Thursday and an open thread

It was the shortest intro I thought I could safely get away with!
it's one of those crazy British words, right HO?
It sounds like a deep swallowing - like the American "GULP!"  Sort of foreshadowing bad events.
There was a story on NPR's "Marketplace" last night about peak oil.  It included an interview with Jeremy Leggett, author of "The Empty Tank: Oil, Gas, Hot Air and the Coming Global Energy Crisis."

You can listen to it here:

his book is here: =507846&s=books&v=glance

which I haven't read yet.  Hadn't even heard of the guy until I heard him on the radio, actually.

I wrote a little about this book here
There is a post on FTW concerning consolodation of electric utilities subsequent to the repeal of the Public Utility Holding Company Act last year.


I can't read the whole article, as I do not subscribe.  What do others think of this issue?  I do find the prospect of consolodation into a few large companies to be disturbing - it has not been a benefit most other places it's happened.

Sorry, I got an extra character in there - here's the correct link:


Briefly explained: "When the electricity goes out, you are back in the Dark Age. And the Stone Age is just around the corner."
Yeah, OK, I know what would happen without electricity.  But I was thinking more about the direct impacts of the repeal of the Utility Holding Company Act.  Will it hasten problems in the grid?  If there's one thing that would cause more unrest than high fuel prices, it would be no electricity.  
My point is that someone already predicted the collapse of the grid as inevitable as energy resources dwindled.  The grid doesn't need politics to tear it apart and the flip side is that restructuring could be a last desperate effort to ward off a collapse.
Or it could just be another monopolistic take over of an industry so that a few people can make a lot of money.  Can you say "tycoon" or "robber barron"?  And the concern is that it could bring on a collapse from causes completely separate from dwindling energy resources.  Yet another subvertion of resources so that the weathly few can get even richer.
No, I see it as the desperate wealthy trying just to hang on in a world where money is becoming increasingly worthless.

I do not see any separation between dwindling natural resources and the loss of wealth.  To me money is an accounting system for keeping track of things that all chain together back to the earth's dwindling natural resources.  One day you will see that you can't eat money because it is symbolic for the things it can buy including food.

Where's Stoneleigh?  I'd love to see his comments on this.
I spent most of my day shovelling a vast quantity of snow, and bemoaning the fact that I'm not as young as I used to be :-)

Utility deregulation raises some important issues. Electricity has tradionally been regarded as a public service, but deregulation leads to a very different scenario. The large corporations taking over small utility companies will not have the same responsibility to keep the lights on. Local accountability is lost. They are less likely to invest in new capacity in my opinion, or to maintain the existing excess capacity which provides system stability under variable conditions.

I imagine they plan to engage in energy arbitrage, which could be bad news for the populations they serve. They may have interruptible fuel contracts in order to access fuel more cheaply, and so may not run at all if there are fuel shortages. They may also not run if fuel is simply expensive as they may be able to make more money selling the fuel on to others directly than by using it to generate electricity, and they will be under no obligation to generate. This would be a particular problem in New England where home heating and electricity are both heavily dependent on natural gas.

I expect deregulation and consolidation of utility companies to be very destabilizing influences on power systems, even in the relatively near future. Fuel shortages and price volatility are likely to cause people to shift to greater dependence on electricity, just as the system is being hollowed out and becoming more brittle. Blackouts are inevitable. It seems like a recipe for a few people to make a great deal of money while many others could freeze in the dark.

Well, this is my concern.  In the first round of deregulation, we essentially took control of the grid away from the engineers and technical staff, and gave it to the financial people.  We optimized the system for profit instead of reliability.  Maintenance, reserve capacity, and reliability are down, equipment is pushed closer to its limits, etc.  And consolidation has been happening, but with limits.

Now it would appear we're taking our usual next step, which is to remove the pesky problem of competition by allowing all the utilities to be owned by a very few.  Customers, of course, will have very few choices.  

So the question is, what will the picture look like in a couple of years - your scenario is certainly one strong possibility.

Optimizing the system for profit rather than reliability is exactly the issue, and there are probably enormous profits to be made from energy arbitrage. My own philosophy when it came to designing my home system was to meet uncertainty with flexibility, and that seems to be precisely what the new owners of utility companies are planning to do. If one is sufficiently flexible, one can take advantage of price and supply differentials which could be quite extreme in the coming years.

The risk the companies are not taking into account is civil unrest, which I think is as inevitable as are huge profits and blackouts. Being seen to make enormous profits while the expectations of the erstwhile middle class are dashed is ultimately a recipe for being pulled from one's pedestal. If memory serves, La Belle Epoque (the laissez-faire era of the late nineteenth century) ended with anti-trust legislation against the Robber Barons, and the same can eventually be expected this time. Bear markets can be thought of as nature's redistribution system when the concentration of capital has become extreme - entropy reasserting itself as the disparity becomes too difficult to defend.

The whole process is likely to be uncomfortable, to say the least, for all concerned. Personally, I think the tradition model for grid electricity as a public service will be consigned to history as an unsustainable aspect of technological complexity (in accordance with Tainter), although the dynamics could take a long time to play out. Local distribution should survive, but access and price are likely to be very variable and the poor are almost certain to suffer greatly. Rural people and small communities are likely to have to look after themselves (and each other), which could engender a very useful degree of cooperation.

Tradition model should, of course, have been traditional model. Note to self - proof-read!
Perhaps you are blessed with evenly distributed natural resources and transportation and can thus run medium sized powerplants withouth a large scale grid?

A breakdown of the grid over here in Sweden would strand a large ammount of hydro power and nuclear power. The hydro power cost next to nothing to run when the powerplants are built. There would have to be a breakdown the size of  a civil war to stop this power from being distributed to paying customers. It is not even that expensive to run the current backbone grid and strenghten it.

The grid will become even more valuble if people start to build small powerplants that need accumulators or exchange with the grid to get 24/7 power. Money and resources that people can use for accumulators is good market for grid operator services.

If there is a crisis resources will be used to guard and then strenghten the grid and load will be shed untill it is in ballance. Either with higher prices or defaulting on contracts and rotating or permanent cutoffs. It will indeed be uncomfortable.  

I don't see all transmission disappearing, but what ends up being left (after a long period of decline) could be a pale shadow of its former self. I don't see hydro and nuclear plants being stranded any time soon for instance, not while there are still significant wealth accretions to be served. I do (unfortunately) see the demise of transmission as a public service, the benefits of which would be equally available to all. This would, of course, have consequences in terms of social stability, and I would therefore expect unrest.

I expect the scale of electricity generation, distribution and consumption to diminish over time (involuntarily), with new smaller-scale or modular generation built nearer to centres of demand. (The NIMBY syndrome is less of a factor when the alternative is to do without.) I also expect a lot of new small-scale generation to be private - built by those who can afford it for their own benefit and therefore adjacent to demand by definition. Rural communities may do this communally, which would be useful.

The winter temperature here is often comparable to Sweden, and the geographic scale is much larger, so the problems are likely to be significant. There may be population shifts towards the cities if remote rural areas unable to install their own generation (or district heating) are no longer serviced by the grid. I hope we don't see shanty-towns, but they have been so common in other parts of the world that it would be hard to dismiss them as a possibility.

I do not believe in this scenario for a second.

The break thru time for rural electrification in Sweden were during the first world war when our neighbours were busy killing each other and we had smaller food riots. The immediate need was mostly to replace the kerosene for lamps that no longer could be imported from USA. But most of it was anyway done with three phase power with thin gauges to provide for motor power on farms to replace steam-locomotors.

This was 90 years ago when we had an economy weaker then Mexicos today but with nearly no corruption.

The electrification of the rail system were likewise rushed during the second world war to save coal.

If a grid could be built from close to zero during wartime nearly a hundred years ago it can be maintained or built from zero today with resources a small fraction of for instance the current US economy.

The grid and any non fossil power powerplants will be the crown jewels of any post peak oil country or power company. I find it more likely that there will be a small poor cottage for every 100 high tension poles with someone getting a free 16A and minumum wage as pay for daily power pole inspections, pole painting and manually moving the lawn around the switchyard rather then the grid deteriorating. that scenario...

Some day I will learn how to use this language in a proper way and to preview more.

My scenario is not based just on peak oil, which alone would probably not lead to such bleak prospects. My view of the future includes a financial collapse (potentially extending to the derivatives market, which no lender of last resort could bail out), a liquidity crunch and severe deflationary depression potentially lasting a very long time. It could make the Great Depression of the 1930s seem mild (and brief) in comparison. (The upside, if there can be said to be one, would be that massive demand destruction would leave more fossil fuels for future generations, not that it's much comfort for those of us here now.) In a world of very limited financial resources, the kind of maintenance required by the power system we currently possess would not be possible. Neither would replacement of infrastructure with more efficient alternatives, unfortunately.

Instead of a rerun of the 1930s, I'm afraid it might look  more like a rerun of the eighteenth century, which began with the South Sea Bubble and ended several decades later with a series of revolutions. I'm sure you would consider this to be a very extreme position to take, and I certainly hope it doesn't work out this way. However, unwinding the huge (unprecedented) imbalances that have been allowed to build up in the global financial system is very unlikely to be painless, especially in combination with the effects of peak oil and its attendant resource wars.

For anyone who might be interested, a book I found particularly interesting some years ago set inflation (and deflation) in historical context. It was called The Great Wave: Price Revolutions and the Rhythm of History by David Fischer (and was much more readable than the title suggests).

I interpret such a situation as a general destruction of debt and a very bleak future for most who has retired.

I am an optimist who is quite sure that idle production capacity will find people to trade with as long as they have something tangible to pay with. Complex assurances that someone somday will pay a dept for tangible goods will be worth less then a song. Its an end for a lot of overhead services, not the end of the industrialized civilization.

I think we will get your scenario if the authorities hinders new uses of old assets.

I've been designing substation products for the US electric utility industry for 18 years now, and I know what condition the grid is in.  Seeing what we lost as a result of deregulation is depressing, and the prospect of massive final consolidation is frightening.  BUT, I still feel that the grid will be essential.  In addition to conservation, we will need to move to a much more diverse basket of sources, and we will need to have a common energy interface.  It has to be electric.  

Presently my house has oil fired heat and hot water.  I've put in a good wood stove (theoretically I have enough wooded land to make that sustainable), so the furnace is now a back up system.  I will be switching to an electric hot water heater and heat pump system, and I'm looking at alternate hot water heat sources (so I will have at least two).  I'm going electric in spite of my reservations about the grid because I cannot afford to keep changing my infrastructure.  This is the value of a common energy interface, even if it has flaws.  

So it pisses me off to see them going after what remains of the electric utilities - I know we're going to need them, and we should be pouring money into enhancing the capabilities of the grid, not turning it into someone's cash cow.  I guess I must now figure out how to generate my own electricity - this is a big investment I had hoped to avoid.  

That was a great thread, enlightening, thanks Twilight, Stoneleigh, MR, et al. You do know what you are saying, I hope?

If I may paraphrase: the grid will be dead, long live the subgrid.

Last week there was one radio (not repeated, and I haven't yet trawled online) mention that the UK grid got to its first (trivial) alert on supply. I'm not concerned, distances are small in UK, the grid is under govt control, they will do optimal things to make it function while that can be done, I can survive days or weeks without electricity.

In UK we seem to have few options, self generation or grid. The US situation, as befitting a larger country, is more variable, complex, flexible. But there are still regulations in both that are against distributed power generation. You have maybe more scope in US to implement local, sustainable, generation, grids.... for f*ck's sake DO IT.

I think I know what I am saying but at least 10% is anyway in error or not thought thru enough, allways do your own calculations! ;-)

One intresting piece of information is that modern technology both can make grids more fragile and robust. You can simulate and optimise so that you can run the current equipent closer to its margins. And you can build in smarter automatic systems for shedding load or decoupling parts of an overloaded grid to minimise the size of a power outtage. A large problem with such smarts is that they are hard to test and you might end up creating new kinds of faults.

I have not heard abot micro grids, subgrids etc in Sweden. But there is intrest in iceland running of random parts of the grid after a major fault. And house turbine running of condensing powerplants, mostly the nuclear ones, to faster get them back on the grid after a major fault.  I do not think that anyone exept odd individuals plan on running a local grid as a normal situation.

The rules for adding small generators to the grid are reasonable. This might have to do with the wind power installations. I have heard but not read that we now also have code for allowing emergency generators in teleco stations, hospitals etc to bid on selling peak power to the grid.

The deregulation left the almost rediculously large cold snap spare powerplant capacity withouth any economy. We mostly hade about 35+ year old oil fired condensing powerplants built before the nuclear plants that were run for a few days or a week every other year or less. Some of them are now scrapped others are bidding on providing spare capacity that is paid for by the transmission fees on the high tension grid. But we now have too little spare capacity since absolutely everything has too work to handle a statistically 10% risk winter cold snap.

Most of the local Swedish investments are in upgrading the nuclear powerplants, more electricity production in the pulp industry, more combined heat and power plants for district heating using natural gas, garbage or biomass as fuel, wind power and uprating of the grid. The grid uprating is mostly adding 400 kV and HDVC links to get rid of bottlenecks and massive cablification of the rural distribution to make it weather proof and to compensate for the lack of locally living and workig maintainance staff. The most uncertain plans seems to be massive wind power investments and new natural gas pipelines.

Thanks for taking the time to comment!

I suspect you're right, based on what we've already experienced with deregulation.  (One word: Enron.)

What I don't understand is why Democrats and Republicans both are still so enthusiastic about deregulation even after the Enron disaster.  

Although they have political differences, Dems and Reps essentially work for the same lobbyists.  Most corporations send a lot of money to both parties.

Politicians won't work for the average folk unless they start donating, voting or unionizing in droves.  As long as most of us obey tv and radio blabbermouths, we will be pandered to, but otherwise ignored.

Sigh.  That really doesn't bode well for the future, does it?
unless we could get private funding removed from political campaigns.

that's pipe dream isn't it?

Natural Gas injections were a net 1 bcf positive in the past week - news released today at 1030 est link

nat gas futures down 60 cents to 9.40 - multi month lows. interestingly though - 2008 and 2009 gas futures are still sitting at all time highs.

Synapsis: The worry about running out due to cold weather this year was overdone - the structural problem however is being recognized as a long term one.

Trading thought: I may buy october/november futures in for next few years out - odds are that there will be steep hurricane premium at some point approaching expiration...

Can anyone have a case (other than employees of IEA and EIA) for nat gas going sub $6 in next 5 years or so?

"Overdone" is putting it mildly.  A few weeks ago we had silly comments here about not there not going to be enuf pressure in the pipeline crap.  And the March 2006 working gas trough being as low as 400-Bcf.  My low estimate was 925 and i've been raising it ever since and contemplating a rise from December's 1050-Bcf to 1075-Bcf in our January Reserves Report.  As this is becoming common knowledge, the prices are normalizing.
Piedmont Natural Gas and its Nashville Gas division customers should soon see some relief in their January natural gas bills. As a result of significant decreases in its wholesale cost of gas within the past week, Piedmont is working with the Utility Commissions in North Carolina, South Carolina and Tennessee to receive expedited approval to lower its rates for natural gas service, effective January 1.
BabyPeanut - Your comments have been very interesting, one request - could you avoid linking whole paragraphs? It's hard to read so much of the orange on white...thank you.
This is how it works - demand can give in a lot, and the crisis is avoided. So it seems there is no crisis, no peak gas or oil problem. The consequences can be and probably are very indirect and hard to see. This is why economists have so much difficulty in finding the connection between economy and energy. Peaking energy production will not be that kind of conspicuous oil crises the world had in the '70s.
demand can give in a lot

In other words a recession.

and the crisis is avoided.

What me worry about a recession?  It's only increased poverty in a world full of violence and guns and bombs and people who think they are entitled to unsustainable consumption.

Peaking energy production will not be that kind of conspicuous oil crises the world had in the '70s.

Dream on.  It will be worse since the "solution" to the '70s crisis was for the developed world to exploit the rest of the world.  When there's nothing left to exploit then what?

In other words a recession.

But not necessarily an American recession.  

There has already been a lot of demand destruction, but it has occurred mainly in Third World nations.  I could see it getting a lot worse, without affecting us much.  So what if taxi drivers in Yemen go bankrupt because they can't afford fuel?  It won't even be a blip on our radar.  

It will be a blip on our radar, like the planes which flew in to the WTC.  Spreading economic insecurity and poverty make prime breeding grounds for terrorists.
There will be an American recession, too, but I think it is true that so far most of demand destruction has happened elsewhere.

But my point was that we cannot expect that the Peak Oil will be seen as an energy crisis and met with energy policy. Look, we have had here in TOD nice graphs showing that, maybe, we might already have passed the oil peak. Of course, we cannot know it, yet. But let's suppose that we really passed the peak. What happened? Nothing much. Oil prices came down. Economy was rather good. We might already live in a post-peak world. So, maybe it wasn't the final peak. So what. We have all reasons to expect that the real peak will be like this.

It seems that the world economy is heading towards a recession. The growth is stalling, but the music is still on. This is what we should expect after the Peak. The focus will not be in Priuses or energy policy or biofuels or anything like that. It will be in the economy, unemployment, housing and stock crash, foreclusers, indebtness, cracking financial system. What will be new, will be the protracted nature of the economic crisis. But this will be seen only after a long time. It is here that the Peak Oil people have something to say.

Freddy -I agree with you short term - but what are your long term thoughts? Can you make an argument for lower NG prices 5 years out in US?
I have been interested in natural gas also.
I love the in depth work on oil production here at TOD.
Is there anyway to do the same with natural gas production?
The LNG issue hits close to home for me, but I still don't see how the shippers will be able to pull this off without funding from the government, or large rate increases.

The Russian/Ukraine issue should open up a few eyes, as far as future gas prices go.
Looks like will will pay at least 9$ 1000cufeet.
This makes wind power and nukes look like a bargin.

A year ago, i would was saying that domestic production in north america was facing shuttering of fringe fields 'cuz they would not be able to compete with the three buck LNG coming in.  However we are in NIMBY territory and terminal approvals are running way behind.

LNG should have taken care of increased demand each year after 2007, but that is now threatened.  To what degree i am presently unsure...

Further, fuel switching due to higher oil prices has exacerbated LNG pricing at the int'l level.

Yes - the feedback loops between oil and natural gas are not something many of us have thought about enough, maybe.  The Russia-Ukraine thing seemed to have quite an effect on oil prices.
For what it's worth, I finally posted my notes and thoughts on the October Petrocollapse conference. Has anybody been keeping track of Michael Ruppert since then? He was at the time claiming we were "weeks" away from massive economic calamity (in the US) - it's been about 13 weeks now, no collapse...
I see on Ruppert's web site that he will be on the late-night "Coast to Coast" radio show next week debating "Peak Oil vs Abiotic Oil". Unfortunately this looks like a case of ignorance debating fanaticism and it is hard to root for either side. But if you stay up late you might be able to call in and ask Ruppert when this dang calamity is going to get off its butt and start happening. We're tired of waiting.
No, no, Halfin. Whatever your views on the protagonists (and I probably share them) please do not wish for calamity, we will have enough without the wishes of ambivalents ;)

I will be happy to wait forever for what I see happening next, but in vain unless benevolent aliens help us out (I'm not so deluded to expect that, btw).

For the exact (albeit messy) details of Ruppert's views, I think nothing is better than this post on his site. Yowza.
Yes, and POP! went that bubble!
   these recent conversations about weather our illustrious president is a moron or an idiot....i am shocked, shocked, i say!!....the problems of petrodollar repatriation are solved....he took care of them last spring, when he met with his friend-for-life, prince abdullah of saudi arabia:

on another subjet, i was surprised by matt simmons recent article in barrons. not by what he said, but what his interviewer, sarah ward, said:

People don't dispute we have reached peak oil production in Saudi Arabia. But they disagree that it is a crisis because advances in technology and other countries' reserves will offset any decline there.

...nobody disputes saudi production has peaked??..even the more exteme here haven't totally come to that conclusion yet...but wall street has done a 180 degree about face already in the last 6 months?..i find that interesting.

she was misinformed, or uneducated on the subject -wall st does not believe saudi arabia has peaked. And by definition, 'new technology' should be able to find new oil in Saudi Arabia which would imply it has not peaked (I personally dont believe this, but in theory). Her phrasing it as such does not make it so. If the street thought SA had peaked - back months would be above 100$
Saudi-Arabia probably peaked already in 1980.
WILD Speculation Ahead!

I was pondering the recent Russian-Ukraine Natgas Crisis when a sudden 'Eureka' moment slowly crawled across my beer-addled synaptic structures.

What if Putin was given a covert blessing by the G8 leadership to temporarily yank the Ukrainians into the short-lived crisis?

The short-lived natgas shutoff sure got the attention of the Media and the general public across Europe. Could this be a 'stealthy' way to get people aware of Peakoil and maybe Dieoff? Then the politicians can more widely discuss required Thermo-Gene mitigation changes without fear of being voted out for re-election. Recall that Putin's
theme is ENERGY for his next year as the G8 conference chairperson.  Could he just be preparing the unwashed masses for some harsh, but true news in the near future? Maybe with all these world leaders gathered in one spot is when they will announce that we are Hubbert Downslope bound!

Increasing Peakoil awareness has historically been a grassroots effort and overcoming public denial our biggest barrier to rapid Peaknik growth because they have seen us as 'nutcases'. Politicians have been historically reluctant to take the Peakoil lead because of worries that the voters still in denial would see them as nutcases too, and not re-elect them. Purposely creating a temporary energy crisis and public alarm will allow the politicians to safely endorse the experts adding public-perceived legitimacy to Peakoil-- it is a subtle way to quickly increase the required public 'critical mass' for positive change to occur. In summary, it bridges the public-to-politician gap.

Does this make sense, or was it just my beer talking?

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

Does this make sense? As science fiction or conspiracy theory - yes.

Is it real? Who knows. It wild and baseless speculation without any link to evidence. How can one prove, disprove or argue it.

Yes, it is--see my opening statement claiming it is wild speculation.  I posted it as 'food for thought'.  It's value is as a method for the politicians to engage in 'Peakoil Outreach' to wake the teeming masses from energy denial.  This denial is the major obstacle preventing major behavioral changes.  For example, I bet more XMAS money was spent on IPODs than the gift of seeds, garden tools, weather-stripping, and insulation combined.  Recall all the commercials encouraging the gifting of cars or jewelry with no mention of the thousands of tons of mining overburden and pollution left over.  An ounce of gold takes the processing of 50 tons of ore-- what is left over is toxic, not rich, loamy topsoil.

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

One single observation in that experiment...

I bought my parents an MP3 player from Amazon specifically so I could get them to listen to some things about peak oil (yeah, I know, sicko) since they are likely to live 5+ more years and my prediction of heavy messy impacts on the fan are uncomfortably closer than that.

Well, they emailed me the tues before xmas saying "can't supply" so wednesday I went and bought one, checked my email when I got home: we have despatched your MP3 player, Amazon. So, I spent £50 on 2 MP3 players.

Did my seed orders, they came to £25 but about half was for my dad, most my seeds are last years or saved from own (maybe 15 saved).

So, I spent twice on MP3 players as I did on seeds but half the MP3 spend was unintentional and most of my seeds are saved or prior years' supply.

How do I factor in the seeds I give to others, lol, sorry to f*ck with nice concepts and stats ;)

That was so funny. The Democrats had to raise taxes, so the Republicans ran against them on the basis of cutting taxes and elected enough legislators to take over, and the governor.
The Republicans were looking forward to spending all the money and were outraged when the lame duck Democratic legislators went back into session after the election and REPEALED all the tax increases, saying "The people have spoken!".
The Republican legislators had to raise the debt ceiling for the state just to keep it running, let alone getting more money for pork barrel politics for their districts. Pissed them off no end. Not that there was anything they could do about it.
But what does this have to do with peak oil? Peak Oil is not Republican vs. Democratic. It's geology vs. technology.
I want to make a comment on efforts to use Hubbert's logistic curve model and associated linearized decline curve to predict worldwide decline scenarios. Stuart has done a nice job mathematically on this but I am concerned that the underlying assumptions are not valid.

The problem I have with Hubbert linearization as applied to the whole world is that the economic situation is fundamentally different when the world oil supply is declining than when an individual field is declining.

When an individual field declines, its decline does not in and of itself drive oil prices up. One field is not producing all the oil in the world. There are many other fields in all stages of their lifetimes, some well advanced and others just coming into production. The decline in production from one field, even a large field, is only going to have a relatively small impact on world oil supply.

However this consideration is completely different when we turn our attention to the world as a whole and try to apply the same model. When one field's oil supply declines 10% it just means the owner gets 10% less revenue. But when world oil supply declines 10% the entire world gets turned upside down! Oil price goes crazy, economies undergo wild shifts, wars may be fought. The consequences are enormous.

Hence it is highly implausible IMO that the motivations and forces that control the amount of oil production will be equivalent in the two situations. And therefore we cannot extrapolate from the success of the logistic curve model for individual fields or even whole countries, to conclude that this is how it will go for the entire world.

I don't know how it will go, but at a minimum I suspect that the worldwide decline will be much more chaotic than the decline of individual fields. Economically we would expect that the fall in world supply would be met with intensive efforts to improve the situation, much more so than the decline of an individual field (where the option exists to go get oil from somewhere else). Whether such efforts will actually produce significantly more oil is unknown, but it is clear that the situation will be very different from the situations in the past where Hubbert linearization has been successful.

Halfin - when you say 'chaotic', that translates as 'steeper decline' to me. It is a good point though - we've seen graphical hubbertian history of individual wells, regions of wells and whole nations - but dont have any precedent for the world as a whole.
When an individual field declines, its decline does not in and of itself drive oil prices up.

So much the worse for the poor guy who only has that one field!  He's got declining production, and doesn't even have higher prices on his remaining oil to cushion the blow.

Sure, all of society may try to boost production from declining fields post peak, whereas pre-peak it was just the individual field owners.  But I suggest that those field owners were highly motiviated to boost production.  In many cases, they were living on the income from that field, and are now seeing a real decline in their standard of living.

It's not clear to me that having all of society trying to pull a bit more oil out of that field will actually increase production any more than having one guy for whom squeezing another few barrels a day will make the difference between sending his daughter to an ivy league school instead of a state university.

The problem I have with Hubbert linearization as applied to the whole world is that the economic situation is fundamentally different when the world oil supply is declining than when an individual field is declining.

That is the $64000 question - I've been asking it myself and so far I haven't found an answer, though I've racked my brains and I've read almost every peak oil classic from cover to cover. Perhaps I just missed out. Perhaps there is a very simple answer that's staring me in the face but I haven't seen it yet.

Anybody able to give a helping hand?

I don't know that this will be a helping hand,maybe a reaching one .  Because the biggest wells are the easiest to find, so comparatively large( best return on investment), they get tapped first.Infrastructure (mostly pipelines) I guess tends to limit the initial expansion to not 9include  smaller wells until decline starts for the big wells.  I think Hubbert kept looking at the  data and fit the curves with the logistic curve as best fit. Deffues uses a gaussian curve for instance( very similiar).   So the U. S. peak caused demand destruction enough that the normal incentive to drill threw off Hubbert's 2000 worldwide peak.    I think when you get to look at a larger region this makes the  up and downs even out, so for the world the math is likely to have less  errors due to some deviation at some local. I think this also is why Stuart's declines(Slow Squeeze) are only a few %( <4%) the first couple of decades.  Now if the basic geology wasn't similiar thjen it would not work. Also the water injection might cause the decline to dropoff steeper.    I look forward to someone critiquing my/our layperson understanding.
Bingo!  This is a major concern of mine, as well, and I think it's time everyone paying attention to energy issues recognizes this issue.

On a personal note, one of the reasons I grew dissatisfied with my graduate studies in economics a long time ago and never finished my work toward my PhD was precisely this tendency of economists to try to force everything to fit a solvable mathematical model.  In the real world we're immersed in unforeseeable events and less-than-wholly predictable human behavior; the more you try to force reality into a tidy little package, the more you're just begging to look stupid.

(And no, this IS NOT a shot at Stuart or anyone else here, just to be clear.)  

I would add to Halfin's sources of chaos: international relations (i.e. embargos and war), technological advancements, and public policy shifts (i.e. imagine the change in US energy policy if the next president is more like Carter and less like Bush 43).  

As best I can tell from years of reading about energy issues, peak oil and NG are real and coming way sooner than I'd prefer.  But trying to make even semi-specific predictions (like Simmons' recent comments about $200 to $250 oil) is little better than throwing darts with your eyes closed.

There are some fundamental problems in your post, Halfin, that need to be addressed.
  • Experience of declines from megafields where the history and data are known are extrapolated to other fields (e.g. Cantarell, Ghawar, Burgan) which are also "mature". We might define maturity, as westexas does, as the point seen in a Hubbert Linearization when the field in question has produced approximately 50% of its reserves. These megafields have always produced a large percentage of the world's oil. It is a perfectly reasonable to assume that these fields will follow the rule seen in other fields where good historical data is available. There is no argument that the world production is analogous to individual field production. Instead, there is an argument that the big fields that have been our major source of supply are and will decline as in known cases. This will also apply to smaller fields, oil provinces and countries.
  • The new discoveries curve shows a clear & undeniable trend. The world is well-explored by petroleum geologists. We can make reasonable assumptions about how much new oil will be discovered as we go forward in time. Technology may help out in some cases (e.g. for superdeep offshore projects or the Arctic but the oil will be challenging to produce and expensive. Meanwhile, overall decline rates--especially in megafields--will continue as experience shows they do.
  • Alternative sources of fossil fuels are off to a shaky start (eg. the Alberta oil sands). Oil shales are at best 20 years away (if ever). No significant investment have been made in extra-heavy oil/bitumen, CTL or GTL to date. Even if these kinds of alternatives pan out, it will not be in any timeframe that could possibly compensate for ongoing declines that are not offset by new supply sources. It's just not going to happen.
  • New but relatively small (1Gb or less) fields come online all the time especially in that diverse country called Other (which includes Chad, Mauritania, Vietnam, etc.). That's nice but combined with infill drilling & EOR from major suppliers, it is an open question whether decline rates will be matched. Big new fields like Kashagan or the Gulf of Guinea fields are rare and, compared to the megafields, pretty small. For example, there may 24Gb OIP in West Africa (offshore Gulf of Guinea) but this pales in comparison to historically known cases--taking in accelerated decline rates for offshore production like those seen in the North Sea or Cantarell (original OIP = ~35Gb with an overall estimated 50% URR after using Nitrogen injection as the EOR technology of choice). What's the URR hope for off-shore West Africa?
No, a single field's production declines is not analogous to world oil production and so is a bit misleading, I agree. But my points above attempt to clarify the role of that kind of information in predicting peak oil along with the crucial accompanying factors that fill out the bigger picture. Discoveries peaked in the 1960's. New signifant big discoveries are rare indeed--Kashagan in 2000/2001 was the last one I know about. The new oil is tougher and more expensive to come by. The economics for smaller fields must make sense but they only do if prices are higher than now. In my view, the peak oil future is clear since I don't think the demand elasticity side of the equation is elastic.
But when world oil supply declines 10% the entire world gets turned upside down! Oil price goes crazy, economies undergo wild shifts, wars may be fought. The consequences are enormous.

Oil price is going crazy, economies are undergoing wild shifts, wars are being fought.  Was that your point?

I wonder of any here can give the amount of coke and extraneous substances by weight/volume lost due to the cracking process of heavier crudes. In the advanced cracking must the energy input last longer/be greater than in the standard evaporitave separation technique?

I understand that 'Sour' is an expression of the percentage of sulfur. Is this a signicant amount percentage wise of the oil?

What is the variation range of oils being processed with respect to the ratio of processed output to input, in other words, what percentage of a barrel produces distillates and has this changed as the make-up of light to heavy, sweet to sour has changed?

It seems to me a few points either way may in fact significantly affect the demand/supply aspect we currently face. If what I suspect is true then we may be increasing supply input and lessening output simply by the type of oil we are currently processing.

Thanks in advance for your comments.


I am not an expert on oil refining, but I can answer at least the part of your question having to do with sulfur content.  The sulfur content of most crudes is only on the order of a few weight percent, so the problem is not one of the sulfur displacing the 'goodies' in the oil. The problem, and hence the additional production costs, arise from the desulfurization process needed to remove the sulfur. The more sulfur you have to remove, the more costly it is.

Then after desulfurization, one has to contend with the final disposition of the removed sulfur, which poses all sorts of environmental problems and costs. Sulfur dioxide air emissions can also be a problem. With several hundred thousand barrels per day going though a large refinery, even a few weight percent of sulfur adds up to many tons of material on a yearly basis. Even if you recover the sulfur as elemental sulfur (as opposed to sulfuric acid or aqueous sulfate solutions), sulfur is such a low-value material that it's final disposition is still a big headache.

We had discussed before whether post-peak conditions would help or hurt WalMart.  The NY Times says WalMart, and other stores targeting low-income buyers, fared poorly over Xmas.  One culprit was higher energy prices:

The nation's merchants, waving deep discounts in the final days before Christmas, drummed up enough last-minute sales to deliver a decent, if unspectacular, 3.4 percent gain for December.

"Not bad. Kind of average," was the verdict from John D. Morris, a retailing industry analyst at Harris Nesbitt.

Sales at stores open for at least a year in fact exceeded an industry forecast for a 3.1 percent increase, but an unexpected slowdown at the nation's largest retailer overshadowed those gains.

Wal-Mart Stores - which accounts for 10 percent of all retail sales excluding autos - dragged down the entire industry with its worst December performance in five years. Sales at stores open for at least a year crept up 2.2 percent, barely landing within its forecast for a gain of 2 percent to 4 percent.

Excluding Wal-Mart, overall retail sales rose 4.3 percent in December, according to Retail Metrics, a research firm.

Wal-Mart's performance struck Wall Street as sluggish, given the chain's considerable marketing campaign: television commercials with Garth Brooks, rock-bottom $400 laptops and pledge to match competitors door-buster prices on the day after Thanksgiving.

Analysts attributed Wal-Mart's sluggish sales to higher energy prices, which pinched the retailer's low-income shopping base; an early advertising blitz that tapered off in December, leaving Wal-Mart vulnerable to competition for procrastinating shoppers; and negative publicity, including organized holiday protests in front of the chain's stores.

"The 2004 holiday season revealed that Wal-Mart was no longer invincible," said Bernard Sosnick, an analyst at Oppenheimer Securities. "The 2005 holiday season did not erase that."

But Wal-Mart was not the only midpriced retailer that disappointed analysts. Khohl's and J.C. Penney both missed forecasts, indicating that lower-income consumers held back spending.

"I don't think it's a Wal-Mart problem," said Bill Dreher, an analyst at Deutsche Bank Securities. "It's a demographic problem. If you were focused on the moderate-income sector, you were disappointed."

We certainly held back spending, and hardly went out between Xmas and New Years, but there seemed to be a lot of traffic when we drove to the mall to see Kong.  Family members told us that the post-holiday shopping was brisk.

So some people were shopping as usual while others huddled in the living room for warmth.  

I'd like to think that I did my part with regards to Wal Mart's holiday season.

I didn't buy a damn thing from them.

Hopefully some of their lousy practices are paying handsome dividends - like disappointing holiday sales.

Couldn't happen to a nicer bunch...

Here's a good article about human responses to disasters:

This talks about what would happen if an asteroid were to hit Earth. Apparently groupthink and mass denial would make defecting it in time, difficult.

We don't need to go to the "what if's" of asteroid impact. Just look at how we, the human race, respond to Global Warming  and Peak Oil: denial and dellusional belief that some magic technology or invisible hand will arise from thin air to save us ("The markets will provide", "Necessity is the Mother of all inventions".)
invisible hand will arise from thin air to save us

  1. If that invisible hand is gonna be Adam Smith's hand, then that hand actually NEEDS to be an invisible hand, not a hand in a metal glove and others running about with magnets.

  2. Did not the celeberation of Chanukkah teach you anything!?  
If you need to light the Temple's light (transport to get to and from the temple of consumerism), but only enough oil to last one day, the invisible hand will keep ya in oil!
Eric, Thanks. I agree. Certainly would not want that metal-gloved hand slapping me or you around, especially if it's an iron-fisted glove with a swastika painted on its side and it has a tyrrant behind it, telling us that his ideaology is a non-negotiable one to be accepted by all. Luckily, I see no one who fits that description in today's world and I will continue to not see him/them as long as I keep my ostrich head deep underground and safe in the lemming tunnels.

Thank you also for comemerating the holiday of Channukah with me. Luckily, none of my kids managed to knock over the menorah candles and burn down the house. I trust that your house is still an upstanding one as well. In the future, burning the house might be one of the last ways to keep warm after we run out of menorah wax and oil.

Despite my persistent attacks against Adam Smith here and on my lemmings page, I'm no commie. Far from it. Democraticlly-run Capitalism is the best system devised to date for providing consumers with a cornucopia of goods and services. But it has its shortcomings. One of them is that it is a mindless machine (not an intelligently designed one) and it is driving all of us at a maddening pace towards the edge of the cliff.

I wish there were a better system. Much as I rack my brains, I can't think of one that will encourage people to work hard and be productive and yet at the same time, cause people to realize that some forms of profit-making are actually net losers for society as a whole, like pumping CO2 into the atmosphere and counting the activity as a "zero" cost factor (an "externality").  Maybe someone out there has ideas of how to force the accountants to be truthful in their evaluating of human activities. Until then, Chag Samayach, Salamm Alaichem and have a Happy New Year.

is this a sign of geologically or politically induced decline?

The Organization of Petroleum Exporting Countries, or OPEC, will probably cut oil output at its next meeting in January, Iran Daily reported, citing the country's oil minister, Kazem Vaziri-Hamaneh.

``OPEC will probably reduce the production ceiling and consider Iran's proposal to reduce one million barrels of oil from OPEC's quota,'' Vaziri-Hamaneh said at an official ceremony in Tehran yesterday, according to Iran Daily.

The group, which pumps about 40 percent of the world's oil, will meet on Jan. 31 to discuss whether members need to reduce production. Oil prices have tripled since 2001.

Well, it would be a real elagant way of masking your oil-field decline...

Come on! Cutting OPEC output??? The whole world is counting on OPEC to increase supply, as non-OPEC and non-Russian oil is already in decline. So if OPEC cuts it's output, we will surely have less oil in 2006.

That is exactly what I think will happen - politics will mask the geological decline and the markets will hold out hope that as long as (insert political crisis dejour) can be resolved, there will be plentiful energy supplies.

Simmons outright says in Twilight that the 1973 Saudi oil embargo masked their need to give key fields a rest before they lost pressure.

I completely concur.

I, too, have thought that peak would be masked by "geopolitical events" and manufactured managerial schemes of those in power who do not wish to let the public know they have no control.

We live in a world run by managers, people with degrees in pseudo-disciplines like "management," "finance," "business," and, goddess forbid, "marketing," not people with smart degrees like physics, biology, and mathematics.

They think they can manage the very clusterfuck their world views have caused. They're latter-day Oedipuses.

"YOU are the city's pollution!" quoth Teiresias.

Re:  Hubbert Linearization

The peak of Texas oil production, at 54% of Qt (based on the Hubbert/Deffeyes method), was in 1972, just before a 1,000% increase in oil prices from 1973 to 1980.  As a result of the oil price explosion, the rig count in Texas reached an all time record high in 1980, and by 1982 the number of producing wells increased by 14%.  In response to 14% more producing wells, Texas oil production dropped by almost 30% from 1972 to 1982, and despite every technological advance known to the industry, production has dropped steadily for 33 years.  

In my opinion, the Hubbert/Deffeyes P/Q versus Q method works because we are primarily plotting the decline of the billion barrel plus oil fields.   The oil industry is very good at finding large oil fields, and the smaller fields that we subsequently find can't make up for the decline from the big fields.  

Every country/region that I have looked at--that has decades of serious production--has shown Hubbert Linearization.  In the absence of political problems (e.g., Iran), production peaks at around 50% of Qt.  

The argument that fields, regions and countries show Hubbert Linearization--but the world won't--doesn't hold water.  This is exactly analogous to saying that individual oil wells will decline, but the field--which is the sum of individual wells--will not decline.  

I don't think that it is a coincidence that the same year that we hit 50% of Qt worldwide, we saw:  (1)  record high nominal oil prices and (2)  flat production year over year.

I agree.  That is how Simmons predicted the North Sea peak.  He knew that the "giants" had already been found.  

Today's DTI report says it all:

Seven new fields started production after September 2004 but production from these fields was insufficient to make up for the general decline in production from older established fields.

Hirsch's work also supports the idea that it's the giants that count.  He studied whole regions, not just single fields, and found that the peak is sudden, sharp, and comes with no warning.  The small fields cannot make up for the fading giants.

Westexas/Halfin - the P/Q hubbertian graph for the US had a steep downtrend first 10 years then the slope got a little flatter and the regression points to about 200 billion barrels total ultimate production link

But for the world, the change in slope after the initial volatility is much FLATTER. Could the difference be that the first modeling of world Hubbert curve just used nations that were producing and some nations were never considered until they started producing much later?

And what would happen to hubbertian math if avian flu/aids/asteroid,etc wipes out 2/3 of human population then plenty of oil left for everyone and slope changes quite a bit - not ALL geology.

Well, but some thoughtful people (eg Halfin and Lou Grinzo) are not persuaded, so we have more work to do to close the remaining holes in our logic (or concede the point if we cannot so close them).  I have some thoughts on how to go about this, and will try to take it up tonight (if I can work out my ideas in one night, anyway).
Well, but some thoughtful people (eg Halfin and Lou Grinzo) are not persuaded, so we have more work to do to close the remaining holes in our logic (or concede the point if we cannot so close them).

You're being overly charitable, I think. For us laypersons who cannot go as far as scouting out all the minutiae of mathematical formulae: choose a side and live accordingly.

I believe Deffeyes over posters on internet sites any day.

I repectfully disagree.  Thoughtful critiques keep the discussion honest.  If everyone on this site were in agreement, there wouldn't be much point to our discussions, would there?  To me, the value of this site is the quality of the commentary, which is enhanced by Halfin's (and others) dissent, in my opinon.

As long as the discussion is civil and intellectually honest, we can all learn and make up our own minds about the issues at hand.

I suggest that everyone read a new book, "The Worst Hard Time," about the Dust Bowl.  The worst of the dust storms, in 1935, almost blotted out the sun in New York and dropped a layer of dust on ships out in the North Atlantic.  

It was more than a little unsettling to read the book and then go outside and find a thin layer of dust ever morning on my car in Dallas.    Presumably, it's the result of the fires and/or dust storms to the west of Dallas.

It's possible--and perhaps likely--that the drought in Texas, the active Hurricane season and the cold winter in Europe are all related to the slowing of the Gulf Stream.   The Fortune article last year on the slowing of the Gulf Stream predicted all of the above.  

Current events question. In the event that Ariel Sharon does not make it within the next few days, who would be his successor? and how would this affect relations with Iran? or the rest of the Middle East for that matter? I haven't had the time to research this stuff, so I thought I'd throw it out here to kick around.
And Iran continues to antagonize Israel relentlessly. Iran's President Mahmoud Ahmadinejad was quoted as saying that he hoped for Sharon's death. "Hopefully, the news that the criminal of Sabra and Chatilla has joined his ancestors is final," he said, according to the Iranian Students News Agency. This has to have some affect on oil price speculation.
Hi everyone! Just wanted to enter the fray and say how much I've enjoyed this site since I discovered it last fall. I'm considered to be this Peak Oil brainiac amongst people I know, yet posting here is a little intimidating, given the stupendously high degree of expertise on display here. So far, I haven't really had much to say to add to the great debate, and that's rare for a guy like me that always has an opinion about EVERYTHING.

So anyway...keep up the great work! As soon as I feel I have anything to add I'll be sure to post more.

Thanks Stuart! I guess now I might say something...

I live in Ontario Canada, and worked for the Ministry of Energy here for a time. The current debate in what's traditionally been regarded as Canada's economic centre is that we are direly short of electricity, and we don't quite know what to do about it. The current Liberal government promised to shut down all of our coal based power generation by 2007, which is a date I knew full well they could never adhere to. Sure enough, they've pushed it back to 2009...a full two years after the fixed election date in June of 2007 in this province.

The thinking right now is to go with more nuclear, which tells me they at least get that relying on natural gas is a dead end proposition. But that is going to be a tough sell, especially to the PO-noninitiated - nuclear power has been a boondogle of cost overrun in this province, culminating in the Darlington Nuclear Power plant that was budgeted at $3 billion and ended up costing $12+ billion - all at taxpayer expense, and contributing to an astronomical debt of around $30+ billion that hydro in general is on the hook for. And never mind the environmental considerations.

Plus this is happening while rates are still being kept artificially low, where people are paying 5.0 or 5.8 cents per kwh in spite of power trading around the eight cent mark. Year after year we sell power below cost, and somehow the Ontario government has to deal with this debt albatross.

As if that weren't bad enough, the IESO, the government agency responsible for ensuring there is enough power in the province, has recently warned that if Toronto (where I live) doesn't either engage in major conservation, or locate power generation right within the city limits (not likely with the NIMBY factor) we are going to face rotating blackouts at peak demand periods in two years. This was put out last year, so we're talking 2007.

Let me state it more clearly - the main government agency that oversees power distribution within Canada's largest city is saying we will be facing rotating blackouts within said metropolis by 2007. Why this wasn't on the front page of the Toronto Star I will never know.

Economic growth cause the upcoming shortage? Also why was the scheduled shutdown of coalfired plants due to environmental concerns- acid rain ?
Ever heard about the small village called Jühnde in Lower Saxony, Germany? It is going to be the first energy independent village, fueled by biomass for generating electricty and heating the houses. I just found this link to an english site. The project proceeded in the meantime. The medeia interest seems to be enormous and there are signs, that several rural areas want to do the same. This is a mesmerizing idea for a complete change not only in rural areas. &tplid=6&aktuell_id=62&PHPSESSID=7ad5427943d81dd9f8d8fbf80c9d449a

Greetings from Berlin

Have been reading part of a discussion about wind power. Tends to get a lot of NIMBY responses, as the windturbines make noise and some people think they're ugly (not me).

Anyway I live in a coastal town with lots of wind and sunshine in The Netherlands, and I'm planning to get me some "home grown" electricity. I'll get some solar power but also would like to utilise the ever-blowing winds here. That is a problem as I would never get the permit for a small windturbine in a residential area due to the noise and sight. And the danger of blades being blown through my neighbours window.

In my search for a viable windturbine I found an excellent product!

These things are promising as they do not make any noise. I went to a testside to see it in action and their claim is true: no sound or whatsoever. This was with Beaufort 7. These are also more efficient than traditional windturbines and are more durable. Tested from the Sahara desert to the North of Finland. Starts making power with very little wind, no need for any precautions with severe storms; you can just let it run wild. And I think I can get a permit to put  1 or 2 on the roof.

Another tip for 82 miles/gallon

I have been interested in wind and wave power for some time and have checked out the website for the Windside wind turbine.

This device appears to be a modern, more refined variation on the Savonius wind machine dating back to  probably before the 1970s.  Both revolve around a vertical axis, both are omni-directional, and both are based on differential drag, i.e., at any given time the portion of the rotor on one side of the axis has a lower drag than the other.  

The old Savonius had some drawbacks, in that the rotor tended to be heavy in relation to a comparable conventional wind turbine blade and that it had a relatively low efficiency.  One hopes that the Windside people have corrected some of these drawbacks.

I also notice that the Windside wind turbine is only available in relatively small sizes, more suitable for individual use rather than for large-scale power generation. Which is fine, if that's the market niche they choose to operate in. However, I can envision some major problems in trying to scale the Windside up to something equivalent to these large utility wind turbines.

One thing I must say though,  the Windside is a pretty machine, and its design, along with the various towers that they are place upon, are quite nice to look at.  It proves that wind machines don't have to be ugly. I hope it works out well for you.

AP reports Iraq's largest oil refinery closed again Thursday (yesterday) after insurgents ambushed a convoy of oil tankers.
Here's a thought:

So we are told Iraq's reserves are 112.5 bbl. Now this figure date's during Saddam's regime, and we all know is over estimated.

What happens to this figure once foreign companies re-evaluate the fields?