A Crude Awakening: The Oil Crash

Great Debates
61

Me, I’m a practical guy, I don’t believe much of anything, I go and look up the numbers myself. Bringing this conversation back to real numbers, the BP Statistical World Energy Review Workbook gives the following figures for oil reserves and usage in thousand million barrels per year:


 Year                    1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 
 Proved Reserves Gbbl     688  717  727  762  770  877  909  996 1004 1001 1006 1011 1012 1018 1027 1049 1059 1070 1090 1115 1140 1173 1188 1194 1201 
 Usage Gbbl/yr             22   21   21   22   22   22   23   23   24   24   24   25   24   25   25   26   27   27   27   28   28   28   29   30   30 
 Years Remaining           32   34   35   35   36   40   40   43   42   41   42   41   41   41   40   40   40   40   40   40   41   42   41   40   40

Note that there has been no change in the number of years of oil remaining since 1986.

Note that during that time, oil consumption increased by 36%, and thus proved reserves increased by that amount as well.

Note that this does not include unconventional sources (oil sands, oil shale, coal conversion).

So while we will undoubtedly run out of oil at some point, I don’t think it’s time yet for speculation about widespread depression … nor is there any indication that we’ll see prices at $200/bbl (barring a major Middle East war) any time soon.

w.

62

The thing is everybody agrees that oil is a finite resource. But some people, while they concede this fact, are in denial about the possible implications of it. If you ask them if we are ever going to run low on oil, they can’t deny that we’re going to run out someday but they then add that that day will be far in the future and by the time it occurs we won’t need oil anymore anyway because we will have invented something to replace it. When you ask them what evidence they have to support this timetable and what steps we’re taking now to make it happen, they’re a little vague on the details.

In some cases, I reminding of the people who win a windfall in the lottery and run through it. They seem to feel that any amount of money past a certain point is so big that they will never run out. Even if you point out that given the amount they won and their current rate of spending and factoring in the rate of change of their spending habits, you can determine that they will spend their last dollar on October 22, 2015, it won’t have any real effect on their lifestyle - they’ve got millions of dollars right now.

63

[QUOTE=Little Nemo]
The thing is everybody agrees that oil is a finite resource. But some people, while they concede this fact, are in denial about the possible implications of it. If you ask them if we are ever going to run low on oil, they can’t deny that we’re going to run out someday but they then add that that day will be far in the future and by the time it occurs we won’t need oil anymore anyway because we will have invented something to replace it. When you ask them what evidence they have to support this timetable and what steps we’re taking now to make it happen, they’re a little vague on the details.
[/QUOTE]

No, it’s that we believe that oil will run out very gradually, and as it does the price will rise and signal the market to invest and transfer to other sources of energy. The ‘Peak Oil’ people need to have the transition happen very rapidly for their dire predictions to take place - as in a handful of years or something. If it happens gradually over 50 years, with oil going up 10-20% per decade, then there’s plenty of time for a smooth transition to alternatives, even if we had no other technology than what is available today.

But we will have other technology available. Take it as a given that there will be improvements in a host of areas that will either lower our need for energy or replace our supply of it. Battery technology enabling us to use large-scale power plants (nuclear, solar, wind, hydro, whatever) to power our smallest engines. New materials that will make vehicles lighter and more efficient. Higher-yield solar cells. You name it. The alternative energy infrastructure is getting better by the year. Some technologies won’t pan out, but others will.

So if we have decades of gradual increases instead of a 10X price spike in a few years, we’ll be fine. And we know we have those decades, beacause as oil gets more expensive oil shales and oil sands will come into play, and there are certainly decades worth of reserves there. Plus, we are still discovering new oil all the time. There are still discoveries like this one happening:

64

[QUOTE=intention]
Me, I’m a practical guy, I don’t believe much of anything, I go and look up the numbers myself. Bringing this conversation back to real numbers, the BP Statistical World Energy Review Workbook gives the following figures for oil reserves and usage in thousand million barrels per year:


 Year                    1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 
 Proved Reserves Gbbl     688  717  727  762  770  877  909  996 1004 1001 1006 1011 1012 1018 1027 1049 1059 1070 1090 1115 1140 1173 1188 1194 1201 
 Usage Gbbl/yr             22   21   21   22   22   22   23   23   24   24   24   25   24   25   25   26   27   27   27   28   28   28   29   30   30 
 Years Remaining           32   34   35   35   36   40   40   43   42   41   42   41   41   41   40   40   40   40   40   40   41   42   41   40   40

Note that there has been no change in the number of years of oil remaining since 1986.

Note that during that time, oil consumption increased by 36%, and thus proved reserves increased by that amount as well.

Note that this does not include unconventional sources (oil sands, oil shale, coal conversion).

So while we will undoubtedly run out of oil at some point, I don’t think it’s time yet for speculation about widespread depression … nor is there any indication that we’ll see prices at $200/bbl (barring a major Middle East war) any time soon.

w.
[/QUOTE]

No offense, but does anyone really believe that over the past 20 years, new discoveries have substantially outpaced consumption? If that were generally accepted as true, we wouldn’t be having this conversation. But that’s the direct implication of your link. I’m guessing they’re taking a lot of countries’ word on what reserves are ‘proven’, e.g. Middle East (SA, Iran, Iraq, Kuwait, UAE, etc.) proven oil reserves’ going from 431.3 billion barrels in 1985 to 742.7 billion barrels in 2005, despite the enormous quantities of oil they pumped out of the ground during those two decades.

65

It’s a global conspiracy to make reserves look higher so, uh, the price of oil can be kept down and the companies in the conspiracy can make less money.

It’s all so clear now…

66

[QUOTE=RTFirefly]
No offense, but does anyone really believe that over the past 20 years, new discoveries have substantially outpaced consumption? If that were generally accepted as true, we wouldn’t be having this conversation. But that’s the direct implication of your link. I’m guessing they’re taking a lot of countries’ word on what reserves are ‘proven’, e.g. Middle East (SA, Iran, Iraq, Kuwait, UAE, etc.) proven oil reserves’ going from 431.3 billion barrels in 1985 to 742.7 billion barrels in 2005, despite the enormous quantities of oil they pumped out of the ground during those two decades.
[/QUOTE]

So you’re basically going with “this cite is no good, because I don’t believe what it says.”
Ok then.

67

[QUOTE=Little Nemo]
But some people, while they concede this fact, are in denial about the possible implications of it.
[/QUOTE]

Just as some folks are in denial about how vast our reserves still our (looking at those peak oil folks here :)). As the price of oil rises many of those fields who are currently not economically viable due to cost will come on stream.

Let me try to put this another way. In the past I’ve seen gold and silver mines our west that are shut down with their equipment basically mothballed. Why? Because there is no gold or silver there? Nope. Because getting the gold and silver out of them at the current market prices is not economically viable.

Its the same with oil. We KNOW there are vast deposits of tar sands and oil shale…much more in fact that was EVER in the ME. We KNOW you can get crude oil out of them. So, where is that oil now? Why aren’t we using it? Simply put, its too expensive at the current price of crude to do more than research. Eventually however this won’t be the case and those reserves will be exploited.

[QUOTE=Little Nemo]
If you ask them if we are ever going to run low on oil, they can’t deny that we’re going to run out someday but they then add that that day will be far in the future and by the time it occurs we won’t need oil anymore anyway because we will have invented something to replace it.
[/QUOTE]

Well…what about this isn’t true? I’m sure you are aware that there are several viable alternatives currently in development. Is it your contention that these technologies have reached their peak, that in a few decades or centuries they will essentially be exactly where they are today? One has but to look at how battery technology alone continues to push the enevelope. And thats just ONE alternative (or one piece of several alternatives).

Maybe you could expand some on this one as its something I have never understood. Given that we have literally decades (if not centuries) before the price of oil makes it unviable as a transport technology due to cost, why exactly SHOULDN’T we expect a technological replacement(s) for oil?? Based on what historical baseline?

[QUOTE=Little Nemo]
When you ask them what evidence they have to support this timetable and what steps we’re taking now to make it happen, they’re a little vague on the details.
[/QUOTE]

:dubious: This is a strawman. This question was asked and answered in this very thread by several posters…and the answers weren’t ‘a little vague on the details’. As the price of oil rises due to depletion of the reserves that were easy to get too, reserves less easy (and more expensive to exploit) will come on stream. If you feel you need more details I could get you the current estimated reserves…but, oh, wait. intention already provided them.

In the mean time several alternatives, including battery, solar, hydrogen/methane fuel cells, straight hydrogen, bio-fuels, etc ARE in development. The only thing thats ‘a little vague on the details’ at this point is which one of these (or what combination of them) will emerge as the eventual winner in the market…and thats because none of us has a time machine to look forward to see who will eventually come out on top.

-XT

68

[QUOTE=xtisme]
I never have understood these peak oil hair tearing arguments to be honest. There is more oil locked up in shale and tar sands (or methane hydrates for that matter) than there ever was in the biggest reserves in the ME…and yet folks are always frantic that we are somehow running out of oil and that our civilization is on the cusp of complete collapse. Hogwash.
[/quote]
Problem is, as you say, this oil is “locked up” in shale and tar sands. Even at $100/barrel, there’s going to be a limit on how much can be profitably extracted per year. And at any fixed price, even at $100/barrel, demand will continue to rise, barring a technological breakthrough or rearrangement of how we do things on a day-to-day basis that substantially reduces the extent to which we rely on oil to power our transportation needs.

I don’t know who says we’re ‘running out’ of oil, just that there’s more demand than capacity, and that will continue to push the costs up and up pretty much no matter what. If oil peaks, then those increases will happen a lot faster.

I lean towards ‘the whole peak oil thingy’ on account of tripping over Matt Simmons’ writings while doing a bit of Googling back in the spring of 2005. I’ve yet to see any good arguments or evidence contradicting him, and I’ve been keeping my eyes open. This is why I’m hoping T_SQUARE, who suggests you can’t swing a cat without hitting an expert who’s skeptical of Simmons, can show me what those experts are saying. I’m open to the counterargument, if there is one that’s not along the lines of “we believe everything the Saudis tell us about their reserves.”

Well, sure, we’ve got the technologies, but it’s a question of applying them. Electric cars? We’ve done 'em. Now find me one. Hybrids? Well, we’re doing a bit better there, but even now, high-mileage hybrids are a small fraction of American new car sales each year, and even if they were half of all new car sales, it would take 10-12 years to realize that percentage on the roadways.

I’m not sure whether, by “market-based solutions” you mean “government, stay out and let the market work its magic” which means that we’ll adapt only when we’re forced to, and the resulting economic dislocation will be abrupt and painful, or whether you’re amenable to governmental constraints (such as higher CAFE standards) that let the market work, but within a tighter set of boundary conditions. I’m all for the latter.

69

When you have all of the major oildfields producing at peak capacity, what happens if something goes wrong? Suppose 9simultaneously), Hugo Chavez facesa revolution in venezuela-and the oilfileds shut down. At the same time, saudi militants blow up a pipeline, halting output from the Ghawar oilfield. and a severe hurricane shuts down the Gulf of Mexico. oil would soar overnight-would the USA release the startegic petroleum reserve then? :confused:

70

Again, I’m not saying we will all run out of energy and civilization will collapse, just like my hypothetical lottery winner isn’t going to run out of money and starve to death. Civilization and the lottery winner will find ways to get by. But both will look back and realize in retrospect that the good times are over.

Step back and take a historical look at our civilization. We’ve been around for thousands of years and gotten along without oil products. Then in the last century or two, we’ve built up a huge new technological society which for the most part has been fueled by oil. But at some point, regardless of whether it’s in twenty years or five hundred years, the oil will run low. Will our technological society survive? Or is humanity just enjoying the good times while we spend our lottery prize and then we go back to work? A thousand years from now, people may look back at our times as a sort of anti-dark ages - a brief highpoint for mankind before civilization settled back down to its normal level.

71

[QUOTE=RTFirefly]
Problem is, as you say, this oil is “locked up” in shale and tar sands. Even at $100/barrel, there’s going to be a limit on how much can be profitably extracted per year. And at any fixed price, even at $100/barrel, demand will continue to rise, barring a technological breakthrough or rearrangement of how we do things on a day-to-day basis that substantially reduces the extent to which we rely on oil to power our transportation needs.
[/QUOTE]

Tar sands are already becoming economically viable to exploit…at the current prices of oil today. As the price of oil rises they will become fully exploited…well before oil gets close to $100/barrel. The fields in Canada are moving from testing and proof of concept into production TODAY. Venezuela is also looking into how to exploit its vast tar sand resources…and the US in Utah. And the reserves of tar sands alone are vast. IIRC, something like 2/3rd of the total oil for the planet are locked up in them…and thus far they haven’t been touched by any wide scale exploitation.

Then there are the shale oil deposits. Tougher to get at, more expensive…but also vast.

Seriously…I can see complaining about the ecological impact of the continued use of hydrocarbons as a transport fuel. I can see complaints about the ecological impact of the strip mining or some of the other methods used to exploit tar sands and shale oils. But there simply is no viable argument that either we are going to run out of this resource or that its going to have a major impact on our civilization. Even at $100/barrel the price at the pump here in the US will probably be something on the order that the Euro’s ALREADY pay for gas. Oh, it might force some changes in demand for fuel efficient cars and such, to be sure…but its not going to require “a technological breakthrough or rearrangement of how we do things on a day-to-day basis that substantially reduces the extent to which we rely on oil to power our transportation needs.”

The technology for exploiting these alternative resources ALREADY exists…they just weren’t economically viable until recently (well, shale oil, afaik, STILL isn’t economically viable at $70 a barrel). Nor will they be used in a wide scale effort until its sure that the price of oil is not going to go back down again…no one wants to lose money by making a huge capital investment in, say tar sands exploitation, if the price of oil is going to go back down to $50-60/barrel.

Now, if you want to talk about the impact on the use of hydrocarbons that concern over GW and CO2 emissions may bring, thats something else again. I DO think that could have a major impact.

[QUOTE=RTFirefly]
I don’t know who says we’re ‘running out’ of oil, just that there’s more demand than capacity, and that will continue to push the costs up and up pretty much no matter what. If oil peaks, then those increases will happen a lot faster.
[/QUOTE]

I disagree. What do you base this assertion on? There is a hell of a lot more oil locked up in tar sands than there is in all of the other oil reserves world wide combined. It hasn’t been exploited to date because those other oil reserves were easier and cheaper to get at. Once it becomes economically viable to exploit the tar sands fully the capital will pour in…and we’ll have plenty of oil in the pipeline again.

Now, if by ‘capacity’ you mean refining capacity, then you may have a point…we are pretty much maxed out for refining capacity atm (just note the disruption Katrina caused). However, this is fairly easily fixable with increased capital investment in refining capability.

[QUOTE=RTFirefly]
I lean towards ‘the whole peak oil thingy’ on account of tripping over Matt Simmons’ writings while doing a bit of Googling back in the spring of 2005. I’ve yet to see any good arguments or evidence contradicting him, and I’ve been keeping my eyes open. This is why I’m hoping T_SQUARE, who suggests you can’t swing a cat without hitting an expert who’s skeptical of Simmons, can show me what those experts are saying. I’m open to the counterargument, if there is one that’s not along the lines of “we believe everything the Saudis tell us about their reserves.”
[/QUOTE]

Well, I’ll let T_SQUARE handle that then. I know there are a lot of oil experts skeptical of the whole ‘peak oil thingy’, and I’ve seen several arguments in these threads before. If you are really interested, as a full member, just do a search on one of the myriad peak oil threads that have been in GD in the last 3 years. If T_SQUARE doesn’t get back to you on this I’ll see if I can dig up some skepticism on Simmon’s writings.

[QUOTE=RTFirefly]
Well, sure, we’ve got the technologies, but it’s a question of applying them. Electric cars? We’ve done 'em. Now find me one. Hybrids? Well, we’re doing a bit better there, but even now, high-mileage hybrids are a small fraction of American new car sales each year, and even if they were half of all new car sales, it would take 10-12 years to realize that percentage on the roadways.
[/QUOTE]

Well…no. Thats where you are missing the point. Its not a question of applying the technology. As you rightly pointed out we HAVE the technology for electric cars and hybrids and such (even hydrogen/methane fuel cells or pure hydrogen power plants, bio-fuels, etc).

The REAL question is making them economically viable and competitive with the existing technology. You don’t (or didn’t) see many of these alternatives, and the few you DID see were VERY expensive simply because there was no market for them. You couldn’t get anyone to invest in a mass production facility or devote serious capital for more than research if the end product wouldn’t be able to compete with whats already out there. No one is going to lose money on such a scale. So, instead, what you have is companies researching the various technologies, refining those technologies…in the expectation that one day (soon probably) these things WILL be economically viable and competitive with the current technologies.

This is the part that the peak oil crowd never seems to get…and I don’t know why since it really is a simple concept. As long as oil was so cheap AND there was a huge and widespread base in hydrocarbon technologies there was no way for these other technologies to compete. As the price of oil continues to creep up however these alternatives become more attractive AND more economically viable. One has but to look at how hybrids are currently expanding in the market place. A few years ago there was like 1 or 2 (fairly shitty) models that were very limited in production, hard to get and little bought. Today I think that just about every major manufacturer has at least one model out, and in some cases they have a hybrid car, truck and sometimes a SUV model as well.

-XT

72

I think the big problem here is that the price of gas more than doubled in an eight month period. The excuses were “markets” and “peak oil” and China and India. But it really underscored the fact that the oil companies run the show. People WANT another choice…another mode to basically tell big oil…the middle east…ect…to go fuck themselves. Yet now all we get is “calm down…when the oil REALLY starts to dwindle then we can focus on something else”. I’d happily pay MORE for an alternative transportation just to cut big oil and the middle east out of my life.

73

[QUOTE=xtisme]
Tar sands are already becoming economically viable to exploit…at the current prices of oil today. As the price of oil rises they will become fully exploited…well before oil gets close to $100/barrel. The fields in Canada are moving from testing and proof of concept into production TODAY.
[/quote]
I am aware of this. But what I’ve read is that “full production” will look like 3-5 million barrels a day. That’s nice, but at a constant price, that gives about 2 years’ worth of slack in the demand curve.

If they can produce 20 million barrels a day at $100/barrel, then that would put a very different complexion on things, and I’d cheerfully admit that I’m wrong. But that’s not what I’ve read.

See above. It’s a question, really, of whether there’s some price where oil suddenly becomes plentiful and stays that way for awhile, whether it’s $100 or $120 or $150/barrel - or whether each additional $20/barrel gets you another few million barrels/day of production, but the next few million barrels/day have to wait for the next $20/barrel price increase.

My understanding is that the latter view is closer than the former view is to how things will pan out.

And some restructuring of the market. For all the oil companies’ crocodile tears about how regulation makes it too expensive to open up new refineries, they’ve been closing refineries for decades.

At any rate, the question of whether more refineries are needed, is intimately connected to the question of whether there will be more oil to refine. If 84 million bpd is all there is, then more refineries won’t do a thing. But if at $100/barrel, 100 million bpd is economically viable to produce, then more refineries will be needed.

Hell, I was one of the first posters to bring Simmons’ name into the discussion here. And while I haven’t hit every peak oil thread there is, I haven’t seen his arguments exposed as weak.

At any rate, a search on “peak” in GD thread titles nets me 9 threads, and two of them were before anyone here had heard of Matt Simmons, so that leaves 7 to actually read. I’ve got to get some work done, but I’ll see what I can find in them later.

74

The discussion here shows just how much people fail to understand how the market works. The unorganized activity of entrepreneurs, inventors, and large companies works much better at solving these problems than any government program. Before oil was discovered, our nation was concerned that we were running out of whale oil (a fairly legitimate concern). But then some smart guy came along, figured out how to tap petroleum and turn it into kerosene, and all of a sudden our nation’s energy needs were met. Why? Not because of some government program, but because the price of energy was going up and he had an incentive to find a new resource.

I know some people here have a hard time thinking that if it isn’t done by the government, it’s not going to get done. That just ignores history. When we are truly running out of oil (and we aren’t even close today), the price will keep going up. That will send a signal to the variety of greedy, evil companies in the world (who are just interested in making money) that they need to start developing other energy sources. They do this because there is a need for these sources and they will make money if they do so. That is how our nation’s transition to petroleum-based energy began, and that is how our nation’s transition away from petroleum-based energy will also begin.

A grand government strategy is the last thing we need. Government cannot respond as efficiently as the market. In fact, government will likely only try and subsidize or encourage the development of alternative fuels that please certain constituencies but do little to actually help our energy needs (the history of ethanol subsidies is a perfect illustration of this). It will distort the market and actually delay the move away from petroleum-based resources.

75

[QUOTE=RTFirefly]
I am aware of this. But what I’ve read is that “full production” will look like 3-5 million barrels a day. That’s nice, but at a constant price, that gives about 2 years’ worth of slack in the demand curve.
[/QUOTE]

True…if that production rate is true. From everything I’ve read, once the capital is invested in going full bore with exploitation of both the Canadian and Venezuelan reserves (especially those in Venezuela) ‘full production’ will be just that…equivalent or more to todays oil production. The reason why today we get only a modest production out of the Canadian and Venezuelan reserves is that the capital just hasn’t been forked over to allow for a full ramping up of production from those sources. In the case of Venezuela (who’s oil sands are actually easier to exploit…and also of higher quality IIRC) its that they just can’t get the capital influx they need (no wonder either with their president doing things like nationalizing not only their oil industry but foreign oil as well). In the case of Canada the expense is still prohibitive WRT the current price of oil.

Look at it this way. Say that I have a process to exploit tar sands. Lets say that my break even point is $60/barrel (I think its actually lower, but just as an example). That means that when the price of oil crosses that point it becomes profitable for me to produce oil using my process. Fine. However, lets say it will cost me several hundred billion dollars in order to create the infrastructure and industry in order to exploit the resource with enough production capacity to meet the expected demand. As long as there is still plenty of cheap conventional oil, as long as the price is hovering around my break even point (and may still dip down below that) why should I or anyone invest the major capital in doing something that may, in the short term at least, either break even or lose money?

[QUOTE=RTFirefly]
If they can produce 20 million barrels a day at $100/barrel, then that would put a very different complexion on things, and I’d cheerfully admit that I’m wrong. But that’s not what I’ve read.
[/QUOTE]

Well…why wouldn’t they be able too? I’ve never read anything that says that, assuming the major capital is invested to create the infrastructure and industry necessary, that they CAN’T produce the volume needed. Do you have a cite where they claim that there is some major problem (besides money) to doing this? Its the first I’ve heard of this particular argument, so I’m curious.

[QUOTE=RTFirefly]
See above. It’s a question, really, of whether there’s some price where oil suddenly becomes plentiful and stays that way for awhile, whether it’s $100 or $120 or $150/barrel - or whether each additional $20/barrel gets you another few million barrels/day of production, but the next few million barrels/day have to wait for the next $20/barrel price increase.
[/QUOTE]

My understanding has always been that once oil crosses some threshold (like $70/barrel) this will open up vast new fields to be exploited that aren’t currently being exploited…like the tar sands in Canada and Venezuela (and Utah). We aren’t talking of a few million barrels in that case but literally trillions. Once THAT is in the pipeline then costs would stabalize for a time (read: several decades or a century or so, assuming we don’t decide to ditch hydrocarbons due to its impact on GW of course)…and then start to rise again as this resource is fully exploited. Once the price per barrel reaches some other threshold (say $90/barrel…again, just for example) then you have the vast resources of shale oil available for exploitation. Again, we aren’t talking about a few hundred million barrels here but trillions of them.

Once THAT is exploited…well, we will either have moved on from hydrocarbon based transport technology (which I think we will do long before we even get started using up the tar sands) or we’ll have to go to a coal based gasification scenario (or maybe turkey guts for hydrocarbons)…and then eventually go back to living in caves I guess. :slight_smile: We are talking a couple of centuries however so I’m more concerned about what these things are doing to the environment than I am about the possibility of us running out and our whole society collapsing.

[QUOTE=RTFirefly]
Hell, I was one of the first posters to bring Simmons’ name into the discussion here. And while I haven’t hit every peak oil thread there is, I haven’t seen his arguments exposed as weak.
[/QUOTE]

Well, as I said, I’ll let T_SQUARE handle that if s/he wants too before I dig in. I don’t recall if Simmons’ specific arguments were addressed in past threads or not to be honest…but I’m guessing that even if he specifically wasn’t mentioned that various of his arguments were. I know there have been a lot of threads on this topic…though its not always called ‘peak oil’. Just as THIS thread wasn’t titled that way.

-XT

76

[QUOTE=Little Nemo]
Then in the last century or two, we’ve built up a huge new technological society which for the most part has been fueled by oil.
[/QUOTE]

Nitpick: coal, not oil, surely? At least until WW2.

77

[QUOTE=xtisme]
Well…why wouldn’t they be able too? I’ve never read anything that says that, assuming the major capital is invested to create the infrastructure and industry necessary, that they CAN’T produce the volume needed. Do you have a cite where they claim that there is some major problem (besides money) to doing this? Its the first I’ve heard of this particular argument, so I’m curious.
[/quote]
Mostly because it seems to be this way with a lot of resources. Not all of any substance found underground is equally accessible in constant purity. Petroleum has gone from ‘black stuff coming out of the ground’ (let’s see who picks up on that reference first! :)) all by itself, to stuff that you really have to work hard to get out of the ground. Coal is sometimes near the surface, in very pure veins, and sometimes it’s deep down there, or the purity isn’t great, or it’s the kind that doesn’t burn too well.

So maybe, once the price of oil goes north of $70/barrel, trillions of barrels of oil in the Canadian tar sands will be available in a cost-effective manner. If so, we’ve got nothing to worry about, at least with respect to oil supply. Currently, light crude is selling for $66/barrel, and I’d pay good money for a guarantee that my energy costs for the next 30 years would be based on the availability of petroleum at $70/barrel in 2007 dollars, not including whatever carbon taxes the government chooses to levy in the future. Hell, even $80.

But things have a way of not working out that smoothly. Still, I’d be delighted to be wrong.

78

Whether or not peak oil causes us economic hardship is not really of concern to me…sure, prices will go up, and people will adjust. Big deal.

The thing we need to be concerned about is that there is a point on the downward edge of the graph where we can’t extract the oil for energy, no matter how much is left. Now THAT crunch is a physical one and we’d better hope we’ve developed wind and solar by that time. It will be a condition of very rapid emergence of scarcity of oil energy regardless of how market forces affect things.

For the same reason, be wary of the supposed promise of nuclear. The processing that we’d need to do on spent fuel or sea water in order to get more fissile material suitable for power generation is very, very close to the break-even point, energetically. Actually, my father, who designed nuclear detection systems for power plants for a living, told me that back in the day it was known to be a temporary solution.

So don’t worry about peak oil. Actually any economic strain it puts on us will be a good motivator. Because the real crash is when it costs one barrel of oil to extract one barrel of oil. That will hurt far more.

The future for solar and wind look bright, however. They’ll be orders of magnitude more efficient in a few years.

79

I don’t think there’s any hard cap on what rate you can pull oil from the Athabasca tar sands. It’s currently around 1 million bbl/day, and projected to be around 3 million bbl/day by 2015. How much higher it can go depends on how much you want to spend increasing capacity. The issue is that it’s a capital-intensive process. The oil companies are spending many billions of dollars to set up operations up there, and expanding capacity at a rate higher than they’re doing currently would require mass importation of labour. Even as far away as Saskatoon, you can’t find a place without a “Now Hiring” sign in the window. The problem with importing labour is that there’s nowhere for foreign workers to stay. Housing can’t be built fast enough - there’s a shortage of labour. It’s a bit of a pickle.

80

Sorry for the delay:

As for Simmons, it’s been a while since I read his book, and I don’t know what he says in the movie. But, as I recall, the premise of Twilight in the Desert is that Saudi Arabia is pulling the wool over everyone’s eyes about their potential capacity. In fact, they may have already peaked, and are engaging in chicanery to keep the world from finding out.

Simmons, an investment banker of some sort, believes this because he can’t believe Aramco isn’t going full bore maxing production as an Exxon or Shell would be doing. But lots of economists, myself included, have suggested that Aramco is behaving exactly as they would be predicted to, because they face a host of issues that Exxon doesn’t. They have different goals and motivations. This is kind of an Occam’s Razor thing, Simmons might be right, but it isn’t the only explanation, or even the simplest.

I’m sorry I can’t link you to an online cite, as a lot of my information comes from conferences, proprietary data, subscription stuff and just shooting the bull with experts. I recognize that this is weak, and I am not saying you would instantly see it my way if you “knew what I know.”

As for my associate who has been inside the control bunker, his only claim is that current production seems to be inline with official Saudi data, something which I believe Simmons is dubious of. Injecting water into an old field is standard procedure, and not a sign of disaster.

My biggest problem with Simmons is his claim that oil will average above $200 per barrel in calendar 2010. This will almost certainly not happen, the only thing that might make it happen is a full on war in the Middle East, and in that case, I would say Simmons got lucky, unless such a scenario was part of the original prediction. Current futures strip prices for calendar 2010 are about 71 (for WTI), it’s always dangerous to bet against collective market wisdom, and $200 would certainly be in the extreme tail of the distribution of this wisdom. Personally, I suspect Simmons knows this, and made this claim to sell books. Stephen Leeb is using the same playbook. As others have stated, a book claiming oil will be about $70 3 years from now isn’t going to top any charts.