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Peak Oil - Now or Later? A Response to Daniel Yergin
Posted by Euan Mearns on September 22, 2011 - 3:44am
In a recent article called There Will Be Oil in the WSJ, Daniel Yergin once again attempts to debunk the concept of peak oil and sees global production capacity growing to 110 mmbpd by 2030, followed by slow decline. In this short report I will take a quick look at his key arguments in an effort to bring further convergence between the peak oil and business-as-usual camps.
Global oil production (crude + condensate + natural gas liquids: C+C+NGL) has been on an 82 million barrel per day plateau for 7 years despite record high oil price, deployment of technology such as horizontal wells and 3D seismic, the development of new oil provinces such as offshore Angola and unconventional play concepts such as the Bakken shale in North Dakota. Oil production rose during the great oil bear market from 1980 to 1998 but has largely stagnated during the great bull run ever since. Many things are upside down on the back side of Hubbert's peak. Data from BP.
Decline rates
Any discussion about peak oil should begin with decline rates. Yergin’s organisation CERA is well aware of this fact having produced an excellent report on the subject a few years ago.
Decline is the natural process whereby production rates fall as a result of depressurisation of the reservoir combined with water ingress into the oil-bearing strata. Oil production companies go to great lengths to mitigate for decline by injecting water or gas to maintain pressure, well maintenance programs (work overs) and by drilling new wells. Observed declines are therefore much less than natural declines but nevertheless run at a globalised average of around 5% per annum.
With global C+C+NGL production running at 82 mmbpd, 5% observed net declines will wipe out 4.1 mmbpd capacity every year. What this means is that the oil industry must add 4.1 mmbpd new capacity every year from new field developments just to stand still. And this new capacity has to be derived from a stock of second-tier assets such as deep water Gulf of Mexico, heavy sour oil in Saudi Arabia, Arctic oil or the Bakken Shale since most of the favoured tier-one assets have already been produced.
In order for production to grow beyond the 82 mmbpd plateau the oil industry must add more than 4.1 mmbpd new capacity every year from an ever degrading pool of resources. To reach 110 mmbpd in 2030 would mean adding more than 4.1 mmbpd each year to 2030 reaching an additional 5.5 mmbpd new capacity in that year. Where is this new capacity going to come from? Yergin cites a list of new discoveries and new play concepts. But it has always been the case that new discoveries and plays have been developed and produced, and for the past 7 years these have been inadequate to provide new production in excess of declines.
New plays and play concepts
The oil industry continues to make new discoveries and to deploy new technology that has made it possible to develop low-quality reservoirs that would have been un-commercial a decade ago without new technology and high price. The giant Claire Field off the west coast of Scotland, and the Haradh segment of S Ghawar and the Khurais field, both in Saudi Arabia, are examples of low quality reservoirs, discovered decades ago, whose commercial development has been made possible by extended reach horizontal wells. Developing these giant fields in this way has enabled the global industry to maintain the 82 mmbpd plateau but not to exceed it.
Yergin cites new discoveries off shore in Ghana, Brazil and French Guiana as examples of new plays that may boost future production together with unconventional oil from Canadian tar sands and oil produced from shales like the Bakken. New production in Angola, Rajasthan in India, Congo Brazaville, and deep water GOM may be added to the list of recent new provinces that have been brought on stream. The fact is that without this steady stream of new developments, the oil industry will fail to maintain production at current levels and production will enter the decline phase.
UK independent explorer Cairn Energy has just drilled 6 dry wells in the Arctic waters off the West coast of Greenland, reminding all that despite the best seismic technology and basin models, exploration remains a high risk business.
The Bakken Shale in North Dakota does represent an interesting case study.
In 2003, the Bakken formation in North Dakota was producing a mere 10,000 barrels a day. Today, it is over 400,000 barrels, and North Dakota has become the fourth-largest oil-producing state in the country. Such "tight" oil could add as much as two million barrels a day to U.S. oil production after 2020—something that would not have been in any forecast five years ago.
In email correspondence, Oil Drum editor Arthur Berman pointed out that Bakken production comes from around 6000 wells, giving an average rate of about 67 bpd per well whilst Oil Drum editor Tad Patzec pointed out that in the GOM total, Bakken production may come from a handful of Macondo-type wells. Thus, while there is an interesting lesson for all to learn from the Bakken, the scale of effort required to win this production is immense and despite this effort, global oil production remains glued to its 82 mmbpd plateau.
Similarly, the immense effort to develop the Canadian tar sands has not managed to boost global production for the last 7 years. If this scale of effort made in the tar sands and the Bakken are not maintained then global oil production will fall.
Oil price and technology
Hubbert insisted that price didn't matter. Economics—the forces of supply and demand—were, he maintained, irrelevant to the finite physical cache of oil in the earth. But why would price—with all the messages that it sends to people about allocating resources and developing new technologies—apply in so many other realms but not in oil and gas production? Activity goes up when prices go up; activity goes down when prices go down. Higher prices stimulate innovation and encourage people to figure out ingenious new ways to increase supply.
I certainly agree with Yergin that the simplistic geological maximum flow rate model advocated by early workers such as Hubbert needs to be refined to incorporate a systems approach based on economics, society, politics and technology. It is of course the case that high price will stimulate oil industry activity whilst at the same time reducing demand. The key question here is where does the price balance lie between stimulating production and killing demand?
Yergin fails to mention that we have experienced a high price environment for several years now and this has failed to boost production beyond the 82 mmbpd plateau (see chart up top), in part because high price has at the same time tempered demand for oil, especially in the OECD. High price does not seem to have impacted the decline of the North Sea at all, although it seems likely that without high price that decline would have been even more rapid. Ingenious technologies have helped maintain this plateau but it is far from clear that they will in future move oil production substantially above it.
5 trillion barrels more
Currently, it is thought that there are at least five trillion barrels of petroleum resources in the ground, of which 1.4 trillion are deemed technically and economically accessible enough to count as reserves (proved and probable).
There is simply no point speculating about vast unconventional oil resources replacing the easy flows of light sweet crude upon which our current society and economy is based. The cost of recovery, in economic, energy and environmental terms is quite simply too high. And as already noted for unconventional oil sources like the Bakken and Canadian tar sands the scale of endeavour required is immense compared with traditional oil that flows out of the ground at rates of tens of thousands of barrels per day. The type of society that may be founded on unconventional sources such as these will look very different to today's society that is founded on easy flows of cheap oil.
A parable on Scottish unconventional diamond resources may help illustrate this point. Diamonds occur in Earth’s upper mantle, at depths greater than 100 kms, below crust of Archaean age (older than 2.5 billion years old). Scotland is blessed to have rocks of this age in the northwest highlands of our small country providing us with potentially millions of tonnes of diamond resources. All we need to do is to wait for prices to rise and the right technology to come along that will enable us to mine at such great depths and we will single handedly flood the market (dumping prices – oops) ending diamond scarcity once and for all.
Peak demand
In this view, the world has decades of further growth in production before flattening out into a plateau—perhaps sometime around midcentury—at which time a more gradual decline will begin. And that decline may well come not from a scarcity of resources but from greater efficiency, which will slacken global demand.
The concept of peak demand is actually one that I subscribe to but certainly not in the way articulated here by Yergin, who seems to believe that improved energy efficiency will lead to a reduction in demand for oil. In fact, the exact opposite of this is more likely to be true where improved energy efficiency enables society to afford a higher price that will lead directly to more, not less oil being produced.
The notion of peak demand that I subscribe to is one where there is a maximum price for oil that the global economy / society can bear. That price will fix the amount of poor quality resources that can be converted to reserves since every time the price ceiling is hit the World gets cast into recession reducing demand for oil in a way just experienced during the 2008 / 09 peak oil crash.
Summary and conclusions...
Over the years there has been significant convergence between the peak oil and business-as-usual camps, each hopefully learning from the other. Yergin, whilst attempting to debunk peak oil, appears to have been converted to a late peakist. I can certainly relate to many of the concepts described by Yergin - price influencing supply and demand, technology, innovation and new plays etc - but wonder when these are going to result in new production capacity (supply) that exceeds annual declines?
The stakes are high. Should policy makers listen to Pulitzer Prize winning historians? Or should they listen to geologists and a growing band of economists who can see the dependency of economic growth upon increasing supplies of cheap energy that quite simply do not appear to exist? Most important of all, will the WSJ publish a modified view of the oil world than that presented by Daniel Yergin?
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Over the three years 2008-1010, according to megaprojects, 14MBD new production came on stream
In addition due to the economic crash, OECD demand dropped by 4 MBD during that time, for a total change in supply demand of 18 MBD
We have never had that large a change in supply / demand, in either absolute or relative terms, in that short a period, in the 20th century.
In addition in 2011, with the OECD countries at very close to "stall speed" growth rates of 1.4% demand is flat/down in OECD
However, oil prices have been at sustained levels of about $110/B for the past 6 months. Highest sustained levels ever.
In 3 year period 2008 to 2010 decline will have destroyed 3*4.1 mmbpd capacity = 12.3 mmbpd and while OECD demand has dropped owing to high price and recession, non-OECD demand has risen to compensate. Its interesting that non-OECD are more tolerant of higher prices and that is a serious problem for us.
Spare capacity may have risen in that period but I wanted to avoid getting too bogged down in a discussion on spare capacity since it tends to lead nowhere.
The easy way to describe this phenomenon is that the cost of filling a scooter is still cheap even if the cost of petrol (gas) doubles. If one is filling a SUV on the other hand........The complicated way of describing this is the oil intensity of the economy. China for instance still uses much less than the US on a per capita basis. In fact around 1.3bn (1.5bn?) people in China use half the amount 307m people in the US do. Hence the tolerance.
There's also the fact that China - and potentially others, although I am not sure - subsidize the price of oil to a set price, so that when oil prices rise, those increases are only partially transferred to consumers.
And if the cost of the flow of oil is a very large military - should that cost be added to a barrel of oil? What if "others" benefit from that very large military spending....how does one assign that cost to other Nation States who did not agree to the use of the military, yet accrue a benefit?
There is no net benefit to oil consuming states from a large military - the military does not increase the flow of oil since even nasty, unpleasant dictatorships will continue to produce oil without military intervention. They need the money.
I suppose the theory of the countries with large militaries is that they can divert to themselves oil that otherwise would go to other countries. That being the case, they should properly bear all the costs. Unfortunately for them, the costs are in the $1000/bbl and up range, so it is not really cost effective. They would be better off just bidding for the oil on the international market.
There is no net benefit to oil consuming states from a large military - the military does not increase the flow of oil since even nasty, unpleasant dictatorships will continue to produce oil without military intervention. They need the money.
Would the US Dollar be the world reserve currency if it did not have the largest military?
Would anyone accept the US Dollar if it was not the world currency?
(And what is money anyway?)
Would the US Dollar be the world reserve currency if it did not have the largest military?
Sure - the Dollar is the world's reserve currency because of the size and stability of the US' economy - something that military expenditures harm, rather than help.
The US has wasted a lot of money on the military.
It is not just that the per capita use is lower in emerging markets; their use of oil is for higher value purposes. Someone who can afford only small purchases of oil will use it for things that have the highest value first. Even when prices rise to levels that cause demand destruction in OECD countries, the net value oil use in emerging market countries is high enough to justify continued purchases of oil and other forms of energy at those higher prices.
OECD consumers can "easily" adjust to higher oil/energy prices by discontinuing low value uses of energy. Unfortunately, past a very minimal level, reducing energy use results in a lowering of living standards and lower economic growth. OECD users will meet emerging market users somewhere in the middle of the usage scale, from which they will then both be required to curtail use as prices rise even further.
Let me state your proposition in simple terms:
There is a lot more value added to the economy when you use oil to convert from plowing with oxen to plowing with a tractor than using the oil for hauling somebody's fat a** around in a fat a** SUV.
Unfortunately, the fat a** has the capital to buy the SUV, the oxen farmer doesn't have the capital to buy the tractor, so utility of our use of oil is suboptimized.
If more value is added to the economy by the oil use in the farm, then the farmer will have more capital. The market economy sorts these things out.
Perhaps. And if then only in the absence of distortions.
Spare capacity at any given time is very difficult to model. Supergiant fields can water out very quickly and unexpectedly, so the 4.1mbpd replacement requirement is at best a statistical average, and the true figure is probably impossible to measure. Spare capacity can accumulate, particularly in OPEC countries, and remain invisible to outsiders, but once it reaches zero, it can only be disguised by over-pumping remaining fields and drawing down undeclared storage. I strongly suspect both of these occurred in 2008.
The high price being paid for oil is driving a drilling boom, at least in countries like USA. However, as widely documented on this site, this economic activity is very inefficient at bringing even known reserves on-line, as unrealistic prospects are drilled and production fails to meet projections, and the demand for skilled staff and finite drilling resources causes players with more realistic prospects to be priced out of the market.
Panic can cause less, not more oil capacity to come on line.
It seems inevitable that global production will result in a shark's fin curve close to the peak. Global demand must collapse suddenly, when the financial trading edifice can no longer be sustained, and production will collapse, never to reach similar heights again.
It is interesting, but not surprising. All uses of oil are not equal. Some things we do because we die otherways (run tractors over fields and such), and those are the most neccesary things we can do with it. Other things we do because we have to, but we could do different if we wanted to. Such as driving our kids to school in a car, because it is safer, sine there are som many cars driving around by the schools. Then we have the not neccesary at all uses of oil, such as driving to the next town to shop, just because it is fun. Those are the least neccesary things to do with oil.
When oil prices climb, it is the less usefull activities that get sacked first. Poor countries do more of the usefull stuff, so it is among rich countries the knife will cut first and most.
Having ridden with up to 20 other people in four-cylinder turbo-diesel minivans in non-OECD countries, I can testify that this is a very fuel-efficient way to travel. Since the van gets at least 25 mpg, it is getting about 500 passenger-miles per gallon, while someone in the US driving to work in the solitary splendor of his SUV is getting about 12 passenger-miles per gallon - about 40 times as much fuel consumption.
The difference in incomes between these non-OECD countries and OECD countries is substantial, but nothing close to 40 times as much. As a result, the non-OECD workers can easily outbid the OECD workers for the fuel on the international market.
Americans should start preparing for a future in which they have to share a ride to work with 20 other people. Either that, or not having work, which is the more likely probability.
It would be a lot easier to buy a Leaf, plug-in Prius, or Volt.
It might be easier, but they are expensive and don't get 500 miles per passenger-gallon. The commuters in China are still capable of outbidding Americans for oil.
Actually, they're not expensive at all. A Leaf is cheaper than a Nissan Sentra, over it's lifecycle. A Chevy Volt is cheaper than a much inferior Cruze. The Prius was cheaper at $3 gas.
A Leaf gets infinite miles per gallon. If your commute is less than 40 miles, so does a Volt.
With EVs, you don't need oil at all, so who cares how much Chinese commuters can bid??
Professor Hamilton, at Econbrowser, found this Yergin column from 2005:
http://www.washingtonpost.com/wp-dyn/content/article/2005/07/29/AR200507...
It's Not the End Of the Oil Age
By Daniel Yergin
July 31, 2005
Following is a copy of the letter I sent to the WSJ, in response to Yergin's recent essay in the WSJ:
And some supplemental comments by yours truly:
To summarize, in 2004/2005, Yergin predicted that oil prices would fall, because of rising production, and that there would be plenty of oil to meet Chindia's increasing demand.
So far, annual US oil prices have all exceeded the $57 level that we saw in 2005, with four of the past five years showing year over year increases in annual oil prices.
Global C+C and total petroleum liquids production basically stopped growing in 2005.
And the data show that Chindia, post-2005, is consuming a rapidly increasing share of a declining volume of Global Net Exports (GNE):
So, how did the media respond to this catastrophic failure by Yergin and CERA? His prognostication skills are widely praised, and the WSJ gives him a full page for him to explain why near term Peak Oil advocates are wrong.
Right, even though his record would normally put such a person in the 'ignore' column;
http://home.entouch.net/dmd/cera.htm
I'm of a mind that payoffs are being made by a group or institution that could financially benefit from these so called experts proclaiming the price of oil will drop. What's the angle on that I wonder?
The alternative is too incredulous to believe, that anyone could be that openly grabbing the mantle of expert on a topic, he's so wrong about in reality. That takes a special mental disorder, a shameless person, or someone getting funded. I'm beginning to suspect the latter.
Wouldn't the oil companies benefit from propping up 'Experts' in oil to be at the forefront of MSM to lead the regular folk to believe there's no such concern as peak oil, and to become complacent about being concerned about price, because after all, its going down, right? It may be a tired old routine, but it's obviously one they feel helps sway public opinion, so the funding goes on.
Hmm, is there a connection between the worm and spice?
He works for a consulting firm that is funded by the oil industry. He constantly talks about how oil will be cheap and there is plenty of it because that helps keep the oil customers hooked. I don't think it is that blatantly direct/corrupt . . . IHS/CERA certainly do provide a lot of data and analysis. But you tend to make more money publicly spinning the message your client wants to hear than by telling everyone the full truth.
I'm on the obverse side of that coin. If it sounds corrupt and looks like it from all those consistently wrong predictions on price, then it probably is.
+1
Yergin is a BAU huckster for the erl bidness. Heaven forbid we should start any movement that could result in alternative energy use, or even {{shudder}} conservation.
Hello Westexas,
Personally I do not doubt that you and Sam have a far better grasp of reality than Yergin and Cera, or the NYT.
Furthermore I am impressed with the way you stick to the facts without resorting to insults.I have no doubt that someday young ournalists and historians will be making the pilgrimage to whereever you may be found.
I am personally knowledgeable about the basics of geology, having taken a year of it at a good university, and having read a lot in the field, and your case is obviously airtight, exceot for one thing.It does not appear that the claims of the pessimists are PROVEN, in terms of the inability of the industry and the economy to ramp up unconventional sources of oil fast;I may be quibbling, and personally agree that such a fast ramp up won't happen, but this is our opinion, not a proven fact.Some new technology, or a radical change in political and economic policy might concievably enable production to continue rising for some time yet
I am a little bit upset that so many of us do not appreciate one of the first rules of successful communication and management of people when a dispute arises -this rule being that you should never direct your critical remarks towards the person , but rather than towards his behavior.
If you attack the person as an individual, the results are two fold, both bad.First, it caudses the person to be resentful, and to harden his attitudes and beliefs in respect to the disputed behavior.My personal opinion of Yergin as a forecaster and arbiter of reality is better left unstated, given the bit of folk wisdom that if you can't say something nice, you shouldn't say anything at all-which in and of itself says a lot.
The second bad result involves the bystanders, the audience in this case being the whole world, or at least anybody in it who stumbles across this web site.We all know that the typical person, even if well educated by conventional standards, is abysmally ignorant of the perilious state of the environment in general and the energy industries in particular.
Such a person is not apt to be ignorant of the arguments used by Yergin and his fellow cornucopians.As a matter of fact, the better educated he is, by conventional standards, the more apt he is to believe them. A little reflection on this matter should convince anyone of us this is true;most of us have been exposed to the teachings (Boiled down to a nutshell, they are to believe in the trinity of work, investment, and technology.)of conventional economists all our lives, and have succeeded reasonably well in getting along in life by following them.(That they are no longer entirely relevant, or even completely unsuited to current times, is not relevant to MY argument.)
So when he comes across a site wherein Yergin is castigated as a fraud or an incompetent, he has no trouble at all making up his mind, since he is comfortable with his own beliefs, which match those of Yergin to a considerable degree, that we are the frauds and incompetents.as a matter of fact, it would require a near miracle for him to stick around and get acquaunted with us and OUR arguments.
Hence we should acknowledge thatYergin is a fine writer, and accept the premise that he sincerely believes what he is saying- not personally, but in our public statements.Giving the opponent credit where he is due credit, and extending him some when we are not ABSOLUTELY sure about his sincerity or competence, is a far, far better route to initiating serious conversation with the person uninformed with your own views.
It is EVEN MORE important that you do this when you ARE SURE of the opponents incompetence or lack of sincerity -the revelant rule being that if you want to get what you want, apologize when you are right, allowing the person in error, who has the power to give you what you want, to save face.
Remember, you are trying to COMMUNICATE with people who probably share Yergins views! Calling Yergin a fool or fraud is paramount to calling your intended audience or conversational partner the same thing.You want his attention.You won't get it, except in the form of a countering insult, by calling Yergin a fraud.
These tidbits bit of elementary psychological wisdom are brought to you free of charge as a public service announcement by OFM, who learned it in psyc class back in the dark ages when 100 octane Amoco unleaded could be had for thirty cents a gallon. ;-)
Really Mac? I think Jeff's assessment of Daniel Yergin has always been spot on. He always attacks his stupid predictions and estimates of when world oil will peak. I have never known him once to attack his person. If, from Yergin's predictions, and from his past missed predictions, Yergin comes across as a fool, then that is his problem. You are way off base to castigate Jeff for pointing out Yergin's shortcomings. I would do exactly the same thing myself but Jeffery just has a better inventory of Yergin's past predictions than I do.
Ron P.
I concur - I cant remember Westexas getting personal about Yergin. I do recall his well-argued critiques which do APPEAR to make Yergin look foolish - but then again being serially wrong does that to a person.
I also concur. Yergin and CERA do command an extraordinary audience who do listen to them, but that doesn't mean they haven't been wrong. They have been, with most of what they have said. They also resort to ridicule, which indicates their arguments are weak. By contrast Jeff has always been fair and what he says is measured, sensible and well supported by data. I am sure I am not alone in thinking Jeff is far more credible than Yergin/CERA. The team at TOD have been quietly, purposefully and politely drawing attention to Yergin/CERA's nonsense for some years now and they do seem to have lost some of their profile of late. Lets hope they disappear altogether soon, because they are doing the world a huge disservice!
I most certainly did not mean to belittle of criticize any particular person here in making my comment.
After rereading my own comment, it seems to me that I did not do so.
However, if anyone feels insulted personally, please accept my sincere apologies.
I was and am simply trying to point out the practical realities of communicating with a prejudiced and poorly informed public.
The only practical way you can REALLY obtain the attention of said public, or an individual, is thru what is known in the nursing/ medical/mental health professions as therapeutic communication.It would take too long to describe therapeutic communication , but anybody interested can look it up.
There is another way to get attention of course-that is to either hit the subject upside the head with a figurative brick-which is not conducive to good communication, or wait for reality to hit him for you.
At that point, the subject is said to exhibit readiness for learning.;-)
Prejudiced and ill informed people are simply uninterested in facts when the facts are brought to thier attention in a way that disturbs thier own comfortable mindset or world view.When the subject is oil and energy, ignorance and prejudice are just about as prevalent in the faculty lounge as they are in a redneck bar.
You gotta get inside thier head and create a favorable impression, you gotta be nonjudgemental-you point out the facts, but you do it in such a way as to not insult the intelligence and self esteeem of the audience.Now this is a subtle process, and while it sounds simple enough, actually doing it takes practice.
I also thought you were just making a general comment.
Incidentally, following is an excerpt from a Cornucopian type on another blog:
It seems to me that this pretty well sums up the cognitive dissonance that many people seem to be experiencing, to-wit, they acknowledge that there are case histories of discrete regions showing a peak in some types of fossil fuel production, e.g., Texas & the North Sea, but "resource doomsayers" have always been wrong, and will presumably always be wrong. In other words, we will always find new sources of energy. This is the explicit case that Peter Huber makes--that our total consumption of energy will increase forever, even as discrete sources of energy peak and decline.
Here is the problem that Huber, et al are facing. They have to convince themselves that the sum of the output of discrete sources of energy that peak and decline, e.g., crude oil production in Texas & the North Sea, will result in an infinite rate of increase in supply:
http://i1095.photobucket.com/albums/i475/westexas/Slide1-2.jpg
why is everyone so hard on yergin? Here is a story by NPR seems much more that there is a 100 year supply of oil story to me. There is plenty of cheap oil in the U.S.
http://www.npr.org/2011/09/25/140784004/new-boom-reshapes-oil-world-rock...
Euan, I have a suggestion. Your first graphic apparently shows yearly average oil prices and stops with 2010. The graph should include a note about the price. Also, you might include another data point with an average of the first 8 months of 2011, along with some comment noting that this last point is not a yearly average, but a preliminary indication of price...
E. Swanson
I'm disappointed that this article does not deal with the issue of the total energy content of the various production figures.
In what way? Sweet light crude versus heavy sour crude? Or do you also mean EROEI?
It might be interesting to have a main post looking at all the different ways to measure peak and their pluses ans minuses.
Staniford had an interesting article on peak oil per capita the other day. Then there's EROEI, light sweet, crude and condensate, everything-but-the-kitchen-sink (biofuels, LNG, tar sands...)...
Actually, EROEI could apply independently to each of these. When was the EROEI peak for per capita light sweet crude, for instance?
Of course, I don't want to be the one to crunch these numbers '-)
I'll leave that to you other brainiacs.
Energy content of today's "all liquids" total vs the previous total. Is the proportion of barrels with significantly less energy content than a typical barrel of conventional oil increasing?
What about Stonleigh's comments that we are going to head into a deep deflationary period- thus driving down prices for the short term as they were in 2008. I know this would create a cascade affect - another arab spring this time saudi arabia---decrease in oil production do to less cash available etc...this in turn would cause an overshoot and send prices shooting back up but may leave more oil in the ground due to circumstances, which might be a good thing for some. This in turn would cause the pundits to start yelling see oil was just speculation!
Yes, we're probably heading for big price oscillations...this may make it more difficult to get the peak oil story out.
Euan,
Excellent article, thank you. One question: are decline rates technologically or geologically constrained? In other words, you presume that a ~5% decline rate will be in effect in perpetuity. Is it possible that new technologies could lower this decline, e.g. technologies that allow a greater concentration of gas/water to be pumped into reservoirs so more oil can be extracted? Or is this not possible, since there is a certain pressure limit that the surrounding rock can tolerate without fracturing, which means that the 5% decline rate is more or less geologically constrained on its lower bound? Thanks.
Michael
Hi Michael,
The 5% figure comes form the CERA report and IEA WEOutlooks. It is an aggregate guesstimate since different production settings have widely varying underlying and observed declines. For example, onshore OECD have much lower decline rates than deep water west Africa. In deep water, deep reservoirs and in HPHT settings it can simply be too expensive to drill infill wells and so declines are more rapid, whilst onshore and in shallower water settings 3D and 4D seismic can be used to identify by passed oil that can be targeted with infill wells and so forth. Technology is taking us in one direction, making interventions to boost recovery and reduce declines more feasible together with high price whilst geology is taking us in the other direction with ever higher amounts of production coming from marginal fields where interventions are less economic.
Technology is taking us in one direction, making interventions to boost recovery and reduce declines more feasible together with high price whilst geology is taking us in the other direction with ever higher amounts of production coming from marginal fields where interventions are less economic.
quite the tug-o-war. I love to see a fairly simple graphic of just how many barrels of oil production comes from what type of sources and how that has changed over the last twenty years. Excellent post.
The historian strikes again - a well meaning bright fellow, but continuing to follow the old paradigm (Yergin, not Euan).
Here is the conclusion from a post I wrote almost 4 years ago which had pointed out Yergins/IHS poor track record and myopia of focusing on productive capacity alone:
From Peak Oil, IHS Data, and the Broken Clock
This written in Feb 2008, displaying considerable foresight!
It has never ceased to amaze me how so many well established and respected media commentators and organisations can be so wrong for so long but that the media and public at large fail to pick up on this fact by history matching what they said against what came to pass. And that the individuals and organisations fail to recognise this themselves.
It has never ceased to amaze me how so many well established and respected media commentators and organisations can be so wrong for so long but that the media and public at large fail to pick up on this fact by history matching what they said against what came to pass.
Because few track these things - and what is the "reward" for tracking?
Jon Steward does it as part of his show on occasion. Sometimes the person tracked looses their credibility and pundant job, sometimes not.
The political tracker Politifact does this - but how many elected official have fallen because of such tracking?
There will be Oil . . . . 'Equivalents?'
One of the most persuasive statistics presented by Yergin in his WSJ Op-Ed was this:
http://online.wsj.com/article/SB1000142405311190406060457657255299867434...
But is that true? Where did he get that statistic from? I am guessing that he is using the SEC filings from the public IOCs . . . but aren't they now all reporting their the reserve figures in millions of barrels of oil equivalent (MBoe) which includes all their natural gas? If so, what he wrote is an outright falsehood that massively misleads people into thinking there is lots of oil when there is really just lots of natural gas. So does anyone know the source of his 1.6 barrels of new reserve figure?
Iraq, Iran, Venezuela and many other countries took a pencil and updated their "proven reserves". There is a race in OPEC to have a higher amount of "proven reserves" than other OPEC nations. In 1he 1980 OPEC reserves increased dramatically without a single new barrel found. This same thing has been happening the last few years but to a lesser degree.
Yergin would refer to this as "reserve growth". You get reserve growth when your previous estimate of a field was too low, so you upgrade it to what you think it really is now. However virtually all the old giant fields in the Middle East have already been upgraded many times in the past. I guess they just keep growing and growing and growing however. ;-)
Ron P.
Yes, it would be interesting to know what data lies behind this. From BP data, much of the reserves increase in 2007 / 09 came from Venezuela booking >100 billion bbls for oil sands. And of course ME OPEC continue to get away with flat line reserves reporting.
Ah. I forgot about the Venezuela reserve upping. Well, I stand corrected then in that it would not be an outright falsehood. It just goes back into the massively-misleading category.
Seriously now . . . we are going rely upon Venezuelan heavy oil to be our savior? Hugo Chavez is quite right to be paranoid about people attacking him then.
I think the biggest misleading thing about his article is that most people would believe that there will be oil at around current market prices. But when the oil you are depending on is tar sands, heavy oil, deepwater oil . . . well the prices are not going to be cheap.
Yes, the markets are going to work their magic and ensure that the oil markets are well supplied. But what that really means is that prices are going to keep going up in order to destroy demand and fund pricey oil extraction (tar sands, heavy oil, deepwater, etc.)
If I recall correctly, Exxon is booking tar sands as oil these days.
Well, it is processed into liquid oil. Of course a big issue with all these unconventional reserves is that they simply cannot be produced quickly . . . they require large amounts of investment, development time, and water. Peak oil is all about flows . . . if you cannot produce the reserves then it really does not matter how massive they may be.
Yergin is really misleading people. But he probably believes what he says . . . it is very "faith-based" though. Faith in the speed of extraction technology development, faith in new discoveries, faith is cracking those oil shales economically, faith in new efficiency gains, etc.
Peak oil is all about flows .... advocates of Peak Oil have been wrong at every turn, six years of annual global production data show flat to declining crude oil and total petroleum liquids production data. ..... The EIA shows that global annual crude + condensate production (C+C) has been between 73 and 74 mbpd (million barrels per day) since 2005, except for 2009, and BP shows that global annual total petroleum liquids production has been between 81 and 82 mbpd since 2005, except for 2009. In both cases, this was in marked contrast to the rapid increase in production that we saw from 2002 to 2005. Some people might call this "Peak Oil,” ......
3 different blocks of jello(tm) to nail down.
http://www.energybulletin.net/primer.php
Peak oil is the simplest label for the problem of energy resource depletion, or more specifically, the peak in global oil production.
http://transitionculture.org/essential-info/what-is-peak-oil/
” Peak Oil” refers to the maximum extraction rate of oil, after which the rate of extraction will decline.
http://en.wikipedia.org/wiki/Peak_oil
Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline
And 3 more different definitions of peak oil.
Arguing if Yergin is right/wrong depends on what definition one ops to use. Move the goalposts of the argument. Go big picture - point out how the Earth is a finite ball in space and oil will run out.
The oil sands are a good news / bad news kind of resource. The good news is that there is 400 years of oil reserves in them (at current rates of production). The bad news is that it will take 400 years to produce it all.
Don't look for a big jump in oil sands production rates to offset the decline in conventional oil. Total oil production (conventional + non-conventional) will decline, at first slowly and then steeply, and oil sands will just stretch out the tail of the decline curve.
Cherry-picking a few dates to support one's argument is a tactic that has long been used by AGW deniers.
Picking figures for three years only, and not for a statistically meaningful number of years, should, by now, set off alarm bells in everyone's heads. This cherry-pick of Yergin's instantly persuaded me that his article was a snow job. Up 'til then I was in doubt.
As I said on drumbeat about this, what matters here is not what Yergin says, it's that the WSJ feels the need to have it said.
Yergin publishes in the Wall Street Journal.
Euan publishes on theoildrum.com.
Checkmate. Doesn't matter who has the facts on their side.
And very few people read either...
But someone, clicking on the link that's come up on their Twitter stream, or on farcebook, etc, might just learn something new.
What was your point, exactly? And how does that help?
I don't have the numbers, but I think it's fair to say that far more people read the WSJ than TOD. More influential people, too.
My point was, that it doesn't matter that Yergin is wrong, and westexas et. al. are right. Yergin will be listened to, and TOD won't.
What this means, is that the USA will do little to nothing to mitigate the effects of PO, and in fact will probably do things to make the situation worse.
I don't know how that helps, just describing the situation as I see it.
Well, it that is a sad statement of our media. Yergin is saying want the WSJ wants to hear, so they'll publish him any time he wants to say something.
I wish Yergin would publish more predictions since that would provide a better record for people to judge him on. But he is wise enough to know that his predictions often don't turn out well, so he only occasionally makes pronouncements and keeps them intentionally vague.
This latest article is no exception. If oil prices were to go up to $250/barrel, he could point out that such a price change doesn't actually contradict what he wrote. If that caused a peak he would just dismiss that as "peak demand" not "peak oil". If oil production were to go down because of such high prices, he would just point out that he was only talking about oil "production capacity". Of course that is a pointless artificial construct. To the consumer that can no longer afford oil . . . there is no practical difference between "peak demand" and "peak oil". Either way, the economy melts down.
Its check, but not checkmate in what is a very long game. On his side, Yergin has the benefit of being famous, and rightly so for writing The Prize that was a tour de force. I find it more difficult to link that endeavor to his leadership of CERA.
There are a number of contributors here at TOD who have gained a degree of access to the political system that we may not otherwise have had.
A quick question about tar sands - the figure given in the Wiki says 1 barrel of oil takes 1.47 mcf natural gas (for the Canadian 'oil' sands.) I must not understand the units because I can not believe the standard unit is correct - that amount of gas would be huge just for a barrel of oil - what gives?
The units are right. mcf = 1000 cubic feet, which is roughly equal to 1 mmBtu of heat from natural gas. At today's prices, 1.47 mcf of natural gas will run $6 of natural gas per bbl of crude bitumen to separate the lighter components from the heavier. That's part of the premium we pay for oil from tar sands vs. conventional crude oil.
Hi Cermet,
One possible source of confusion is that "mcf" stands for 1000 cubic feet (not million). Wiki also asserts that 1 barrel of oil equivalent (BOE) is approximately equal to 5800 cubic feet (5.8 mcf). So, the numbers show a positive return for just this expenditure.
George
Hi Euan,
Thanks for a very interesting article. You report that the average decline rate is about 5.5%, then apply that rate against the world's production. Is that appropriate? I was under the impression that the average decline rates were estimated for fields that have been identified as being in decline. In contrast, world production comes from a mixture of fields (those in decline and those not-in-decline). The product, then, may be a bit of an overestimation. This is nit-picking, truly, but it may influence people's confidence in the conclusion.
Separately, Mr. Yergin derides Hubbert's estimates because today, more than five decades after being published, the estimates are "off". Hubbert extrapolated a value of 1.5 million barrels of oil being produced per day, whereas Mr Yergin cheerfully points to the current production of 5.5 million barrels per day. I'm wondering if that is fair. After all, Hubbert's estimates were focused on land-based wells in the lower 48 states that produced conventional crude. I was wondering if it was possible to determine how good Hubbert really was? Does anyone have a production estimate for this set of wells?
Hi GN, welcome to The Oil Drum,
Re your first question about decline rates, oil fields go through 3 main stages of ramp up, plateau followed by decline. By far the majority of fields (numerically) are in decline, but a higher proportion by production are in ramp up and on plateau. I need to go back and check whether the average decline figure is for total production or for just the latter case "3" fields in decline. So this is not nit picking. But from memory, the 5% number is aggregate decline for the whole production stack.
And re Hubbert's accuracy - this comes down to cherry picking how you want to present Hubbert - he was part right, but got some details wrong. These details are important and it is equally important to properly weigh their significance. US oil production did peak in 1971 but the decline was not so severe as Hubbert anticipated owing to N Slope, deep water GOM and technology.
Following up on the question of Hubbert's accuracy. On page 22 of this 1956 report, Hubbert drew a simple curve that forecast US crude oil production at approximately 1 billion barrels per year for the present time period.
http://www.hubbertpeak.com/hubbert/1956/1956.pdf
When Hubbert made his prediction, Alaska was not a part of the US. The latest EIA estimate of lower 48 crude oil production is about 1.78 billion barrels per year.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrfp4e1&f=a
Translating that into daily figures (by dividing by 365), Hubbert predicted 2.7 million barrels per day. The latest EIA production statistic is 4.9 million barrels per day.
That can be further broken down by onshore and offshore statistics. Hubbert's forecast was pretty close to the current onshore production figure.
http://oilindependents.org/resources/a-closer-look-sources-of-increasing...
As Euan said, a lot of the discrepancy from Hubbert's curve is from technology improvements that have allowed deepwater drilling, as well as onshore shale production and other enhanced recovery.
Of course, Hubbert was an intelligent person and realized that technology could improve, which could affect his model. He wrote (on page 24 of his 1956 report):
It seems that Yergin either hasn't bothered to read Hubbert, or is being disingenuous.
Ahemm....one minor, tongue in cheek nitpick. When Hubbert made his prediction, Alaska was indeed part of the US. It just wasn't a state, it was still a territory. Oil exploration was already well underway. The discovery of Swanson River Field in 1957 was one of the events that helped the push for Alaska statehood, since it removed doubts that Alaska could be economically viable.
Hubbert's projections were for the lower 48 states.
Yes, that is well known to anyone who has studied Hubbert's prediction. So then why not just say that? Alaska was purchased from Russia in 1867, and has been "part of the United States" ever since.
FYI, oil exploration in Alaska had been going on long before Hubbert made his prediction. The first Alaskan oil field to go into production was at Katalla, in 1902. The first truely significant discovery was at Swanson River in 1957.
Edit: clarify wording
No argument from me, I should have said that! Thanks for the additional info about Swanson River. Probably explains why Hubbert left Alaska out of the model -- at the time, there were no significant reserves to include. And the earlier small fields hadn't been very profitable because of climate and distance.
Hubbert's prediction was only for the lower 48 states, but the additional production from Alaska didn't stop the decline, it just put a bump in it.
However, the real question is, "How many more Alaskas does the US have left to explore. I believe the answer is zero.
It is true that the USGS has estimated vast additional amounts of oil to be found in the Arctic, but nearly all this hypothetical oil would belong to other countries, the Russian and Canadian sectors being much larger. And franky, having worked for a company that spent billions drilling all the likely prospects in the Canadian sector, I doubt there is nearly as much oil up there as the USGS believes.
If memory serves Hubbert stated that he did not have sufficient data to include Alaska in his prediction. In addition his "Lower 48" did not include anything beyond the three mile limit. Hubbert also expressed reluctance to truly predict world resources. As a world class scientist he was aware that the data was incomplete. At times he drew sample curves using various estimates for total world endowment.
Ivanhoe on Hubbert http://hubbert.mines.edu see 97-1
Although this may be too obvious to be worth stating, there is an asymmetry to the impact of oil price before and after peak:
During periods of oil production growth, increased prices should make peak occur earlier as exploitable resources are available.
During periods of oil production decline, increased prices should mitigate the rate of decline.
Worldwide oil production is different than that of an individual country, as globally determined prices will provide continuous pressure for new production. Conceptually, the world oil production profile should be skewed toward a longer tail than that of an individual country.
I think judging the predictive power Hubbert's model should be limited to the model system he used; continental oil production in the lower 48 states.
The amazing thing about Hubbert’s analysis was not its predictive flaws, but rather how compelling and even predictively valid his conceptualization has been.
So much truth in such a simple formulation.
Strictly speaking, I think that Hubbert made two "If, then" statements:
If Lower 48 URR are 150 Gb, then we peak in 1966.
If Lower 48 URR are 200 Gb, then we peak in 1971.
It would appear that the 200 Gb estimate was more accurate, and we peaked in 1970, but they key point is that a 50 Gb increase in URR only postponed his projected peak by five years.
GN - There's an even more basic problem. As Euan points out no field has ever had a constant decline rate. Field A may have a 1% decline rate Y1 to Y5 and then the water hits the perfs and the DR jumps to 15% for Y6-Y9. And from Y9 through the remainder of the field's life the decline rate falls to 1%. Taking the entire field life from Y1 to depletion the decline might be 5.5%. But what does that 5.5% really mean? At no time during its life did that DR apply.
If one had a completely accurate DR for every well on the planet you could calculate the decline rate of all production ONCE ALL THE FIELDS HAVE DEPLETED. And what good is that number to us today? It can't be used to predict where production will be in, let's say, 8 years. The 5.5% is the decline rate over the life of all existing production...not over some arbitrary period. If we want to know the DR of production over the next 8 years we have to take the DR of each individual well and see where it ends up. And then take the initial rate and final rate and computes the decline over the 8 years. It might be 10% or 3%. It will be what it will be. But it won't be the DR over the life of all the producing fields on the planet.
Now let's look at some of the hot plays like the Eagle Ford Shale in S Texas. Very exciting indeed: wells coming on 500 to 1,200 bopd...hundreds of rigs drilling every days. ..about $2 billion/yr being spent right now. Not sure what the DR will be for those wells when they ultimately deplete down the road. But during the first 2 years the DR is looking like 80% to 90%. Yes...that's not a typo. A well coming on at 1,000 bopd is producing 100 bopd or less in 12 months. It may produce commercially for 10 or 15 years and one might see a DR of 5.5% over ITS ENTIRE LIFE. But how is that DR useful? You can't use it for a well just coming on production. It's also useless to apply it to the same well during Y12 when its actual DR is 1%.
Lots of examples along this line. A DW GOM that comes on 300,000 bopd may have a field life of only 7 years. Obviously a much higher DR than 5.5%. But DW fields contribute a large % of domestic production. So how does that 5.5% DR apply when these fields are added into the total? Mexico's Cantrell Field had an artificially low DR due to the massive N2 injection program. But that same URR method is the cause of the very rapid DR seen in the field recently. Maybe when the field is ultimately depleted we'll calculate a 5.5% DR...a value that has virtually no bearing on the field's character during any time in its life.
It's natural for folks to want to take production today and use some DR rate to estimate what the rate from existing wells will be X years out. Despite the importance of that number it can't be done by using some assumed DR. Especially not a DR rate based on a DR over the LIFE OF THE FIELDS. The decline rate of all existing wells over their life maybe be 5.5%. That doesn't mean you can use that number to project their rate X years into the future. The DR of all existing wells over the next 5 years can only be estimated by taking the DR of each individual well and then back calculating the DR for the aggregate. But why bother: you just went through the truly monumental task of charting the individual DR of every well on the planet. Of course, even if one tried to do this you would have failed on Day 1: For the vast majority of wells on the planet you will not be given the data to do the analysis. The KSA won't tell you want an individual well produced last month let alone its history from when it first went on line. One can't even taken a ASSUMED global production value of 12 months ago and, using the ASSUMED current production rate, to calculate a NATURAL DR. Even if you had those numbers and calculated a 5.5% DR how would use that going forward knowing that both rates were determined by how much the companies wanted to produce...not how much the wells could produce? Specially I have a well that's been declining NATURALLY at 5.5% but oil prices drop and I cut it back so it appears to decline 20%. So you use that 20% DR to estimate what my well will produce next year. But next year oil prices jump back up so I open the well back up. Now instead of a 20% DR it shows a "-10%DR". IOW a production increase.
So if folks want to hang their predictions on some assumed DR they can have at it. I've analyzed production histories of thousands of wells over the last 36 years. DR, as offered by some, is virtually meaningless/useless to me. But if you don't have all the data all you can do is guess. And you're guessing without any data to support that guess. Thus, IMHO, all that's really being presented is just one more opinion. A that even rates lower in my book than a guess.
Nice set of caveats on decline rates. An analyst looking at an individual well from a commercial perspective would plainly be crazy to use a generic decline rate to get at its ROI. It seems like the implicit assumption of Hubbert modelers is that the decline rate converges to something estimable from URR * recovery factor (more fudgeable parameters), and that regional production history tells us a little bit about what these look like (i.e. Brown/Foucher histories for East Texas & North Sea). All inferential arguments.
And at the end of the day, isn't it partly the inferential nature of the peak oil argument that allows the debate to continue? Yergin et al can argue that the decline rate itself can change due to commercial conditions, allowing a long term plateau or even growth. The penumbra of uncertainty creates a lot of opportunity to shadow-box.
steve - "Yergin et al can argue that the decline rate itself can change due to commercial conditions,...". I think this is where the discussion gets a tad confusing at times. Sometimes folks use "decline curve" to describe a region's production curve. The decline curve of a well, a field, or a region is just that: decline of existing production. But if you take a projection of the decline of a region's existing production and add projections of new wells/fields being developed (along with their declines) you end up with a different animal.
An extreme example: the Eagle Ford Shale. Individual wells are clearly showing a 70% to 90% decline the first couple of years. So if the EF trend is producing X thousand BOPD today will it be producing just 20% of X thousand bopd in 12 months? Yes and no. It will be producing much more than that X amount because so many new wells are being drilled. But the wells existing today will it be producing much less than the X amount. You can predict the decline of existing wells, the gains from new wells and combine those two curves to make one. The net curve is not a decline curve...it's a projected production curve. They sound alike but are very different.
But you can't project that curve as a single independent function. As I just pointed out in another post, once wells are producing changes in pricing has little effect on the rates of those wells for most operators. In fact many will do what they can to increase production in the face of low prices. Prices get too low some wells can be abandoned since they are no longer commercial. But that also means they were producing very little so their loss doesn't show up to a significant degree. New drilling is obviously very dependent on pricing. The shale gas drilling boom brought on a lot of new production and some big projections about future increases in NG production. But when NG prices fell from a high of $13/mcf to less than $4/mcf those projections became worthless. But the projected decline rate of existing wells didn't change at all: operators kept producing/depleting regardless. The projection of future rates fell entirely of the side of new drilling.
I saw your other post in DB as well, and it's a good point. The operator might be running at a loss on a fully-loaded basis, but it will usually be worthwhile to keep producing, i.e. 'cash is king.'
It may be valuable to compare the decline rate of fracking wells to the decline rate of wind or solar power.
Solar and wind can be built with energy produced today (ave ~EROI of 10 to 20), but will produce far into the future.
Daniel - Be a waste of energy (pun intended) to do so. Two different animals entirely. There are frac'd wells with long lives but they produce very little on a daily basis...sometimes just tens of $'s. But they are the exception and not the rule. Many frac'd wells aren't delivery very much energy after 5 years.
But you make a good point even if you don't realize it. I might generate 3X as much energy from a WT as a frac'd well when both have the same life time...say 15 years. and just for grins let's say the WT has an EROI 5X that of the frac'd well. But because the frac'd well produces so much of its energy in a short amount of its INITIAL life it generates a rate of return 3X greater than the WT. And there's your problem: ask an investor what project we would rather invest in: a 15% ROR or a 5% ROR even though the lower ROR will deliver 3X as much revenue over its life. Find some investors who'll take the lower ROR and you got yourself a wind farm. Until then get ready for a lot more frac'd wells. It's even a worse pitch to a public oil company that doesn't even care that much about ROR but is just trying to satisfy Wall Street's demand for y-o-y reserve growth regardless of low profitability.
"A parable on Scottish unconventional diamond resources may help illustrate this point."
My version of that story is about the gold in the oceans. The ocean contains trillions of dollars worth of gold, there for the taking. So there should never be a gold shortage. But if it takes $3 to extract $1 worth of gold, there can be gold shortages despite an abundance of gold. This is analogous to the oil shale in the Western U.S., where the high cost is a result of high energy inputs -- the classic receding horizons problem.
I've heard the same type of think concerning Uranium and the oceans. There is lots of Uranium in ocean water, so if the mines run low, we could just get Uranium from the oceans. Some think it would be economically feasible but that is a tough sell.
http://www.jaea.go.jp/jaeri/english/ff/ff43/topics.html
The same thing could be said about fresh water. One like Yergin could ask "How can there be any fresh water crises anywhere in the world when 3/4s of the Earth surface is water?"
Saudi Arabia tried that in the Red Sea. I can't find the link, but it is somewhere on Saudi Aramco's website:
http://www.saudiaramco.com/content/www/en/home.html
Daniel Yergin touts his book on the Willis Report this afternoon. Gerri Willis has a problem pronouncing Hubbert's name. Yergin immediately brings up Technocracy which seems to convince Willis that peak oil was a sham.
http://www.foxbusiness.com/on-air/willis-report/index.html#/v/1174676277...
I think Fox Business was created to prove that there could be a worse TV news channel than Fox News. ;-)
Right, it's called "Poisoning of the Well". If you can discredit the person for some other he/she might have had then any other opinion that person may have held is discredited by also. In other words because Hubbert was wrong about Technocracy then he was wrong the Peak Oil also.
Great video by the way, thanks for the link. Just what we would expect from Fox News.
Ron P.
Hubbert was wrong about Technocracy
How was Technocracy shown to be wrong?
Best I can tell it has not been tried.
Just a heads-up: Yergin will be on The Colbert Report tonight.
Colbert is a pretty bright guy, but I wonder what approach he'll use on this topic. Could be interesting.
Kunstler was on after the release of World Made by Hand.
http://www.theoildrum.com/node/3935
Bill Mckibben was also on last month. I expect Colbert's interview to be a lot more penetrating than Willis'!
The Yergin interview by Colbert at about 15:31;
http://www.colbertnation.com/full-episodes/wed-september-21-2011-daniel-...
Interesting coverage of the euro crisis as well, ahead of the Yergin talk.
As i post this the colbert report is having Daniel Yergin speak about his new book and he agreed with him on the old spiel about how peak oil is wrong etc etc. the audience likes him and i believe that if someone with our point of view doesn't get on the show later to prove him wrong we might have a set back here..
This is a less-than-ideal rebuttal, partly because Yergin himself has not disclosed the sources of his statements(like the 1.6 barrels added for each barrel consumed in the last few years, how did he come to that number? And so forth).
However, Libya will increase it's production by 2 mb/d extra in the coming years aside from the 1.2 mb/d it produced up until now, Iraq is steadily marching onwards, albeit with a slightly slower speed and it's undeniable that the shale oil production in North America has outperformed far better than any of the regular writers on TOD even dreamed of (Gail's post in particular come across as wildly off the mark just a few months later).
The U.S. production is actually increasing now in a quick pace and as Goldman Sachs wrote, it could actually be the world's largest oil producer by 2017. Bakken is just one field which is outperforming, but now the East Coast shale is in play too.
The cost of producing this oil is steadily falling, it's now near 80 dollars and falling further(some even claim it's closer to 60, but that does sound a bit optimistic).
The Israeli shale oil is even cheaper to extract, the cost is a mere 40 dollars there and the reserves are enormous.
True, it will take 6-8 years before meaningful production will manifest itself, and the world is likely to be lingering along in the current economic malaise until it does, which will further keep a lid on oil expansion.
But the doomer narrative which was so prevalent since 2005 has failed to manifest itself. The world has muddled along like it has and the production on both the conventional and non-conventional side looks very bright.
The question is that of time: will the production come in due time or will it be 'too late'. That depends on how well the world economy performs. It if does as bad as I think it will, the chances are very good that the 2020s will be quite bright. Of course, if there is a major conflict in, say, the Middle East during this decade all bets are off. But that would also actually act as a suppressor on oil demand even more - and peaking prices by a large extent - giving even more time for production to rise.
The situation's volatile and far from cleared, but the Doomster scenarios are failing to manifest themselves for quite a few years now as well as the calls that shale oil production would either be A) insignificant and/or B) too expensive to perform anyway.
Neither has thus far proved to be a right assertion and the Kunstler's of the world, who are predicting the roof to fall down each year, are continually proven wrong. That people still listen to them is probably of the same reason people still listen to Glenn Beck: people wedded to an idea so strongly that they do not want to start thinking critically.
Well if things are as great as you allege then why do we have $100/barrel oil while stuck in a recession? The price should move down if there is such a flood of oil. Especially in view of the weak demand in the USA. I guess you can point to WTI being in the 80's but that is still pretty darn high for 9% unemployment days.
Global Warming, food prices, nuclear shutdowns and blowouts the insolvency of the US plus half of Europe.
I have plenty of other things to be doomer about. All inter-related with oil and with no mitigation in sight and all single handedly capable of rocking, if not outright sinking the boat.
Woudl that tripling of Libyan oil production be like the quadrupling of Iraqi production post the 2003 'liberation", which has resulted in Iraqi production returning pre-war production levels after a mere six years?
BTW Libya was recently producing 1.6Mbpd, not 1.2
From my post up the thread:
Regarding US natural gas production, we did see a small increase in 2010, but our net natural gas imports increased year over year, because of a rebound in consumption, and we remain one of the world's largest net natural gas importers.
Regarding global oil exports, 21 of the world's top 33 net oil exporters showed net export declines from 2005 to 2010. Iraq was one of the 12 exporters showing a five year increase, but they have shown two straight years of declining net oil exports.
Given basically flat US crude oil production since late 2009, and given an ongoing decline in Global and Available Net Exports, the US--at least at the present time--is still headed toward "freedom" from our reliance on foreign sources of oil.
*Four week running average
Yes, but this is not horrible. We needed to use less oil and we need to face up to peak oil.
US oil production at a lower EROI will provide more jobs in the US.
Decreasing imports will drastically reduce our trade imbalance.
For good and bad, this should make the the economy and dollar stronger than they otherwise might be.
Extraction does not matter any more, the auto factories create demand faster than any driller can find and bring new oil to market.
Auto factories and demand: the millions of young people in the streets around the world wanting 'a better life' do not represent a single drop of new oil production but more Chinas worth of demand. The Egyptian and the Libyan are ready to die for a new car: how does this measure against the rates of extraction which are literally set in stone?
It's all about demand ... All Yergin talks about is supply and 'production' as if these mean anything. They haven't for years ... all buzzwords that are intended as propaganda to support the 'innovation' product that Yergin himself and the Wall Street Journal are trying to sell.
It is a no-cost game for Yergin. If innovation fails, it is because that is the high risk nature of innovation. If innovations succeed then Yergin can take credit for promoting them. Yergin does not have to sell any oil, he can safely sell demand knowing that the demand relates to nothing that comes out of his mouth. That is Yergin's Big Lie: peak demand due to efficiency.
He's a very cynical fellow who has positioned himself well ... as a marketer for Exxon, his non-existent integrity cries all the way to his bank ...
Leiten, that posting was delusional from one end to the other. I could go through it on a sentence-by-sentence basis, but there's really no point. It's almost completely wrong.
Things are not at all good at the moment, and they are steadily getting worse. It's not that I don't think there's more oil out there, but I think there's not nearly as much as you think there is. We seem to be sliding into a recession like the one three years ago, and having two oil-price-induced Great Depressions back to back is going to be very hard on people.
And I'm one of the optimists around here.
A great new article is out this morning that rips Yergin and his comments.
Daniel Yergin and Peak Oil – Prophet or Mere Historian?
But Yergin thinks high oil prices are, in the long run, good because they cause more oil to be produced and in the long run helps the economy. Bold mine.
Ron P.
Yeah, that is what I found to be the biggest misleading thing about his article. Although he doesn't explicitedly say it, saying there will be lots of oil implies that it will be available at current/low prices. Thus people are lulled into a false sense of security. But if oil prices shot up to $250/barrel that would not contradict what he wrote . . . he'd say that is all according to plan. And at $250/barrel, I have no doubt that there would massive amounts of oil "production capacity". But actual oil production would be quite limited due to weak demand.
American drivers would feel quite mislead but Yergin could say "See . . . I was right!"
Does anyone recall a MSM outlet that ran an article that pointed out Yergin (and CERA's) many erroneous predictions regarding oil prices and production?
I am beginning to think that the MSM can't afford to hurt Yergin's credibility. Let's assume that there is something call the YUM Index, which is the Yergin Usefulness (to) Media Index. With rising production and net oil exports, the YUM Index is low. But as production stagnates and falls, and as net exports fall, the YUM Index rises, and the faster the decline in production/exports, the faster the rise in the YUM Index. In effect, the media's need for Yergin to explain why production and/or exports have not peaked increases as the evidence for Peak Oil/Peak Exports increases. Therefore, the MSM can't afford to do anything to hurt Yergin's credibility.
"Most important of all, will the WSJ publish a modified view of the oil world than that presented by Daniel Yergin?" When pigs fly.
The 2008 crash was largely blamed on the US sub-prime mortgage market. And listening to economists on the UK terrestrial news tonight, the 2011 crash will be blamed on Greece. You'd think the WSJ would mange to get their head around the fact that oil is the lifeblood of the global economy and when it runs scarce and expensive that crashes will follow.
But the oil price didn't cause the crash directly. It sensitized the system, removing safety margins so that the the normal thumps and bumps cause unanticipated disasters.
It's more like the Andrea Dorea than the Titanic. A top heavy ship, running with the fuel tanks empty instead of ballasted with seawater (to save money of course), a Captain inexperienced with radar, heavy fog, and another ship with a bow reinforced to follow icebreakers through the Baltic.
The top heaviness plus lack of ballast made the ship susceptible to capsizing. The fog made radar necessary, they thought they knew how to read the screen, but they didn't do it correctly in a near head-on situation. The Stockholm's reinforced bow punched deeply into the ship, flooding the empty fuel tanks on one side only, and the list made half the life boats unlaunchable. It could have been much worse that it was.
Back to the economy in 2008, normally the bad loans would have made a recession, but the underlying oil stress blew it into a depression. Normally, a small country like Greece could default without global effect (look at Argentina early in the previous decade). But with the system already under high stress, it could well unravel most of Europe, and that would take down China in turn, as they are also under stress.
As the Russian said,"That is not good."
Agreed, its one variable in a meta-stable system. But with markets in chaos yesterday there has not been a single whisper of the link between high energy prices and slowing economic growth. In fact there was a tendency for most commentators to focus on Greece and what the Euro zone must do to fix the Euro problem skipping over the underlying cause of yesterdays chaos that was fear of a double dip recession. If the underlying issues are not understood then there is zero chance of finding any form of remedy.
I've been watching the copper price for weeks / months - shaping up very similar to 2008 crash, I'm guessing oil will follow.
http://www.ft.com/home/uk
Use the commodities link.
It was not the captain of the Andrea Doria allown how failed, it was at least to a big degree the radar officer of the Stockholm Carstens-Johannsen. The italian captain was pre judged by public opinion, that's all...
Back in 2008, the US economy was like a house of cards. The upper stories were really flimsy as a result of half-baked government policies. The bottom card was the oil price. Knock the bottom card out, and the whole house falls.
More specifically, US consumers were maxxed out on debt, carrying as much as they could handle, particularly mortgage debt. Relaxed mortgage rules allowed US homeowners to borrow much more money than they should have been allowed to.
There is something of a trade-off in the US between housing costs and transportation costs. They vary from area to area, but the total cost of the two to consumers is remarkably constant. If people are paying less for housing, it is because they are farther in the suburbs and are paying more for gas.
If you raise the price of gas substantially, it puts many consumers under water. They had a choice between not driving and not paying the mortgage. Since not driving is not an option in most of the US, they defaulted on the mortgage instead. The banks assumed that mortgage defaults would be a rare thing, and when they became a common thing, it put the banks in default on their borrowing.
That, in a nutshell, is what brought down the US economy. We appear to be in for something of a rerun, same cause and similar effects but with Europe the main disaster area, so I've put my money into gold shares and cash (Canadian dollars) for the duration of the crisis.
i'm surprised that no one has mentioned that richard heinberg gave a 2 hour presentation on peak oil on the coast-to-coast radio show last night, broadcasting over 500 affiliate stations to more than 4.5 million americans. this dwarfed the viewership of yergin on colbert.
Got a link?
http://www.google.com/search?sourceid=navclient&ie=UTF-8&rlz=1T4RNSN_enU...
it was a fantastic show -- even with several nutty callers! heinberg was excellent, second time on in a week, after first promoting his "the end of growth".
"It has never ceased to amaze me how so many well established and respected media commentators and organisations can be so wrong for so long but that the media and public at large fail to pick up on this fact by history matching what they said against what came to pass. And that the individuals and organisations fail to recognise this themselves."
"You'd think the WSJ would mange to get their head around the fact that oil is the lifeblood of the global economy and when it runs scarce and expensive that crashes will follow."
It is not amazing at all, nor do I expect the WSJ to "get their head around" anything so threatening to their identity. Self-justification to reduce cognitive dissonance. Please read "MISTAKES WERE MADE (but not by me)" BY Carol Tavris and Elliot Aronson. Our immense capacity for self-justification and self-delusion will be our downfall. I think it will prevent us from acting collectively to solve the problems of CC and peak oil before it is far to late.
The co-founder of the ASPO, Jean Laherrère, tears into pieces Daniel Yergin's arguments, in an article I published on my blog (hosted by French main newspaper "Le Monde") :
[LeMonde.fr] Pic pétrolier : Laherrère répond à Yergin [tribune]
http://petrole.blog.lemonde.fr/2011/09/22/pic-petrolier-laherrere-repond...
Laherrère writes that Yergin is no more than a liar, who ignores his company's own figures about world oil reserves - figures supposed to be confidential, but that Laherrère gives anyway.
Google translates (quite approximately, I'm afraid) : http://translate.google.fr/translate?sl=fr&tl=en&js=n&prev=_t&hl=en&ie=U...
Btw, some people here may have read this piece I did last year :
[LeMonde.fr] Washington Considers a Decline of World Oil Production As Of 2011
http://petrole.blog.lemonde.fr/2010/03/25/washington-considers-a-decline...
Guess what ? Turns out that Glen Sweetnam has recently admitted, off the record of course, that he has actually been transfered from the EIA/DoE to the White House's National Security Council because of his interview with me.
A sort of promotion, but into the world of silence. Very telling, I guess.
Hello Matthieu, was going to put a pointer to Jean Laherrère analysis of Yergin "paper" on your blog, but even better from yourself
Cheers,
Yves (isbninfo on your blog)
Thanks for the link Matthieu. And in that link was a link to something Yergin wrote in The Washington Post in July of 2005. Bold mine:
Ron P.
Don't scare the horses.
There is also the issue of double-counting, especially with regards to biofuels. It takes some of the fossil-fuel (BOEs) to create this biofuel, but this is not accounted for in the rosy Yergin projections. This double counting also would apply to the tar-sands BOE output since, as I understand it, natural gas must be used as a source of the extra hydrogen to 'lighten' the bitumen in order that it may be used by refiners for the typical refinery products.
I don't know what kind of volumes we are talking about here, but such double-counting is likely rising as more and more BOEs come from both bio-fuels and heavy oil sources.
Peak Oil Scam is Based Upon Ideological, Fact-Blind Liberalism. 9-25-11
http://canadafreepress.com/index.php/article/40667
Wow: This can make your B P Jump. Perhaps I should mention I am simply the Messenger.
I tried to post this at the WSJ article in question, and it said: "The language you used does not comply with community standards. Please re-enter." You be the judge as to what was objectionable -- was it simply questioning the status quo?
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T R U E S T O R Y
Okay, I'm just a farmer, not a high-falutin' chairman of some energy prognostication firm. But I do know a thing or two about M. King Hubbert's theories.
I picked a pear tree a couple days ago. By just going out there and reaching up, I could pick about 40 pounds of fruit with my bare hands -- that's worth about $80 when I haul it to market. But the tree is probably 50 feet tall, and it is fruit-laden all the way up!
So I went and got a ladder. It cost me $120, but now I can pick up to about 14' high! Cool! So now I can get another 40 pounds of fruit, for another $80. But damn, my net profit has actually declined to $40, since I had to buy the ladder. But no worries; I can use that ladder for other things.
So I went and got the tractor, and lashed an old pallet to the front loader. Now I can go up to 21' in the air, and pick another 40 pounds of fruit! The tractor is good for many things, so it would be unfair to put all its costs toward this one harvest. But it was very expensive, and I have to put fuel and maintenance into it regularly.
But now I've hit "peak pear." I've still got half my pear crop up in the air, unreachable by any technology I can easily wield. I could go out and buy a manlift that will take me to the top of the tree, but it would cost decades of pear profits, and would be relatively useless for other tasks. I could rent a manlift for a day or two to pick the rest of the tree, but the rent would exceed the value of the fruit picked.
So now, I'm in possession of a half-tree's worth of fruit, and no economically feasible way to access it. Luckily, I can wait for it to fall. It will be bruised and over-ripe, and will have negligible market value, but I can feed it to my goats or compost it.
I think Yergin is waiting for the high-hanging fruit to fall, so he can feed it to his flock of admiring goats. At which point does the cost of oil-producing investment exceed the revenue produced?
Sounds like your problem is you need to figure out how to use that manlift on more pear trees: either plant more, or cooperate with a bunch of other farmers.
My point: you haven't really reached "peak pear". Now I suspect that Yergin is wrong, and the world has indeed reached "Peak Oil Lite", but we if really needed to, we could produce more oil. Fortunately, we seem to be beginning to realize that oil's usefulness has peaked.