The end of the oil era: The fall of civilization, or just a bump in the road?

[Try2B_Comprehensive]

@ralfy

The problem isn’t the discovery of huge reserves, as reserves for crude oil alone are very high. It’s that the production rate will not meet demand, and that’s what’s happening now.

That’s why a better understanding of EROEI is important. Most oil requires more energy to extract, and that eats up production, not to mention requires more money. Thus, most of reserves will remain untouched.

Well, I think the whole point of “we need another Saudi Arabia every x years” is because consumption was continuing apace while discoveries were not. But that trend didn’t continue- very large, recoverable discoveries have been made. I agree, they are harder to work with, have a higher EROEI and may not be produceable at as rapid a rate as some would like. OTOH, production isn’t going to just hit a wall because of absence of resources as the worst-case Peak Oil scenarios suggest. Oil gets more expensive, probably dirtier and less worth it, but remains available.

Unfortunately, the same applies to solar, wind, etc. These have low energy returns, and still require oil for petrochemicals, etc. The global economy, and especially a growing global middle class, requires high energy returns.

A few points here. Solar first. The energy return of solar isn’t a single figure- it varies quite a bit according to what system you are using. For example, there has been a big boom in rooftop solar installations in the US and other places recently. The majority of these installations use cheap Chinese panels with a conversion efficiency of 15.6%. That isn’t bad, but the best commercially available panels right now are (I think) 24.5% efficient, and the next couple of iterations of improvement are already in the pipeline such that we can expect 26+% within a few years without any new discoveries or breakthroughs. Production of these modern, high-end panels is currently limited. If we get out of the way of or even support the industry, these will become more common and we’ll see a revolution in solar on top of the revolution we’re witnessing already.

EROEI for solar panels are hard to find, and again, it isn’t one thing. For the top panels it is something like 30-40x, and again, it is improving all the time. I don’t know if it will solve all our problems, but solar is really going to be big.

As for the energy requirements of the middle class, well, something has to give. If a middle class lifestyle isn’t possible, people just won’t get it. Besides that, middle class around the world isn’t going to mean a house in the suburbs with a garage, a driveway and a big Chevy with fins on it in the driveway. New middle classes are going to be more sensible from a consumption point of view IMHO.

That means new oil, especially from unconventional sources, will have to contend with a drop in crude oil production plus increasing demand. And if more consumers from the rest of the world join the global middle class (as seen in increasing oil consumption and sales of various consumer goods), then even more new oil will have to be put online quickly.

So maybe oil will cost too much and the price will rise such that people don’t consume more than what can be produced. I see economic trouble and continuing environmental consequences attached to our oil situation. What do you see happening?

[DSeid]

For the sake of discussion please assume that the price curves of oil and alternative sources cross such that oil rich countries still can produced at some elevate cost but at that price there are relatively few takers. They need to sell at a low margin to compete, just to recoup their development costs. The countries that have been awash in petrodollars become struggling and/or collapsing economies.

Geopolitically what are the ramifications?

[Bosda_Di_Chi_of_Tricor]

Blast the ruddy oil! (CLICK HERE)

Not complete, but very, very interesting.

[Rune]

@ralfy

The catch is that we need high energy returns and other sources of energy cannot allow for that. More details can be found in the chart featured in the EROI article shared earlier.

We have many options. Nuclear energy. Solar panels and other forms of solar energy are getting better and better. Wind power taking leaps. Hydro. etc. Fusion eventually. We just need oil & gas for a few more decades to tie us over. There’s more than enough for that. If not we’ll just have to convert coal.

[ralfy]

@nevadaexile

Do you actually work in the energy industry or are you regurgitating something that you have read?

If we were experiencing “Peak Oil” then refineries around the world would decrease their throughput as they would have decreasing quantities of product to refine. That’s not the case. Also, infrastructure upgrades around the world would fast-tracked instead of stalled as the need for oil in the system would trump environmental concerns or future concerns of climate change.

Please check the first article I shared. It contains data from the EIA showing that conventional production peaked in 2005. See also the article showing that the IEA acknowledged the same back in 2010 and the Outlook 2010 report, both linked earlier. Finally, see the article about the production for the five major players dropping by 25 pct since 2005.

Again, I shared all of these articles and reports in previous messages in this thread.

[ralfy]

@Try2B_Comprehensive

Well, I think the whole point of “we need another Saudi Arabia every x years” is because consumption was continuing apace while discoveries were not. But that trend didn’t continue- very large, recoverable discoveries have been made. I agree, they are harder to work with, have a higher EROEI and may not be produceable at as rapid a rate as some would like. OTOH, production isn’t going to just hit a wall because of absence of resources as the worst-case Peak Oil scenarios suggest. Oil gets more expensive, probably dirtier and less worth it, but remains available.

Again, reserves are not the same as production rate. See the article about rate of flow which I shared earlier.

The reference to one Saudi Arabia every seven years was made by the IEA and refers to production rate, not reserves. See the IEA report which I shared earlier.

Also, the increased energy needed to access new oil is the brick wall.

Finally, keep in mind that there’s a limit to prices that the market can tolerate until demand goes down while capital expenditures go up. View the Kopits lecture shared earlier for details on that.

A few points here. Solar first. The energy return of solar isn’t a single figure- it varies quite a bit according to what system you are using. For example, there has been a big boom in rooftop solar installations in the US and other places recently. The majority of these installations use cheap Chinese panels with a conversion efficiency of 15.6%. That isn’t bad, but the best commercially available panels right now are (I think) 24.5% efficient, and the next couple of iterations of improvement are already in the pipeline such that we can expect 26+% within a few years without any new discoveries or breakthroughs. Production of these modern, high-end panels is currently limited. If we get out of the way of or even support the industry, these will become more common and we’ll see a revolution in solar on top of the revolution we’re witnessing already.

EROEI for solar panels are hard to find, and again, it isn’t one thing. For the top panels it is something like 30-40x, and again, it is improving all the time. I don’t know if it will solve all our problems, but solar is really going to be big.

Even a 26-pct efficiency rate does not bring the EROEI of solar power to needed levels.

As for the energy requirements of the middle class, well, something has to give. If a middle class lifestyle isn’t possible, people just won’t get it. Besides that, middle class around the world isn’t going to mean a house in the suburbs with a garage, a driveway and a big Chevy with fins on it in the driveway. New middle classes are going to be more sensible from a consumption point of view IMHO.

That’s my point. Keep in mind that the global capitalist economy requires increasing consumption of resources and energy to back increasing credit. Given peak oil, especially in light of global warming, that economy cannot be sustained.

So maybe oil will cost too much and the price will rise such that people don’t consume more than what can be produced. I see economic trouble and continuing environmental consequences attached to our oil situation. What do you see happening?

I see the same, but I think there’s potential for worse, as we are dealing with a much more complex system and many other problems. That is,

• a growing global middle class that needs more resources and energy

• even renewable energy components that are heavily dependent on oil for manufacturing and delivery, especially through JIT systems stretching thousands of km in various directions

• a global economy with much of money supply controlled by a few, and that needs to keep the value of that money afloat through an expanding market, which means more resource and energy consumption

• a twenty-fold increase in arms production, sales, and use, through heavily armed groups (including police and military forces), and given the last few decades, a propensity for engaging in military intervention, surveillance and control of populations, and in several cases leading to a lot of civilian casualties

• riots and protests brought about by increasing food prices, austerity measures, unemployment, and related economic problems

• significant environmental degradation, including water and air pollution, decline or collapse of various species due to chemicals, disease, etc., several of which act as barometers for the health of ecosystems, and on which we are dependent for food sources, etc.

• increased chances of environmental disaster as more countries use multiple energy sources, including oil sands and nuclear, to deal with the threat of energy shortages

and so forth.

[ralfy]

@DSeid

For the sake of discussion please assume that the price curves of oil and alternative sources cross such that oil rich countries still can produced at some elevate cost but at that price there are relatively few takers. They need to sell at a low margin to compete, just to recoup their development costs. The countries that have been awash in petrodollars become struggling and/or collapsing economies.

Geopolitically what are the ramifications?

Very good points. Kopits refers to these and others in his lecture (shared earlier).

[ralfy]

@Bosda_Di_Chi_of_Tricor

Blast the ruddy oil! (CLICK HERE)

Not complete, but very, very interesting.

I think there’s energy needed for the process.

[ralfy]

@Rune

We have many options. Nuclear energy. Solar panels and other forms of solar energy are getting better and better. Wind power taking leaps. Hydro. etc. Fusion eventually. We just need oil & gas for a few more decades to tie us over. There’s more than enough for that. If not we’ll just have to convert coal.

According to one study linked in an earlier message, we have to do this in a decade or so.

The following points need to be considered:

• all of these sources have low energy returns, and we need higher, i.e., equivalent to oil in the 1970s; we also need petrochemicals;

• there are energy traps in the transition process (e.g., oil is needed for the manufacturing and delivery process not only of renewable energy components but even the infrastructure that will use that energy);

• the global middle class is growing, which means energy and resource needs across the board are rising because of that plus a growing population;

• the transition process will require extensive cooperation and coordination between governments and even businesses, something that has not been taking place throughout decades of conflict and competition;

More details are given in the IEA report linked earlier. My other points can be seen in this message:

http://boards.straightdope.com/sdmb/showpost.php?p=17302699&postcount=130

[JohnT]

Sorry for the delay - work is busy and I don’t have much time to spare in regards to this.

However, some people called into question my citation that crude oil production has not yet “peaked” and is at all time highs. Here’s the data, in PDF form (but a small PDF.)

To quote my favorite June reading material, the BP Global Energy Outlook says:

An increase in official Iraqi reserves was the single largest addition adding 6.9 billion barrels. Proved reserves remain concentrated in OPEC which controls 72.6% of the world’s oil reserves. Global proved reserves have increased by 26% or nearly 350 billion barrels, over the past decade. The global R/P ratio stands at 52.9 years at the end of 2012 up from 48.3 years a decade ago.

Energy economics | Home

In reviewing other Peak Oil discussions, I have noticed that Ralfy’s mentioning of energy returns is something that gained favor with POers as the shale discoveries started taking place. Even in this thread, not a single person from 2003 mentioned the concept.

Moving goalposts? You decide.

[Bosda_Di_Chi_of_Tricor]

@ralfy

I think there’s energy needed for the process.

Which can come from nuclear, coal, solar, wind, hydro, tidal…

[DSeid]

@ralfy

Very good points. Kopits refers to these and others in his lecture (shared earlier).

It’s not points so much as a question.

IF that, as a hypothetical, occurs, and the countries that have been awash in petrodollars become struggling and/or collapsing economies, what are the geopolitical ramifications?

What does a Russia with dramatically decreased revenues from oil and natural gas do? What they still have is a large land army, nuclear weapons, and a leader unpredictable enough to give other leaders pause that he might, just might, do something crazy.

What do various Arab nations that have not adequately developed their intellectual human capital do as their revenue stream deceases dramatically?

How does it play out in an era that is also expected to see climate refugees and conflicts over fresh water resources?

I am not sure and wonder what others speculate.

[BrainGlutton]

@Rune

Solar panels and other forms of solar energy are getting better and better.

Enough so to frighten some.

[BrainGlutton]

@DSeid

What do various Arab nations that have not adequately developed their intellectual human capital do as their revenue stream deceases dramatically?

I recall an old 60 Minutes piece on Bahrain, I think it was, or possibly Kuwait (this was long before the Gulf War, at any rate) – one rich sheikh is quoted as saying, “My father rode a camel. I drive a Cadillac. My son drives a Rolls Royce. My grandson will ride a camel.”

[ralfy]

@Bosda_Di_Chi_of_Tricor

Which can come from nuclear, coal, solar, wind, hydro, tidal…

Which have lower energy returns, and lowered still because the energy needed for the process. See the EROI article shared earlier for details.

[ralfy]

@DSeid

It’s not points so much as a question.

IF that, as a hypothetical, occurs, and the countries that have been awash in petrodollars become struggling and/or collapsing economies, what are the geopolitical ramifications?

What does a Russia with dramatically decreased revenues from oil and natural gas do? What they still have is a large land army, nuclear weapons, and a leader unpredictable enough to give other leaders pause that he might, just might, do something crazy.

What do various Arab nations that have not adequately developed their intellectual human capital do as their revenue stream deceases dramatically?

How does it play out in an era that is also expected to see climate refugees and conflicts over fresh water resources?

I am not sure and wonder what others speculate.

More social unrest due to higher food and fuel prices plus increasing incidences of external conflict due to a combination of increasing debt, high food and oil prices, austerity measures, unemployment, increased arms production and sales, high war costs, heavy dependence on oil by manufacturing, food production, and military forces, long-term effects of global warming and environmental damage, etc.

[DSeid]

“Social unrest” is more vague than what I was looking for. Also looking for something a bit more specific than “external conflict.”

Social unrest in many Arab countries we see already. How does decreasing oil revenues play into it. Does it strengthen the hand of fundamentalists? Does the rest of the world just disengage from the area as oil becomes a less critical resource?

Does a Russia dealing with social unrest become more set on relieving that social discontent with a sense of militaristic pride and fuel an economy by military expansion?

Who become the new winners in that scenario?

[Try2B_Comprehensive]

@ralfy

Again, reserves are not the same as production rate. See the article about rate of flow which I shared earlier.

The reference to one Saudi Arabia every seven years was made by the IEA and refers to production rate, not reserves. See the IEA report which I shared earlier.

Look, it isn’t like you’re making The Argument From Outer Space. I would agree that an increase of a Saudi Arabia’s worth of production every 7 years is not going to happen… from oil. But at this point it doesn’t make sense to ignore other energy sources. Speaking of Saudi Arabia, they’re going to invest $109 billion to install 41GW of solar generation. Germany recently hit a peak of 59% of power generated from renewables. I know most of this renewable power does not find its way into cars today, but the trend is moving toward more fuel-efficient or oil-free transportation all the time. The world needs more energy, but it is also getting more energy.

Also, the increased energy needed to access new oil is the brick wall.

Well, it isn’t the brick wall envisioned by the worst-case scenario Peak Oilers, in which discoveries aren’t made, production from old reserves peters out, and everyone just watches helplessly as civilization collapses.

I think it is more like increased resistance than a brick wall. Here is an interesting article in today’s WSJ:

Ivan Sandrea, a research associate at the Oxford Institute for Energy Studies in England and a former executive at Norway’s Statoil, says that while the industry has done a good job of finding new oil and gas deposits, profitability remains a problem.

“Who can, or will want to, fund the drilling of millions of acres and hundreds of thousands of wells at an ongoing loss?” he asks. He expects the industry to focus on more-profitable areas, he says, lowering output growth below current forecasts.

And here you can look at the losses taken by companies involved in fracking. I don’t think you’re completely wrong, see. One could read peak oil into these articles- oil is losing its profitability, and so producers are going to cut back, causing a decline in production. You could read it that way, but the oil world has quite a lot of players, and what is more likely to happen is that the price of oil will go up, drilling it will be profitable again, everyone will complain and life will go on. Meanwhile, alternatives will continue to grow grow grow.

Even a 26-pct efficiency rate does not bring the EROEI of solar power to needed levels.

Do you have a cite for that? Elsewhere you said that the EROEI we need to prevent serious economic trouble is what we had in the 70s. Back then it was 25-30. We can get an EROEI of 25-30 with wind or solar today. These industries (especially solar) are changing very quickly- if you haven’t paid attention, you might have missed the latest. We’ll eventually do even better than the 70s.

I’m not saying transitioning to alternatives is going to be easy, but by your own standards it doesn’t look impossible.

I see the same, but I think there’s potential for worse, as we are dealing with a much more complex system and many other problems. That is,

• a growing global middle class that needs more resources and energy

• even renewable energy components that are heavily dependent on oil for manufacturing and delivery, especially through JIT systems stretching thousands of km in various directions

• a global economy with much of money supply controlled by a few, and that needs to keep the value of that money afloat through an expanding market, which means more resource and energy consumption

• a twenty-fold increase in arms production, sales, and use, through heavily armed groups (including police and military forces), and given the last few decades, a propensity for engaging in military intervention, surveillance and control of populations, and in several cases leading to a lot of civilian casualties

• riots and protests brought about by increasing food prices, austerity measures, unemployment, and related economic problems

• significant environmental degradation, including water and air pollution, decline or collapse of various species due to chemicals, disease, etc., several of which act as barometers for the health of ecosystems, and on which we are dependent for food sources, etc.

• increased chances of environmental disaster as more countries use multiple energy sources, including oil sands and nuclear, to deal with the threat of energy shortages

and so forth.

well I’m not a prophet, I can’t say for sure. Plenty of those things appear plausible. I see the potential harm of global warming as being much greater than Peak Oil, though Peak Oil is (maybe) more immanent I suppose.

[ralfy]

@Try2B_Comprehensive

Look, it isn’t like you’re making The Argument From Outer Space. I would agree that an increase of a Saudi Arabia’s worth of production every 7 years is not going to happen… from oil. But at this point it doesn’t make sense to ignore other energy sources. Speaking of Saudi Arabia, they’re going to invest $109 billion to install 41GW of solar generation. Germany recently hit a peak of 59% of power generated from renewables. I know most of this renewable power does not find its way into cars today, but the trend is moving toward more fuel-efficient or oil-free transportation all the time. The world needs more energy, but it is also getting more energy.

Something to think about before we continue: these countries are now focusing heavily on renewable energy, especially one that is supposed to have extensive oil reserves, in a world that’s supposed to be awash in oil and gas.

Well, it isn’t the brick wall envisioned by the worst-case scenario Peak Oilers, in which discoveries aren’t made, production from old reserves peters out, and everyone just watches helplessly as civilization collapses.

Discoveries peaked in 1964. Peak oil is not about reserves decreasing but production peaking and decreasing. More details can be found in my earlier messages.

I think it is more like increased resistance than a brick wall. Here is an interesting article in today’s WSJ:

And here you can look at the losses taken by companies involved in fracking. I don’t think you’re completely wrong, see. One could read peak oil into these articles- oil is losing its profitability, and so producers are going to cut back, causing a decline in production. You could read it that way, but the oil world has quite a lot of players, and what is more likely to happen is that the price of oil will go up, drilling it will be profitable again, everyone will complain and life will go on. Meanwhile, alternatives will continue to grow grow grow.

What expected oil production will be put online by these alternatives? The rosiest one I’ve read shows an increase by only a few Mb/d until 2020, and that has to contend with rising demand and a drop in crude production. More details can be found the IEA report shared earlier and one of my earlier posts.

Do you have a cite for that? Elsewhere you said that the EROEI we need to prevent serious economic trouble is what we had in the 70s. Back then it was 25-30. We can get an EROEI of 25-30 with wind or solar today. These industries (especially solar) are changing very quickly- if you haven’t paid attention, you might have missed the latest. We’ll eventually do even better than the 70s.

Reposted:

http://www.theoildrum.com/node/3786

Photovoltaic is only around 10. The U.S. alone requires 40, and it makes up less than 5 pct of the world’s population.

To maintain current economic growth, we need new oil put online equivalent to one Saudi Arabia every seven years. For a growing global middle class:

(Reposted:)

The rise of the global middle class

the equivalent of one Saudi Arabia every three to four years:

Former BP geologist: peak oil is here and it will 'break economies' | Nafeez...

Again, this refers to rate of production, not reserves. For reserves, we have hundreds of years’ worth of that, including crude oil. And yet crude oil has been in a 73.4 Mb/d plateau since 2005, just as Hubbert predicted.

(Multiple links for that, shared in previous messages.)

I’m not saying transitioning to alternatives is going to be easy, but by your own standards it doesn’t look impossible.

Not just my standards. See an article about that shared earlier. See also the conditions needed to maintain growth as explained in the IEA report (linked earlier).

well I’m not a prophet, I can’t say for sure. Plenty of those things appear plausible. I see the potential harm of global warming as being much greater than Peak Oil, though Peak Oil is (maybe) more immanent I suppose.

I think both will take place, as the IEA argues. See the IEA report shared earlier.

That is, as we are forced to resort to unconventional oil, we face higher oil costs (which is the effect of peak oil) plus higher CO2 emissions. Hence,

World headed for irreversible climate change in five years, IEA warns

If the change has to take place rapidly, then we will have to see incredible levels of cooperation between governments and sacrifices in energy and even resource use by most.

Given business that want more profits through increased production and consumption of goods coupled with financial speculation, governments that work for them, and households that want a middle class lifestyle, this rapid change is not likely.

[Precambrianmollusc]

It would be better to refer to the 2012 Medium term oil report from the IEA than then 2010, in that they do explain that the new production from shales and deepwater are having a significant effect.

[QUOTE=IEA]

The transformative power of non-conventional oil production technologies applied in shale and tight formations in North America exceeds earlier expectations.”
The share of deepwater production as a share of global supplies is expected to increase from 6% in 2011 to around 8% by 2017 (from 5.5 to 8.2 mb/d), with the lion’s share of this growth centered in Brazil’s deepwater (>1000 feet).

[/QUOTE]

In terms of cost to produce shale and deepwater liquids, shale liquids production cost peaked 2011 and have been declining. A lot of the price reduction is related to 3rd party contractor costs reducing as more suppliers for the essential drilling/pumping services moved into the market. So high shale production costs were , in part, due to availability of service providers, not a fundamental problem with shale oil production.
Deep water expansion remains somewhat constrained by the limited supply of deep water rigs, and some drilling and production technologies that haven’t come to fruition yet, although the technology pipeline for deepwater drilling and production is healthy.

Regarding “flat production since 2005”, a thing to remember about production numbers is that it is only what is produced, not, what is capable of being produced. 2003-2008 we certainly had a very tight supply/demand issue. That said Saudi still kept 2MM b/y sour heavy shut in.

In terms of what is produced vs what is capable of being produced. anyone outside OPEC sells whatever they can produce, barring horrible economics, so non OPEC production is a good indicator of what can be produced by existing wells (outside OPEC). It is not a good indicator of what could be produced if there were more wells. Oil companies have a limited amount of cash to invest in exploration and production. Internally asset groups fight for the cash to develop the best prospects. Quite a few economic prospects don’t get developed because the cash went to other projects. So non OPEC produces everything it can currently produce, but increased production is limited by access to capital, not always access to oil. As has been noted by others, the access to oil isn’t really a problem at the moment, reserves are expanding.

OPEC however typically has a lot of shut in capacity. When you look at world oil demand to supply analysis, the big variable is the “call on OPEC supplies” basically how much OPEC oil was purchased from OPEC . For the 2012-2017 period:

[QUOTE=IEA]

The call on OPEC, on an annual average basis, is not expected to exceed 31 mb/d until 2017, after remaining in the low 30 mb/d range through most of the forecast period.

[/QUOTE]

When we look at OPEC excess production we find

[QUOTE=IEA]

By the end of the forecast period (2017) , OPEC effective spare capacity is projected to more than double from 2.8 mb/d to somewhere between 5 mb/d and 7 mb/d, a level unseen since before the 2003-2008 rally, except briefly after the financial crisis of 2008-2009

[/QUOTE]

So with a global supply ( including OPEC and OPEC NGLs) rising from 92.8 to 102.8 , against a demand of 88.95 to 95.68 , while production has been flat from 2005, that would be more of a demand rather than actual ability to supply going forward. They also expect to see a price decline from 110 to low 90s high 80s.

So , production is flat due, in part, to flat demand, supply is increasing, costs are reducing. if we see prices rise I would expect more capital to become available to access more reserves.

Regarding the comment on Saudi investing in solar, a country that is awash with oil, the answer is not because they have limited oil, but because they have an increasing domestic demand for energy and they don’t want to compromise their revenue. They could use their own oil production to satisfy that demand, but as that would eat into the countries revenue , it would make more sense to utilize solar energy locally ( many reasons for that, lots of sun, lots of empty space) which cant be exported , and save the oil for maintaining a revenue stream.