Whether it’s MC or ATC, you’re saying oil pricing is a cost-plus phenomenon. It’s not. It’s based on estimated future demand. What can explain the statement that 1/3 of world crude production (ex-site) costs $10/bbl while a barrel is trading at $100? Even if you add exploration and development costs (pre-production) average cost to produce shouldn’t exceed $30/bbl.
http://www.ogj.com/articles/2013/01/cges--oil-field-costs-havent-made-crude-oil-prices-rise.html
Wrong on multiple levels. At its most fundamental level, the concept of “peak oil” is just the fact that oil production can’t keep increasing forever, because eventually you’re going to reach some sort of limit. That doesn’t depend at all on what technology you have. At a more detailed level, that of trying to predict when peak oil will happen (or possibly, has happened), even Hubbard’s original paper assumed technological advancement. Technological advancement is in fact one of the reasons why oil production has been increasing with time in the first place: Peak oil, in the conventional model, is not where technological advance stops, but just where depleting reserves catch up to it (which must, inevitably, eventually happen).
OK, the definition according to wikipedia is
That means it’s a meaningless concept since the extraction tech constantly changes. IOW, the “peak” is constantly moving with changes in technology, no?
Yes, but you’re dealing with a finite resource and technology just makes production more efficient. There’s no point in arguing the existence of PO. What’s worrying about PO is the way economists draw the chart. Once you reach that peak, production is expected to fall very sharply. This considers expected demand. To a geologist like me, it’s saddening because it also considers future (better) exploration, development and production.
But while you’d think that the generation hit by PO will live very differently from previous generations, it won’t be a disaster. PO considers only well oil and gas. Remember you have other sources like sands, shale, and coal. And then there’s nuclear power.
Yeah, but the peakers’ (as I call them) whole argument is time dependent isn’t it. I mean if we keep pushing PO into the indefinite future it becomes irrelevant since it will eventually be replaced by other energy technologies.
It’s worrying mainly because the present generation is still heavily dependent on fossil fuels, especially oil. Technology development towards removing that dependence is where much of the excitement is. Even a 2nd grader knows that oil will eventually run out.
What did a 2nd grader think about fracking 10 years ago? :rolleyes:
It’ll still run out.
You’re not paying attention. My point is that the peakers’ argument is time dependent. As you say, everyone knows that there is a finite amount of hydrocarbons. There’s also a finite amount of matter in the universe.
Wait, what’s this about moving the date of peak oil? Do you have a time machine or something? There is one and only one date for peak oil, we just don’t know when that date is yet.
Yes. I think I said that.
It is you who is not understanding this. All commodities fundamentally are priced based upon the marginal cost. That doesn’t mean that it is a perfect price of the marginal cost at all times. However, the price generally should revert toward the marginal cost of production.
Now, I have no idea why you think it should have any relationship to the average cost of production. It doesn’t matter that it costs $10/bbl to produce in the middle east. What matters is the entire demand for oil and the cost for the last barrels of supply needed to fill that demand.
Yes, some of the strongest backwardation the strip has seen in a long time.
Well, then a second grader is wrong. Perhaps you mean we will eventually run out if we use it at today’s levels. Of course that is true. However, as the cost to produce climbs higher and higher, we would clearly switch to other energy sources causing consumption to decline. Same thing with coal. We’ll never run out. We’ll just stop using it before we ever exhaust the resource.
AIUI we are not going to know when Peak Oil has happened until after it has passed and production is really declining, hence all the predictions thwarted by tech. There is also the question of cost, while production cost is not a real driver in market price think what a barrel of oil will sell for when production costs are $100 USD per BBl.
IANAE in oil production but the Saudi’s have quite possibly been overstating their Proven Reserves by as much as 40%
http://en.wikipedia.org/wiki/Oil_reserves_in_Saudi_Arabia
The real problem is if we are blindsided by but a series of sharp price spikes and less overall production. We as a population do not need that to happen and the turmoil it can cause, should be avoided by preparing for it.
Capt
The point of peak extraction of petroleum isn’t “into the indefinite future”; it is at the point at which the cost of extracting petroleum exceeds the market value. Just because technology has enabled the extraction of petroleum from reserves previously too costly to extract (and at increasingly greater environmental impact) does not mean that the capability will extend “into the indefinite future” or will last long enough to “become irrelevant” to be replaced by other technologies. It makes far more sense to invest in the research and infrastructure changes required for the most desirable alternatives now so as to avoid economic and social disruption.
To address the original question of the o.p., the major oil companies are very interested in alternative energy sources, although they are obviously interested in sources they can control versus more distributed sources such as solar electric or offshore wind, which alters the emphasis of research. Until about ten years ago, virtually all of the major non-governmental investment in controlled nuclear fusion came from various petroleum companies, who have since decided that this technology is too far into the future to provide a return on investment. Currently they are still profiting even on the more expensive extraction methods (and take every advantage upon market fluctuations to boost profit) but there will certainly come a point at which petroleum extraction becomes too costly for the current market.
Stranger
What do you think the break even price is for the Bakken? That’s one of the better plays in the U.S. I can absolutely guaranty you that some U.S. producers are bringing their production to market at a loss right now with $105 oil.
I gave the definition of PO above. Please refer to it. I also gave my argument for why it is irrelevant if it is a constantly moving target, which it clearly is. But if you want yet another example since fracking doesn’t seem to be doing it for you, how about methane hydrates.
This would be yet another potentially huge, as in inestimable source of hydrocarbons that is currently not profitable (or feasible) to exploit. However that technology could easily change in just a few years. This would not directly affect PO in the technical sense but would possibly make it irrelevant and this precisely the sort of thing that I had in mind when I made my argument above.
Well not precisely. Actually I had things like wind and solar in mind, but this also works.
Oh so I (and the 2nd grader) are wrong given certain assumptions. I can live with that. I should have said “all usable petroleum deposits on earth, assuming we seek to extract them all, will run out.” :rolleyes: I think I mentioned the alternative energy factor a few posts back.