 | DrumBeat: November 13, 2008 | The Oil Drum | The 2008 IEA WEO - The World Energy Model and Energy Demand |  |
The 2008 IEA WEO - The Oil Drum Initial Review (#1 in a Series)
Posted by nate hagens on November 13, 2008 - 9:55am
Today, the world's energy 'watchdog', the International Energy Agency (IEA) published their long awaited annual World Energy Outlook (WEO) for 2008. In stark contrast to bland-to-cornucopian supply commentary in past reports, the initial language in this years Executive Summary is of an urgent nature. This report is a step in the right direction for conveying our rapidly deteriorating energy situation to world policymakers - the IEA should be commended for making the turn and finally acknowledging: costs, investment limitations, new capacity requirements, steep decline rates of existing wells, and externalities (in this case GHGs). In effect, this report shatters the global illusion that oil resources magically turn into cheap flow rates. However, at first glance, the report's details do not support the urgent tone of the beginning paragraphs. Beginning tomorrow, The Oil Drum staff will be running an ongoing daily 'analysis/review' of the new IEA outlook. Below the fold is an overview/introduction to this series.
World Oil Production in IEA's Reference Scenario (IEA WEO 2008 Slide 8) Source (pdf)
For the first time sine 1998, the IEA has forecast a higher oil price in the year 2030 than the current market price. In fact, the new price forecast for 2030 of $200 per barrel is not only higher than all previous WEO forecasts, it is higher than all previous WEO 2030 price forecasts combined. (1998-$17, 2002-$29, 2004-$29, 2006-$58, 2007-$65).
Here is the lead paragraph from the Executive Summary:
The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable — environmentally, economically, socially. But that can — and must — be altered; there’s still time to change the road we’re on. It is not an exaggeration to claim that the future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply. What is needed is nothing short of an energy revolution. This World Energy Outlook demonstrates how that might be achieved through decisive policy action and at what cost. It also describes the consequences of failure.
WOW. Great stuff. Who wrote that? Let's sign him/her up as a The Oil Drum contributor! Basically, this is spot on, and one hopes it will be backed up with data, details, and recommendations going forward.
Second paragraph:
Oil is the world’s vital source of energy and will remain so for many years to come, even under the most optimistic of assumptions about the pace of development and deployment of alternative technology. But the sources of oil to meet rising demand, the cost of producing it and the prices that consumers will need to pay for it are extremely uncertain, perhaps more than ever. The surge in prices in recent years culminating in the price spike of 2008, coupled with much greater short-term price volatility, have highlighted just how sensitive prices are to short-term market imbalances. They have also alerted people to the ultimately finite nature of oil (and natural gas) resources. In fact, the immediate risk to supply is not one of a lack of global resources, but rather a lack of investment where it is needed. Upstream investment has been rising rapidly in nominal terms, but much of the increase is due to surging costs and the need to combat rising decline rates — especially in higher-cost provinces outside of OPEC. Today, most capital goes to exploring for and developing high-cost reserves, partly because of limitations on international oil company access to the cheapest resources. Expanding production in the lowest-cost countries will be central to meeting the world’s needs at reasonable cost in the face of dwindling resources in most parts of the world and accelerating decline rates everywhere.
Also well said - a public recognition that a) oil is finite, b) it is getting increasingly expensive and c) market prices do not predict future scarcity but rather oscillate with short term supply/demand unrelated to realizable long term flow rates.
Paragraph 3:
Preventing catastrophic and irreversible damage to the global climate ultimately requires a major decarbonisation of the world energy sources. On current trends, energy-related emissions of carbon-dioxide (CO2) and other greenhouse gases will rise inexorably, pushing up average global temperature by as much as 6°C in the long term. Strong, urgent action is needed to curb these trends. The 15th Conference of the Parties, to be held in Copenhagen in November 2009, provides a vital opportunity to negotiate a new global climate-change policy regime for beyond 2012 (the final year of coverage of the first commitment period of the Kyoto Protocol). The conference will need to put in place a framework for long-term co-operative action to bring the world onto a well-defined policy path towards a clear, quantified global goal for the stabilisation of greenhouse gases in the atmosphere. It will also need to ensure broad participation and put in place robust policy mechanisms to achieve the agreed objective.
Whoa. I am not a climate expert, but the magnitude, language and tone in this area strikes me as highly political. A further look at the executive summary shows that almost 1/3 deals with carbon emissions, climate change, and sequestration. As a card carrying ecological economist, I welcome the recognition of non-market costs (externalities), but the IEA is first and foremost an 'energy' watchdog and this segment borders on being both incomplete as well as incorrect. Firstly, there are many other non-energy environmental limitations to energy production: (most notably water, but also pollution) as well as limiting industrial inputs such as copper, steel, skilled labor etc that are not addressed at all in this report. Secondly, the focus on a 6 degree temperature rise in the reference case suggests a) they are using different climate sensitivity parameters from those that the IPCC uses - (with MAGICC Dave Rutledge reached 1.8ºC with 460 ppm) and b) the scenarios laid out to reach atmospheric CO2 concentration twice or higher those of today imply ultimate recoverable reserves for the combination of all fossil fuels to be several times higher those estimated by TOD and published by the industry. Though this website focuses on energy, not climate, the sudden attention and scale of these carbon figures in the IEA WEO will have to be analyzed and discussed. Further muddying the water is the new discovery of methane hydrates on the North Slope of Alaska which can apparently be 'safely' harvested with no runaway GHG implications.
In the end, the primary 'solutions' to resource depletion (source side) and climate change and externalities (sink side), are the same (less consumption). The area of contention will be center around how much of our remaining cheap fuel we should allocate to sequestration.
_________________________________________________________________________________________
The Full Report
At first blush, the urgency of the executive summary is not replicated in the full report. The devil, after all, is in the details. Here are some initial thoughts, which will be revised and expanded upon in a 2 week The Oil Drum review/critique of this important document.
Decline Rates
IEA WEO 2008 Slide 7 - Average observed oilfield decline rate by year of first production Source (pdf)
We know that technology and investments have perpetually been in a race with oil depletion. (first and second laws of thermodynamics assure the eventual victor, the pace and rate of change are open for debate). One area we can witness the extent by which technology is 'losing' this battle is in overall decline rates. The IEA production-weighted average decline rate worldwide is projected to rise from 6.7% in 2007 to 8.6% in 2030 as production shifts to smaller oilfields which tend to decline more quickly.
Chapter 10 of the report provides an excellent overview of oil field decline rates based on a total of 798 super-giant, giant and large oil fields and sub-sets thereof. The data are analyzed in terms of field size, field age, reservoir lithology (sandstone / limestone), OPEC/ non-OPEC, onshore / offshore setting, geographic location, etc.
Leaving the detail for future discussion, the key number is a postulated 6.7% global average decline rate that incorporates an extrapolation to thousands of smaller fields that have not been studied directly. This figure is significantly higher than the 4.5% global average decline rate postulated by CERA last year (Peter Jackson, personal communication with Euan).
The IEA data set is based upon IHS field data (and other sources) and is likely comprised of the same data used by CERA. The very large difference in the conclusions has significant implications for future oil supplies and must at some point be debated and resolved.
CERA notes that 41% of production comes from fields that are in the build up phase or on plateau. Their 4.5% average is based on averaging higher observed decline rates for the 59% of fields that are in decline with the 41% of fields that have yet to enter the decline phase using somewhat more sophisticated methodology than may be apparent from this simple summary.
The IEA adopt a different methodology: applying a decline rate to all fields, irrespective of their stage of development. And, for example a decline rate of 0.3% is applied to Ghawar, even though the field is still on plateau and the production history of this field is dominated by political production controls.
Fields in the build up phase, brim full with reservoir energy, will not actually experience decline in the early years. It seems that the IEA apply a decline rate to this production increment which at face value seems an erroneous practice, though it is premature to draw this conclusion. This may result in over-estimation of decline rates, and this vital issue may only be resolved through dialogue with the IEA to determine how the analysis was undertaken.
The IEA provide evidence for decline rates increasing with time and, if true, this poses a serious challenge to the global oil industry going forward. Especially with current credit conditions - lower oil prices and lack of credit reduce tertiary recovery and make observed decline much closer to natural. What needs to be added to the IEA scenario spectrum, is an analysis where NO new investment takes place - what decline rates and production then?
Finally, the IEA WEO chapter on decline does not mention decommissioning of aging offshore infrastructure in areas such as the North Sea. The boom of recent years has resulted in decommissioning deferred and the slump that is now gathering pace may see an acceleration of decline rates as aging offshore platforms are sent to the brokers' yard.
Capacity Additions
IEA WEO 2008 Slide 8 World Oil Production Under IEA's Reference ScenarioSource (pdf)
Under the reference scenario, production reaches 104 mb/d in 2030, requiring 64 mb/d of gross capacity additions –(six times the current capacity of Saudi Arabia) –to meet demand growth & counter decline. Historically, the 1960's was the decade with the largest capacity addition, with about 30 Mb/d added during that 10 year period. So, the IEA Reference Scenario assumes we need to do as well as the best decade ever over the next 22 years.
Technology is clearly better now than in the 1960s - but the resource being worked is in considerably worse shape (fewer large new fields, more old and smaller fields). It's not just the case of doing as well as we did before, it's a case of doing so with a worse resource base - a losing battle. It seems the only way what the IEA is proposing is defendable is if the new resources (like deep water) and/or new technology (EOR) will somehow offset depletion of the old resource base. This has NOT been the case in the United States, where data to measure such a thing at least used to be available, which brings me to my next point.
Net Energy/ Biophysical Economics
The above graph predicts that a full 20% of 'oil production' in 2030 will be comprised of Natural Gas Liquids. On average these liquids have only 70% the BTUs as crude oil, yet this handicap is not reflected in the report as IEA measures by volume, not energy. Of course much deeper than this omission of gross vs net, is the energy cost of harnessing the remaining fossil fuels. No mention of costs in anything other than dollar terms is made in the IEA WEO report. As witnessed by current global currency morass, measuring costs in dollar terms is a moving target. A huge amount of resource may be projected to be recoverable at $100 oil, but once $100 is reached, costs too have increased - this law of receding horizons does not seem to be considered in the IEA analysis. Economic activity is ultimately grounded in energy. It takes energy to procure energy. Therefore, if energy becomes as expensive and difficult to procure as the IEA suggests (requiring $24 trillion investment, etc.), more energy will be used by the energy companies themselves. The only true evidence of this we have (due to lack of data) is the work by energy analysts Hall, Cleveland, Costanza, Kaufman, Herendeen and others on US oil and gas data, showing a 100:1+ energy return in the 1930s, declining to 30:1 in the 1970s and a range of 10-17:1 in 2000. Anecdotally, it is much lower than that at present, though no one keeps data in energy terms anymore. At some point, lower and lower energy gain sends society over a net energy cliff:
As energy surplus declines, more and more of societies resources (the red) need to be allocated towards energy production
Clearly, irrespective the currency or price, if we spend more energy (of equal quality) to procure 1 unit of energy as we get out of it, this energy is no longer a source but a sink. I suspect much of the URR of global fossil fuels in the IEA report will ultimately be shown as such. The recent plunge in crude prices may be like a receding tide, laying bare those companies/projects that are close to energy breakeven. More analysis to follow on that next week.
Investments
The Reference Scenario projections call for cumulative investment of over
$26 trillion (in year-2007 dollars) in 2007-2030, over $4 trillion more than posited
in WEO-2007. The power sector accounts for $13.6 trillion, or 52% of the total.Unit capital costs, especially in the oil and gas industry, have continued to surge in the last year, leading to an upward revision in our assumed costs for the projection period. That increase outweighs the slower projected expansion of the world energy system. P 39 Exec Summary
The current financial crisis is not expected to affect longterm investment, but could lead to delays in bringing current projects to completion, particularly in the power sector.P39 Exec Summary
Ironically, the day of this IEA release calling attention to the precarious nature of future energy supply is being met with fresh 3 year lows on oil prices. Unfortunately, recent market events, only indirectly related to oil, will now likely set July 2008 in stone as the date of maximum world oil production, despite the 'best-best case' scenario portrayed in the IEA report. Up against near double digit depletion rates and higher cost (lower energy gain) prospects, the oil industry now also faces a growing lack of confidence in the international financial system where near herculean investment is needed ($26 trillion = 37 times the recent controversial $700 billion bailout package in US), and credit, especially when the price of oil is well below the marginal cost of extraction (at 86mbpd) makes approving new projects, let along continuing existing production, problematic. Though not explicitly stated, one may infer that there is now increased risk that these investments will not be made. Furthermore, the goal of OECD governments of procuring cheap energy is incompatible with these investment goals. And still further, the goal of OECD governments of having cheap energy is incompatible with their goals of reducing CO2 emissions.
As has been written here often, the world's fiat currency reserves and financial assets, which works as a system of exchange and store of value because everyone agrees that it does, nominally dwarfs the amount of real commodities. Leverage, and leverage upon leverage provided by easy credit not checked by biophysical realities unleased a massive speculative bubble in financial asset classes in recent years. Though some claim this was an oil bubble, the facts suggest it has been a bubble in all paper assets, the unwinding of which, though largely over, has spilled over into the real economy. Earlier today Russia, the world's second largest oil producer, lifted their short term interest rates to 12% to defend the ruble. The currency traders, out of defense, are playing increasingly serious games of hot potato. Hedge funds and money managers, part of a global derivatives market measuring north of $700 trillion dollar earlier this year (in perspective that was 10 times the value of a 1 trillion barrel yet-to-be-recovered oil resource at $70 a barrel)
Bloomberg graph of oil, euroyen cross and SP500 daily closes
Those who rationalize the recent crash in oil prices as evidence of an oil bubble are only partially correct, and miss the greater point entirely. We are in the midst of a global deleveraging of an enormous bubble in financial assets, of which oil futures contracts, is just one. Oil futures peaked on July 14, 2008 (somewhat ironic in that the IEA is headquartered in Paris). In the nearly 4 months since, the daily price moves of oil have an R^2 of .97 with the SP500 - the prior 2 years the correlation was -.29. Similarly, just about all the major asset classes have had a .85+ correlation with the unwind of the carry trade (investments in all sorts of things using borrowed dollars and yen). As the unwind took out banks, insurance companies, countries? (Iceland+), wealthy natural gas entrepreneurs, etc. it had an unseen but far more tragic casualty - energy market disruption and misleading signals of future scarcity of oil (and gas).
The (Initial) Bottom Line of the IEA WEO 2008 Report
Though it is clear there were many different factions and authors writing this report, about 1/2 in the urgent and 1/2 in the complacent camps, the general sea change in opinion, analysis and outlook is long overdue. The certainty of future oil supply painlessly matching demand for decades to come has been replaced with something closer to reality. However, as long time readers of this website are aware, the world energy situation is even worse than the 'best-best case' scenario this IEA report has portrayed - more analysis to follow after we have read the actual details.
In sum, recent events in the real economy have put us in the liminal space where drops in demand will temporarily exceed drops in supply. Our energy future is a battle being fought between depletion and investment/technology in a world that is not only interconnected and complex but increasingly fragile. Counterintuitively to most, the lower oil prices go and the longer they stay below $80-$100 per barrel, the steeper the fall off of the crude oil plateau will be, and the dimmer our energy future. In sum, this Jekyll and Hyde IEA WEO 2008 report was needed 10 years ago. Uncertainty, error bands, black swans and the precautionary principle need to be terms injected into international energy discussions. Governments and decisionmakers should assume what is presented here is a 'best-best case', and start making urgent, difficult decisions with respect to social priorities. As many know, without cheap and consistent energy availability, nearly all other social objectives cannot be met. Energy is everything.
In the coming weeks, we will provide analysis and commentary on the details of this IEA report on the following topics:
- Decline Rates
- Saudi Arabia/Ghawar
- Natural Gas (in particular, Europe)
- Net energy and EROI
- Demand
- Coal
- Biophysical economics
- Human belief systems and paradigm shifts
- Reserves
- Renewables (hardly given much attention in the article)
- Energy and Climate Change
- Wikipedia Megaprojects
- and others..
Essays and analysis will be from The Oil Drum contributors as well as guest posts from James Buckee of Talisman Energy and Professor Charles Hall. We will probably raise many more questions than we will have answers. But that is perhaps as it should be.
Stay tuned!
Contact
- Content: editors at theoildrum dot com
- Tech support: support at theoildrum dot com
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
Comparison of the IEA and CERA decline rates:
The IEA chapter on decline is clearly written by an expert. However, so is Peter Jackson of CERA an expert. Considering the three main stages of oil field life:
Build up
Plateau
Decline
There is a genuine conceptual problem in getting to grips with how build up is handled in modeling a global average decline rate. My gut feel is that the real number most likely lies somewhere between 4.5 and 6.7% - but we will need the IEA to engage if closure is to be reached on this vitally important issue.
I developed a model earlier this year (presented at TOD several times) that had decline rates (with EOR) at 5.7% in 2008 and 4.95% in 2007. My projection was 6.0% for 2009 and 6.4% for 2010.
This is in line with the 5.1% the IEA measuerments say, because the data was collected in early 2008, and the result (5.1%) is between 4.95% and 5.7%, closer to 4.95% (as expected, 2008 Q1 being closer to 2007 than 2008 as a whole).
The most important thing in my opinion is: In case prices remain low, some EOR projects will be abandoned, effectively increasing the decline rate very close to 9%. That should result in a loss of 3 mbpd (as that's 4% of 75 mbpd, and 4% = 9.1% - 5.1%)
All in all: any EOR projects abandoned NOW wil lresult in a loss that can never be overcome, because there isn't enough in the pipeline for the years to come.
In other words: we have already seen peak production and it is all downhill from here on.
The IEA do a good job of differentiating between Natural Decline (9%) and Observed Decline (6.7%), the difference being attributed to field interventions such as in fill drilling, work overs and EOR. I've not read the whole report yet, but the slice of additional EOR in the chart Nate posted up top, is I believe CO2 injection - what chance at $60 / bbl?
The question I'm posing here is how to handle decline in fields that are in build up phase. -ve decline rate, zero or +ve decline rate?
I will write the IEA to ask them how they have handled this and to discuss.
euan
this is another example of feedback. the lower we go in oil price
a)the fewer new projects
b)the smaller the difference between natural decline and observed decline due to pricing out of EOR (though I believe Denbury Resources is profitable above $25/bbl)
So, as oil prices drop we have the double whammy of both larger natural decline and less EOR leading to larger observed decline.
If you email IEA - ask them how much oil out of 106 mbpd is profitable at $55 per barrel. I suspect they won' know the answer (because no one does), but my guess it's a good bit less than 106 mbpd
Re-phrasing that:
"What oil price is required to reach 106 mmbpd and what will the % be of global GDP?"
It looks like the markets don't have a f*ng clue about the implications of all this and we are now bound to an energy suicide pact:-(
Its actually much worse than that the consumer is already fairly certain high oil prices are a con game by the oil companies the recent price drops will make it almost impossible to get consumers to believe in peak oil.
You can ponder if this was intentional or not.
We are not going to see support for mitigation of oil until every single producers admits they are well past peak
physical evidence alone does no good.
To be fair even perma-PO-Bull Matt Simmons said something along the lines of "we won't be able to judge Peak until it's in the rear view mirror..."
(But by having a damn good informed guess I hope -and probably so do many who come here- to be positioned well in order to benefit, cope OK or simply survive)
Nick.
On the menu tonight is MEAT AND POTATOES! Yummy!
There is a strong element of belief in all this. Unfortunately, as Memmel and so many others here point out ... the beliefs are ALL WRONG!
IEA sez:
I'd suggest the IEA hire an economist ... unfortunately, most of these are servants of the status (or stasis) quo. Things really ARE different this time. The "current financial crisis" is a long- term shift in the economic ground rules even if one leaves the micro- economics that surround petroleum production untouched. There will simply be less (or no) credit available to anyone in a few years and this will become a permanent state of affairs.
As a 'financial lifeboat', a locally distributed hard- currency regime could be built from scratch but the available credit from such a system would be hard pressed to meet the needs pressed upon it.
The likelihood of a hard- currency regime happening in the current political environment is almost non- existent.
Nate sez:
The market is wicked; it is inherently unstable. The idea that markets can faithfully serve the financial needs of investors is being unmasked as a fantasy. In all instances, the stable market is a manipulated market; the breaking of the hedge funds is giving all a view of the 'Free Market' at work. Markets are inherently and destructively unstable. This is my own personal opinion and is not shared by 'legitimate' economists.
Nate sez more:
The unwinding of paper assets is just beginning; there is a lot of paper out there and the belief holds that the market will 'turn around some day (tomorrow would be nice.) Most 'investors' don't mean to day- trade, they hold until retirement ... or until the doomsday market hits and stop loss orders (or margin calls) eject them. What is happening (starting in credit- landia) is a market clearing event; all speculators will be broken before the bottom is reached. Real estate will be valued as unimproved land, stocks @ pawn- shop valuation and bonds will tell us the future was ... in Paul McCartney's famous lament ... "Yesterday, all my troubles seemed so far away ... "
Solutions:
- An Oil Drum solution would be an 'Alternative Economic Convention' that would sharpen the focus of non- establishment thinking and press to change public policy. I can think of several very smart persons who would have something useful to say; Nouriel Roubini, Michael Shedlock, Doug Noland, Umair Haque, Greg Mankiw, Nassim Taleb, Herman Daly ... the people here could certainly add more names.
Something needs to be done to move the situation from 'top dead center'. Have this convention and ask Obama Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to attend.
:)
In a general way, the ultimate solution is obvious: since underground resources are being depleted (hydrocarbons) or will become inaccessible (metals and minerals) because the those being depleted, the only solution is to move to reliance on above ground resources -- soil, water, forests, oceans, etc. all of which have been seriously damaged. This means radical retrenchment of course. The hope is that science will allow us to rejuvenate the soil, the forests, etc. There is just no other place to go -- simple logic.
But getting there, the transition, that's the toughie. I am tending to think we need two economies: ONE is the global and national market economies; TWO is the the new non-or-local-market economy.
TWO is what needs to grow, and it needs to be where people can go if there is no longer room for them in the ONE economy or they are willing to be pioneers or early adapters. It needs to be an economy based in small dense towns surrounded by agriculture and light industry. It needs to be mostly and as much as possible self-sufficient in basics. Their claim on underground resources need to be, say 5 or 10 pct of that of those in the ONE economy. The gov't(s) need to fund and encourage and protect these TWO economies. They are the future.
The ONE economies cannot and will not disappear overnight. But shrink they must. They are the ones consuming the finite underground resources. It's a tricky matter distinguishing between necessary interim industries and totally parasitic ones (which have been getting the bailouts). The guidance of traditional economists, or at least the more radical of them, will be needed to avoid prematurely crashing the whole system.
Over the next 20-30-40 years the transition needs to be made from ONE to TWO. At that point ONE will be small relative to ONE, and subservient to it, literally. But TWO will be important, because that is the world link, the fiber that hold humanity, science, culture together as one -- otherwise we become disconnected tribes, and we will not have the advantage of science in restoring a badly damaged natural enviornment.
On the one hand, I know this is sounds utterly unreal, even ludicrous. And of course it will not be readily adopted. On the other, what choice is there? What other possible route is there to survival?
Well said.
We need to "Grow" a new economy. One not based on oil and fossil fuels. The monetary system, money and investment if you will, needs to be linked to this new economy.
By default fossil fuels, and the economy tied to them, must shrink and eventually perish just like an individual business that has outlived it's usefulness, say making rotary phones, perishes over time.
We are in the very beginning of the transition between the two and it will get worse before it gets better. The money doesn't know where to go yet.
"The likelihood of a hard- currency regime happening in the current political environment is almost non- existent."
Not related to a hard-currency regime but I heard that 1.2 million copies of a spoof New York Times were handed out. The headlines were "Iraq War Ends" & "Nation Sets its Sites on Building a Sane Economy".
Shame it's just a spoof but maybe it will help remind the politicians why they are there. Oh, i forgot with over a million lawyers who are vastly over represented in government there's little chance.
It's also online.
http://www.nytimes-se.com/
This is very insightful. I'm a PO believer. Most people here are too. But the fact of the matter is that we are tiny percentage. My business partner thinks oil company profits are totally obscene. The "Photo of the Day" in my local paper is a picture of a gas station sign advertising the first sub $2/gal price here in town for about as long as anyone can remember. Nowhere is this IEA report mentioned.
My totally unscientific survey suggests to me that 90% of the country thinks that oil problems are over -- afterall, gas is only $2 now. 8% don't really care because they either don't drive or are so rich that price is irrelevant. 1% are one or both of perpetually stoned/psychotic and are simply not capable of caring. Of the remaining 1%, a few are POers concerned for the future, a few are POers hoping hoping for calamity due to religious beliefs, environmental notions, and/or a form of self-directed hatred (where self=nation) or anger toward the "rich bastard oil moguls who deserve to be taken down a few notches." A few simply defy categorization.
Anyway, in my not so humble, but not so valuable or nationally voluble opinion, we won't see any recognition of PO till gas approaches $4/gal again, or it isn't available in sufficient quantities. Even for me, with gas this cheap, I've stopped hypermiling, ride my motorcycle far less, and think very little about running out for an errand. This of course, does not bode well for the future as my behaviors are certainly compounded by millions.
I'm not of the opinion as inferred in one of the comments above that its all down hill from here and think we will have one last surge before the 'Big Event'.
My reason is simply this -and reflects your comment- the vast majority of people DO NOT BELIEVE IN PO.
Only when there is a 'mass recognition event' will it be game over IMO.
So my advice to you would be wait around 12 months and buy as many PO-related downbeaten stocks as you can afford and sit back and wait till 2014 at which point you will probably be glad that you where one of that tiny % of believers way back in 2008...
Nick.
I have been buying energy and energy shipping stocks, but I fear that it might not work out as I intend. There is so much anger directed toward energy companies by such a large portion of the public, that I wonder if we won't see nationalization either directly, or through onerous tax burdens that destroy any profitability. For an example, look at how Canada has treated its canroys in the last couple years. Two years ago it arbitrarily changed the tax structure after explicitly promising not to, which caused the value of canroys to drop about a third. This year, Alberta decided it wants more royalties, again causing damage to share prices. Nobody sees these things as issues however, because, in the minds of many, oil companies are evil and deserve punishment.
Anyway, I keep buying in, but without the same conviction I used to have that I will see a good payoff in 5-10 years. I used to worry about flow rates and reserves and such, but I'm coming to realize that the largest risk energy companies face is government and public sentiment -- something perhaps even more fickle than mother nature's underground world.
Natural decline in oil fields is defined as the decline taking place without any improvements. So that decline is there irrespective of oil price. If the oil price is lower and these improvements are scaled down the "observed decline" will go towards the natural decline rate, that is the difference is actually getting smaller
ya - sorry i was tired
i meant the bigger the overall decline rate and the smaller the difference. thanks
And what does the 5.1% figure stand for then? My understanding of the FT article mentioning that number last week was that fields undergoing secondery and tertiary recovery tend to show a decline rate (weighted average) of 5.1%
Is this interpretaion of mine false?
On observed decline rates:
5.1% for 580 fields post-peak
5.8% for 479 fields post-plateau
Adjusted up to 6.7% global average to take account of higher decline in 1000s of smaller fields not included in their data set
Thx.
Euan, how does these figures - 6.7% average decline rate for all fields today, rising to 8.6% by 2030 - square with the projected 64 mbpd additional oil by 2030?
How about a joint list of questions from the oil drum personnel?
Otherwise they might get crazy by the bombardment of emails with questions from each oildrummer.
Obviously, the single biggest flaw is in the projected capacity additions. One is left with the impression that these numbers were pretty much just made up to fill the gap between supply and demand, rather than being built on the basis of anything truly realistic.
In detail:
Crude oil fields yet to be developed: The Megaprojects database does not support a projection anything close to this. If this projection is to be realized, there need to be a lot more megaprojects already far along in the planning stage than we have seen to date.
Crude oil fields yet to be found: Where? Is there ANY evidence that the level of present discovery effort, and the results of past discovery effort, can produce these types of results in the future? This is certainly the most purely wishful of all these projections.
Crude Oil additional EOR: This is the one thing on this graph I might actually be able to believe. Of course, this is also very expensive oil, both in terms of dollars and energy inputs.
Non conventional oil: Mostly tar sands, I presume. Well, maybe, but it is also going to come at a very high price.
NGLs: The world is straining to maintain present levels NG production, so where is this going to come from? Are they assuming that NGLs that are presently not being separated out, captured, and transported into the global inventory stream will be brought on line? Fine, but need I point out that once again we are looking at massive infrastructure investments to make that happen. Once again, where will all the money be coming from?
I continue to assume that something in the range of 50-60 mbpd by 2030 is much more realistic.
WNC - PO.com member OilFinder2 maintains a Catalog of recent oil discoveries. 25 pages long, started in January. Lots of 50 million bbl bits of course, but he isn't fazed by all my arguments about flow rates/costs.
One of the industry journals he linked to has a page dedicated to recent finds - forget which one. Rigzone seems to have a discovery piece every other day. They're out there, but the pickings are slim, or really fat but buried underneath thousands of feet of molten salt. ROCKMAN commented once about how much easier it is to find fields now, but they're much dinkier - albatross vs. passenger pigeon.
It would have been nice if they gave equal weight to the pessimistic.
Maybe a best, middle, worst case scenario.
Makes me wonder if there is another version for World Leader(s)?
Seconded. It's pie in the sky speculation without discussion of what can actually be done, is likely to be done, and could happen if it wasn't done. Doesn't sound to me so far like they fulfilled the last sentence of their first paragraph, specifically the part about consequences of failure. But maybe that will come up in a later portion of the review?
The lightblue and red additions are each half as big (due to overstated reserves), there is a line labelled 'total exports' which goes from about 40Mb/d in 2008 to around 10 Mb/d in 2030 out of total production of around 60 Mb/d.
Can someone convert the figures into energy rather than barrels? If you assume NGL's are equivalent to about 0.75 barrels of crude and non-conventional oil is about 0.5, Are these figures approximate? What effect does this have on the graph. IMO its very misleading to display total production in volume when energy content and EROEI is so different.
"Non conventional oil: Mostly tar sands, I presume. Well, maybe, but it is also going to come at a very high price."
Too true! So far there is no panic in Calgary, but all the petes are cutting back both conventional and non-conventional projects. The existing oilsands projects will continue to operate, I dare say as low as $20/barrel, because the capital costs are done. New projects are being postponed, officially because of high costs. I'm invested in conventional infill freehold drilling but you can't convince the drilling rig operators there is any crisis and they won't lower their rates. There are none so blind as they who have eyes yet will not see.
Calgary housing prices have declined about 10% because of overbuilding, not because of the Panic of 2008. Other than that, there are as many SUVs on the road as ever, and the malls are still packed. The economic indicator I use is 7-Eleven; they are still advertising here for clerks at $11/hr plus benefits plus retention bonus.
There are vast deposits of heavy and extra heavy oil that fall in the unconventional category. Much of this heavy oil is very high in sulfur and vanadium. It is typically produced by steam injection and tight well spacing and requires it upgrading, all adding up to low EROI. The other big problem is the low output per well. This is the stuff we'll still be using 50 years from now.
Well below that level. Based on my model we will have C&C production at 60 mbpd by 2015, and my model proved to be way too optimistic, as I assumed a smaller decline rate now (5.7%) and I didn't take the financial crisis into account.
We should put progressive price tags on this image and calculate the assumed minimum price floor based on where the demand curve falls (the following is just a dummy exercise, not reflecting real marginal production costs):
Now, that's just a quick idea sketch on top of the latest WEO08 graph.
We'd need a production flow time series graph like that, but more based on cost of production (as a function of time).
Then dropping a demand curve on top of that would give a rough idea of where the price might fall.
Of course, this would assume maximum theoretical production at each level of production that was surpassed by demand - using that price figure. So it would be a rigid model and not dynamic, like the cost function is in the real world.
However, the point of this exercise would be to make it simple for decision makers and ordinary people to understand that the marginal production cost is not fixed and that the more they use, the more the price is going to rise.
I wish I had the time to wade through the WEO2008 data myself in detail and build even a crude approximation of above.
But I don't, so I'll just pass this on.
On a last note, one could also use some other production profile time series (ASPO, etc), because some of those wedges in the WEO08 graph are whacked.
Excellent idea, SamuM!
That's exactly what I thought recently: In uranium mining it is common practice to classify the reserves by $50 Uranium, $70 Uranium etc. (or whatever numbers) but not so in oil, natural gas and coal, although this informations should be even more important.
I hope that we'll find more accurate data for this.
Great work as always, Nate.
The original summary (which is unavailable from ASPO-Australia as of today) had this to say about the fields analysis:
From this do we infer that IHS has access to KSA production figures? I'm puzzled by this, given Matt Simmons's call for data transparency.
Nate
I've been sprinkling questions on the little data that is publically available on this report on different threads. If you have access to the full report, can you answer:
1) do they define what is included and what is excluded from the base decline data on old fields? No precise reading actually seems to fit, but I think they include all reworking on old fields (which makes the decline rates very high)
2) do they give decent info on the year by year decline rates on old fields? Because from the data in that graph, they seem to accelerate and then slow down again.
3) Take a look at the graph from the top of your article. Look on the blue boundary around 2020. See this?
It looks like they edited the data by hand in a vector package before turning it into a PDF. Given that this is the point the decline levels out, is there any better data elsewhere in the report? A tabulated set of data maybe?
This?
Year on year would be nicer, but that table screams out problems itself. Supergiant OPEC decline rates of 2-3% say its after all infill and extension work is added (given previous Saudi statements of gross and net decline).
The more I look at this, the more I don't think they have done an 800 field bottom up analysis, but fudged something from average data. Whether they actually did it and didn't like the results is a question - but its smelling like a back-of-the-envelope calcs at the moment.
Oh, and where is Cantarell in that above table?
Perhaps we should also have a closer look to the various types of decline they describe (natural decline, observed decline...).
In the text sometimes they use one type, sometimes the other, which makes it difficult to compare them.
The Second WEO Report.
It is hard to believe that any leading organization with access to prime data could be far off track in its projections. Hence, there may be some reasons that could explain, let’s say, the still exaggerated optimism in this report: What I am talking about is the possible economic impact of a WEO report based upon “the truth, the full truth and noting than the truth” under the current conditions of a global recession already on its way. IEA analysts are most certainly not stupid to believe in their own “fairy dust discoveries” of new fields that suddenly seem to appear with deus ex macina just as they become required by demand projections.
Garip’s remark of possibly hand edited graphs made me even more suspicious about the existence of a second 2008 WEO report - classified top secret and strictly denied to exist. Rambling, just rambling, but what’s published may be just an estimate of the maximum level of gloom & doom that present market hysteria is able to digest without an immediate cardiac arrest.
http://www.guardian.co.uk/business/2008/nov/12/oil-gas-companies-credit-...
3 Saudi's by 2015?
The tooth fairy must be really good to the IEA
LOL! A much needed bit of levity--thanks Dude.
If you can't get it up after 4 years of trying hard, you've Peaked, unless you are the IEA, and they must use lots of Viagra :)
00ps, that's vhat Yiagr@ can d0 8-)
Hi Nate,
Thanks for the summary - good stuff.
I have a nit regarding your comments on paragraph 3 in the intro - I didn't see anything particularly wrong with their discussion of potential temperature rise due to CO2 emissions. First off, they hedge by saying temperatures could rise by "as much as" 6 degrees "in the long term." They are not necessarily predicting that amount of temperature rise, only saying it's within the realm of possibility at some (unspecified) future date (unless this prediction is made in another part of the report which you did not reference in your summary). And secondly, while an atmospheric CO2 concentration of 460 ppm might lead to ~2 degrees of warming assuming all other things being equal, of course all things are not equal. Ice caps will melt, the ocean may stop absorbing as much CO2 from the air, etc. Who knows what feedback mechanisms will kick in? This kind of uncertainty explains the possibility of such a large rise in global temperatures for the reference case.
I agree re feedback mechanisms - you are right - we don't know.
My main problems were:
1)focus on GHG without any mention of other environmental impact
2)1/3 of report seemed to be about climate change which is not IEA wheelhouse - but perhaps there IS no agency that can tackle the intersection of the two?
3)their FF numbers are exceedingly high, making climate seem more dangerous than more realistic fossil flow rates. (on the other hand, if they are high on oil and low on coal estimates, then it could be worse
"I don't know" should be an acceptable answer for anyone. unfortunately, it is not in our political nature to say those words. I find it difficult myself...;-)
I agree wholeheartedly with 1)
I agree that 2) is a bit odd, although to be honest I don't view it as a problem. Energy and climate issues are closely linked, so I'm glad to see the IEA is recognizing this.
In fact, it seems odd to say (in point 1) that they should mention environmental impacts besides climate change, then (point 2) say it's a problem for devoting so much time to the one environmental impact then do mention.
As for 3), I don't necessarily disagree, but I'd like to see their predictions for coal. Do you have that information? If so, I'd appreciate it if you would put it in a reply or in one of your future posts on the IEA report.
It's been 2.5 years since our Peak Oil and the Environment conference in Wash DC. Most environmental organizations who were given free entry tickets were no shows. Truly sad that 2.5 years have passed, we've burned more cheap oil, scaled more corn-ethanol, oil prices are lower than at our conference, and about all we have accomplished is a general acknolwedgement that oil is finite. At this pace of action, the cliff will arrive well before any meaningful, forward planning.
Coal-to-liquids on massive scale was our biggest fear then, but I am now more concerned about water.
This was a quick intro post - yes we will have both a coal analysis and an analysis on total fossil fuels-maximum c02 ppm - likely next week.
Nate,
Some positive developments in last 2 years; US has added 12GW wind power capacity, and has doubled wind capacity additions, most major car companies are now in early stages of testing BEV or PHEV for production in 2010. Legislation has been passed to encourage PHEV vehicles and further renewable energy. The SUV owners have seen $4 gasoline prices, and may be more reluctant to replace current vehicle with another gas guzzler.
The biggest development is that you now have a president elect who appears to understand the situation and is not owned by oil companies.
Nate wrote:
2)1/3 of report seemed to be about climate change which is not IEA wheelhouse - but perhaps there IS no agency that can tackle the intersection of the two?
The intersection is so strong that findings supported by the vast majority of scientific organizations should be recognized and given due weight.
Don't forget that GHG doesn't just mean CO2; methane is potentially more serious;
DoE's Office of Environmental and Biological Research
Earlier this summer...
The methane time bomb starts to go off
And then...
Hundreds of methane 'plumes' discovered
Nate also said;
"I don't know" should be an acceptable answer for anyone
Science Academies Call for International Action on Climate Change, Global Health
I don't have a problem with that. As I've said before, few people are joining these two problems of fossil fuel depletion and human-caused climate change. Those most concerned about climate change just assume "there are more than enough fossil fuels to burn to destroy us" and those more concerned with peak oil either think peak oil will screw us within a few years while climate change will take generations to harm us, and are often actually climate change deniers.
And the thing is that in both cases the simplest and single largest though not only solution to the problem - burn less fossil fuels, and eventually none - is the same. So people need to be joining these problems.
Really we need more of that in our society. While putting everything into little specialist boxes lets us have a good understanding of those particular things, if we stay in our box then we often miss out on great benefits from bringing the different fields together. Sometimes one solution solves several problems.
The agency which is meant to tackle the intersection of different problems is democratic government. That is imperfect and rather muddling, which is what we have freedom of speech for - to wake 'em up. And that includes freedom of speech for the IEA, to bring up whatever they think is related to their main concern.
I don't think it's a big leap to go from "how much energy will we have?" to "what are the effects of using it?"
I'm relatively new to this forum having been a lurker for several days and this being my first post
However, I have an extensive background in much that is being discussed in what I would characterize as apparently quite analytical and in general quite well reasoned fashion.
Unfortunately, the above has to be subject to a major "But" -- not when Climate Change is being discussed
On this topic -- the usual suspects seem to be dominant -- believing the "Al Gore Hype" -- "Hook Line and Sinker" -- where is the analysis and natural skepticism that should be present
When I read people uncritically accepting professionally ignorant press releases masquerading as science -- and in particular "settled science" -- I feel like the character in "Network" -- go to the window -- open it and shout "Its the Sun you Morons!"
in short -- Anthropomorphic Global Climate Change is a Monstrous triumph of pseudo-science over reason and true science -- the obvious natural variability of weather and climate on all time and geographic scales should be a given from thousands of generations of human vicarious observation and adaptation -- to whit:
1) we didn't make it cold -- e.g. Little Ice Age
2) we didn't make it warm -- e.g. Medieval Optimum, 20th Century Optimum
3) we lived through both -- adjusting as necessary
4) we won't make it cool -- although it will certainly get cooler sooner rather than later
5) we wont make it COLD -- although it is inevitable
Our real concern -- should be 5) -- as a real cold period (colder than the 1600's in Europe) -- would be a major human catastrope
In general while we can argue about the details we must remember the basics:
1) It's the Sun that makes this place not an unimaginably cold iceball -- the sun has not always and will not always behave as benignly as it has for the past few thousands of years
2) CO2 is Life itself and within a factor of orders of magnitude -- More CO2 means richer and more productive life
3) Warmer is almost always better than colder -- certainly when we are talking a few degrees C average
4) Humans have adapted to changing temperature, changing rainfall patterns and changing sea levels and will continue to do so
Finally for today -- Let's worry about providing adequate energy to keep the planet productive -- that means for the next few decades at least we depend on petroleum, natural gas, coal and most importantly nuclear with minor contributions from wind and solar and the rest of the "non traditional" sources
Westy
If you wish for a full, frank, and vigorous discussion of human-caused climate change, feel free to come to my blog, search for relevant articles and comment, I get an alert when someone does so I can respond however old the article.
The nature of this particular place does not allow me to give you the full and frank response you deserve.
This is not the thread for climate change discussions, we have been over that say at Euan's thread the other week... we do peak oil here.
Have a look at realclimate.org, there you can discuss on a forum dedicated to your postulations.
Here we want you to back up arguments with data and figures.
You said "in short -- Anthropomorphic Global Climate Change is a Monstrous triumph of pseudo-science over reason and true science --"
1) you mean anthropoGENIC, I assume.
2) I work as a researcher in that field - I consider my research quality to be of perfectly normal standard, compared to history and other fields. Not very nice of you to call my professional life "monstrous pseudo-science"....
Get me data mate.
OK -- here's a brief summary of how I learned to be a skeptic of anthropogenic or – perhaps it should be anthropomorphic as in AlGore’s Global Hot Air (sorry I meant to say Climate Change)
I started as an experimental Plasma Physicist studying "Hot Fusion" in Tokamaks using arrays of x-ray, pyroelectric radiometer and magnetic sensors to image the magnetic mode structures of the "instabilities" that limit the confinement of the hydrogen plasma. This research taught me several things beyond the detailed plasma behavior:
1) the sun also has a magnetic mode structure that is quite similar (except in geometry) -- in fact the events that we called "Disruptive Instabilities" that terminated the plasma confinement -- appear to be very similar to Solar Flares
2) Most computer predictions of the behavior of complex physical systems are subject to GIGO (Garbage In -- Garbage Out) and are not worth the paper that the plots are printed upon
3)Most systems in the real world are highly nonlinear in their behavior and even measuring the behavior -- let alone predicting it is difficult at best
4) I also learned a lot about processing and extracting frequency domain data from non-stationary processes
The next climate/energy relevant step in my professional career involved serving as the "engineering seat holder" on a citizen commission that served as the policy adviser to a quite-large municipally-owned electric utility -- here I learned what kinds of energy supply systems were realistic and what kind were of academic interest only. At the same time we introduced a pioneer appliance efficiency incentive program
The next step in my professional career involved looking at a lot of the National Climatological Data Base in order to analyze the propagation of radio waves through the atmosphere -- I found that the database was highly unreliable in terms of ocean-based measurements of ocean surface and near to surface water and air temperatures -- I identified several sources of error embedded in the data base some of which was due to a systematic change in measurement of seawater temperature and some of which was due to a combination of systematic and random errors in the most up-to-date (at the time) measurements of air temperature (particularly the diurnal variability and the effect of direct solar heating of the sensors)
Most of the rest is just my analysis combined with a natural distrust of theorists pronouncements and computer models that don't include all of the necessary physics combined with adequate initial or boundary value data and then "kinda fudge things" to make it up -- i.e. GIGO
Since the 1970's scare of an immanent new Ice Age -- I've been skeptical of Climate Scares that have later been shown to be Hype without substance -- as I'm quite convinced that the latest mild warming of the past few decades is of a similar nature and utterly undeserving of ALGore Armegadonism
Specifically recent climate change seems to be well described by being:
1) solar activity driven -- several potential mechanisms -- none proven as yet although the flux of galactic cosmic rays is apparently 180 degrees out of phase and strongly correlated with solar magnetic activity
2) apparently over -- using the admittedly flawed surface temperature record -- there has not been any significant change in global temperature over the past decade since the Highly Hyped Warmest year of the (..... fill in the blank) of 1998. -- in fact while a year doesn't make much of trend -- the earth seems to be cooling -- certainly it is not catastrophically warming over the past decade (its almost 11 years now since 1998)
3) the Sun seems to be (a) unusually active or (b) unusually quiet or (c) both
The answer is apparently (c) -- it was unusually active for the past few decades (perhaps since about 1830 although long term trends are still hard to extract from the combination of direct observations and measurements of radio nuclides produced by Galactic Cosmic Rays and deposited in trees and ice) and it now is kind making up for it by being very very late in starting Sun Spot Cycle 24
By the way -- much of the same pseudo-scare-based-analysis is being applied to "Peak Oil" or "Peak Hydrocarbons" , etc as has been applied to AlGore-based Climate Catastrophism.
We have reasonable understanding opf the processes that lead to Oil depletion in a field --- mostly due to local geology and locally economically supported extraction technology combined with the effects of economic demand determined price
On the other hand -- Planetary Oil or hydrocarbon resources is mostly guessing game on a moving playing field -- with some factors that include aggregate demand determined price combined with all of the technology involved with finding and extracting the hydrocarbons, global and local politics -- not a nice simple system that can easily be modeled -- mostly GiGO
You also mentioned history -- I presume in a disparaging fashion -- to boost the prestige of your chosen profession versus that of what you might consider to be less important or "brainy" ones
Well I like to consider myself to be an amateur historian when it comes to the influence of Climate on Human Life -- I'm a great believer in taking from the non-mathematical record what we can as well -- thus I'm perfectly willing to take advantage of pre-Galilean and certainly pre-Wolf (method of counting sunspot numbers since 1750) observations of sunspots and other anecdotal information to conclude that there was a "Little Ice Age" and it happens to have correlated pretty well with the absence of solar activity during the Maunder Minimum
Should we study what has happened in the past (through proxies, anecdotal observations and direct measurements) and try to understand what are truly at this time mathematically intractable complex systems -- Yes!!
Do we now know enough of how these systems behave to confidently predict the future of Global Climate or Global Energy will be -- No!
I'm sorry -- but anything else is SOPHISTRY
Westy
PS: if my spelling is not up to your standards I apologize -- sometimes my typing has trouble keeping-up with my thinking and I don't always notice the miscues
Well, since there was no Ice Age scare in the scientific press, you can let this one be the first "climate scare" you're sceptical of. [source]
Cosmic "rays" are actually about 90% protons, 9% helium nuclei, and 1% electrons. These have no "phase" measured in degrees or the like. What are you talking about?
You have a contradiction here. First you say that the data is no good, then you say that the data shows no warming.
You can say the data is no good, or you can say that the data shows something. Which is it?
Or could it be that your assessment of the reliability data depends on whether it agrees with your preconceptions? That is a very common though not admirable trait among many scientists.
Those notoriously sloppy scientists over at NASA give us the following,
Figure above shows:- Annual surface temperature anomaly relative to 1951-1980 mean, based on surface air measurements at meteorological stations and ship and satellite measurements of sea surface temperature; the 2007 point is the 11-month anomaly. [Green error bar is estimated 2σ uncertainty….]
They tell us,
"Through the first 11 months, 2007 is the second warmest year in the period of instrumental data, behind the record warmth of 2005, in the Goddard Institute for Space Studies (GISS) analysis. The unusual warmth in 2007 is noteworthy because it occurs at a time when solar irradiance is at a minimum and the equatorial Pacific Ocean has entered the cool phase of its natural El Nino – La Nina cycle."
So 1998 the warmest ever, not quite.
Uncertainty goes both ways; things could be more resilient than we think, or less.
Thus, if we're unsure about how the system works, then that means we need to be more careful about what we put into or take out of the system, not less.
If it is true that we don't at all understand climate and resources and our interactions with them, then things could be worse than even the most hysterical greenie says.
Think back to your lab days. If you have to move a piece of lab equipment you don't recognise, you ask how delicate it is.
"I don't know," says the boss.
"Oh okay I'll just kick it over here, then."
No.
This is all pejorative and useless except to illustrate you are acting to fulfill an agenda, not from a perspective of objective inquiry. You are not a sceptic, you are a denier.
By using insult as your primary argument, you show you have no real argument.
You are implying some scientist somewhere has "confidently predicted" the future. This is, of course, false. If you so poorly understand what modeling is intended to do, how can you bother commenting? You are being hypocritical when you speak of sophistry.
As to your background, there is nothing there that makes you a climate scientist, so you get no more points for that than our proverbial Joe Sixpack.
Then you toss out discredited point after discredited point and use logical fallacies to underpin your positions:
1. The supposed Great Ice Age Scare was wrong, so current climate science is wrong.
2. The data has errors, so it is useless.
3. There were sunspots and warm periods, this is cause and effect. If you know anything at all about climate science you know the sun's output has been completely deconstructed by better science and peer review of "research" in the area.
4. Al Gore is the Climate Devil! Strangely, you wish to be taken seriously when you post here acting as if Al Gore actually has anything at all to with climate science? Do you not realize he's not a climate scientist? He's a politician doing what politicians do, nothing more. Invoking his name does nothing but show *you* to be the propagandist, using the Appeal to Authority in order to discredit scientific endeavor.
Sadly, what damns your position more than anything else is your own writing. You are asking us to believe a person with the education and experience you claim would not know the difference between anthropogenic and anthropomorphic? Sorry, but I'm not buying. You prove the mistake was one of knowledge by then claiming it was a spelling error. No, sorry, it was a usage error, and one that would be nigh impossible for you to make if you are what you claim.
Also, it seems someone of a similar background was here posting not long ago, just as you are now?
I feel confident in labeling you both a troll and a sock.
Jeers
Westhighlander wrote;
I have an extensive background in much that is being discussed
Perhaps you can share your educational and research background with us, so that we have an understanding of said background. So far, all I see is a regurgitation of denialist propaganda.
Will Stewert said,
"So far, all I see is a regurgitation of denialist propaganda."
Will, I know you have been coming here long enough to know this, but really, I would try to use a different insult than "denialist".
I may not agree with everything or anything that Westhighlander said, but calling someone a "denialist" here has kind of lost it's sting. It is the term used to refer to anyone and everyone who does not agree with everything claimed and said by the inner circle.
RC
Rather than "denialist", I have many other words which I think aptly describe the people who deny or downplay humanity's part in climate change. However, as I said before, that sort of full and frank description and discussion does not have a place on TOD, which is why I invite such people to come to my blog.
So far, none have come: one or both of courage or interest have been lacking. They prefer places where they are not seriously challenged.
ThatsItImOut said;
calling someone a "denialist" here has kind of lost it's sting. It is the term used to refer to anyone and everyone who does not agree with everything claimed and said by the inner circle.
"Inner circle"? Read the scientific consensus by over 30 scientific organizations and then get back to us. I don't consider Rush Limbaugh and James Inhofe to be on the same level...
If the term "denialist" has "lost it's sting" (and note that I used it as an adjective), then what are you complaining about?
Troll, what was your former sock?
As with all denialist trolls, provide even one peer-reviewed paper that has withstood critique.
Actually, don't. You're wasting bandwidth with faerie tales.
Jeers
Nate I agree with all three points. 2) raises an important concern as peak oil and climate change are very much related given that CO2 emissions are a significant factor in global warming, a hypothesis still requiring much more investigation. "I don't know" is really, really the best response. If AGW turns out to be true AND early peak oil also turns out to be true, we could use an agency to examine the intersection of the two hypotheses. TOD might be a logical place to start.
In many countries global warming is more accepted than peak oil so the hidden message is: the oil may be there but we cannot continue on a growing oil path because of CO2 limitations. Because of lack of integration of the different chapters this has not found its way into the final oil production graph.
Hello Nate,
Thanks for the write-up. We poor slobs without access to the report appreciate it. As you essentially said, the only real surprises in this report are that they did it at all, and that they appear to have been relatively truthful about decline rates, even if not completely candid about future scenarios and net energy. A big step forward, at least.
I must question your comments on Climate Change, however.
One would certainly hope so! The IPCC report was behind the curve before it was even presented to the public. It was released almost two years ago. That makes the science behind it anywhere from 3 to 6 years old. I am certain you know this, so don't understand why you would use it as your reference point.
This is especially true with regard to climate sensitivity, which were based in the long-standing use of the range set in 1979 by Charney using research from Hansen and Manabe.
The IPCC paper was primarily useful as a wake-up call to the general public, not as an up-to-date scientific treatise. How could it be with observable changes coming so fast that all of our models are hopelessly behind the curve, too?
Can you please justify your use of Rutledge as your touchstone here given the work of Hansen, et al., is the Gold Standard with regard to climate sensitivity? With all the discussion of this topic on these forums, I find your surprise at the 6C number - commonly and often stated here and in the media - a bit strange.
Just to be clear: the 6C comes from Hansen, et al. Given the hydrates are melting a century ahead of schedule and potentially store more carbon than all other fossil fuels, I'd say 6C is a bare minimum, wouldn't you?
Cheers
The tables and graphics for IPCC emissions (SRES) scenarios can be found by browsing here:
http://www.ipcc.ch/
What these may mean for projected temperatures are here:
http://www.ipcc.ch/graphics/graphics/syr/fig3-2.jpg
I notice that only some parts of one scenario group, A, goes up near 1000 ppm, and that the upper end of these scenarios get towards 6 C.
It appears that the IEA is presenting a "worse case" from that perspective.
However, I would caution that while the IPCC scenarios have way overblown fossil fuel reserves, they clearly underplay positive and delayed feedbacks in the climate system. This is key: the climate system is dominated by positive feedback loops. While the climate models play out the physics of the planet's heat balance, they don't incorporate long-term albedo changes from ice loss and vegetation shifts. Neither do emissions scenarios include liberation of stored carbon from soils and peat, vegetation death, bubbling methane hydrates, etc.
So, it is quite possible for fossil fuels to push the planet to 2C above 1990 levels, and then the system takes off on its own without anymore burning of coal, oil, natural gas, etc. In my view, 6C is NOT a worse case scenario given the existing fossil fuel reserves with peak everything fully acknowledged.
Thanks Jason. Iw a ponering this lat night that Peak Oil might just be the only thing standing between us and catastrophic climate change. Thanks for the wake up call as I was begining to feel a lttle hope that global warming may not be inevitbale. I still think that there needs to be a lot more work done to explore how FF decline rates will impact climate change. However the risk is that vested interests may use such research to push for short term BAU rather than investing in mitiagtion strategies that will extend the oil age and allow for safe and ordered population decline. If I have to choose, I'll take the world with no oil, gas or coal, over the world with no rain, acidified oceans, depleted soils and coastlines that march rapidly inland.
For an academic paper evaluating the link between global warming and peak oil you may want to have a look at,
Implications of "peak oil" for atmospheric CO2 and climate, http://arxiv.org/abs/0704.2782
P.A. Kharecha, J.E. Hansen (NASA GISS and Columbia Univ. Earth Institute). Although they are rather optimistic about peak oil dates, relying on the usual official data for reserves and future production (a year ago)
"6C is NOT a worse case scenario..."
That's why James Hansen claims the stop should be at 350ppm, not 450ppm or higher, and that a way to accomplish this is to sequester coal by leaving it in the ground.
This caught my attention:
"Expanding production in the lowest-cost countries will be central to meeting the world’s needs at reasonable cost in the face of dwindling resources in most parts of the world and accelerating decline rates everywhere."
Talk about political! They are looking at OPEC and national oil companies and saying, "Please let the International Oil Companies extract your resources."
Now, take a look at slide 7. Who is doing the job of keeping decline rates low? The nationals!
Another issue I have, which you bring up Nate but I want to highlight. If they are so worried about climate change (and that's nice), then why aren't they applauding the demise of easy and cheap oil. Why don't they give us models on the potential build out of alternative energy systems and conservation? That would be an actually useful service. Instead, they are pleading for the money to permit the planet to go to 6C...huh? (Not that I believe any amount of money would get those reserves.)
My completely non-insider suspicion is that the answer to both my questions is the same: The IEA is basically a sanctioned political tool of the international oil corporations.
Based on your summary at least, this report is a load of inconsistencies and should be easy pickings for TOD.
Ya think? What could ever have given you that idea?
"The IEA is basically a sanctioned political tool of the international oil corporations."
Good observation for starters. Did you hear the story of the three bears? One of them (govts of importing countries) married a giraffe (the IEA) and the other two (the IOCs) put him up to it (conjure up visual image here).
Who funds the IEA? Isn't it the govts? Maybe the IOCs lobbied for it to be set up, but I recall its inception during the '70s oil crises as basically a reaction by govts motivated mainly by energy security issues.
Question: Did the IOCs lobby the IEA to suddenly become aggressively proactive on climate issues, even though they are not so aggresive themselves? Was the IEA's new view on climate at the behest of the govts or the IOCs? From the govts' perspective, the IEA is just jumping on the bandwagon, but the potential benefit for the IOCs is that they can now just borrow the IEA's views when they address climate issues. ("We're not wing-nut advocates, just repeating this, you see.")
Well written stuff Nate on the IEA changing their models to reflect economic variables better. As written in the report.
"The oil and gas production and trade models were expanded tot take better account of economic variables and to reflect the recent surge in cost inflation and the fall in the value of the US dollar against most other currencies." (IEA World Energy Outlook 2008, page 61)
Is there a hint of understanding in the report of the problems arising in the world oil markets when exporters increases consumption?
[Edit: Looks great!]
My Question is this: for how will the black line flow to the left if what goes the other way is increasingly worthless? (or perhaps just 'worth less')
Nick.
I expect a shinking of the available oil on the world market to push the price up since it is so vital for economic activity... There are limits to how much less oil the importers can use without catastrophic results, so the willingness to pay up should be there.
Also increasing world oil prices might convince exporterts that it might be in their economic interest to tune down internal consumption... But as long as prices are just modereately high and export surpluses for exporters remains strong this pushes in the direction of more internal consumption.
Have you any eperience with 'Systems Dynamics' modeling? I think you have the start of a nice model there, need some equations to model the flows now. At its most simple you can use Excel...
One v.important thing you don't show though is 'Petrodollar Recycling' -a lot of the money that goes to the Exporter bubble gets fed back as purchase of goods, bonds (debt) and other financial assets from 'Importer'. If America ever loses its global Dollar Hegomony or defaults on its debt then this pipeline is cut and "VERY SERIOUS THINGS" would happen... Watch this space?!
Nick.
I don't have experience with pure "System Dynamics" in a theoretical sense but I have done a lot of programming and made a couple of quite dynamic systems that way.
What I fealt as the biggest ommision from this illustration was that it didn't represent depletion and reserves... I was thinking about adding som graphics to show that too...
Then one could program a system, plug in reserves, production rate, decline rates, export share, internal consumption share, demand growt in both imporing countries and in exporting countries, price level where export is favoured over internal consumption.
I guess if you run such a system simulation then pretty fast you will end up with a scary picture of available oil on the global market.
I thought this slide from Ken Verosub's ASPO 2008 presentation did a good job of summarizing the different viewpoints on when oil production would peak:
Clearly the IEA believe in the larger values for conventional reserves. Here is a main point from their summary:
The USGS is a tool of the energy industry. For U.S. citizens, you can see your tax dollars at work: to bamboozle the American public while the fat cats take your dough to the bank, ha.
Meanwhile back at the ranch, the U.S. Army Corps of Engineers said Peak Oil is now.
Venezuela has certified more than 400 billion barrels of heavy oil. It is less expensive than Alberta tar to extract. How long will they sit on their position without exporting? They might be able to get a quota like Saudi Arabia but more, certainly not less.
There could just as well be 3.5 gazillion barrels, if the money isn't there to recover it, then it stays in the ground and might as well not even exist.
This is the main problem with these optimistic projections - they just assume that whatever might be in the ground will be recovered, that however much money is required will be provided, no matter what. These are not valid assumptions. In particular, they ignore the fact that the marginal cost of each additional barrel of oil production capacity is getting higher and higher. What this ultimately means is that the portion of the World's GDP "pie" that is going to fund oil exploration and development must expand more and more, relative to all other slices of the pie. This is going to be true even if the global GDP pie continues to grow, which is increasingly doubtful. The implicit assumption is that continued exploration and development of oil resources is and will continue to be the number one global priority, trumping all other priorities. Really? I'd like to see some evidence to back up that assumption.
(Note: I am aware that oil prices may increase as much or more than the marginal costs of adding capacity, thus making even very costly exploration and development projects economically viable. But it is also true that increasing the price of oil results in oil itself taking an increasingly large slice of the global GDP pie. This will leave less of the pie for everything else, including oil exploration and development. It is not unheard of for opportunities of exceptionally high profitability to go unrealized in a declining economy, simply because nobody has the money necessary to seize the opportunity and make a go of it.)
The alternative hypothesis is that the slice of the global GDP pie that is presently dedicated to petroleum exploration and development will continue to maintain roughly the same proportion as it does now and has historically. This in turn implies that as the marginal cost per unit of capacity added through exploration and development increases, FEWER, not more, units will be added to capacity in the future.
Look at what has actually been happening in the recent past, look at the megaprojects list, and then explain to me why this alternative hypothesis does not better accord with the real world.
Another alternative is that the productive value per unit of oil production increases dramatically through efficiencies -eliminating the 'low hanging fruit' first by substitution say- in this way GDP might not have to fall and could actually increase as these new industries begin to thrive.
IMO we shouldn't lose sight of the fact that the Earth is awash in Energy, its just in a weak form and transition to its use is going to be painful. $50 oil is not really helping anyone.
Nick.
We also shouldn't forget that other systems outside of human endeavor require that energy to keep running, and that we depend upon those systems for our own survival. Just because the earth is "awash in energy" doesn't mean that we can or should make efforts to exploit, and even if we did, we'd still run up against a wall in terms of maximum extraction rates eventually. The world is finite, and the sooner we get that fact through our thick skulls and change our behavior accordingly, the better for all of us.
Laherrere has a great paper, very recent, discussing ultimate reserves and the multiple lines of reasoning supporting the lower number. He looks at Hubbert Linearization, backdated discoveries, technical 2P reserves, new field wild cat vs discovery creaming curves.
Peak (or plateau) of fossil fuels Oct 2008
One of the charts I like best is this one contrasting political reserves against technical reserves. Since production passed discoveries in the 80's, technical reserves started to drop. But political reserves just kept increasing. His estimate is that we have ~800 GB of conventional oil left (2 trillion total).
When you put the WEO report together with the report by Energy Watch Group (funded by the German Parliament), "Peak Oil Could Trigger Meltdown of Society," that concludes that Peak Oil is now, and that alternative energies will not fill the gap, things look bad,
"By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame."
http://www.globaliamagazine.com/?id=482
Yikes alive!!!
". . . things look bad,"
Indeed, things look bad. I think that oil production will not increase but instead will decrease, regardless of what happens to prices.
A "supply gap": What exactly does that mean? I think it means that we are in for a Greater Depression caused by decreasing oil production and rapidly diminishing net oil exports. All the stimulus packages in the world will not help much, because expansionary fiscal and monetary policy assume that a declining economy is declining because of deficient demand. Measures to stimulate aggregate demand will just drive up prices--not drive up real GDP.
In contrast to the Depression of the nineteen thirties, when the problem was declining aggregate demand, the Greater Depression that we may now be entering will be due to continually declining net oil exports. I can only imagine an end to the Greater Depression when me make a successful transition away from fossil fuels, and I fear this will take decades. Thus my crystal ball shows declining real GDP throughout the world. As usual, the poor countries will be hit hardest, but the decline in living standards for rich countries will be dramatic.
Projections for an increase in oil production over the next dozen or twenty years are not based on the data, in my opinion, but rather are based on faith and hope in new technologies to extract ever more oil and to find new oil. Santa Claus may exist, in the sense that: "Yes, Virginia, there is a Santa Claus." but I think faith in new technologies to increase oil production is sadly misplaced.
Hi Don,
you don't think we might have just one more mini 'blip-up' in a couple of years b4 things get REALLY bad (post 2012?)...
I'm wondering whether the 2012 London Olympics might be the last one with full stadiums, sigh.
Nick.
I'm expecting the 2012 Olympics to be a farce, and doubt that even the stadiums will be completed.
The UK is far more over-extended than the US, and the crash will be enormous.
You ain't seen nothin' yet!
Let's just hope that the 2012 Olympics won't be like the 1916, 1940 or 1944 Olympics!
Synchronised hypothermia is the biggest scheduled event, I believe.
Ah, no, that's a Winter Olympics event.
You raise an interesting point: What exactly will be the timing of the Greater Depression? I don't have an answer to that question. It is possible that there will be a demand-led recovery next year because of all the bailouts and all the stimulus from increased deficit spending. I don't expect this recovery (if it happens) to amount to much. The best guide to timing the Greater Depression is to look at the volume of net oil exports: If they turn down fairly sharply in 2009, then I expect next year to be the first true Depression year. If they hold up fairly well, then real GDP might be about flat--a recession with rising unemployment, but not yet the Greater Depression. In other words, the Export Land Model tells the tale, and it is telling me that real GDP is going to decline for many years to come. Though there is not a one-to-one correspondence between declining rates of net oil exports and declining rates of real GDP in the U.S., I think there is a tight linkage between the two variables--with rates of change in real GDP being the dependent variable.
Oil prices could go either way. If the global decline in real GDP is faster than the decline in net oil exports, then oil prices could stay low for years to come. My guess is that within a few years the rate of decline in net oil exports will be faster than the rate of decline in real GDP, and that this difference will trigger an abrupt upsurge in oil prices. Something else I do not know is whether we're going to have deflation or inflation over the next few years. Eventually I think inflationary pressures will trump deflationary ones, but "eventually" could mean a few years from now. So, in my opinion, nominal oil prices in the near future are anybody's guess; we have no way to predict accurately what will happen to demand expectations, and changing expectations of demand dominate short-term price changes in oil.
Hmm well I disagree to some extent. We have known demand curves from the great depression and our various recessions. In general our recession have been to short to get a long term feel.
However I've been looking at oil demand in depressed regions of the US which are larger then most countries. Here we find routinely that once the economy stagnates demand stagnates. It does not go up or down.
Whats interesting is if what we are seeing now will be the real future i.e demand falls faster than supply which means we have nothing to really worry about as far as peak oil goes. It does mean our economies will slowly revert to zero growth as attempts to grow hit peak oil and cause recessions.
So our current situation is either a short term anomaly caused by above ground financial factors or its a real trend.
However all the data I can find about demand in stagnant and shrinking economies shows it does not change much.
The example I like to use is someone making 100k uses about the same amount of oil as someone making 50k. So you can have some serious economic changes without changing intrinsic oil demand.
The demand for oil will go down as a result of the Greater Depression: unemployment will rise a great deal and the real wages of those employed will also go down. What nobody can say at this point is whether demand for oil will go down slower, at the same rate, or faster than the net export supply of oil.
I think we saw the peak of crude plus condensate production in 2005, and since then we've been on a plateau. Production will either rise or fall from this plateau, and I think it will fall--gradually at first, then faster and faster.
My best guess--and it is only that, an intuitive feeling that I cannot back up with hard numbers, is that net exports will decline faster than real GDP declines within two years. Thus the huge fact is declining oil production in the future, which will cause a global decline in real GDP--faster in some countries, slower in others. In oil exporting countries real GDP could increase for years to come, especially as oil prices rise.
Eventually oil prices will rise a great deal as declining supply trumps declining demand, but for now expectations of demand dominate the fluctuations in oil prices. Expectations can turn on a dime and are far more volatile than the fundamentals behind demand for oil. Thus I expect continued extremely high volatility in oil prices--but the long-term trend will be up. Even if we get a deflationary depression (as predicted by Stonleigh, Ilargi, and Roubini, among others), I expect the real and nominal prices for oil to increase over the years, no matter how bad the Greater Depression becomes.
In my opinion, many people were surprised by the abrupt fall in oil prices from from $147 per barrel to where they are today because they did not understand or appreciate the volatility of demand expectations. Expectations, not fundamentals, underly short-term demand fluctuations. Expectations, not fundamental numbers, drive speculation. And expectations are especially tricky, because traders care not so much about their own expectations as they care about what they think other traders expect. Keynes had some good words on this subject when he wrote about expectations in his "General Theory" book.
Once we start global oil production decline (pretty steep stuff), demand will always be higher than supply. The IEA says demand will increase at 1.6% annually. Of course the IEA may be crazy, but the demand for oil will increase in the Middle East, China, and India, and it will continue in the rest of the world -- to keep things moving and public works and stimuli stuff.
Then add in the drop from declining exports and we are in trouble :(
It's time for Peak Oil Preparations: more red wine :)
I agree about stockpiling more red wine; my favorite is Gallo Hearty Burgundy. But it is possible for the demand for oil to decline faster than the supply of oil. Suppose global GDP falls 25% over the next two years--not especially likely but quite possible. If both real and nominal GDP decline at this rate, then the price (both real and nominal) of oil would decline.
The most likely scenario for the Greater Depression, however, is oil supply declining faster than real GDP declines, thus causing rising oil prices--unless there is deflation. If there is drastic debt deflation (as predicted by Ilargi and others), then the price of oil will fall as aggregate demand and also demand for oil go down much faster than the supply of oil declines. Debt deflations tend to be abrupt; they feed on themselves with powerful feedbacks.
A few weeks ago I thought the odds of debt deflation were fifty-fifty. Now I think the chances are less than fifty-fifty, but they are still significant, perhaps one chance in three.
Remember, the rest of the global demand is increasing, and places like China, India, the Middle East, and Mexico will use public works to keep the economy going, and so too will the U.S. and Europe, etc. -- to keep people employed and keep them shopping and business as usual. This was done just a little during the 1930s depression. Even now, federal and state highway projects continue, and will continue as the number of cars on the highways decreases.
Don I agree 100% that at the moment its a expectations game.
Also I might add that the current situation fits perfectly with my assertion that when complex systems collapse
they effectively lie about their real state and its impossible to determine the truth.
With oil we have a almost bimodal situation either its worth 200 a barrel or 50 no real in between solution.
Technically we cannot determine which situation was telling the truth earlier this year or the second half.
One is incorrect.
Don:
Instead of a "Greater Depression", I'm thinking it will be more of "The Great Decline". I see both global and US real aggregate and per capita GDP declining to a permanently much lower level over the course of next several decades, and maybe continuing all the way through the rest of the century.
Oil supply is a major driver in this, but it is not the only one. All non-renewable resources are depleting, and due to the externalities driven by overpopulation and industrial production, we've been degrading many renewable resources (like fisheries and farm land) as well. ACC is going to take its toll as well, and it is very possible that the toll might be very frightful indeed. In short, we cannot sustain global or US populations at anything like existing GDP levels. We are going to have to decline, sooner or later, one way or another, to lower, sustainable levels.
Even were it not for having overshot the carrying capacity of the resource base, we have a massively overleveraged economy that is largely dedicated to useless "bling", escapist fantasy, and imaginary financial instruments; this can't go on forever either, as we are now discovering.
For my own planning purposes, I am hoping (incurable optimist that I am!) that the US just MIGHT level off at around 25% of present real per capita GDP - IF WE ARE FAR MORE LUCKY THAN WE HAVE ANY RIGHT TO BE. It could, of course, end up far worse. I am hopefull that this will be a somewhat gradual process stretching over many decades, probably in a stairstep pattern rather than a smooth downward curve. I interpret what we are going through now as the first step down the stairs; there will be further steps downward yet to come. As for the rest of the world, there will be a very few places that might be a little better off than the US, and most will be far worse off. I feel badly for them, but really don't know what to do about that.
Whether oil (and by implication, through substitution, all energy prices) becomes less affordable through price increases, or whether one becomes less able to afford it through declines in one's real income, really doesn't make all that much difference in the final analysis. Most likely, our future will be a combination of both.
It will make a world of difference whether oil prices are high or low.
In the low case scenario then most of the remaining supplies will simply not be developed, and so supplies will be far lower than in the high oil price case, and the chances of getting through it in any reasonable shape will be very different.
It is also a lot tougher to finance other energy sources such as renewables or nuclear energy if the price of fossil fuels is low.
In regards to oil and the 1930's depression, most people are unaware that this was a period of major oil discoveries, including the East Texas Field, the largest in the lower 48 states. It wasn't lack of demand that caused the all time low oil price, it was too much supply. Many of the discoveries were made possible by the introduction of introduced geophysical surveying instruments in the late 1920's.
Prices of all commodities fell, and those who had jobs saw their standard of living rise.
Most economists probably failed to appreciate the low oil price and the adaption of electric power by industry, particularly the small electric moror, for increasing productivity and lowering the price level overall. 1
The frightening thing about the Second Great Depression is that we are facing the opposite conditions with oil. This raises the posibility that the depression may be endless. Hopefully the government will halt all new car sales and build mass transit.
1. Energy at the Crossorads by Vaclac Smil discusses the role of electrification on industry and living standards. An excellent energy book.
http://www.easttexasoilmuseum.com/
My wife worked for John Perritt, Mayor of Ruston, LA, years ago. Mayor Perritt was from Tyler Texas and once told me a story about what it was like living at the time of the East Texas oil boom. Part of the story was about the thousands of people who came to East TX looking for work. He told me that so many people were on the highway that all you saw driving at night were miles and miles of headlights.
Question:
This report acknowledges that future oil supplies are going to be 'limited'.
But just because there are X zillion tonnes of reserves available at $Y/bbl doesn't mean that it will actually get produced.
Maybe some producer states might want to keep this highly valuable commodity in the ground for 'future generations' or as a 'national strategic reserve'. Any mention of this in the report?
I suspect not,
BobE
"Maybe some producer states might want to keep this highly valuable commodity in the ground for 'future generations' or as a 'national strategic reserve'."
Yeah, that's going to be some valuable "national strategic reserve" after the infrastructure that can get it out of the ground and move it is allowed to fall into disrepair and decrepitude. One assumes the producer states will eat sand in the meantime, and just tell the nations and banks they owe to go to hell.
Sounds like a well planned future to me.
RC
Does anyone out there have a chart showing the IEA's predicted oil price each year up to 2030 they can share?
Their 2030 price is $200 -is that in 2008 $s? (about 3.6 x todays price...)
Hi
the $200 is in nominal terms - I just need a graph showing the oil price for each year up to that point, but haven't come across one yet...
Table will be up tomorrow in next IEA post.
Rembrandt
Here is a price chart based upon some WEO forecasts,
What are the chances that each years IEA WEO had analysis that just so happened to come up with a price forecast for 2030 that had virtually zero deviation from the price in the year of the analysis?
Cheers,
thanks for the chart!
A little comment on ERoEI. In one way of looking at it, the ERoEI includes the energy for running the janitor's fridge, and basically all the energy used by the things the janitor buys with his wage. The EI can be reduced, and hence the ERoEI increased, by reducing the janitor's (and everyone else's) wage. This will happen if it has to. Note that wages can't be reduced in the energy sector alone, or the janitor will go elsewhere. So this predicts the very obvious fact that wages will fall in real terms as ERoEI falls.
Secondly I would argue that at some level of abstraction there are two inputs to human activities: energy and expertise-weighted workers. When there was an excess of available energy then wages were good and energy prices were driven to the floor. When there is a shortage of energy then wages will be driven to the floor, as they were before cheap energy created the Industrial Revolution and the middle class.
I think you have written a very nice two paragraph summary of this TOD article: At $100.00 What can the Scientist say to the Investor
Where in hell are they getting the estimates for the red and light blue portions of the first graph above? The red field requires that there by an *increasing* discovery rate from 2012 onward. This is completely unphysical as the pattern established by the last 50 years of discovery, which is the basis of the whole concept of peak oil, is that we are in declining discovery regime today (sporadic flurries of not-so-big finds as in 2000 do no change this fact).
Is there any evidence for these mysterious yet-to-be-developed fields that are going to be yielding over 15 million barrels per day around 2020? I do not find the light blue shaded portion of the graph credible at all. The first graph is essentially pulled out of the *ss, contrived to hide the impending decline in global oil production.
The stuff one pulls out of one's *ss can at least be converted into methane, a valuable energy source. That, at least will contribute more real energy to the world than will these totally imaginary projections.
Imaginary Energy Abundance?
Nate writes,
I haven't read the IEA report, but I can make some general responses to this anyway.
There are a few different things mixed up here, as in most discussions of climate change.
Firstly, the IPCC does no data collection or experiments of its own, it simply studies, reviews and summarises the existing scientific literature, and in general takes a conservative view. This is very common in scientific boards - if they err on the side of understating the dangers, then a few years later when things turn to shit people will still listen to them; if they err on the side of overstating the dangers, then a few years later they'll be ignored. So if five studies give 450ppm are resulting in 1, 2, 3, 5 and 8 degrees warming, they'll go with 2. They don't want to be the boy who cried "wolf!"
Secondly, because these different gases have different warming effects, to make it simple we when we speak of different concentrations of the different warming gases, we speak them as CO2-equivalent in terms of warming over a century. So that 1x CH4 = 23 x CO2, and so on. It's much as though we measured all drinks in terms of how many bottles of Budweiser they were.
This means that when we talk about different warming scenarios of 450ppm or whatever, sometimes we're speaking of 450ppm of CO2, and sometimes of 450ppm of CO2-equivalent. The distinction is not usually made in the general media because the values are quite close (somethign like 370ppm for CO2, but 376ppm for CO2-equiv from memory, but don't quote me), but is an important one. It's also important for the next point.
Thirdly, CO2 from burning fossil fuels currently contributes about 55% of all greenhouse gas emissions in terms of warming effect.
A farmer who has no fossil fuel-powered machinery, but who has a solar-driven cool room to store his vegetables with CFCs in its system, who clears acres of native forest and burns them off, who applies artificial nitrogen fertiliser to his land, who keeps a rice paddy where organic material rots down, this guy is a big greenhouse gas producer even though he burns no fossil fuels.
We can easily imagine scenarios in which fossil fuel use plateaus or declines (because of resource peaks, carbon taxes, treaties, wars or whatever), but where the other greenhouse gases increase - because of climate change much agriculture fails, and so we make more efforts with it, clearing more land and putting in more fertiliser, thus getting more methane from rice paddies and livestock, more nitrous oxide from manure and artificial fertiliser in agriculture, more CO2 and methane and less CO2 absorption from deforestation, and so on.
Lastly, there are two temperature rises commonly mentioned with climate change - "by 2100" and "eventual" (by 2500 or so). A scenario where temperature rises 1C by 2100 may give us 2C or by 2500, as all the feedbacks come through. That's another distinction often ignored by the general media.
Thank you for this post, I'm in the process of saving it onto my hard drive. 5 stars.
Rather than trying to prove that we will run out of carbon before global warming gets out of control, maybe the best thing is to forget about Peak Oil and just concentrate on reducing greenhouse gas emission by 80% of 2006 levels by 2005.
I stumbled across something the other day that could join a few dots. I was presented with the question "Where does money come from?". At first I thought it was an easy question and have enjoyed asking others and watching their ensuing confused looks (less than 5% comes from the mint in case that is what you thought). Of all the people I have asked only one knew the right answer and no doubt some of you will know also, but most won't.
We live under a "Fractional Reserve" System, which is a literal time bomb. Money is created from debt. When anyone gets a loan or a mortgage, the bank doesn't go to it's vault and retrieve the money for you, it creates it out of thin air, on the promise that you will repay your loan. Your loan becomes brand new money conjured from absolutely nothing by the bank and put in your account with a keystroke. That same money disappears from circulation as you repay the loan.
As you spend your loan the new money becomes the basis of new loans on a diminishing "Fractional" basis. At the beginning of the Fractional Reserve system, 300 years ago in London, a bank was allowed to lend double what it had in reserve. This later blew out to 9:1 and today there is no limit at all. The banks can create as much money as they want, limited only by the amount of debt they can create. BUT, if everyone paid back their debt, there simply wouldn't be any money at all!
To add insult to injury, the "new" money created by banks on a daily basis, does not include the money to repay the interest! There is never enough money, ensuring continual debt forever, with foreclosures built right into the system. The real reason governments fear negative growth so much is because it reduces the money supply. They have to spend to create more money, and consequently increase their debt at the same time! Just to make sure there is enough money in the system to ensure growth.
Guess where all the interest goes...to the few men who own the "private" central banks!!! You don't have to think too hard about the influence that they do yield.
Because all debt can never be repaid and must be borrowed, an exponential curve on debt follows. The system has only one end - implosion. For a far more detailed and fascinating explanation, this film tells it all http://video.google.com/videoplay?docid=-9050474362583451279
Thus, if peak oil represents permanent negative growth, in short order there will be NO money and a complete collapse of everything, the system guarantees it.
It was a big shock to me to learn that we have operated under such a totally insane and corrupt system for so long. The reason for events over time become clearer.
Peak Oil is suddenly much more dangerous.
"At first I thought it was an easy question and have enjoyed asking others and watching their ensuing confused looks (less than 5% comes from the mint in case that is what you thought). Of all the people I have asked only one knew the right answer and no doubt some of you will know also, but most won't."
OzStrat,
Are you saying that the people you asked did not know where money comes from, or just that they were not familiar with your rather...uh, let's say "interesting" ideas of where it comes from?
"The banks can create as much money as they want, limited only by the amount of debt they can create. BUT, if everyone paid back their debt, there simply wouldn't be any money at all!"
If you get a chance, try to explain how that would work in practice, if you will. (After all, if as you say the banks can whip money up out of 'thin air', they would simply whip up some more when all the debts were paid, and the new money they whipped up would have even more credibility than the old money, after all, there would be no debt against it (all the debts were paid, remember, so the banks, instead of having no 'money' would have all the money, and be able to 'whip up' more with all the credibility in the world, UNLESS you assume that all human economic activity would just STOP and then there would be no demand for money.
You want to know what money is worth? Go down to your local hooker or pusher, and see what they are charging.
RC
I guess you didn't watch the film. Your concerns were addressed.
I tried to make the explanation as simple as I could and maybe a little too simplistic for your liking. I hoped it would inspire some to look further to get the full picture. I strongly suggest you do if you want a better understanding of what is going on in front of you. I do not have the desire or time to write a complete explanation. That is why I gave you a reference.
"I do not have the desire or time to write a complete explanation. That is why I gave you a reference."
I did see the film, although it was not easy, I have dial up so I had to go to YouTube on my Iphone to watch it in segments.
What it looked to me to be was an elementary history of banking, nothing more or less. If someone was shocked by it, it must be because they had never been educated on the nature of banking to begin with. I remember seeing films like this in undergraduate school and even in high school economics class. Well, except for the "workers utopia" weirdness near the close...
Henry Ford once made the same or similiar arguments against bankers and banking, but he had a tendency to think of all bankers as Jews, and vice versa. Ford complained that any industrialist was a slave to the bankers, and swore against using the banks...ohh, only after he had used the banks money to make billions and then he could afford to accuse them of being currupt Jews!
Did people really assume there were vaults full of gold sitting behind their dollars, or Pounds, or Yen or Euros? What a childish image of banking and economics in general!
In the film, the narrator asks "Isn't a collapse inevitable? I would reply OF COURSE! We have been through repeated collapses. The railroad barons used to call it "re-syndication". Then it was called "Panics", and then "depressions", and now, (I love this one) now we are calling it "deleveraging"! The collapse usually comes by creating a distrust in the currency, banking and economic system. And of course, that is what this film is doing. But after the collapse, who always benefits? That's right, those with money, whether they are bankers or not! Did the richest men in the world, let us say Bill Gates or Sam Walton or Ted Turner get their wealth from lending? No, they actually got it from borrowing!!! They then did what very few people manage to do...they used the money they borrowed to PRODUCE WEALTH!~!~ SHOCKING CONCEPT ISN'T IT!! Why, it's, it's, it's, FILTHY CAPITALISM!!
I constructed an introduction to my own counter argument in my prior reply to you, and nobody bothered to refute it, except to say that a banking system that was born before the age of oil has survived three hundred years and took humankind from walking in horse and mule dung to the moon as a sham. I assume that you will forgive me if I forego judging it a failure just yet, given that I do not hold out high hopes of surviving three hundred years myself.
I used pushers and hookers as examples in that post for a reason. Because no matter how much we may wish otherwise, humans want one thing: MORE. More security, more action, more sex, more fun, more status, more food, more kinds of food...more of more if you will. That is the problem, is it not? People will borrow on potential future income and production because they want MORE NOW.
And if there are no banks, the whores and pushers and bookies will loan their services at a cost plus basis, let us call it a "waiting fee" for their "patience", can we dare call this "banking service"? And they will collect at the threat of violence. When was the last time you were beaten nearly to death by your banker for not making your car payment or your house payment? Trust me, there are ahem, "businessmen" who will do just that if you fail to pay them back promptly and with FULL INTEREST. Usery may be a sin. So is gambling, drunkeness, and cavorting with whores, but that don't stop it from happening does it?
If what the film hoped to show with their "goldsmith" example (or was it Goldstein they were trying to say?) is that the banking industry makes as much money as it can, and uses every tool it can to do so, I agree, that's what banks do. It's just that I am not surprised by this. What I am surprised by is that anyone would be surprised by this. The history of power in the world has been in great part the history of debtor vs. creditor. With no government or civil control, the creditor will use violence as a way of collecting if allowed to. They are called "loan sharks" and "bookies" for those who do not know.
To my knowledge, Citicorp or Wells Fargo will not send "goons" out to beat you up. But make no mistake, they will use EVERY other tool they can to collect their money and make more of it. And the one thing that the banks never have to worry about is that people will stop wanting MORE and stop being willing to borrow the money to get. That everyone will pay their debts, and not demand more and thus end the need for "money" seems about as pie in the sky as any idea I can imagine. So I will save my worry for something that matters, and the horrors of the "fractional" banking system or "fiat money" is not high on the worry list, I assure you. Now, where's my credit card, I just saw the nicest camels hair winter coat online...:-)
(edited and updated based on extra information)
RC
I watched the whole film as well, but around the middle of it I began to get a little confused. I did manage to get my tinfoil hat on just in time for the last 5 minutes ;-)
Here's the bit I don't understand. The film said we need an ever increasing amount of debt to produce more money and that this is not sustainable. Why is this not sustainable? Money, unlike oil, is not a finite resource. They can create as much as they want and it does not require any resources, just a few keystrokes. If the numbers get too big, just lop off a few zeros. I don't see exponential growth of money as a problem. It's just a question as to what the money is worth.
Am I wrong here?
"They can create as much as they want and it does not require any resources, just a few keystrokes. If the numbers get too big, just lop off a few zeros. I don't see exponential growth of money as a problem. It's just a question as to what the money is worth."
The old joke is if these folks feel that money is so worthless, they can just send it to me. They won't.
I have yet to find the person who was so fascinated with the idea of seperation of church and state that they will refuse to take cash because it says "In God We Trust" on it! :-)
Economics is a social science. As you say "it's what the money is worth." And folks do a lot of talk but they still accept it for goods and services. It's a confidence game of course. When people want to stop using money and stop playing the game, obviously some adjustments have to be made. And they will be, even if it hurts like hell.
RC
Then your education was unusual. But, I doubt very much you saw a film in HS OR college that explained the system in a critical manner such as the film linked does.
As for myself, I am not an uneducated man, but had never been told about the history of money till I started my research about the current crises a couple years ago. I am not young.
Spoken like a banker. That is a load of pejorative crap, even if true, as it addresses none of the issues raised. It's obfuscation, nothing more, and essentially a propaganda technique. I am sure you can do better.
More pejorative crap. Got anything more substantial to share? I mean, equating capitalism to fractional banking is a false equivalence. Captialism, per se, is not unsustainable, but the form now practiced is. Consider: the CPI in centuries prior to, say, 1850 was almost flat despite a high degree of growth and development worldwide. There is a huge difference between that, your whores and pushers notwithstanding, and what we have now.
Had fractional banking never been allowed to become the basis of our economic system, development would have been much slower, but would not have ended. At the very least, AGW would not be an issue at this time, and perhaps never would have been as the Earth might well have absorbed the carbon. Or, perhaps the problem might have been recognized and dealt with. Since it was first noted a good hundred years ago, that seems likely.
Growth that is too fast, out of control, is never healthy, is it?
So, being against fractional banking and the Fed = anti-semitism? Disgusting and B.S. You should be ashamed of such prattle.
Being anti-Fed = anti-gov't? More pablum.
And so you show zero understanding of, or perhaps a degree of selfishness with regard to, the problems of exponential growth, and beg Al Bartlett's question.
Cheers
RC, fractional reserve banking is indeed a very "interesting" topic. It has major implications for how well our economic systems will (or won't) adapt in a post-peak world, particularly with reference to the constant need for growth to keep the whole financial system stable. The premises on which the banking system is based may seem outrageous but they're a vital piece of the puzzle needed to understand where things may be heading. "Usury" used to be regarded as sinful, and with good reason!
Indeedy, this is what the musings of hypertiger amongst others have said since 2004 (just come across him via Denniger's forum). Our 'bubble' of b.s. is over 300 years old at least.. Banking itself is inately flawed. He claims even in the era of the gold standard there was still fractional banking. It's only a question of time before it falls over, it has to fail, it's all Ponzi - the question is can you put another credable credit bubble around the burst one and carry on the merry game?*
*Ans: No :(
The bubble has been growing for over 300 years, at an exponential rate. According to Benjamin Franklin, the PRIME reason for the war of inedpendance was to escape the clutches of London's central bank. The battle was lost in 1913 when Woodrow Wilson signed the Fed Reserve into existance. Wilson suffered deep depression as a result, aghast at what he had done. The system is based on the exponential function so it's ultimate failure is built in. I don't know how long is left before the bubble bursts but it seems to be nudging up against it at the moment.
All the current bailout money is being created out of thin air, albiet with a huge debt attached, compounding the US's already precarious position.
Understanding the monetary system helps explain why future oil projects are struggling to find the finance to proceed, and much more.
Again, as incredulous as it sounds, money = debt, no debt = no money. Negative growth = less money. In light of current circumstances, the level of investment suggested as necessary in the IEA's recent report is likely to be pie in the sky without a return to positive growth.
This is a major reframing of the way we view the economy. It took me a while to make the paradigm shift. I think it's really important - because it implies that the only way to minimise your debts is to live on as little money (i.e. debt) as possible. It feels the wrong way round...but ultimately the aim is similar to peak oil survivors - live off grid, barter goods don't do ious, etc...
This is a major reframing of the way we view the economy.
This is the effect it had on me. It puts the way the whole system works into better context. Thatsitimout, we appologise for not having the same educational background as yourself. And judgeing from my widening survey, we are far from being alone. We are all trying to learn as much as we can and I appreciate your contribution to make economic novices such as myself more aware of how the system works, and the actual reason for growth at all costs. You better believe it came as a shock. The shock was that I didn't know.
Of the 20 or so people I have asked where money comes from, one knew, a few said the mint, the rest said it grows on trees, as their eyes glazed over.
Thanks, Nate and Crew,
re: "Unfortunately, recent market events, only indirectly related to oil, will now likely set July 2008 in stone..."
Nate, would you mind, please, quickly reviewing the basis for your opinion about recent market events being "only indirectly related to oil"? (I'd just like to make sure I understand.)
A very good and worthwhile read, to which I will add the following comments provoked by a few passages that struck me as dissonant:
WOW. Great stuff. Who wrote that? Let's sign him/her up as a The Oil Drum contributor!
The important question is not who wrote that, but why has he only now been selected to write that.
There has been dissent, no doubt, in the IEA for years.
Also well said - a public recognition that a) oil is finite, b) it is getting increasingly expensive and c) market prices do not predict future scarcity but rather oscillate with short term supply/demand unrelated to realizable long term flow rates.
We need to understand why prices do not predict future scarcity but only short-term supply/demand fluctuations. One reason is that anyone who tries to withhold oil supply until the prices rise further is likely to be exposed to political retaliation for hoarding. You have to make hay while the sun shines and when the government gets involved in the wrong way, which is about the only way it ever is involved, the sun stops shining.
Clearly, irrespective the currency or price, if we spend more energy (of equal quality) to procure 1 unit of energy as we get out of it, this energy is no longer a source but a sink.
I wish people would stop talking about EROEI and start talking about LROLI, where L is liquid-fuel-energy or maybe fluid-fuel-energy. We do all sorts of things in our society that are sinks for energy. Indeed, that is why the energy industry exists. In principle there should be no shortage of energy for a long time, because the supply of thorium is ample. Yes, I know, that is still on the drawing boards, but I don't think there is any doubt it can be done.
Counterintuitively to most, the lower oil prices go and the longer they stay below $80-$100 per barrel, the steeper the fall off of the crude oil plateau will be, and the dimmer our energy future.
There is a drop in demand because the rate at which society is adapting to the energy shortage is accelerating, now moving faster than the drop in supply. Hence, prices are dropping. That is a good sign, not a bad one. To artificially hold the price of oil higher than it is might be a good idea, but it also might not be a good idea. There is a "best price" and a higher price will be counter-productive. Unfortunately, we don't know where that best price is.
The drop in demand is related to the deleveraging, which is telling everybody in effect: You have to change how you're using energy, among other things, and you have to get the incompetents out of office, because as long as you have incompetents in office, nothing is going to go right, including the efforts of Oil Drum people to get government to act reasonably. That means, IMHO, both Democrats and Republicans, but Republicans first, because they are in power right now (in the administration in the USA). One thing at a time. Democrats later after Obama makes W look like the second stupidest President in history.
The lower price for oil is a bad thing because it reduces incentives to transition away from oil. So long as the price of oil is low, we will have more Business As Usual. The reason for the drop in oil prices is declining expectations for real GDP growth. Demand is, in the short run, primarily moved by changes in expectations, and now financial markets expect falling prices of all commodities as we move deeper into recession.
We can hope for massive public works programs in nuclear and renewable energy projects as unemployment increases. Because of falling stock markets and the credit crunch there is little private funding available now for energy projects--either conventional energy or renewables. The transition away from fossil fuels is being hindered by lower prices for oil, natural gas, and coal.
To make any sort of meaningful projection as to future oil production you have to make some assumptions about price. There will be a whole lot more oil produced at $200 per barrel than there will be at $50 per barrel. Lower oil prices mean lower prices for oil substitutes, and vice versa.
Actually, in most developed countries the transition away from fossil fuels is being most hindered by "free market electricity", rapidly fostered onto people in near-emergency mode in the 1990's (often much too rapidly, see California) in an effort to ensure that when governments like the incoming Democrats get into a mood to consider projects like solar-thermal and nuclear construction as large public works projects, that avenue won't be open. Market priced electricity generation (as opposed to rate case priced, often publicly owned) is primarily a mechanism for the fossil electrical generation fuel supply industry to defend itself against competitors which aware public officials might like to foster financially.
The strategy appears to be working very well.
The lower price for oil is a bad thing because it reduces incentives to transition away from oil. So long as the price of oil is low, we will have more Business As Usual.
One could equally say: The lower price of oil is a good thing because it reduces the incentives to produce it.
Really, it does. At $40/barrel you will see a big fall-off in oil sands production, for example.
We have to get beyond simple arguments if we want to question the current oil price.
On your argument $50,000 per barrel is too low, because incentives to transition away from oil are lower than if the price were $100,000 per barrel.
There is a cost to disruption that you are not considering.
I don't know what that cost is. Nor does anyone else.
The massive public works projects are a dream. It's not just private industry that's having trouble raising money. This is not the 1930s. Then the government was fiscally responsible. It had the leeway to engage in such spending. We have a $1T deficit this year. It's going to get much worse as the depression deepens.
I'm not sure if this is the best place to put this, but here goes anyway:
To What Extent Is Alternative Energy Performance Linked to Fossil Energy Prices?
http://seekingalpha.com/article/105751-to-what-extent-is-alternative-ene...
In fact only the select few "alternatives" (to fossil) which have no hope in hades of ever making any near-term difference, eg. wind, solar PV.
I'm not sure I follow you, Len.
Surely wind can make a short term difference?
You may find, with truely heroic effort, that wind generation will be capable of connecting 15% or perhaps even 20% of nameplate MW of total grid generation. With a generous 25% reliability, that will amount to a total energy input of 4% to 5%, which is not going to even come near to covering predicted growth over that period due to increased population from immigration in N America, much less a switch from gasoline or diesel to PHEV's. A really smart real-time-price electrical market like IMEUC might improve that, but the resistance to it is as stiff as can be.
No threat to coal or N. Gas, in fact wind generation is the biggest friend N Gas generation has. Solar thermal, OTOH, is clearly capable of providing much higher percentages of energy without grid disruption, and at lower cost long-term, but is receiving relatively very little support, esp. given its potential. Most wind energy is generated at night in winter, when the energy is essentially only useful for shutting down large continuous-run baseload generation, which then mostly gets substituted with low-efficiency quick-start N Gas generation, a perfect setup if you're selling N Gas. Such a good fit I'm surprised T. B. Pickens etc. aren't promoting wind generation. Oh, wait!!!
OK, I can see where you are coming from.
I am pretty agnostic on wind power in the States, as the limitations you mention are indeed unsolved, but at any rate it is a much better resource than in Europe, and unfortunately present economic circumstances are likely to make it much more difficult to finance longer term prospects like nuclear power, and wind power is at any rate quick to build.
I rather think that the recession will be severe enough to greatly restrict energy demand anyway, so much more energy will be simply unaffordable.
I can certainly see solar thermal being useful for peak power in the hotter areas, but the problem of annular variability at the latitude of the States seems rather large to allow present use for base-load power.
Here are the figures in 1:6 for Cairo, which at 30 degrees north suffers far less from this than anywhere in the continental US, where the Mohave, for instance, is at 34 degrees:
http://www.powerfromthesun.net/chapter1/Chapter1.htm
As can be seen, even at 30 degrees north both the hours of daylight and the power when the sum is in the sky greatly reduce the total amount of power you would be able to get in a day, although it could be partly counteracted by motorised dishes, but that costs money.
The other solution of overbuild is also very expensive, so for the moment at least I see solar thermal as being for peak load.
Diurnal variation can be overcome.
There are also issues with cooling, as just like any other thermal plant they need cooling, but by their nature have to be in some of the most water stressed areas, whereas coal and nuclear don't.
My favourite underutilised renewable resource is geothermal, which is available 24/7.
Anyway, just a bit more grist for your cogitations!
ALL solar thermal uses two-axis alignment (or equivalent for trough systems) for the collectors. The data you reference appears to be based on earth surface area, which of course sees seasonal variation. Not so relevant. Also, seasonal cloud cover is often at least as significant as seasonal apprent motion of the sun north-south.
With all its variations etc. at least solar thermal commercial installations can typically be built for 40% reliability with some thermal storage, and better with minor N Gas burner backup. And the energy when it is generating is generated at a time when it will be putting the least efficient fossil peakers offline rather than the most efficient baseload units, like wind does.
Some minor research should enable saltwater cooling, i'd think, though I've not seen evidence that the professionals, eg. Sargent & Lundy engineering, are as concerned as you are. And many desert areas may have resources of salt water.
Assessment of Parabolic Trough and Power Tower Solar Technology - Cost and Performance Forecasts - Sargent & Lundy LLC Consulting Group Chicago, Illinois
http://www.nrel.gov/csp/pdfs/34440.pdf
I don't think I really have my head around that one, Len.
For a start, I am not sure of the terminology, but I believe systems like Ausra use relatively simple alignment to keep costs down.
Perhaps more importantly though, surely providing the ability to collect sunlight with greater efficiency in the winter, will also mean that the summer sunshine collection will be optimised?
IOW, the difference between winter and summer daily solar collection would still be as great, meaning that you would need to overbuild very considerably if you were to use solar thermal as baseload.
Certainly present solar plants burn NG to provide for power in the winter, as well as later in the day and to deal with cloud cover - a problem in the Mohave with the wind blowing in to the mountains.
You have to do that to more fully utilise the equipment.
The point with winter vs. summer is the reduced humidity, usually resulting in clearer atmosphere when not cloudy and fewer cloudy periods.
With solar thermal, unlike wind, "overbuilding" simply amounts to adding additional collection per unit generation, not a very costly proposition, eg. about $300 / kw or less for large troughs, likely less for towers with reflector fields.
None of the example plants evaluated by Sargent & Lundy used OR proposed N Gas burning for backup, they all proposed large insulated beds of gravel for thermal storage instead. I propose N gas burning for 100% reliability / availability in dodgy condition locations.
If the cost is not in the collection area and associated plumbing and tracking equipment, where is it?
It is rather easier to see a fairly low extra cost in the solar tower, as you don't need extra plumbing.
The info I was looking at on the NG burn was for Solar One, but it was not presented in a very friendly way so I may have misunderstood.
The basis of my information about winter sunshine incidence causing difficulties for base load generation was from a guy who work in the solar industry in SoCal, although I course I may have over-interpreted what he had to say in the discussion on a blog.
It is going to be a long time before we have to worry about how to generate base load from solar. Solar might never be the appropriate technology for base load.
The Mojave desert is cloudy in the winter. Not all deserts are.
I'd tend to agree. I support renewables but think it is important not to get ahead of ourselves.
This co-generation scheme sounds more hopeful to me to keep costs down:
http://www.greencarcongress.com/2008/11/epri-to-evaluat.html#more
The US in particular is fortunate to have large reserves of renewables, which can be gradually phased in.
Europe is not so lucky.
News to me. Has something changed since I lived there?
Cheers
Nate,
I think you are making assumptions that connot be well justified in this paragraph. I think you could be fine with July 2008 being the peak, but as a consequence, the cost of the marginal barrel is now quite a lot lower than the current price of oil. As we have cut consumption, the price of the marginal barrel falls steeply because we are getting back the the situation where the Saudis have spare capacity. That means a very low cost marginal barrel.
At this point, investment in almost all new oil is counter-productive. Much of it has to lead to higher oil prices rather than lower prices. So, cutting further investment, especially in unconventional oil projects but also in deep water, leads to a lower future cost of production than otherwise. To keep the price down, we need to cut consumption. But, that means low CO2 emissions, just the opposite of your thinking.
Let's think for a minute about a carbon tax. That would put the amount of money paid at the time of purchase of some fossil energy up which would reduce demand. But the reduced demand forces the price of the fossil energy itself down. It also forces the cost of production of that fossil energy down since we end up with spare capacity held by the lowest cost producer. Cheap fossil energy is a consequence of a policy that attempts to reduce CO2 emissions. On the other hand, high fossil fuel prices encourage investment is stupid projects like CTL which boosts CO2 emissions and require a cost price for fossil energy owing to inefficiency.
Chris
You may be a solar expert, but you have no idea what you are talking about with oil. He didn't mean 'cost to public' of marginal barrel, he meant cost to produce, over time. What % of oil production that was producable at a profit at $100 now is unprofitable and will be scrapped?
What you are writing is utopian crap - that low oil prices will somehow magically transform our preference for liquid fuels into renewables -low prices are going to hook us even worse!
Furthermore, how do YOU know what the Saudi cost of marginal production is? No one else does. Not Nate, not the IEA, probably not even the Saudis.
Give me a break.
Once you have scrapped those high cost marginal barrels, they are on longer the marginal barrel. You can not say that the price depends on the cost of the marginal barrel and also expect that barrel to have the same cost if the price changes. The marginal barrel becomes a different barrel from a different well as demand and price change. I did not mean the price but the cost as I hope I made clear.
We do know that the Saudis did not go broke for many years at $20/barrel, so their cost is lower than that.
You should reread what I wrote since you seem to have misunderstood the origin of the low price: control of demand.
Chris
Chris,
It's a complex issue and is made more confusing when mixed with erroneous assumptions. I'm not picking on all you views but let me offer some real life examples. I work with two oil fields in Texas. Both fields cost $2 million to fully develop. Field A will ultimately produce 50,000 net bo. That works out to a cost of $40/bbl to develop. But the oil is light and flows naturally out of the well head. Thus the production cost (called lifting cost) is only $2/bbl. Field B will produce 200,000 bo and thus cost only $10 per bbl to fully develop. But it's a thick oil and requires a lot of pumping energy and surface processing expense. Thus its lifting cost is $15/bbl.
So which field will be abandoned if oil falls to $30/bbl? Neither since it costs less to produce oil in either field then the market price. At $30/bbl Field A will produce $1,400,000: ($30-$2) X 50,000 and thus never recovers the initial investment. Field B will produce $3,000,000: ($30 - $15) X 200,000 bbls and thus recover 50% more than the costs.
Points to take away: 1) it doesn't matter what to cost to develop a field...it will be produced as long as the lifting cost are less the price of oil. It doesn't matter whether the field looses the majority of the original investments or returns many time the investment. 2) What it cost to develop an oil field has no bearing on what that oil will sell for. It will sell at the current market price just as in the case of the two fields above. There were many oil fields in TX making a nice profit even when oil got very low in the early 90's because they had already recovered the initial investment. And there are even a few fields I know which were never going to recover the initial investment even if oil had stayed up at $147/bbl. 3) The anticipated price of oil does play a heavy role in the economic evaluation of future drilling efforts. The profitability (or lack of) from previously developed projects doesn’t have a bearing on the decision to invest in a new project. The ability to pay for the new drill will depend upon cash flow/credit availability and not upon the value of past investments.
yup!
fixed vs marginal EROI is what matters. The bootstrap of cheap OG infrastructure may be masking the EROI cliff. Am trying to write on that but seems like too many balls in air...thanks Roc
I agree with you that the marginal barrel is pretty notional. Perhaps the oil production that gets shut as demand slows is that which has the highest lifting cost or other associated ongoing cost. Perhaps it is the bankruptcy of some oil companies that takes out a mixed chunk of production because the receiver can't figure out the books. But, once there is substantial spare capacity, we pretty much have to say that it resides in Saudi Arabia where the cost of production is low. It therefore does not cost much to increase production slightly from that position. Increasing supply a little when there is little spare capacity might involve finding the cash to start up abandoned wells and the like. People won't do that unless it is worth their while. So, production that is a net loser moneywise but won't be abandonded when prices fall such as the situations you consider, can't be considered part of the marginal supply. We need to look elsewhere. My point is that we should be looking in Saudi Arabia when demand is low rather than at some expensive and desperate effort to try to catch a transient high price perhaps in an abandoned Texas oil field for the origin of our notional marginal barrel.
Chris
I think this figure from WEO 2008 that rembrandt posted covers your question about cost:
The ME cost of production is low.
Chris
Chris
I hadn't seen this chart when I wrote this post. I will hopefully have time to study it over the weekend.
Hi Nate,
Thanks for the response. I was censored today on drumbeat and so do not intend to post here any longer. If you'd like to discuss these issues further, this thread might be a start: http://mdsolar.blogspot.com/2008/11/oil-is-still-too-expensive.html
Chris
Seems to be a lot of confusion in comments above relating to prices. (excluding ROCKMAN, who is an oracle by comparison). The confusion I refer to is that many people for whatever reason, and recent evidence to the contrary, think of the "American dollar inflation adjusted" as a fixed amount of value, even when paying for oil internationally. A LOT of the recent runup in the price of oil was due to a serious devaluation of the $US, and a LOT of the more recent drop in the price of oil has been due to a reversal of that. The reasons for the devaluation, to my thinking, are obvious and inevitable. The reasons for the more recent strength are not apparent to me, however I've said for quite a long time that the US federal govt. will be doing heroic measures to keep the economy happy through the 2008 election campaign, but WATCH OUT once the election is done, esp. if it looks early on like the Republicans will loose.
"In the coming weeks, we will provide analysis and commentary on the details of this IEA report on the following topics: . . . ."
The topics do not include energy conservation and efficiency improvements. Does the WEO-08 report address these? I'm thinking of things like expanding and electrifying rail (Alan Drake), increased water transport, etc., that could save massive amounts of energy and buy time for smoother energy transition.
Also, concern is expressed up top about the IEA's discussion of climate change - - could it be that the ever-political IEA is using the (largely) politically-correct climate issue as a PROXY for the politically-incorrect peak oil issue?
My impression of national politicians in recent years is that some who clearly are peak-oil aware (e.g., Bill Clinton in the U.S.) use climate change and "energy security" as motivating factors for policy change, since peak oil is still considered the "third rail" (touch it and you will be shocked) of energy politics.
Given the shift in IEA views expressed in WEO-08, can we look for more favorable discussion of peak oil in the next year or two?
New IEA emphasis on CO2 impacts is consistent with the growing policy and management trend to use Climate Change concepts and terminology as proxies to address Peak Oil requirements, i.e. systematic demand destruction. When one cannot realistically discuss sensitive topics in a public domain, then conceptual proxies must be used instead. IEA CO2 impacts are clear exaggerations relative to baseline studies (IPCC etc).
Then any work by Hansen is not to be considered? That's just crazy talk.
Cheers
Temporarily removed
hello
The IEA worte in red letters, the oil industry have to bring 6 times of the capacity of saudi arabia on stream until 2030.
Is it simple possible that, this sentence is a distress call from the IEA, that indicates, the problem is so overwhelming. We, the IEA, are so scared,
that we couldnt speak it loud, that this with the 6 times saudi arabia capacity until 2030 is not gonna happen. So we, the IEA, write an figure 64mb/d until 2030 is so far from any reality and in red letters to say the question is not how we reach the additional 64mb/d, instead how we manage the distribution on the may be 60 to 70 mb/d, the world produces in 2030?
Finally is it possible that in the IEA inofficial nobody believes the figure, they print in this report?
garrett47