd by 2013 from its current level of 2.5 mbd".

Only a few days later on July 3, 2008, Shahristani "told lawmakers that short-term technical support contracts worth around $3 billion may not get signed" which will limit Iraq's ability to increase oil production.

Iraq may have significant remaining oil reserves but extracting that oil is not easy.

Iraq has produced about 32 Gb of crude & condensate to Dec 2007.
OPEC Annual Statistical Bulletin http://www.opec.org/library/

The creaming curve for Iraq below indicates a total URR of 130 Gb.

source http://www.oilcrisis.com/iq/iraqLaherrere.pdf

The black line in the chart below shows that Iraq could produce up to 8 mbd peak plateau, assuming no constraints. This is highly unlikely.

Colin Campbell has dropped his forecast peak production rate for Iraq from 4.5 mbd in December 2002 to only 2.65 mbd in June 2008. Campbell's peaks are assumed to peak plateaus in the chart below.

The Iraq Oil Minister hopes that 4.5 mbd can be reached by 2013. The forecast below delays this production rate of 4.5 mbd by one year to 2014.

Given the instability in Iraq and the need to not just drill production wells but also the requirement to build necessary infrastructure, an upper bound peak plateau of 4.5 mbd for Iraq seems reasonable.


In all probability the Iraq oil will be shipped to Europe given nte cheaper transport. But it will take some price pressure off US purchases. Time will tell. While the operator does have some control over buyer selection you have to remember that all the companies you mentioned have big markets outside the US. For instance, last year I drilled some wells for ExxonMobil offshore Equatorial Guinea (west Africa). All the production was tankered and ship straight to Europe.

If you're concerned about sovereign control of oil deliveries keep an eye on China. They have been buying into oil fields all around the world for years now as well as making big capital investments in new projects. The Chinese gov't will have increasing control over the sourcing of crude buyers in the years to come.

Brilliant stuff -- and a 24/7 nightmare.

In case we forget:

There will be a large, unprecedented buildup of oil supply in the next few years. Between 2004 and 2010, capacity to produce oil (not actual production) could grow by 16 million barrels a day -- from 85 million barrels per day to 101 million barrels a day -- a 20 percent increase. Such growth over the next few years would relieve the current pressure on supply and demand.

Daniel Yergin (CERA), July 2005


If Yergin is right we are close to be hit by a tsunami of oil.

If Yergin had been "right," we'd still only be 25% closer to that 16 million barrels. He must have been drinking the Neo-Con Iraqi-Oil-will-pay-for-the-invasion KoolAid.


I purcased my first ever oil-wave-surfboard yesterday, based on this very information. It's has a completely new and unexpected design .... no warranty , but who needs such in times of affluence?

The database contains now more than 425 separate entries and is growing everyday.

This means there are now many small projects which were previously "hidden" in the decline rate. Once you inlude all field improvement projects, the assumed decline rate must be much higher than 4.5% pa.

As pointed out many times before, the Rio workshop of the IEA in 2004 contains a slide with decline rates at field level of 7% in 2005 accelerating to 10% in 2015.

IEA workshop July 2004 in Rio entitled "Is the world facing a 3rd oil shock?"

Absolutely. A decline of 4 or 4.5 just doesn't seem to jive with what we are seeing. I think a lot of noise is created, intentionally, by including any and all forms of petroleum. That is, all liquids is and always will be misleading until it is adjusted for BOE and BOEU (Barrels of Oil Equivalent Utility).

Of course, a lot of th problem lies with the prouction numbers bein so fuzzy. It would do so much for oil to be counted at the well head. The fact virtually none are willing o do this speaks volumes. Too many games for too much money and politics and not enough concern for how many will be dying.


so if 08 is the big jump in supply - and we have these prices now... GAWD HELP US!

Also another topic for a PhD thesis: "how does $300 oil change the global supply chain?"
for the past 20 years we have heard about off shoring, and the labor advantages of Asia

- at what price oil does the China cost advantage go away?

what are implications if suddenly their North America and Euro markets go away? I think this is about 30% of their exports. Is that good or bad for N Amaerica? more jobs stay home, but goods suddenly get a lot more expensive, and the river of cheap money that has financed the US goes away... suddenly

As long as China can import raw materials form Africa and Australia, their internal markets and close neighbors are going to provide the markets. Shipping raw materials in Cape size vessels is very efficient. Many exports from Asia to US and EU are low value and bulky but some are high value(electronics, white goods, cars). Shipping costs are not going to make local US industry that much more competitive, except for the bulky low value goods. In fact, it may be the other way, US exports ( from East Coast) will become less competitive, as Asia becomes the center of the world economy, rather than Atlantic port countries.

Exactly high shipping costs works both ways and the US also needs to import a wide range of raw materials.

Plus of course we would have to significantly rebuild our industrial base and wages would have to be competitive. Shipping costs are pretty much a wash I suspect.

This is completely different from building stuff for local markets or those reachable by low energy transport using local materials. It becomes efficient assuming wages are basically equal to ship high value goods quite long distances from a vertically integrated source.

This of course is the traditional trade networks with regional specialization allowing you to exploit local resources and produce high value goods. This sort of defacto monopoly has been long destroyed for the most part.

Would the start up of new refineries which are able to handle the heavy-sour crudes that no one seems to want, have an impact on the peak? From a practical viewpoint, peak oil will manifest itself as peaks in various finished products. For some finished products the peak will come earlier than for others and the demand destruction will curves (and impact on pricing) will be different due to various factors.

Would the extra finished products made available by new refineries able to process virtually "unusable" forms of crude oil push back the peak? Or does the mega project lump in all types of crude oils and assume new heavy-sour refining capacity will be available (no undue build up in inventories of heavy-sour crudes) and finished products will grow (or decrease) at the same rate as crude oil production?


"From a practical viewpoint, peak oil will manifest itself as peaks in various finished products"


  • Peak discovery: 1964 or so (backdated)
  • Peak Light Sweet: 2004 to now (take your pick)
  • Peak conventional: 2008-2012 ???
  • Peak oil industry investments: ?
  • Peak net oil exports: 2011-2013 ?
  • Peak total net energy from liquids: ?
  • Peak all liquids (C&C+NGL+heav/extra heavy): ?
  • Peak distillates (gasoline, diesel, etc): ?

Not necessarily in that order.

It may be difficult to pinpoint peak distillates by type, as that seems to be a function of demand, margins and refinery capacity - ie. not just physical factors.

Our children can go back and fill in those missing dates for us.

* Peak discovery: 1964 or so (backdated)
* Peak Light Sweet: 2004 to now (take your pick) [[[[ 2004-2005 ]]]
* Peak conventional: 2008-2012 ??? [[[ 2005 ]]]
* Peak oil industry investments: ? [[[[ 2008-2009 ]]]
* Peak net oil exports: 2011-2013 ? [[[[ 2007 ]]]]
* Peak total net energy from liquids: ? [[[[ 2007 ]]]
* Peak all liquids (C&C+NGL+heav/extra heavy): ? [[[[ 2008 ]]]]
* Peak distillates (gasoline, diesel, etc): ? [[[[ 2005 ]]]]

In not too distant future there will be no one writing history, as they won't have time, and no communications to know what happened after the LAST BLACKOUT. And nothing coming in from the "outside," sorry, no Pony Express, nor telegraph. No power grid = nothing.

Within a mile of me there's a midsized hydroelectric dam. It's not going anywhere. Nor are the massive dams on the Columbia River that power the Northwest. Electric power production works just fine on relatively smaller and more local levels. The large grids have their uses, but electrification never required them.

All that stuff goes out when the highways and power grid goes out. Just how long will this stuff last without parts, all of which come from all over the world??

More importantly, how long will he have power if neighboring regions discover he has power when they do not?

Don't worry about that, how would they know about what is happening "outside", how would they organize, and how would they get there to steal power, and how to move stuff to get pylons and cable up in order to stal power. And really, what good is that power anyway?? Can't eat it. You could heat with it if you had enough, but too many people heating on it would bring it down.

That's funny. A recent documentary about what would happen if humanity vanished had hydroelectric dams humming away unattended for years - and they usually research these things quite well.
What is your research for the statements you so confidently make?
Which highways need to go out, and how much degradation would the system have to suffer before by your calculations hydroelectricity was not sustainable?
How long is this going to take?
What, specifically is going to fail on the grid, and when?
What exactly is this 'stuff' which won't last, and where in the world does it all come from?
Can any of it be produced more locally, and if not, why not?

Since they have no supporting argument at all these sweeping claims do not add much to any debate, and merely set-out your assumptions.

Which highways need to go out

Moreover, why do these highways go out?

Oil production isn't going to stop overnight. Unless civilization collapses, there will be tens of millions of barrels per day of the stuff being produced for decades to come. That's not even in question; the only question is how many tens of millions.

If one is going to argue that in the near future there will be no oil for even critical tasks like electrical grid repair, one needs to explain why. Saying "no oil because society collapses because of no oil" is circular reasoning, and hence is not a valid - or useful - argument.

Since they have no supporting argument at all these sweeping claims do not add much to any debate, and merely set-out your assumptions.

Quite right.

If one is going to claim "this is how the future will be", one needs to back that claim up. Simply saying "trust me, I know the future" isn't going to make an argument credible.


It's not so much refiners don't want the heavy/sour stuff. It’s the lack of refining capability. The last time I saw the number a week ago the refiners handling this stuff are making the best profit spreads out there. While you hear about oil future contracts selling for $140+/bbl that isn't what the different grades of crude sell for. The heavy/sour stuff was selling for $110 - $125/bbl last time I saw postings.

So why not build/convert more refineries to handle this stuff?. It's a matter of risk: refineries cost a couple of billion $'s to build. Depending on prices they'll take 6 to 8 years to recover this initial expense. And there in lies the risk that's preventing a rush to build them. A refiner is dependent upon two main factors for profit. The price spread (the "profit") made for each bbl processed is obvious. But a much more critical factor is through put...how much crude are they processing on a given day. Making a $20/bbl spread is a great profit for a refiner. But if his 200,000 bopd refiner only has 10,000 bopd running through it for an extended period he'll soon be filing bankruptcy or at least shutting that plant down and eating the loss. And this brings us back to the PO factor. If an investor isn't certain he'll be able to buy a sufficient volume of the heavy/sour stuff for the next 10 years (at a minimum) then the risk will likely seem too great. For a while now the refiners keep hearing predictions of oil shortages...not what you want to hear when you're trying to talk yourself into a big investment.

It seems likely some refineries will close because they can't get enough throughput to remain commercially viable.

Oligarchic upstream + downstream refineries should prosper.

But don't assume all bigger refineries will be owned by the big oil companies.

If refineries can only exist because they have guaranteed supply, it may be that countries like China are one of the 'last man standing' refiners.

Maybe national producers will have to send oil to producing nation-state refiners such as China and Saudi Arabia, rather than oligarchic oil company refineries that have lost their company-owned feedstock backing. Maybe those that still own functioning refineries will dictate the price of crude...

And maybe some small refineries that don't require numerous and large cargoes to run will exist as 'niche' refineries for small-volume oil fields.

Things will get complex.


TODers the world over know how important this ongoing study is because if correct this data shows the near term future of petroleum. The quality of the comments is high although some of the graphs are tough to follow despite their obvious value(thank you Gail!). It is stunning to me that the political nitwits and even so called balanced media(PBS, NPR etc) are missing this so bad. That wouldn't be because EXXON is a newshour sponsor would it? It harks back to the NY Times incompetence before the Iraq invasion.

Some bits associated with the conventional media aren't so blind. But then, that's meant for business leaders, not the sheep public.

PBS and NPR, ........I need 2 shots of Sauza Hornitos tequila just to think about them. It is really ignorance, laziness, and cowardice that explains the media in general, and NPR and PBS in particular.

They avoid Peak Oil, like most people, and as for most people Peak Oil is not really a big deal if you think that alternatives will somehow come on line to save us.

I have spent a year and a half researching that question and have worked very hard to get the message out, even to scientists, and to many people and editors and contributors on this site: THERE ARE NO ALTERNATIVES THAT WILL MAKE UP EVEN A FRACTION OF THE LIQUID FUELS NEEDED TO REPLACE DECLINING OIL PRODUCTION, NO MATTER HOW MUCH TIME WE HAVE, AND THE ELECTRIC ECONOMY IS DEAD ON ARRIVAL.

This message is muted by Peak Oilers, just the way Peak Oilers are muted the general population. People don't like my message, so they find ways of avoiding my research. So, how can we blame journalists if even the educated scientists on this site can't face reality and then inform the rest of the world that we are in deep trouble, that is a euphemism for mass fatalities from exposure, freezing to death, starvation, disease, and chaos. So, the world goes on without any real focus on risk management.

And, every journalist knows that getting out front on a story that has a sad ending is not good for his or her career. Most of these journalists have job security, but they want to be accepted and advanced, and that means keeping the ratings up, no matter public or private radio or TV, and newspapers too. It is all about telling people what they want to hear. So, they say, well Peak Oil is for some other department, it is not my responsibility. Or, I'll interview some expert who will say Peak Oil is real, but when the price of oil gets high enough, alternatives will come on line. Time for another shot of Hornitos.

Please explain the reason we can't build 100,000,000 battery powered electric cars every year till we replace the world gasoline fleet?
I know that we don't have enough lithium, cobalt, nickel, lead, etc. Most of the readers don't. But if you don't explain, they won't get it.
Call them battery cars, not electric cars. It reframes the discussion in a more usefull way.

If you want to claim we do not have enough of any of those resources, please individually back up your claims.
Just on the subject of lithium , here are links to investigations which found otherwise:

If you don't explain or back up your statements, most will certainly not get whatever it is that you think you have!

DaveMart, see the post above to Wkwillis, and search cjwirth on this site, as I have comment on this at length in hundreds of comments on TOD.

These are your claims. Substantiate or retract.

WKWILLIS: No, you have to explain how: when the nation is bankrupt(see Gail's post on the U.S. economy above, about 1/3 into the comments) where will have the capital for these cars; where will the energy will come from for the change over; why even build electric cars; how cars are going to plant, harvest, and move food and goods on the Interstate and rails, and you have to show some actual plans of how this will all be accomplished (not just some photo of an electric small truck, small tractor, train); and how are these cars going to maintain the vast U.S. highway network. You need to show the plans for the infrastructure for all of this (there are none).

When the National Academy of Science published ENERGY IN TRANSITION: 1985 T0 2010, it was one minute to midnight, now it is 5 seconds to midnight.

Where are your plans, and where are the 20 years to do this with practically no oil to do it

The CIA factbook for the US says that 71% of electricity is produced by burning fossil fuels.


Please explain the reason we can't build 100,000,000 battery powered electric cars every year till we replace the world gasoline fleet?

There's no fundamental reason, although there're a few reasons it won't happen.

The first is simply that 100M cars/year marks a substantial increase in automotive manufacturing (there were about 73M made in 2007, including commercial vehicles).

The second is that battery manufacturing would have to ramp up enormously, which would take time. It would have to include increased production of the various metals used for batteries (lead, nickel, lithium, etc.) which is possible (see, for example, DaveMart's link, and note that the wide range of battery chemistries means that there's no single resource constraint for battery manufacturing), but again would take time.

The third is that a fraction of vehicles are regularly used for tasks that electric vehicles cannot currently accomplish - long-haul trucks, for example, cannot currently be replaced by EVs due to range constraints. So total replacement (with EVs) isn't currently possible, even if replacement of the majority is.

The fourth is that there's no need to do so. Likely decline rates (e.g., ASPO's) are quite slow, meaning that the necessary replacement rates are also quite slow. I personally would recommend faster replacement/conservation for many reasons (risk management, energy security, improving trade balances, lowering pollution, etc.), but it's not strictly necessary to keep pace with likely oil availability.

I know that we don't have enough lithium, cobalt, nickel, lead, etc. Most of the readers don't. But if you don't explain, they won't get it.

In particular, they may not get it because it may not be true. Presenting a claim with no support or explanation is generally more-or-less pointless, as there's little reason to believe it. Knowing the answer isn't enough to persuade people; you've got to communicate clearly and effectively why that answer is correct.

If you can't construct a solid argument for why your claim is correct, people will - justifiably - suspect that that's because your claim is wrong.

I'd go along with that. It is unsubstantiated claims I object to, I do not necessarily reject the conclusion.

The first chart shows production of 82 mb/d in 2007, but "all liquids" was given as 86 mb/d for 2007. Adding the difference of 4 mb/d, plus another 1 mb/d for new refinery capacity to refine heavy sour crude not now being used, would give a peak of about 89 mb/d in 2010. the big bump in sour refining capacity is scheduled to come on stream mainly in Q4 2008/Q1 2009 from what I have read.
New refining capacity for heavy sour crude might slow Memmel's pessimistic view of decline rate a tiny bit. Comments from those more numerate then me??

Actually your 100% wrong.

Heavy sour crudes are for all intents and purposes worthless. These complex refineries are billion dollar bondgles that make corn ethanol a walk in the park. Its funny you mention this as a anti thesis to what I've figured out since the first thing I realized one I figured out what was up was that these refineries are only worth their value as scrap.

Its not oil that takes down our civilization.

For the neaderthals (like me)http://www.ugopozzati.it/images/Speranza-Neanderthal.jpg reading this site, the
numbers are confusing...there being so many of them
and all.
But watching price per barrel at $146.00 and climbing
is something even a numerically challenged person
can grasp.
It isnt like people in America are looting abandoned
homes for resources like copper plumbing.
Or the buildings were abandoned because of economic
Its not like oil wars are being fought over dwindling
energy resources.
To suppose that the corporate media is hiding the truth about peak oil is beyond imagination.
WAIT....all this REALLY IS happening!
err...uh...umm...Never mind.

Matt Savinar was on Coast to Coast last night and pleaded for common sense to the masses.Amazingly everyone who called in with a question was in denial. That being: A-biotic oil is the real deal and PO is a fraud.One thing that cannot be denied, however, - The masses are asses.

If you go to coast to coast.com anyone here can listen to Matt, he was on the last hour of the program (7-3-08),he did a fine job.


All in all it was a good program.It made me do a bit of research on the geo-political side and I found this warning from President Carter 30 years ago that now seems prophetic -


I'm afraid the new dark ages are upon us.Its to late to be healed now.

Yep, but the masses are ignorant, but they are so in part due to the lack of education, knowledge, honesty, and courage among political leaders, oil company executives, CERA, professors who taught generations of Americans that solar and wind would take up the slack, journalists and editors who fail to do research and sound off about things they have little knowledge of, and many scientists who have forgotten the Laws of Thermodynamics, the first which is the most important: energy can neither be created nor destroyed (thus it cannot be invented), and many scientists who don't remember that energy must be consumed to get energy.

You're so right cjwirth... I'll pass on one of the worst examples of public disinformation I've seen lately. On Fox Business TV they had a fellow on proclaiming that the chips he makes for the gaming toys will greatly enhance the computation powers of seismic exploration 6X the current standard. Even if you're not in the oil biz but have a little common sense you can probably guess the current computing level in the oil biz. I'm sitting in front of a seismic computer workstation right now. Just a desk top set up but probably several orders of magnitude greater than this guy’s chips. And then compare that to ExxonMobil et al Krays that are many orders of magnitude above me.

It would have been truly laughable except for the realization that many watching would believe this "new technology" could now help the oil industry drill us out of PO.

The Fox reporter didn't even attempt to challenge this guy's claims. Very sad indeed.

Your comment on using a Cray is probably accurate.

I just find it surprising that hear I am, working smart and not hard, and we (including Khebab and others) can figure out stuff that the oil industry can't, or isn't willing to do.

I do all sorts of multiprocessing graphics at work going back to the SGI/Cray days but would never consider expending any of that kind of effort to do the probability analysis that I believe yields huge dividends.

The big question is: Have Exxon and those other oil companies actually done the oil depletion analysis and just sit on it in some backroom, allowing it to collect dust?

Like I have said, the stochastic arguments are not that difficult.

Plug "shit data" in, get "shit data" out. The high powered computing they use at companies like Exxon are more likely for 3D imaging to figure out the ROI when developing a new project. Don't assume that Exxon and the rest of it's ugly sisters in the oil industry don't see the reality. You don't need Crays to look at issues which Excel or Calc are more than capable of extrapolating. It's more a question of vested interests and corporate momentum. All they care about is stock price, dividends, and placing blame elsewhere.

Right on, tell it like it is.

they had a fellow on proclaiming that the chips he makes for the gaming toys will greatly enhance the computation powers of seismic exploration 6X the current standard.

And he's probably right. See, for example, here, or here for an explanation of how it's used for seismic processing:

""One of the things that's exciting about GPUs is that you get vastly more compute power for the same wattage and density," says Briggs. "They're running out ahead of what the standard CPUs are achieving.""

Commodity graphics hardware (GPUs) is spectacular at parallel processing - much better at it than the CPUs that run your desktop's operating system. That's perfect for many scientific and modelling applications, as they can be efficiently parellelized due to the discretized nature of the models (i.e., splitting up the field/ocean/whatever into NxNxN grid cells). Now that GPUs are available with double precision floating point numbers, they're precise enough to use for these kinds of applications; knowing people who do that kind of modelling, I can tell you that's seen as a big deal.

Same thing with the Cell processor that's used in the PS3, by the way. An enormous amount of the hardware that's been driven by games turns out to be excellent for hard-core number crunching.

By all means look this up to check what I'm saying, but you'll find your intuition has misled you here. A good place to start your search is looking into GPGPU (general purpose GPU computing), or groups like this one that make heavy use of GPUs for scientific processing.

Even if you're not in the oil biz but have a little common sense

And that's the problem with "common sense": it's often wrong. That's why fact-checking your intuition is so crucially important.

I had a grant to investigate the application of DSP's to scientific number crunching tasks in the early 1990's. This in particular looked at the application of statistics algorithms that used intensive floating-point computations (the projection pursuit algorithm was one of the more interesting applications). And I can remember using the long-favorite "seismic app" as a marketing blurb as well (even back then, everyone thought the oil industry was loaded with money). One of the lessons learned and will continue to be learned, is that once you hit upon some specific breakthrough in using a special-purpose processing unit like a DSP or a GPU, is that in no time this technology will be absorbed in the general-purpose CPU market. You have perhaps a few month window to penetrate a market, and unless you have some good, easily maintainable software, then you will lose that even faster because users will go with the better software and more convenient workstation environment. You see, even though I could get 100 to 200x speed improvements over the 386 of the day, the 486 and Pentium were just around the corner.

I'm guessing but Rockman might still be using Fortran, maybe some BLAS or other optimizing libraries in his work on his souped up seismic workstation.

Gee Web, I haven't messed with Fortran since my college days over 30 years ago. Most independents use Seismic Microsiesmic Technology (SMT) also known as the Kingdom op system (Windows). It higlights the swing from research driven by Big Oil to dependence on vendors like SMT to drive advances.

As far a speed goes, for most desktop work it doesn't matter too much. Once the data has gone through basic processing (usually a main frame) there's little time used interpreting the data. Most interpretation efforts occur in less than a second so jumping speed even 10X wouldn't even be noticed.

Just as an example of the increased efficiency: 30 years ago, handling paper sesimic sections and posting by hand, might take 3 weeks. I can generate the same interpretation on my desktop in less than a day.

Thanks for the clarification.
So whatever the mainframe does could be a bottleneck. If it is just storage/retrieval of data, speed shouldn't be an issue either?

"but the masses are ignorant"

You are not ignorant, though. I see you charge $100 an hour to converse on the phone with you about peak oil. Very good. Do we get a refund if we school you?

How does that work? If I teach you about peak oil in the hour, do you send me a check?

Answer fast, because people are going to start calling.

Any minute now.

Do you get much business?

Read the TOD rules.

In case this wasn't clear -

Number 9 (it's always number nine that kills you guys, isn't it)

"Using comments to promote products and services for sale is prohibited."

You copied and pasted some bullshit work of yours from here to Huffington Post. Adding your webpage, which clearly sets fees of $100 an hour.

Get lost, clown.

I happened to find this about alge -> oil



This is San Francisco specific, but "scales" well to other locations when thinking about any or all alternatives (pdf): Scalability, Timing, and Alternatives. A few folks elsewhere have told me they found it very helpful.

Thanks for the link Dennis. Fridley's Scalability et al is a neat and succinct overview of peak oil and its choices, much like Gail The Actuary would write.

Interesting his conclusion is exactly the same one I've come to.

Not as colorful as my descriptions but same message.

"There are a range of other issues to consider, but I hope these summary comments are useful. Having spent years considering the impact of peak oil and looking at this various issues regarding alternatives, I have come to just one conclusion, and that is that our energy consumption must decline, either deliberately, or it will be forced upon us. This is not a conscious choice for any living species aside from mankind, and even then, it may be not a possible conscious choice."

I haven't been a Coast to Coast listener since Noory took over from Art Bell. Sadly the links don't work for non-subscribers and it hasn't been worth my while to subscribe for years. I've listened to some of the Noory shows, but the quality seems so much less than when Art was in charge.

I prefer listening to prisonplanet.tv. Unfortunately Alex Jones has vested interests in selling gold and ignores below ground factors in favor of strictly monetary arguments about the price of oil. However, Alex's skill as a host, entertainer, and supporter of certain political ideas outweighs his shortcomings.

Matt Simmons in the article here: http://business.timesonline.co.uk/tol/business/industry_sectors/natural_...

“By 2015, I think we would be lucky to be producing 60 million barrels and we should worry about producing only 40 million,” he told The Times.

The graph in the main post above shows 75MBPD rather than 60MBPD at 2015.

Does anyone have any idea why Matt is so pessimistic?

Or is he simply reporting crude WITHOUT condensates etc?

I think he believes the peak is in 2007-2008, so 60 mbpd in 2015 is a possibility.

The graph in the main post shows crude, condensate and NGL production of 75 mbd in 2015. If an estimate of 9 mbd NGL in 2015 is subtracted then this means that crude & condensate production (C&C) in 2015 would be about 66 mbd.

Matt probably means C&C of 60 mbd in 2015, rather than total liquids. The chart below is slide 31 from his Peak Oil presentation to Northern Trust Bank on Jan 27, 2008. Matt's peak C&C month of May 2005 at 74.3 mbd has now been exceeded in Feb 2008 at 74.6 mbd.

source http://www.simmonsco-intl.com/files/Northern%20Trust%20Bank.pdf

For comparison, Colin Campbell is more optimistic at 68 mbd C&C in 2015, from his July 2008 newsletter, shown below. (This estimate of 68 mbd is after subtracting an estimated 2015 processing gain of 3 mbd.)

Last month, he revised his peak total liquids to 2008 at 85.3 mbd, excluding biofuels.

My forecast is 62 mbd C&C in 2015 shown below.

click to enlarge

I think that Matthew Simmons and Kenneth Deffeyes are correct with the peak crude oil at May 2005. The EIA includes Canadian tar sands in crude oil, and it is not crude oil, as it cannot be pumped out of the ground. The DOE and EIA are captives of big oil, and they don't directly lie about the data, but they change the categories so that things look better for the oil industry. It’s good for business and investing if people think all is well, and better for the stock options of oil company executives. This confirms the 4th Law of Thermodynamics: all oil companies, both private and national, are pirates. :)

EIA APPENDIX GLOSSARY: Crude Oil: "A mixture of hydrocarbons that exists in liquid phase in natural underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities. Depending upon the characterics of the crude stream, it may also include:

1. Small amounts of hydrocarbons that exist in gaseous phase in natural underground reservoirs but are liquid at atmospheric pressure after being recovered from oil well (casinghead) gas in lease separators and are subsequently commingled with the crude stream without being separately measured. Lease condensate recovered as a liquid from natural gas wells in lease or field separation facilities and later mixed into the crude stream is also included;
2. Small amounts of nonhydrocarbons produced with the oil, such as sulfur and various metals;
3. Drip gases, and liquid hydrocarbons produced from tar sands, oil sands, gilsonite, and oil shale."

My guess is that Matt Simmons is pessimistic about future prediction because he factors in production factors, like the number of rigs, their age, personnel, interest in investing, the monetary quagmire that is the U.S. economy, as well as what is happening in the field. For sometime he has said that the whole infrastructure of the oil production is flimsy. and now we see that the U.S. economy is even flimsier. Peak Oil impacts are here.

Even much of oil that has been defined as recoverable will probably not be recovered, for this reason:

When the amount of oil used to produce a barrel of oil equals the amount of oil produced, it is pointless to continue oil production. In addition to the oil used on site to produce and refine oil, energy is used in all of the processes for the machinery, equipment, and personnel used in the extraction, transport, and refining processes. For deepwater oil production, this would include all of the ships, platforms, steel piping (many kilometers of pipes on-site and to onshore locations), and their employees, including the energy used in making the hundreds of thousands of parts, the energy used in the factories that make the parts, the energy used in transportation of all of the parts and employees, as well as the energy that is consumed when employees and stockholders spend their salaries or dividends on goods and services (food, automobiles, yachts, airplanes, recreation vehicles, vacations, consumer purchases, etc.). Because there are a number of confounded energy input variables, it is difficult to measure all of this consumption of energy, but it is an economic reality that is shown in corporate decisions about the profitability of deepwater oil projects. For deepwater, heavy oil, tar sands, and extraction where special techniques are used, the point at which energy consumed in production equals the energy produced will be reached rapidly. For this reason, some oil that is classified as recoverable (for example deepwater oil, heavy oil, and the Bakken formation) may never be recovered.


Clifford J. Wirth

I think the cut off point is earlier then what your suggesting. Understand we used cheap oil because it made us happier. We could by big houses big cars and live out in suburbs away from the poor ethnic groups.

Once oil becomes a set of concrete shoes I think that people will try at least to move off oil fairly rapidly.

This is why I think real estate will suffer a fast collapse we are greedy pigs once the big house becomes a burden we drop it for a easier life style. Once the burden of driving etc becomes to high we will change.
Not because we are enlightened environmentalist but we are lazy pigs. Never underestimate the work people will do in an attempt to be lazy. Thats the heart of the goal to get rich.

So I think the breaking point is fairly flat and scales somwhere between 20-15% of personal income and the same for GDP. When the oil/gas industry takes up 15-20% of GDP and people are spending 15-20% of income on oil related costs then at that point its simply not worth it and taking the bus looks good.

I found this.

It has GDP for Oil and Gas before the boom at 1.6%
I'm have a hard time finding a ling but I think I've seen that now its at 5%
Its probably on this site.

It has mining overall at 9%.

In my opinion regardless of the reasons that oil products would make up that percentage of your income.
Higher prices lower wages etc. When people are spending 15-20% of there income say on gasoline then they will be forced to aggressively target this expense because it will be significantly reducing the overall quality of life.

Or something like that :)

Thank you for your very hard work.

Is there any way you can adjust the chart for demand destruction?

As an example, could you adjust the graph to reflect demand destruction in real world terms? Something like "This line shows where we would be if EVERYONE in the U.S. drove 55 instead of at every speed imaginable?

Could there be a way to include a line that shows where we would be if CAFE standards were raised by 5 MPG?

Could there be a way to reflect an increase of fuel efficiency by simply driving less?

These are thoughts which cross my mind and being a rather logical thinker I find it necessary to work in real world terms.

Thanks again and keep up the good work.


Ahh but is demand really destructed ?

Staying home and driving around locally vs a long trip and then not driving ?

Net result is you probably use more gasoline "saving" gasoline by not going on the long trip.
Plus of course your setting in the house in the summer running the AC.

This impacts NG usage see my my new post.

Americans don't even know how to reduce consumption for some time they will change their consumption pattern
before they realize that they have not actually saved.

memmel - You are assuming much my friend.

I personally do not drive my V-6 much (less than 3,000 miles per year) and do not even own an A/C unit. I do not need it.

So do not chastise me.

I am simply trying to see what impact less usage has on the graph.

Thank you.

I'm the same as you :)
But most people who read this board are not average Americans at least as far as fuel usage goes.

My point is that in my opinion it will take time for Americans just to figure out how to really conserve
and not buying a latte at Starbucks is not conservation. Its reducing expense to keep consumption of necessities up. You should actually drive less so you can afford the starbucks coffee.

Not that I like Starbucks but thats a different issue. I actually drink really good coffee and
I will and do conserve to enjoy my coffee. So I keep my quality of life high and my resource impact down.

I suspect you live the same way enjoying whatever you feel adds to your quality of life without having a big energy impact.

Hell I even bought a mortar and pedestal and looked and building a solar roaster if needed to keep my coffee :) Turns out that you can take one of these solar oven designs and easily convert it to a coffee roaster.

Ensuring you can boil water every morning is a issue however :(

Going without my coffee because its cloudy is a real pisser.

Yes, demand will be reduced, but demand will always be higher than production, thus the rate of oil depletion will remain the same. Even if everyone in the U.S. stopped driving, the rest of the nations (3/4ths of demand) will gobble up what we conserved.

Russia's East Siberian Vankor (2P oil reserves 2.7 Gb), one of the world's biggest oil megaprojects might start in December 2008, but significant ramp up occurs in 2009. Consequently, the Vankor oil start date has been delayed to Jan 2009 to show a more realistic capacity addition profile for the Wiki Oil Megaprojects.

In addition, the 420 kbd Vankor project has been split into two phases: phase 1 start in Jan 2009 to reach 315 kbd in 2010 and phase 2 start in 2011 to reach 105 kbd in 2017, for a total production of 420 kbd in 2017. The changes due to Vankor delay on the Wiki Oil Megaproject are shown below. 2008 capacity additions falls by 420 kbd, 2009 capacity increases by 315 kbd and 2011 capacity increases by 105 kbd.

(The chart has also been updated for phasing Russia's Uvat and YK fields; and for Indonesia's Banyu Urip (Cepu) field)

click to enlarge

Rosneft, Vankor operator, says production to start in early December 2008.

Deutsche Bank, June 6, 2008, said that "according to Interfax, the Chairman of Rosneft's Board, Igor Sechin, has announced that production at Vankor may reach 1.5m tonnes this year and 6-7m tonnes in 2009".

The necessary 550 km Vankor-Purpe pipeline is expected to be finished in October 2008.

This pipeline still has to be tested and filled, prior to customers receiving delivery of oil.

Rosneft's own website is saying the Vankor will start in early Dec 2008. Rosneft's Chairman Sechin says 6-7m tonnes for 2009. 7m tonnes, on a monthly basis, is only 0.6m tonnes. Thus, Vankor may produce about 0.5m tonnes in December 2008, or only 10 kbd, on an annualised basis for 2008. As Vankor is likely to have an insignificant impact on 2008 world annual production, Vankor has an adjusted start date of Jan 2009 to show accurate supply additions, on an annualised basis, by the Wiki Oil Megaprojects.

If we are to surmise certain ideas relating to what will happen after Peak oil, then let's try to analyse the order in which they may take place:
1. Peak plateau initiates in May 05.
2. Cost of oil too high for poorest undeveloped parts of world, as price of oil rises in 06.
3. Price of food reaches new highs in 07, causing food riots in 10 countries.
4. World turns attention to the possibility of Peak oil in 08, as fuel prices in the developed world further contract slow economic growth.
5. Price of oil hits 200 in Nov. 08 as IEA report adjusts downward world oil reserves.
6. Saudi giant oil field Ghawar oil production declines 10.5% in 09, initiating a chain reaction of reduced oil exportation.
7. Post peak oil decline to 83 mbd in 10.
8. Price of oil hits 300 in May 2010.
9. Cost of asphalt too high for most municipalities, as 89% of world's paved roads begin to degrade at 7% per year, with full degradation in 10 years, 2020.
10. Price of oil crests 400 in 2014, with oil production at 72 mbd, with only super-wealthy still driving Hummers.
11. 2015: Energy blackouts in 90% of the world, except in areas with wind, solar, hygdroelectric. Energy output is patchy and extremely expensive.
12. 2020: Cost of food was too high for 2.5 billion people worldwide from 2012 to 2020, with world population reduced to 4.25 billion, but now only dropping by 3% per year.

Any adjustments to this chronology?

I'll offer one possibility. Not a prediction but a model assumption duplicating the effect of the late 70's price spike and the resultant demand destruction which followed in the mid 80's:

8.1 Demand destruction reduces global consumtionp 10% (as it did in the 80's)
8.2 Saudi reduces exports to maintan prices for OPEC (as it did in the 80's)
8.3 Saudi opens wells up and flood the market (as it did in in 1986)
8.4 Oil prices drop 70% from its peak (as it did in 1986)
8.5 Low oil prices induce increased consumption (as it did 1986 - 1996)

But the model does have some very different nodes. Most important, we weren't at/near PO in the 80's. The unpredictable component is the rate of demand destruction vs. the rate of net production capacity decline. The best scenario would include a possible decrease in the net production decline rate due to mega projects coming online in the short term. Though difficult to model numerically, it's obvious that we don't have the potential magnitude of long term recover as we did in the 80's. And regardless of the degree of demand destruction the global pop continues to grow and food resource competition worsens.

8.1 Demand destruction reduces global consumtionp 10% (as it did in the 80's)

See my posts this was from NG the only valid substitute for oil.

8.2 Saudi reduces exports to maintan prices for OPEC (as it did in the 80's)
Saudi is setting on a lot of heavy sour crude thats worthless without cheap NG.
Ghawar one of the main sources of lighter sweet crudes is in interesting shape.

8.3 Saudi opens wells up and flood the market (as it did in in 1986)
With what heavy sour crudes and at what price you can't give the stuff away.

8.4 Oil prices drop 70% from its peak (as it did in 1986)

8.5 Low oil prices induce increased consumption (as it did 1986 - 1996)
Double nope.

No Suadi will eventually be forced to sell heavy sour crudes at a steep discount so the parts of the crude
will be used to refine the rest. Basically two barrels of heavy sour without NG gives 1 barrel of sweet light. As NG approaches parity with Oil its to expensive to burn to refine the crappy crudes.

This of course drops overall output of final products by 50% from the remaining heavy sour supplies.
In this extreme scenario we have effectively lost 50% of our remaining reserves.

I don't see cheap prices.

Your rational are all quit valid Memmel. I can understand why you don't foresee the possiblity of cheap crude. Just as 100% of the Big and Little Oil, the big name economists, all th gov't agencies did in 1979. None of them saw oil every becoming cheap again after 1979. As I said eslewhere: if you didn't project oil to be $100/bbl by 1990 you were run out of the biz.

All the potential loses to production capacity are certainly possible with some being very likely. But until you watch a global depression it difficult to imagine not only the depth of demand destruction possible but also the impotency of every gov't effort to prevent it. I doubt the number could be varified with any degree of accuracy but the demand destruction of the early 80's was assisted by the death of over 25 million and another 200 million being throw into extreme poverty as a result of the oil price spike. Again, I don't know how anyone can really guess such numbers but they did.

Again, my offering is just a model and not a prediction. But I can draw upon past global recessions to model a demand destruction which could leave 10 to 15 million bopd excess capability. Such an assumption is well within range of previous episodes. But even in that event we may actually see OPEC become an effective cartel and reduce production to maintain higher prices. Then you could truly have the "perfect storm" of global depression: historically high demand destuction and the persistance of high oil prices. From the stand point of human suffering at even $70/bbl oil could be suffcient to throw a good bit of the industrialized world back to the middle ages. OPEC actually reacting as a truly effective cartel has never been seen as a model node. But with most of the exporting nations now readily admitting their own individual PO it could well developed into an unpresidented but actual development. At that point I can see "manifest destiny" becoming a norm for many countries who once condemned such rational.

One other point the problem is the destruction of the world economy not expensive oil.

Showing that if we destroy the worlds economy we could have cheap oil is not exactly a solution.
Sort of a destroy the village in order to save it argument.

I'd argue that under this condition oil producing regions would have been taken over via military means
well before what your saying happens.

Heck you might even see super powers invade countries with large oil deposits.

Ohh wait.

And finally the real problem is WT Iron triangle. Homes Cars and Oil.

Homes and Cars have been hit hard and the iron triangle is tottering. Soon the whole thing will crash down.

I don't think that trying to guess the price of crude after a economic collapse esp considering that the military option has already been played is important.

No way they can revive the iron triangle after that since you won't have a middle class to buy McMansions and SUV's etc.

My best guess is that regions that are not taken over become so unstable that its impossible to get the crude. What does get pumped would be allocated not sold on the open market so I don't think market prices make sense. I suspect the worlds armies will continue to have crude but not sure about other uses.

You could be right dunno its like talking about world crude supplies in 2015 the chances that we still have a functional world economy by 2015 once you take into account all the factors are nil.

Right now I think we will make it to 2010 simply because it takes time to collapse. 2011+ dunno
we will have to see where we are in 2010. Right now I have collapse as happening between 2011-2013.
I think we will both last longer then most doomers think and go down harder when we finally go.

But you can be sure that once the worlds economy does collapse we won't ever see oil sold on the open market again. No one is that stupid.


Perhaps I confused you. The demand destrruction model is not offered as a solution but just one outcome of the price runup. As far as the world reacting with military force in the face of a recession: it didn't in the 1980's. But times are different in several important aspects. Most importantly, the US didn't suffer as greatly as the rest of the global economy nor as long. Also, the US political structure at the time wasn't too pro military action. This time around our angry villagers might not be to patient.

On the otherhand, there are few military powers in the world that could attack oil producers to help ease their economic burdens. Perhaps only two: the US and China. And if the US were to attempt to relieve severe economic distress by military intervention they would certainly need to allie with China. It's impossible for me to envision a world where China would allow an interuption in their oil imports via military action that wouldn't precipitate a catastrophic escalation. But that model node was established in 1940 by the Japanese so it's certainly valid.

AFAIK China hasn't got a strong enough blue water navy to project it's force as far as the Gulf.
Russia has though.

Oil is already viewed as a strategic resource once its obvious that its a strategic resource thats dwindling
the rules change.

I think one of the problems a lot of people have is that we have not had total warfare since WWII so its hard for people to grasp unconstrained war.

As far as Naval power goes who knows I think everyone including the Generals start new wars fighting like its the old war or last war and evolve from this point on.

We can't know right now exactly what the situation will be after the global economy has entered serious decline but again I think its a safe bet that open markets for oil won't exist once the global economy drops in a depression and oil is obviously in decline.

Open markets are all fun and games till someone loses a eye.

A few quibbles.
Number 9 will not be 2020 but much later as rarely used roads will last 30 years plus (and with few cars in the global depression this will apply to most roads).
Number 11 will be much less than 90% as many countries depend on coal for electricity (with electric draglines and rail); maybe 50%.
Number 12 assumes the price of food will kill 2.5 billion but a realistic figure would be .5 billion from food prices (including famine) but 2 billion from war/disease/civil unrest.

Number 9 will not be 2020 but much later as rarely used roads will last 30 years plus (and with few cars in the global depression this will apply to most roads).

Last I checked roads degrade significantly just from environmental factors. I disagree completely with this argument. On the cost side its the bridges that are important. Once the bridges degrade you have a lot of roads to nowhere.

My best guess is that as asphalt covered roads develop to many potholes the asphalt will be recycled to use on critical roads and the road reverted to gravel. If it has to many bridges it may be abandoned altogether.

Primary deterioration mechanism for flexible pavement (asphalt) is heavy axle loads. Most significant environmental factor is change to subgrade modulus associated with seasonal moisture and freeze/thaw and how this contributes to pavement response to axle loads. Other environmental factors are secondary.

Hmm this is a easy one. You can find info on the lifetime of private asphalt driveways which don't in general carry heavy loads and its 30 years if you seal them and maintain them.



Properly maintained you can get 30 years but this is with periodic sealing.

This suggests sealing every 3-5 years.

When you do seal the driveway, use a high-quality coal-tar based sealer. These typically should be applied every 3 to 5 years. The driveway should be sealed when either the original black asphalt has worn off the stones or the subsequent coat of sealer has worn off revealing the actual pieces of stone aggregate.

With a lower maintenance schedule 15-20 years is more realistic.

Lets take your normal parking lot which is fairly low traffic generally no heavy trucks.


Asphalt parking lots are very expensive to install and have an effective life of 7-12 years before expensive repairs must be undertaken

Thirty years for well maintained private driveways sure even forty but not for seldom used roads.

And another link

Where is hot mix asphalt used and how long does it last? Generally, this type of pavement is used on lower volume state highways and county roads. Counties prefer this type of pavement because it usually costs less. The life expectancy of an asphalt pavement is between 15 to 20 years.

I can produce a bazillion local county pages with county road lifetimes in the 15-20 year range even for lightly traveled roads.

Again I disagree with your statement. I'm sure a lot of county governments would love to get 30 years out of their asphalt roads.

I was responding to your comment regarding environmental factors & deterioration and not trying to quantify life expectancy. I noted the importance of axle loads as well as freeze/thaw and subgrade moisture as they pertain to axle load effects.

What other specific environmental factors are more significant in the life of a flexible pavement than these parameters?

You may find it interesting to research 'ESAL' or Equivalent Single Axle Load.

I was responding to the 30 year comment.

Number 9 will not be 2020 but much later as rarely used roads will last 30 years plus

Without maintenance asphalt concrete can deteriorate rapidly as fast as 3 years.

The problem with what your saying is its reasonable to assume under dire conditions that roads that are less traveled will have effectively no maintenance. As your aware the road beds of most county roads are not built entirely to the highest guidelines most have troubled areas where the road bed was incorrectly built. Or in many cases water flow problems in or around the road bed. Your always going to have sections of the road that deteriorate far more rapidly then the norm within this 3 year period that I'm speaking up. Simply not filling cracks from one freeze thaw cycle can destroy a asphalt road in two seasons sometimes only one winter is enough.

A road is only as useful as its weakest link. I assume these sections will be simply filled with gravel or other sorts of sloppy fixes if the local government is out of money. Drivability of a lot of roads will thus degrade substantially in 3-5 years without maintenance.

Also of course your ignoring where most of the roads are in there service life obviously most of our roads where not laid down last year in fact a substantial amount of the currently paved surfaces are nearing the end of their useful life. The status varies by region to region but overall the road network in the US is in very poor shape.

The US with our without peak oil is already facing a real crisis with its road networks.

America’s infrastructure faces two enormous and simultaneous challenges, explains Lawrence H. Roth, P.E., G.E., F.ASCE, ASCE’s deputy executive director. “Much of it was built following World War II, so it’s fifty or sixty years old and it’s being attacked by decay and neglect,” Roth notes. “Plus, our population is still growing dramatically, so not only do we have old and outdated infrastructure, we are also putting new demands on it. It’s just being stretched in many different ways.” Roth warns that “we’ve probably got ticking time bombs out there, and if we don’t take care of our infrastructure, if we continue to neglect its maintenance, then it’s not going to be able to take care of us.”

During our recent bubble years we not only failed to take care of existing road beds overloading them with traffic has caused serious damage of the form you have been talking about with way to many cars on the roads.
Given that a lot of our county governments will be bankrupt over the next few years this existing serious problem will not be solved and it will only get worse as peak oil progresses. If you consider that even the poor maintenance we do today may be removed coupled with the conditions of a lot of the roads then I think you would see we could lose drivability of a significant amount of our road surfaces fairly quickly.

This is just one more of the huge issues we will face over the next decade. In fact its one of the big reasons I don't think car type EV's are worth perusing we are better of focusing on building rail and giving up on most of our roads once passenger car traffic declines. We won't be able to rebuild the road infrastructure with the resources we will have post peak. Its a roads or rail choice not both.

9.5 As international trade decreases due to recession, America's rail network is freed from its role as an intermodal "landbridge" and retakes its forgotten place as distribution for domestic food and other goods, not to mention personal travel. Abandoned and underutilized rail-lines into cities are rebuilt with manual labor (no asphalt required). Scrap steel from America's cars is used to electrify some lines, which are powered by coal and perhaps renewables. As trains take over for trucks, America's freight system experiences a %200 increase in fuel efficiency.

12'. (2020?): As shipment costs increase, food exports/imports decrease. Third world farmers are no longer priced out of their domestic markets by (subsidized) US and european food. Global food production and population stabilize (relatively speaking).

I'm not saying I have numbers to back these ideas up; they're put forward as hypotheses. Nevertheless, I expect there to be partial recoveries along the way. Rome didn't decline in a day.

In general I tend to agree with you.

Right now in my opinion in the wealthier countries what we will see is a destruction of the car centric suburban life style and associated with it a general and significant drop in the standard of living at least as measured today. For those able to view life a different way people may well find themselves happier.
The key is that you can never actually go below zero money at any point you can repudiate your debts and start over. Outside of course of tax liens and student loans but even student loan debt has some outs and collection approaches are limited.

As a poor college student I'd say overall I lead a happier life. I did go in debt and am now debt free and back happy but thats just prudent living from being burned.

If food actually becomes problematic then thats a entirely different issue and kettle of fish. But overall Europe, South America and the US/Cananda should easily be able to continue to feed themselves.

I advocate a garden for two reasons first even if food is available its likely to be expensive and second temporary shortages may develop. If you want to be a organic farmer from what I've seen most of these people seem pretty happy if they don't have a high debt load. If you can do it without taking on a lot of debt then its a rewarding life.

Third world I dunno I don't see resource imperialism stopping and if anything it will get worse also in general the overall political climate will get chaotic at best and a return to old colonial concepts is probably certain. Look at Zimbabwe for example regardless of the reasons for there problems they overload any attempt to stabilize the economy or the country. The addition of more external meddling will only cause more problems in many parts of the world.

Eventually of course who knows when these countries will finally stabilize but I fear only after great loss of life.

Many thanks to the Megaprojects Taskforce. The database is no doubt helping thousands of people (and maybe even governments, if they're smart) to start much-belated planning. Without efforts like this, we'd be in the dark.

I wonder just how much the efforts of TOD (and others) contributors has swayed TPTB like the IEA. Unfortunately, I suspect we'll never know.

Kudos all round.