26 August 2009

Peak Oil: So Stupid It's Not Even Wrong?

[An] argument — that the “easy oil” is gone and that extraction can only become more difficult and cost-ineffective — should be recognized as vague and irrelevant. Drillers in Persia a century ago certainly didn’t consider their work easy, and the mechanized, computerized industry of today is a far sight from 19th-century mule-drawn rigs. Hundreds of fields that produce “easy oil” today were once thought technologically unreachable. _NYT
As the author of the above NYT OpEd points out, peak oil doomists have too much at stake to look at both sides of the production and reserves equation. For peak oil fanatics, every jump in the price of oil is further proof that "the peak has passed!". "Over half the oil has already been pumped, all the easy oil is gone, and prices can only go up!", they keep saying time and again -- only to be proved wrong time and again.

Once an idea has infiltrated deeply enough into a human's thoughtways, it cannot be easily exfiltrated. But if the brain is alive and open to the outside world and its reality, it can happen. Just like oil wells that were once considered exhausted are now frequently found to produce as much or more using improved technologies as they produced originally. This will continue to be the case for most of this century.
Easy oil is probably running out because it was the first to be discovered and burned. But it wasn’t so “easy” when it was discovered. By the same token, the difficult oil of today will be tomorrow’s easy oil, thanks to the learning curve of technology expertise. Overall, “difficult oil” exploitation will be the survival and even prosperity key for many Western oil companies in a world that will be increasingly dominated by national oil companies.

It will take time, but I dare to make a prediction. By 2030 more than 50 percent of the known oil will be recoverable. Also, by that time the amount of known oil will have grown significantly, and a larger portion of unconventional oils will be commonly produced, bringing the total amount of recoverable reserves to something between 4,500 billion to 5,000 billion barrels of oil. What’s more, a significant part of “new reserves” will not come from new discoveries, but from a new ability to better exploit what we already have.

To be sure, by 2030 we will have consumed another 650 billion to 700 billion barrels of our reserves, for a total of around 1,600 billion barrels used up from the 4,500 billion to 5,000 billion figure. Yet, if my estimates are correct, we will have oil for the rest of the 21st Century._ScientificAmerican
Of course the oil markets themselves will remain volatile for as long as oil remains so irreplaceable. The oil markets will move up -- sometimes dramtically -- and they will move down. All of that will be based more upon socio-politico-economic events than upon the accessible supplies of oil in the ground.

The peak oil craze has much in common with the carbon climate catastrophe craze, and the population penetrance of the two fanaticisms tends to overlap significantly. But neither is based upon sound science, and both are largely driven by political and economic undercurrents -- out of sight of most unwitting adherents.

A relatively smooth transition into the post-oil era will require the use of a wide range of fossil fuel reserves -- including offshore oil, shale oil, oil sands, coal, gas, etc. The energy starvation approach of the Obama / Pelosi reich is not benefiting anyone except the prophets, politicians, and profit-takers of doom. The Obama / Pelosi policies are creating and worsening the scarcities the doomseekers have predicted. Political peak oil, political energy choke off.

And while Obama is using scarce US resources to prop up oil companies in Latin America, agents of his own reich are preventing US oil companies from engaging in the same type of offshore drilling that the latin companies are receiving Obama dollars to build up.

At this point, Obama's energy and economic policies are as disjointed as a cubist portrait, and as dysfunctional as an Arab or African government. One might even call the man a clown, if one were feeling particularly prejudicial toward clowns at the time.

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Blogger kurt9 said...

Very good comment about Peak Oil. I agree with it.

I would also like to say that there have been some spectacular corporate failures due to betting on ever increasing oil prices. Long timers in the Pacific North west will remember a bank called SeaFirst bank. This bank bought into the "participation loans" that were issued by a regional bank in Oklahoma, Penn Square Bank, that were then used to finance oil exploration and speculation starting in the mid-70's. Penn Square went bust in 1982 because the oil prices dropped rather than increased like everyone expected. SeaFirst was about to fail when BofA stepped in and bought them out.

One of the reason why McDonnell Douglas failed as an aircraft manufacturer is that they bet the company on the MD-11 and lost. One of the advantages of the MD-11 over the 747-400 is that it is more fuel efficient. However, it had several draw backs that the increased fuel efficiency was not able to compensate for, resulting in the MD-11 failing to maintain its market share with the airlines.

Also, both McDonnell Douglas and Boeing were developing fan-jet aircraft (these looked like the MD-80's but with a pusher fan propeller in place of the jets) that were supposed to be 30-40% more fuel efficient than conventional jets. These fan-jets were supposed to enter the market around 1991. Needless to say, these development programs were cancelled.

Wednesday, 26 August, 2009  
Anonymous Anonymous said...

Like you say, there is the physical peak oil fiction and there is the political peak oil issue. Oil and energy are such politicized commodities that it is hard to know what will happen with them in the near-term.

Only partially on this topic, Russia had an oil storage explosion recently yet oil prices went down a bit in the last few days. Russia has been desperately hoping for prices to get to and stay between $70 and $80 a barrel to keep their economy from heading to Davey Jones' locker, only to see the price rarely get over the $70 mark. And the hydro dam explosion that left two aluminum smelters scrounging for power as the winter nears and the Russian state looks to transfer capacity to heating homes is not well timed for the Russian economy.

Hopefully, some oil companies are shrewd enough to see the long-term benefit to exploration and capacity development now. Certainly not those which are owned by petro-state governments but real companies might be - I hope.

Wednesday, 26 August, 2009  
Blogger al fin said...

Thanks for the comments, Baron and Kurt.

We can't help but have a bumpy ride on the oil price roller coaster, with the rapid growth of emerging markets such as China and India, combined with the gross incompetence of the national oil producers such as Russia, Iran, and Venezuela.

The big multinationals have been pushed out of the most lucrative markets, although Iraq is starting to open up.

We need higher oil prices to bring on the substitutes and conservation tactics which will finish off oil for good, as a giant source of international mischief.

Unfortunately, these intermediate term rises in the price of oil will empower the bloodthirsty idiots in control of the oil states, but they will also lead to the final undoing of their power.

Thursday, 27 August, 2009  
Anonymous Anonymous said...

Peak oil is irrelevant, even if it is true.

First, the US and Canada haven't explored their Arctic territories as well as they could have.

Second, the US has massive reserved of coal that can be converted to diesel fuel. Natural gas can be economically converted to diesel as well, and such conversion plants are operating outside of the West.

Third, the US can drastically reduce its oil consumption, by finally moving the last of our interstate freight to rail, eliminating the use of home heating oil and natural gas, and heating homes with nuclear electricity. A couple of years ago, I traveled to San Diego, and the number of trucks traveling east from the coast carrying imports was incredible. The freight from our coasts should be carried by rail, and the railroads should be deregulated even further to allow them to wipe out the trucking industry.

Deporting our oil-using illegal alien underclass would also help us reduce our oil use.

Monday, 31 August, 2009  

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“During times of universal deceit, telling the truth becomes a revolutionary act” _George Orwell

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