Why do economists ignore the idea of peak oil?

The “Green Revolution” was built on cheap oil. The middle class population boom resulted from it. It’s easy to say we’ll just go back to a 19th century economy, but we’ve built a house of cards on oil. In other words, we have a much larger population to support than we did back in the 19th century, and it’s the direct result of cheap energy. Agriculture is very dependent on petroleum because you don’t have to spend much energy to make petroleum useful for agriculture. Converting energy produced by power plants (coal, nuclear, alternative) into transportation energy is a very energy inefficient process.

Needless to say, the increase in oil prices will have an effect on the economy, but the economics taught in school today don’t account for it. The party line is that economic growth is inevitable, and that new solutions are created for lack of resources. I don’t know how you can violate the laws of physics to make this model work. It’ll be interesting to see what happens!

The third world will not be as affected by an energy crunch as the developed countries, because they really don’t depend on oil for everything like we do.

From the looks of local traffic increases, we’re still spending oil like there’s no tomorrow. It baffles me too. All I can say is human beings are really poor at planning for the future beyond their own lifespan.

for a case study on what happens when your economy runs out of resources:

http://www.greatchange.org/footnotes-overshoot-easter_island.html

I would ask an economist: why didn’t the people in the above article come up with new energy and resource solutions?

It seems to me that’s been true for a long long time. I mean, there was a time when people didn’t drill underwater to get oil because it was cheaper to get oil on land. And – if I recall correctly – there was a time when people didn’t even have to drill. None of these changes have caused the world economy to collapse.

Google has a pretty good news archive search function. You have to pay for the full articles, but you can get a flavor from the search results:

From the Washington Post in 1919:

From the New York Times in 1951:

From the Port Arthur News in 1936:

So it seems like there has been debate over how much oil is left for a long time.

It could be that Blake is wrong about 80%, but I think that fundamentally, his point stands. If coal and nuclear were so darn expensive compared to oil, why would they be used for 1/3 of the world’s energy production?

Considering that oil production has increased every year up to 2005, and that oil production has dropped since then, despite record prices, maybe we’ve passed the peak.

Read the EROEI article I linked to. A barrel of oil or a ton of coal has a pretty standard amount of energy in it (setting aside issues of different grades). That’s why some oil has an EROEI ratio of 100:1 and some is 10:1 and some is 1:1. There’s no point in drilling for oil if it ends up taking more energy to produce than it eventually produces itself.

And coal is the same way. There is coal out there that has (or had) good EROEI ratios. But the coal we’re using and have been using is the good stuff that’s easy to find and dig up. The more coal we use the deeper we’re going to have to reach into the bad EROEI pile. And coal has always had a worse EROEI than oil - that’s why we switched to oil in the first place.

You have to understand the concept of EROEI. It’s counter-intuitive but it’s important. It explains why you can have an energy shortage and a huge coal reserve - and why using the coal for energy production would just make things worse.

As I understand things, there are lots of proven coal reserves. i.e. reserves that are economical to mine at today’s prices. Using your parlance, these coal reserves would have favorable EROEI. Right?

[QUOTE=Little Nemo]
I’m not a petroleum engineer (and it’s clear you’re not one either). The oil that comes out of tar sands is indeed liquid crude - what would generally be called conventional oil.[/qouote}

No, it isn’t. While I am not a petroleum engineer it is quite clear that you have no idea whatsoever you are talking about.

Tars sands, shales, coal oil and so forth are not and never have been included under the umbrella of conventional oil or liquid crude. You can look at any of the past peak oil threads to see the countless references I have provdied to that effect. Peak oil alarmists such as yourself simply ignore such non-conventional oil sources and concentrate soleley on liquid crude reserves.

What a load of dingo’s kidneys.

It has been economical to extract oil from from tar sands for the past 15 years. At current oil prices it is very, very profitable.

While it is more expensive than liquid crude it is not so expensive that it would cause an increas eint he current price of oil, no even one cent per barrell. We knwo that because we klnow that numerous comapnies atre extracting tar and shale oil and selling it at a profit at today’s prices.
Any argument that the use of tar, shale, sand or coal oil will mean the end of cheap oil has to contend with the fact that right at this moment the amount of oil in such rources that can be extracted at a workable profit is smoehting like 10 times greater than the entire amount that has been or ever coudl be extracted form the middle east liquid crude fields.

IOW it is a ocmplete load of dingo’s kidneys.

Well now have seen those cite. And there are literally thousands more. Almost every year since 1920 someone has predi cted the end of ouil in 20 years. Anyone who had done even a modicum of research on this topic would be well aware of that.

No, it isn’t. While I am not a petroleum engineer it is quite clear that you have no idea whatsoever you are talking about.

Tars sands, shales, coal oil and so forth are not and never have been included under the umbrella of conventional oil or liquid crude. You can look at any of the past peak oil threads to see the countless references I have provdied to that effect. Peak oil alarmists such as yourself simply ignore such non-conventional oil sources and concentrate soleley on liquid crude reserves.

What a load of dingo’s kidneys.

It has been economical to extract oil from from tar sands for the past 15 years. At current oil prices it is very, very profitable.

While it is more expensive than liquid crude it is not so expensive that it would cause an increas eint he current price of oil, no even one cent per barrell. We knwo that because we klnow that numerous comapnies atre extracting tar and shale oil and selling it at a profit at today’s prices.
Any argument that the use of tar, shale, sand or coal oil will mean the end of cheap oil has to contend with the fact that right at this moment the amount of oil in such rources that can be extracted at a workable profit is smoehting like 10 times greater than the entire amount that has been or ever coudl be extracted form the middle east liquid crude fields.

IOW it is a complete load of dingo’s kidneys.

Well now have seen those cite. And there are literally thousands more. Almost every year since 1920 someone has predi cted the end of ouil in 20 years. Anyone who had done even a modicum of research on this topic would be well aware of that.

Well now you know better so maybe you will stop adding your voice to the Chicken Little clamour.

I stand corrected. That’s what you get working from memory.

Nonetheless you have ducked the issue. You claimed that nuclear and coal are much more expensive than liquid crude. If this is the case then why do people use coal and nuclear for approximately the same amount (33% cf 37%) of energy as oil, given that oil is much more energy dense, easier to obtain, easy to store, easier to transport, easier to work with and so forth? Are you really suggesting that people are so dumb that they will use coal and nuclear in the same proportions as oil even though they are much more expensive?

I really would appreciate a response to this point.

And yet depsite this oil is still onlyused fr ~50% of enegry needs? Why would that be do you think, given that you claim that oil is also much cheaper?

Cite?

What the hell is that based on? There is so much coal in the world that npbody has even bothered to find out how much. there are place sint he US even today where coal can be picked up off the surface. In places like Australia and south America there are literally hundreds millions of acres where coal is less than 100 metres under the surface, and only a few hundred thousands hecatres are currently being mined.

Quite frankly this whole claim sounds like something somebody made up out of whole cloth. Coal is one resoucre we don’t need to worry about in terms of supply or economy.

Bollocks.

Uranium is incredibly cheap and is so dense that importation is not an issue, particulrly given that there are about 500 year’s supply in reserves in Australia, one of the strongest US alllies.

As for you claim that increased use will make it harder to obtain Uranium, there is no truth in that at all. As far as anyone can tell we can extract uranium form seawater at a massive energy and economic return if we wish. We don’t ATM because there is so much yellowcake lying on the surface that we don’t bother to use. But claiming that nuclear fuel is going to be limited anythime soon is fairyland stuff.

Look all I can say is that I’m old enough to have heard all this before. At school in the 80s there was identical hysteria about oil running out within 20 years. It was all based on exactly the same bullshit arguments as the current round, and it was untrue then, just as it was untrue in the 70s, and the 760s, and the 40s. And it is untrue now.

The whole thing seems to be combination of misunderstanding terms like “reserve” and “conventional oil” and greeny porn, masturbatory materila for people who wnat to believ the wicked, industrialised west must pay for its sins.

Can I see where you’re getting your figures on that? I mean, your assertion that doubling coal production would more than double the cost per ton?

What do you mean? Coal-powered cars were always a curiosity, and coal-powered trains had other issues at play. Coal powered airplanes never took off, and coal-powered ships had the same O&M issues as coal-powered locomotives. And we didn’t switch to oil in power generation, if anything oil plants switched to coal (or shut down) in the 1970’s and 1980’s. Which in part is why only about 2% of the US electrical generation is from oil.

So in what context was it that we switched from coal to oil that says it was due to EROEI? This sounds at first blush like an economic tool mis-applied to an engineering problem.

Perhaps a better question would be:

Why do economists ignore the total costs- i.e. social, environmental, and economic, all three of which are closely linked- when evaluating oil production (or anything else, for that matter)?

They don’t. I’m taking an economics course right now that discusses exactly this.

Ah, well, you’re in school, studying the state of the art. Doesn’t mean that it is used widespread. We hear updates on the price of 30 stocks every hour on the radio, yet the real impact of our economy is ignored.

What do you mean it is widespread? Economics is a pretty varied field of study if you get into it. But I can tell you unequivacolly that economists do not ignore oil prices if it is relevant to their line of study. This kind of blanket statement that they ignore it is ridiculous.

Oh, I had to laugh at this.

Post 27, ladies & gentlemen!

Psst, not only man, but carbon-based life on Earth would likely be extinct before the Sun “burns out.” The real likelihood is that with smaller stores of chemical & nuclear power, we’ll just have to use less energy, which means less steel smelting & aluminum refining among other things.

Also, you have no idea how much energy it would take to take “us” to another star system.

There is not now and will not be for the forseeable future (next 100+ years) an energy shortage. What some people are claiming is that there will be a fuel shortage within the next few years. Oil is valuable as a fuel because it’s compact and easy to run an engine, we have plenty of alternatives for energy.

Perhaps, but I have a lot of confidence in the ability of western culture to solve these sorts of problems.

I’m pretty confident that this problem could be solved too. Maybe I read too much science fiction?

At least one person int his thread has said that there will be an end to cheap energy. He specifically included coal, oil, uranium and natural gas amongst other energy sources in this shortage.

If there was only going to be an oil shortage then itis a total non-issue. So long as we have energy we can manufacture oil out of coal, or out of plant biomass, or if needed out of the air itself. It’s just a case of putting in enough energy to re-arrange the carbon and hydrogen atoms in the air.

The whole peak oil chicken little hysteria requires that there be a total energy shortage. They specifically make dire predictiona bout not having enough energy to build nuclear power plants for example, and not having enough energy to even mine and ship uranium.
So it is simply not true to say that people aren’t predicting a total energy shortage. That’s excatly what the Chicken Little’s are predicting: a total shortage of economically available energy to the point that once oil prices rise a few dollars we won’t even be able top start construction of more coal or nuclear electric plants.

How cheap is it to make plastics out of coal? How long would it take before we could do it as cheaply as it is now to make plastics out of oil? Is there anything we currently don’t know how to make out of coal? And, finally, do the coal projections take into account the fact we’d be using coal for everything, not just energy?

150 years ago, “conventional oil” was whale oil. Petroleum was known, butt was a minor alternative with no real market until Drake’s pioneering oil well in 1858. The impending Peak Whale Oil crisis and the demise of the world’s massive whaling industry was as plain as day to anyone who cared to see it (and who chose to ignore alternative sources)

BTW, if the US government had tried to equip the US with solar cells, it would have produced a dramatic upsurge in energy demand/consumption. Refinining silicon to the high purity required for a solar cells is an extremely energy intensive process. By the most optimistic projections and liberal assumptions, it would take 6-7 years of the solar cell’s output to “break even” on energy used to produce just te solar cell. In other words: if the US had gone on a massive solar cell spree after 9/11, it would only have used ~10-20 MWh per kWh of peak capacity produced, years ago, and we would not yet have gotten that energy back yet. The more significant a fraction of our energy needs we make from solar, the deeper a “hole” we’d have to dig ourselves into first.

In fact, to get ~10% of our energy from solar “instead of the Iraq War” would have meant more than doubling our energy consumption in the early 2000s. The solar cell may pay back the initial energy deficit of its own production in 7 years, under ideal conditions, but a solar cell is a minor fraction of the energy used in producing/distributing solar electricity.

I don’t seek to slam solar, but to highlight the disregarded, but very real, issues that have kept it from being appropriately exploited in my lifetime, so we may overcome them. IMHO, the flaws of a “fiscal” approach are one major reason that sensible alternative/green sources haven’t had much impact over 30+ years

First off, only limited regions of the US can make “ideal” use of solar panels to begin with – and those are mostly sparsely populated (with is both good and bad) To utilize those locations on a national scale, you need to build massive inverters (DC to AC converters), transformers (AC to AC converters for transmission), huge power transmission links … oh, and let’s not forget physical plants. This isn’t a science fair project: you can’t just lay panels on the ground. You have to build a facility that will stand for at least 30-50 years (anything less than 20 and you risk not even breaking even on total construction/infrastructure energy) and it has to be designed for monitoring, maintenance, replacement, etc. (a sewage treatment plant is simple in principle, but is a sizeable ongoing public work project)

Of course, we couldn’t have done it if we’d wanted to. It would have meant increasing the world’s production capacity for solar panels at least 100x – buiilding many many more semiconductor factories, building as much fossil fuel/nuclear/hydroelectric power capacity as currently exists to power the infrastructure to build the solar cell factories and then run them – concrete plants, steel rebar plants, petroleum-guzzling construction and delivery vehicles in dizzying arrays. The economic impact would be unfathomable. Producing solar cells in that quantity would vastly increase prices on every step in the process; not doing it to that extent would leave solar a minor source, not worth mentioning. Soon after you complete your Tier One production (to say ~10%) you’re over a decade down the road, with massive ongoing maintenance issues, and planning for replacement: the first solar cells of the massive plan are more than halfway through their rated life, and are already experiencing substantial decline in capacity – and you haven’t broken even on energy yet!

Don’t get me wrong. Solar is a good idea. However, the “If, instead of the war” dollar-based thinking presented in that hypothesis is also the cause of our current petroleum crisis: it treats the market as if money measured value and capability – it does neither, and was never meant to. The economic function of money is something much subtler, which lacks a name in common parlance. What is the “value” of your liver, your child, a good physician or “comfort girl”? Peace of mind, Freedom or Happiness (without which, little is worth much)

Stating that “market price = value” is one of the unjustified (and clearly wrong) simplifying assumptions that economics tends to make at the outset. I don’t blame them: its the best we can do, and they can squeeze some darn clever results out of them, but we’re just out of the stone age (I can, and frequently do, say the same about my field: medicine)

The sad part is: it really hard to find papers that state the “costs” of various forms of energy in objective units (like MWh of energy to produce 1kWh peak capacity). Almost all analyses, by proponent and opponent, government or private, are in terms of fiscal costs, which change according to a thousands factors, most unrelated to the question. It’s just “looking where the light is good”.

I wish I had time (in general, in life) to research this issue better (or even just edit this post down), but here’s on paper that may help people get started:
Corkish, Richard. “Can Solar Cells Ever Recapture the Energy Invested in their Manufacture?” Solar Progress (Australia and New Zealand Solar Energy Society) vol. 18, No. 2, pp. 16-17 (1997)

That seems like a misunderstanding or distortion of peak oil. I’m sure there are peak oilers who believe that but my understanding of the most sophisticated arguments for peak oil is that oil production will decline so rapidly that unconventional fuel sources are unable to ramp up production fast enough to avoid massive economic shock.

Most decent peak oil arguments I’ve heard acknowledge coal-oil conversion, hydrogen cars and the alberta tar sands etc but claim there are massive technological, practical and political issues that would prevent them from providing fuel on a sufficiently large scale.