04 March 2008

Peak Oil: 2050

The price of oil hovers above US $100, but then the dollar is not what it used to be. Even without the huge reserves of tar sands, oil shales, heavy oils, or biofuels breakthroughs, there is enough crude oil underground to last a few more decades. The price is apt to remain high, however, which in terms of attracting investment in alternatives, is a very good thing.
...Hundred-dollar oil will provide a clear incentive for reinvigorating fields and unlocking extra barrels through the use of new technologies. The consequences for emerging oil-rich regions such as Iraq can be far more rewarding. By 2040 the country's production and reserves might potentially rival those of Saudi Arabia.

Paradoxically, high crude prices may temporarily mask the inefficiencies of others, which may still remain profitable despite continuing to use 1960-vintage production methods. But modernism will inevitably prevail: The national oil companies that hold over 90% of the earth's conventional oil endowment will be pressed to adopt new and better technologies.

- What will be the average rate of crude consumption between now and peak oil? Current daily global consumption stands around 86 million barrels, with projected annual increases ranging from 0% to 2% depending on various economic outlooks. Thus average consumption levels ranging from 90 to 110 million barrels represent a reasonable bracket. Any economic slowdown -- as intimated by the recent tremors in the global equity markets -- will favor the lower end of this spectrum.

...When will peak oil arrive? This widely accepted tipping point -- 50% of ultimately recoverable resources consumed -- is largely a tribute to King Hubbert, a distinguished Shell geologist who predicted the peak oil point for the U.S. lower 48 states. While his timing was very good (he forecast 1968 versus 1970 in fact), he underestimated peak daily production (9.5 million barrels actual versus eight million estimated).

But modern extraction methods will undoubtedly stretch Hubbert's "50% assumption," which was based on Sputnik-era technologies. Even a modest shift -- to 55% of recoverable resources consumed -- will delay the onset by 20-25 years.

Where do reasonable assumptions surrounding peak oil lead us? My view, subjective and imprecise, points to a period between 2045 and 2067 as the most likely outcome.

Cambridge Energy Associates forecasts the global daily liquids production to rise to 115 million barrels by 2017 versus 86 million at present. Instead of a sharp peak per Hubbert's model, an undulating, multi-decade long plateau production era sets in -- i.e., no sudden-death ending.___WSJ
If one factors in new nuclear plants to power larger fleets of electric vehicles, increasing use of biomass CHP, and enhanced geothermal power plants alongside larger-scale solar thermal plants--which are highly scalable--one discovers ways to make the oil supply last longer.

Transportation needs diesel fuel and jet fuel. Aviation, maritime shipping, rail freight, truck freight--civilisation depends on these petro-fuels. Clearly, biofuels will eventually provide sustainable substitutes for every liquid fuel humans need. Just as clearly, new in situ methods of crude recovery from oil shale, tar sands, and heavy oil deposits will provide more petroleum than humans are likely to need--assuming biofuels scale up in the next 50 years to the size infrastructure they are capable of building.
There is still a minority view, held largely by a small band of retired petroleum geologists and some members of Congress, that oil production has peaked, but the theory has been fading. Equally contentious for the oil companies is the growing voice of environmentalists, who do not think that pumping and consuming an ever-increasing amount of fossil fuel is in any way desirable.___NYT
Peak oil panic belongs with other fashionable panics of modern times--the holy warmer climate orthodoxy, the overpopulation dieoff.orgians, the gray-goo nano-apocalypse, etc. Even the determined march of the leftist-islamist alliance is not likely to spell the ultimate doom of civilisation, as hard as the duo may try.

Humans will survive, and they will prosper. But they will need to learn to love a challenge. And that will be very difficult for the psychological neotenates among us. Psychological neotenates crave tenure--cradle to grave security provided by others. The future is not likely to provide that.


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Blogger Snake Oil Baron said...

I just hope that Saudi Arabia and Iran peak soon or are peaking. It would be very good for the world if they were forced to spend more money, time and energy on diversifying their economies than on funding terrorism and sedition among their neighbors. A Russian and Venezuelan peak are probably too much to hope for right now but the Middle Eastern monarchy and theocracy are of more concern right now.

Tuesday, 04 March, 2008  
Blogger Hell_Is_Like_Newark said...

I read a blurb on an online trade journal that methane was found being emitted from the Mid-Atlantic ridge. The article also mentioned plans to explore the rift zone further for more complex hydrocarbons (i.e. oil).

I doubt we are going to run out of oil. However, we may run out of cheap oil, which will require changes in our lives.

I run a small contracting firm that specializes in upgrading the energy efficiency of homes. Typically, I can reduce heating bills in the 50% range (most homes are not well built insulation wise) by just installing better insulation in the walls and ceilings.

Bottom line is, that there is still plenty of room for improvements in how we utilize the energy supplies we have. The lack of motivation (until recently) has been the cost of that energy. Right now, I can provide returns on investment in the order of double digits, just because gas and oil is so expensive.

Wednesday, 05 March, 2008  
Blogger al fin said...

The idea of "peak oil" is too simplified to mean very much. For primitive technology 20% to 30% oil extraction may deplete a well. For better technology 40-50% means depletion. For even better technology, 60% and higher extraction is possible, for many wells.

Many wells that "peaked" on old technology are pumping strong with newer extraction technology.

Saudi Arabia can only diversify if it opens to the world. It can only do that if it suppresses its religious police. The best you can hope for from KSA is some type of "free enterprise zone" modeled after Dubai, restricted to only a relative few Saudis. It would function as Hong Kong did to China, as a gateway.

Iran is hopeless as long as the mullahs and cockroach Mahmoud are in charge. If it runs out of oil it becomes more dangerous. A truly nihilist regime in the most violent sense.

Wednesday, 05 March, 2008  

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