What Peak Oil?

Is peak oil imminent? Lots of people seem to think so.

The data (released by BP a company who have a vested interest in oil scarcity) don’t agree. Proved reserves keep increasing:

The oil in the ground will run out some day. But as the discovery of proven reserves continues to significantly outpace the rate of extraction, the claims that we’re facing immediate shortages looks trashy.

Some may try to cast doubt on these figures, saying that BP are counting inaccessible reserves, and that we must accept that while there are huge quantities of shale oil in the ground, the era of cheap and readily accessible oil is over. They might cite the idea that oil prices are much higher than they were ten years ago. Yet this is mostly a monetary phenomenon resulting from excessive money creation beyond the economy’s productive capacity. Priced in gold, oil is still very cheap — almost as cheap as it has ever been:

The argument that the vast majority of counted reserves are economically inaccessible is fundamentally flawed. In the long run there is only one equation that really matters in determining whether oil is extractable, and that is whether there is a net energy gain; whether energy-in exceeds energy-out. If there’s a net energy gain, it’s feasible. Certainly, we are moving toward a higher cost of energy extraction. Shale oil (for example) has a lower net energy gain than conventional oil, but still typically produces five times as much energy as is consumed in extraction.

But the Earth’s extractable hydrocarbons will eventually dry up, whether that’s in 500 years or 200 years. If we want humanity to have a long-term future on Earth, we need to move to renewables; solar, hydroelectric, thorium, synthetic hydrocarbons. And the market will ensure that, eventually — as the cost of renewable energy continues to fall, more and more of us will adopt it. I don’t buy the myth that markets are stupid — if humanity needs renewable energy (I believe we do) the market will see to it (I believe that is slowly happening). Markets are just the sum of human preferences.

According to the International Renewable Energy Institute:

Power from renewable energy sources is getting cheaper every year, according to a study released Wednesday, challenging long-standing myths that clean energy technology is too expensive to adopt. The costs associated with extracting power from solar panels has fallen as much as 60 percent in just the past few years.The price of  from other renewables, including wind, , concentrating solar power and biomass, was also falling.

So no. I’m not lying awake at night worrying about imminent peak oil. There’s plenty of extractable oil, and renewable energy will eventually supplement and replace it. But will politics get in the way of energy extraction? The United States has huge hydrocarbon reserves, yet regulation is preventing drilling and shipment, leaving America dependent on foreign oil. And the oil companies themselves are largely to blame — after Deepwater Horizon, should anyone be surprised that politicians and the public want to strangle the oil industry?

If there’s an imminent energy crisis, it will be man-made. It will come out of the United States’ dependency on foreign oil. Or out of an environmental catastrophe caused by mismanagement and graft (protected cartels like the energy industry always lead to mismanagement). Or out of excessive red tape. Or war.

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58 thoughts on “What Peak Oil?

  1. I suspect that going forward the tougest challenges may lie in energy storage, rather than in energy capture/generation where most of the attention goes. It seems that within a 50-100yr timeframe from now nuclear fusion could become a reality and big strides are being taken towards that (although how much those with a vested interest in hydrocarbons will try and resist it could be a factor). Fusion would solve all our energy needs and then some. But how do you store that energy and make it transportable? That’s a big problem. Batteries seem like a poor solution, with poor efficiencies, low energy densities and most crtically a huge reliance on rare earth metals.. which are rare! There’s not going to be enough to make any where near the amount of batteries that would be required… and besides it’s hard to imagine a jumbo-jet travelling 24-hours straight on battery power… not for a long time. And hydrogen fuel cells seem to be a non-starter as well, plauged by inefficiencies as they are.. But neccesity is the mother of all invention I guess..

    • Fusion would solve all our energy needs and then some. But how do you store that energy and make it transportable? That’s a big problem. Batteries seem like a poor solution, with poor efficiencies, low energy densities and most crtically a huge reliance on rare earth metals.. which are rare! There’s not going to be enough to make any where near the amount of batteries that would be required… and besides it’s hard to imagine a jumbo-jet travelling 24-hours straight on battery power… not for a long time. And hydrogen fuel cells seem to be a non-starter as well, plauged by inefficiencies as they are.. But neccesity is the mother of all invention I guess..

      This seems like the best bet to follow right now:

      http://www.gizmag.com/smaller-nuclear-battery/13076/

      Also synthetic hydrocarbons.

  2. Since all matter IS energy, it seems unlikely that we should be running out of it anytime soon.

    The form it takes is pretty inconsequential.

    • I don’t understand your point. If you intend to store and use that energy, is not the form of that energy of consequence?

      • Jim, the point is that people worry about things completely out of their control. All markets are now so incredibly opaque that it is nearly impossible to make sense out of any of the particulars.

        If oil is running out [which probably makes some sense], who cares? It’s not like there won’t be something else to take its place.

        Energy should be pretty low on the list of problems we humans face; perhaps between, how to procure a good frozen meal, and, how to live forever.

      • Energy is superabundant. There are bottlenecks, of course, which is what this discussion is about. I say the peak oilers are drastically overestimating the size of the bottlenecks and are blind to the (relative) black swans of energy alternatives.

    • Actually, matter is energy in the same sense that a clump of eggs, flour and chocolate is a chocolate cake. The challenge is the conversion. Oil just happens to provide a relatively efficient means of that conversion, which is what the article is all about. Waxing philosophic isn’t going to change the fact that we still need a better way to do it.

    • E=m*c*c, but so far only two elements (U and Pu — the second manmade from the first in a nuclear reactor) have practically been converted to usable energy. And, nuclear energy hardly has won any popularity contest, much less been affordable and usable for transportation vehicle.
      FOSSIL FUELS, which are misnamed because there is no evidence that they are predominantly made from decayed vegetable and animal life, may be essentially unlimited. For example, Saturn’s moon Titan has an atmosphere of natural gas, with methane and ethane rain, lakes, and rivers.
      “What Peak Oil?”

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  4. The fact that oil companies are currently seeking crude from sources that require much greater energy inputs offers proof that most easier reserves have already been fully exploited. The analysis above might make more sense if no other factors came into play, but net energy gain is not the only measure of economic extraction. Some of the limiting factors for extraction have not quite yet kicked in — peak water for one. The extraction of crude from shale requires massive water use, and the cost for that water use may soon spike.

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  7. Hi John,

    The question to look at is: Is oil going to get more expensive and more scarce, or cheaper and more abundant?

    Your price comparison about gold vs oil compares two physically supply-limited assets. The largest factor in the price of mined gold is fuel costs, thus these two assets should correlate closely. It is essential to understand and segregate any analyses of physical assets (supply constrained) vs paper money.

    Some enlightening questions to ask and charts to look at would be:

    1. What is the rate of increase in oil production over the past 10 yrs vs the last 30 yrs, and why is production of conventional oil flat? Why has it changed so significantly?
    2. Why is oil still at $80 – $100 per barrel, even though the world is in an economic slowdown/recession? What will it be when the world economy is robust? Why isn’t oil at $20 per barrel like it was just a decade ago? Do you believe it will go back to $20 in 10 years, or follow its current rate of increase and be at $400 barrel in 10 years?
    3. What is the cost per barrel of new oil sources (such as the ones in the deep sea)? Why can’t we just drill deeper in Texas (where there are almost no regulations)?
    3. What does the per-capital oil production chart look like? Oil production is not keeping up with population increase or demand.
    4. How many people and at what income level are people being economically squeezed out of being oil consumers, and how is this changing over time?

    Your assertions about peak oil are incorrect, which does not matter except it distracts from real conversations about the underlying dynamics. It is essential for you to understand how oil (a liquid transportation fuel) is different from electrical renewables, and how oil as a physical, finite asset fundamentally contradicts some broadly (and wrongly) held economic tenants. It is wise to explore the contradictions.

    A good start would be for you to do your own forecast for future oil prices — one that models historical prices and also projects them forward. What are the factors that drive oil prices? For fun, show how and when oil will get back to $20 per barrel again so we can all be happy oil consumers in perpetuity. Is that what you are asserting? Or maybe that oil will always be in the current range? I am Interested in hearing what you think oil prices will be in 10 years, and why.

    Best regards,
    Craig

    • Craig, you make an interesting point. We are facing the biggest risk to growth in 90 years and we still don’t see oil at $20. There are definately speculators in the oil market, many may have their wealth tied up in storing oil in huge redundant tankers. I mean you can’t use gold to run a machine, but you need energy. The real savvy and wealthy people will be storing oil.

      Russia and Central Asia are seeing huge investment in oil infrastructure. I think they may be curtailing supply to keep prices up. I do think John has valid arguments, but I think there is still plenty of oil around to meet current demand.

    • It is essential for you to understand how oil (a liquid transportation fuel) is different from electrical renewables.

      You’re limiting your critique to electric renewables? What about synthetic solar fuels such as those manufactured by Joule Unlimited? “Solar” energy doesn’t have to be limited to photovoltaic that goes into the grid (and thus has limited storage capacity).

      1. What is the rate of increase in oil production over the past 10 yrs vs the last 30 yrs, and why is production of conventional oil flat? Why has it changed so significantly?

      Yes, conventional is scarcer because we have used most of the easy-to-access stuff. That is obvious and taken as read.

      2. Why is oil still at $80 – $100 per barrel, even though the world is in an economic slowdown/recession? What will it be when the world economy is robust? Why isn’t oil at $20 per barrel like it was just a decade ago? Do you believe it will go back to $20 in 10 years, or follow its current rate of increase and be at $400 barrel in 10 years?

      Because conventional is scarcer and we haven’t fully switched onto the alternatives yet. But I think you’re hugely underestimating the scope and breadth of the alternatives. Natural gas has fallen to relative all-time lows. Why? Because it’s super-abundant right now. As the alternatives (and I am particularly talking about synthetic fuels here) come online (you could fuel the entire US from a synthetic fuel plant equivalent to the size of the Texas Panhandle at current efficiences) and as the the alternatives become more efficient and if we avoid the various manmade crises (war, etc) I fully expect the cost of energy to fall in the next twenty years (if not the next ten — we are still extremely reliant on the conventional interdependent infrastructure).

      3. What does the per-capital oil production chart look like? Oil production is not keeping up with population increase or demand.

      True enough. 20th Century technology is failing to keep pace with 21st Century population growth. But we have more than enough capacity with the newer technologies, specifically synthetic fuels, natural gas, shale, solar, etc so long as there is enough investment (in an energy-hungry free market, eventually, there will be.

      4. How many people and at what income level are people being economically squeezed out of being oil consumers, and how is this changing over time?

      Yes, we’re dependent on conventional. Yes, that is biting. As conventional becomes more expensive the alternatives will become more economically feasible, and the wider their deployment becomes the cheaper the energy cost will be.

  8. Proven reserves is not the same as amount extracted or even the extraction rate. And if net gain, together with the extraction rate, are not high enough to meet increasing demand, then there will be a shortage.

    Also, it is odd to argue that there is more than enough oil and then refer to renewable energy to meet demand.

    Finally, look at this finding from the same company, from last year:

    “Running dry”

    http://www.economist.com/node/21519035

    It shows that demand has been exceeding conventional oil production since 2006, and that the excess is being met only through the use of non-conventional sources which have lower energy returns.

    That is very strong confirmation of peak oil. If peak oil were not imminent, then we should have been seeing significant increases in conventional oil production not only meeting but even exceeding demand.

    • You’re ignoring the fact of synthetic oil. At current efficiencies using current technology the US could feed its entire energy needs from synthetic facilities the size of the Texas Panhandle (less than 1% of US land). As efficiencies improve, and as conventional becomes more expensive this will become more economically feasible and conventional will become increasingly irrelevant.

      Right now we’re facing a technological bottleneck, and a hard transition from conventional. That’s not the same thing as peak oil.

      • Hi Aziz,

        Per your comment – “Right now we’re facing a technological bottleneck, and a hard transition from conventional. That’s not the same thing as peak oil.”

        What definition are you using for “peak oil”? It is not some end-of-the-world scenario. It is simply a curve that shows that for any oil basin, the early oil comes quick and cheap, and the later oil comes slow and expensive. That is empirically factual. Some people extend this analysis by adding the trendline of current-and-growing usage rate, showing that the last half of oil will be used up far more quickly than the first half. Your comment about bottlenecks and a hard transition from conventional, plus your focus on renewables and synthetics suggests that you just might be a closet “peaker” yourself. Where we are on the curve is often a topic of debate, as is if renewables will come in on time and at sufficient scale to mitigate the impact of the increasing cost and reduced supply of conventional crude oil. A true peak oil denier thinks that oil is infinite, and believes that “supply” will appear if “demand” is strong enough…this is where economics is too woo-woo for me. The hard Sciences (physics, chemistry, biology) have more to offer regarding the utilization of natural resources than the social science of Economics (History is more valuable than current economic beliefs).

        I hope companies like Joule are successful. I am intimately familiar with biotechnology (#2 employee of a biotech that we took public, etc before I went into private equity). These companies can possibly make money, but our petroleum infrastructure is so extraordinarily massive that adding even a fraction of that infrastructure will be shockingly, if not prohibitively, expensive and natural resource intensive (land and metals and oh yes lots and lots of water in places that don’t have much, plus power to pump and circulate all that water, and then purify the “good stuff” from the undesirable, and then do something else with the trash…). It is far cheaper and easier to stick a straw in the ground and slurp up ready-to-refine oil than to make the stuff from scratch.

        Regarding the price of oil, I’m not sure how you put that oil will be less expensive in 10 and 20 years into a spreadsheet. The basic factors that drive my model are:

        1) Significantly increased worldwide demand
        2) Decreased conventional supply (cheap oil)
        3) Increased cost of conventional oil recovery (my industry experts suggest a 7% per year increase over the next decade, for a doubling of costs in 10 years)
        4) Increase in alternatives, however this supply will lag the gap between supply and demand and require even more expensive gasoline to pay off all the CAPEX.

        To get a lower price than today in 10 or 20 years, alternatives will be so successful, so scalable, so low-cost that they will oversupply the market and make the entire current crude oil industry obsolete? That paradigm works sometimes for technology (such as Moore’s Law) where things advance by using less energy than previous generations and thus become more efficient, but a different paradigm applies to energy assets or natural resources which have certain consumption and replenishment rates – and transportation fuels are all about replicating the energy density of gasoline or increasing the storage capacity of batteries, but not increasing the efficiency or reducing the quantity of what is transported. The demand for joules (as in physical work) is still increasing in the second paradigm, just the cheap stuff is going away. Energy can have breakthroughs, such as splitting the atom, but it takes an immensely long time to scale up these changes. If it isn’t even past the feasibility stage, even if successful it would take 15-30 years to ramp up. What would oil prices be before then? (it’s valuable to actually do the math, or read others who have).

        Until then, I will keep looking for my Fountain of Infinite Oil to go with my Fountain of Perpetual Youth. I know the demand is there, and my economist friends say that the supply should appear any day now….

        Best regards,
        Craig

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  10. Ouch, Aziz, you certainly did NOT attend the latest peak oil conference in Vienna, but here are all presentations from the event – you can check e.g. Bob Hirsch presentation, or others — no BP agenda (if there was such…) and quess what – OPEC was invited, but did NOT come, guess why?

    http://www.aspo2012.at/program/speakers/

    now I can understand you No Limitis to Growth now arguement,

    Alex

  11. Aziz,

    The real problems are not about supply, per se. This is the naive view.

    The problems of liquid hydrocarbon depletion are:

    1) The aggregate energy return to aggregate price ratio.
    2) Price feedback
    3) The near exclusive use of oil as transportation fuel
    4) The fragility of the interdependent supply chains based on “just in time” delivery.

    Over time, the EROEI has decreased. In the 60s in Texas, it was 100:1. Wordwide aggregate figures are hard to come by, but the numbers seem be be between 20:1 and 12:1. To be useful, EROEI has to sustain not just the oil industry, but industrial civilization activity. At some point, if EROEI continues to decrease, this becomes prohibitively expensive, both energetically and economically.

    High oil prices ripple through the economy, increasing the price of many other industrial products. Now, the cost is trivial. If oil is expensive enough, however, it will raise the cost of almost all other industrial activity, including the cost of locating, acquiring, refining and distributing petroleum products. At that point, high oil prices start feeding on themselves and we can expect some very rapid oil price spikes and crashes until a permanently high plateau is reached.

    Since oil is the fuel of commercial transport, and world supply chains, which themselves depend on other supply chains, depend on large quantities of cheap liquid hydrocarbons to operate profitably, we can expect supply chain decay to start increasing as prices increase, thus adding to supply problems, and increasing prices due to shortages, even in the energy supply industry.

    This is the problem, not a simple shortage of oil. When all of the above breaks down, I expect that there will still be a few trillion barrels in the ground – which will do us no good whatsoever. I also expect that when price and supply chain feedback kicks in, system deterioration will proceed in a non-linear fashion.

    • As I noted to commenters above, we need to stop focusing on the economics of conventional, and consider the alternative technologies (starting with synthetic oil, which at current efficiencies is viable against $50 a barrel conventional), and at improved future efficiencies will easily exceed conventional as conventional is depleted.

      • Synthetic oil too takes energy input. Please provide a link that cites reference for positive energy return on synthetic oil. I am unaware of any such technology that makes synthetic oil an energy positive proposition.

        • We don’t know exactly what Joule’s EROEI is yet, but by all accounts it is at current efficiencies vastly (3-4x) more efficient than ethanol (so much less efficient than crude), but we do know that a 32,000 acre plot (that sounds a lot, but consider that Ted Turner owns 8 million acres! And consider that the shale oil industry will soon cover vastly more than this) is projected to be able meet the US’s entire oil needs at current efficiencies.

  12. Aziz is correct to be concerned with EROI (energetic return on investment). This is a thermodynamic measure that is not distorted by state-owned monopolies, military spending, political agenda, or oligopolistic global corporations, all of which distort the price data. However, Aziz misses the fact that EROI on petroleum resources have been declining for decades (form about 100-1 to now about 2-1).

    The EROI on Alberta Tar Sands is in the high single digits (about 8-1). After refining losses, it drops to a level that is barely better than corn ethanol.

    It isn’t possible to run a modern economy with the levels of wealth that we currently enjoy without primary energy resources that have an EROI that goes much below 20. So you can subtract all the Alberta Tar Sands, and the shale oil, and the the lowest quality reserves right off the BP pie chart. They aren’t economically recoverable without massive subsidy, because they simply don’t yield enough energy.

    Here’s a Table that reports EROI data for lots of energy technologies. All numbers are reported in energy out per unit of energy in. All values are approximate.

    Crude Oil (c.1930): 100
    Crude Oil (c.2000): 20
    Gasoline (c.2000): 10-12
    Coal (c.1950): 100
    Coal (c.2000): 80
    Electricity from coal: 20 (after generation and transmission losses).
    Corn ethanol: 1
    Oil shale: 0.5-10
    Alberta Tar Sands: 6-8 (crude oil)
    Coal liquefaction: 0.5-5
    Solar PV: 5-15
    Wind: 19-25
    Fracking: 50-55

    Some of the data on declining EROI over time is from Cleveland CJ. 2005. Energy. 30:769-782. The alternative energy and fracking data is compiled from lots of other sources.

    • EROEI has been declining for decades, but it started at ridiculous (100:1) levels. A 5:1 economy is viable. A 2:1 economy is probably viable (though economically difficult). I would love to see a full EROEI report on synthetic fuels. I predict that we may be able to get back toward the 100:1 ratio, because most of the input is solar.

      • The solar insolation impinging on the surface of the earth absolutely dwarfs the energy needs of the global economy. By something like one thousand times.

        Aziz is correct to suggest that it is this abundant solar energy that will power the economy in the future.

        However, the technology to convert sunlight into liquid fuels is practically non-existent. It’s in the lab, but at efficiencies so low that’s irrelevant for the time being.

        At least two technology roadmaps are imaginable:
        1. Improved batteries allow storage of electricity produced from solar PV, and enable replacement of fossil fuels for surface transport. (Because solar PV is already competitive with unconventional fossil fuels).
        2. Improvements in direct solar-to-liquid fuels (e.g., artificial photosynthesis) produces liquid hydrocarbons from waste CO2 and water.

        The first roadmap is a lot closer to fruition than the second.

        Other possibilities include algae or microbial production of lipids thru photosynthesis, and thermal conversion paths for water-to-hydrogen (coupled with improvements in hydrogen storage).

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  14. Thanks for another interesting post, Aziz. You state that “the United States has huge hydrocarbon reserves, yet regulation is preventing drilling and shipment….”

    Can you expand upon that a little? Where are the large reserves that the oil companies have been prevented from getting to? Yes, there are a few small areas like the Arctic Wildlife Refuge in northeastern Alaska that are still off-limits. But pretty much all the rest of Alaska, and the rest of the U.S., is open to drilling. I hope we don’t end up sacrificing our last few pristine places for a little more oil. And I don’t understand the reasoning behind those kind of statements about regulations keeping oil inaccessible in the U.S.

    The energy returns on investments do seem to me to be dropping very low. But beyond those kind of numbers, there are other costs that usually don’t get quantified. Have you seen the Alberta tar sands operations? I have, a few of them anyway, and I find them frightening. Huge amounts of waste, and vast areas which in that cold climate will take centuries to return to any kind of biological health, if ever. And they just keep getting bigger and bigger…

    The real costs of oil extraction aren’t just measured in units of energy or money. They are also measured in cultural destruction for Athabaskan peoples in Alberta, and many other indigenous peoples elsewhere around the world. And they are measured in degraded and poisoned landscapes in more and more places. Those costs are rising at ever accelerating rates.

    • Can you expand upon that a little? Where are the large reserves that the oil companies have been prevented from getting to? Yes, there are a few small areas like the Arctic Wildlife Refuge in northeastern Alaska that are still off-limits. But pretty much all the rest of Alaska, and the rest of the U.S., is open to drilling. I hope we don’t end up sacrificing our last few pristine places for a little more oil. And I don’t understand the reasoning behind those kind of statements about regulations keeping oil inaccessible in the U.S.

      The real costs of oil extraction aren’t just measured in units of energy or money. They are also measured in cultural destruction for Athabaskan peoples in Alberta, and many other indigenous peoples elsewhere around the world. And they are measured in degraded and poisoned landscapes in more and more places. Those costs are rising at ever accelerating rates.

      Well redlighting Keystone XL was a pretty big regulatory blow. But I’d like to think all of these natural resources are merely a stopover on the road to renewables, specifically solar-electric and solar-synthetic fuels and low-risk nuclear (e.g. thorium, and later hopefully fusion) as I’ve mentioned to other commenters. With these technologies, you’re going to be able to leave the pristine areas undeveloped. The EROEI on shale is low in comparison to renewables, and I expect that things like Joule Unlimited once scaled up will totally blow shale oil away economically, as I probably should have explained more clearly in the article. This is true both in dollar terms and energy terms, as well as the cultural and ecological factors you mention.

      • Much as I detest the Alberta tar sands operations, I agree with you about the denial of Keystone being a mistake. It guarantees that a pipeline will be built to Kitimat on the northern British Columbia coast, with supertankers threading their way through narrow rocky inlets that until now have been home to far more salmon, whales, wolves and bears than people. Spills will be a matter of when, not if. A tragedy for the whole world.

  15. The argument that the vast majority of counted reserves are economically inaccessible is fundamentally flawed

    I don’t see how spinning it in terms of EROEI makes the essence of the argument false. I’m not saying that the vast majority are inaccessible, I don’t know that. But what I’m saying is that viewing it in terms of EROEI does not change anything. If the technology required to extract the resources cannot be sustained, we will not be able to get to those resources. In the worst case, we might end up digging stuff out of ground with our hands (just trying to depict the essence of what I’m saying).

    Do you have a link to that BP source? I’m curious about what they counted as reserves.

    Something else: gold fluctuates for many reasons, I don’t buy the argument that gold will always reflect monetary dilution (many people would like this to be so, so that they feel comfy knowing they have their trusty gold as a friend – but we should not let our desires influence our perception of reality).

    • Here you go:

      http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2011/STAGING/local_assets/pdf/statistical_review_of_world_energy_full_report_2012.pdf

      Where is the evidence that the technology required to extract the resources cannot be sustained? If you’re sustaining an EROEI if more than 2 (we’re still getting 50:1 out of coal! And synthetic solar fuels promise EROEI’s of 100:1+) there is by definition no Malthusian threat to the technology you’re using (although there are man-made ones such as war)

      I think the biggest threats to humanity are geopolitics, war, and bigger less predictable natural disasters like supervolcanos, gamma ray bursts, etc. So long as we can deploy the energy technology we already have and which is already partly economically viable — specifically solar and synthetic fuels — and avoid the above man-made and natural threats we can have a long-lived and sustainable high-tech future. Of course if Yellowstone blows up tomorrow then it is back to the Stone Age, but that is hardly our fault.

      • Where is the evidence that the technology required to extract the resources cannot be sustained?

        I’m not talking about facts, I’m talking from a purely theoretical point of view (not saying this is reality, or what will happen). Energy requires conversion as well, otherwise we might just as well conclude that since E=mc2, the dirt in my yard will sustain humanity forever. So I was just saying that from a purely theoretical POV, changing it from “economically viable” to “EROEI viable” does not change anything.

        • My point is that EROEI-viable will become economically-viable, if necessary, which is really a side-point to my bigger point that the long-term-sustainable energy is there and the technology to extract is there, so if this all goes wrong (I do not deny the possibility) it is either a man-made crisis (war) or an unavoidable unmitigatable black swan (supervolcano, gamma ray burst, alien invasion, etc).

        • Hmm… There are quite a lot of assumptions/interpretations here. If something is currently EROEI-viable (with the current technology, energy conversion considered) then it should be “economically” viable (if this is the last source of energy to fall back to). But basically, I understand your point is that there is data that there are sufficient sources of energy and proven ways to convert it to useful forms so that humanity can continue to prosper without energy shocks or significantly and abruptly changing our ways of living (or population control). And since you’re talking about war, why not consider wars for resources and energy? When the EROEI or other metric drops below some number, certain populations might get itchy. Of course, we could say that if all people were saints the future of humanity would be bright (but this is a kind of a truism).

          — but then we should look at all the actual data to draw this conclusion. I’m not going to draw it, because I don’t have the data nor the time or expertise to analyze it. But I will not sleep well at night, but then again, neither will I recommend policy or population control if asked. Chris Martenson for example (who has some time and expertise to analyze data) does not say we are doomed, but says we should be worried and recommends various policies (switching to solar etc.)

        • We should be concerned. We are close to solutions, but we have not achieved them yet, and the proof of the pudding is in the eating so until we have viable systems and backups that work and are secure we should take nothing for granted. But I am optimistic.

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  18. Another thing: BP may be internally interested in oil scarcity, but when spinning things out for the public, they’d not want oil scarcity to be a topic of conversation (as that will scare people off and lead them to seek alternative sources of energy). (Just another potential interpretation meant to show what you said may not be necessarily true – i.e. that if choosing to be dishonest, BP would promote the idea of oil scarcity).

  19. Hm…. the fact that you do not see how the gap between Gold and Oil is important in itself should tell any reader here how your brain works.

    “Monetary inflation”, ok, then why didn’t Gold surge? Or any other raw material? Oh, wait, almost everything did. And because somehow this price inflation nags certain humans in our society should tell us to look closer than cornucopians do. Maybe there are alternatives. But they should be connected to the grid as fast as a decade, not several decades. We had the time, but now the economy is eight times bigger than it was in the eighties. Changes to our energy infrastructure ought to happen eight times faster to not provoke negative feed back loops, right?

  20. My comments on all “Peak Oil” posts thru AZIZ’s of 03:58 June 17:

    The only REAL ambiguity/confusion is in defining the term “Peak Oil”. Let’s go back to Shell geologist Hubbard’s half-century-old original definition (was applied to the U.S. only): oil production has peaked and is in decline.

    Since then, here have been huge effects from change, especially (1) GLOBAL supply and demand, with sovereign governments’ controlling the majority of production, reserves and potential discoveries, and with rapidly growing demand from “emerging” economies; and (2) technology, including 3-D seismology, deep sea drilling/completion/ production capability, slant/horizontal drilling and fracturing.

    So today, there is more demand, more production, more reserves, all at current and expected MUCH higher prices per barrel, because all readily accessible (cheap) oil has been found, and IS in permanent decline. The drastic debasement of the dollar exaggerates the rise of oil prices, but is not the basic cause. Decreasingly-accessible gold’s mining costs ares also rising, but more slowly than oil’s; but hoarding by governments and investors to protect against collapse of fiat currencies has kept gold’s price growing apace with oil’s.

    The weight of the evidence clearly supports your two assertions: (1) the economics of supply/demand/price, along with advancing science and technology, will provide oil and gas for the decades (centuries?) required until renewable energy becomes economically feasible/competitive, which (2) it eventually will Your chain of posts also gets attaboys for introducing the costs (both economic and political) of water and aesthetic damage from surface mining.

    But the other facts of life seem to be overlooked. (1) Until LNG production and transport expands a LOT (which will require a LOT of time and capital), natural gas supply is land-locked, and even pipelines take time and capital. Currently in Japan gas (from LNG) fetches 7 to 8 times the U.S. price. (2) Ethanol from corn has a negative energy efficiency (input > output) and persists on subsidies from farm states’ congressional power.

    Worse, several falsehoods (from both ignorance and political malice) are repeated. (1) The ridiculous “Your (AZIZ’s) assertions about peak oil are incorrect”. (2) The unfounded generalization that “oil companies” were to blame for the BP blowout and pollution in the Gulf of Mexico, whereas only certain BP employees were; the industry safety record is excellent and oil and gas operations cause far less pollution than on-shore runoff or shipping. (3) Accusing “western” oil companies of being in a price-fixing cartel (OPEC?), whereas the U.S. oil and gas industry probably has been investigated more than any other for combination in restraint of trade, with no adverse findings since the early 20th century Standard Oil breakup (which, I believe, was based on rail transportation). (4) Failing to cite the Obama administration’s “war on fossil fuels” (oil and gas as well as coal) as a cause of dependence on foreign oil; the truth: there is deliberate government obstruction of development of federal lands — Gulf of Mexico, Alaska, rocky mountains, etc., and encouragement of frivolous lawsuits to halt “fracking” under private lands. Another Big Lie (or misleading half-truth): the president brags that domestic oil production has INcreased during his administration; the truth: production from FEDERAL lands has DEcreased, while production from private and state lands has increased even more. [I suggest that this "rhymes" with Obama's assertion that public employment has INcreased; the truth: FEDERAL employment has INcreased enough to override a big DEcrease in state and local government. Of course, private employment has DEcreased a lot.]

  21. Pingback: Daily Reading on the Financial Markets: 6/18/12 « Playing the Ponzi

  22. When I think about peak oil, I am reminded of my basic chemistry classes and the process that creates methane – a basic hydrocarbon.
    2(H20) + CO2 + heat / pressure = 2(O2) + CH4 (methane)

    When oil companies work to reduce the carbon dioxide in the atmosphere – they take CO2 and sequester it within water and pump it deep underground – many times right into the existing wells they are pumping oil out of. These deep underground wells provide the exact kind of environment (in terms of heat and pressure) that (if managed) could conceivably return the oxidized carbon back to a higher energy state (methane) for reuse in the creation of other more useful hydrocarbons.

    The cost of this is effectively zero… the oil companies are ALREADY sequestering CO2 in this very manner. Only question is whether the methane creation process is working underground. I have to believe in many cases the answer is yes.

  23. In 1983, as a new engineer for Conoco, King Hubbert’s Peak Oil hypothesis was presented. It was never about “running out of oil”. Hubbert defined Peak Oil as when it took the energy content of a barrel of oil, to recover a barrel of oil. When the time comes that it takes a barrel to produce a barrel, oil would not be a feasible source of commodity energy. That’s Peak Oil.

  24. Thorium fission is more likely than fusion! Thorium’s storage life is in a few thousands
    of years, not the few millions of years that is uranium. Orchestration of green energy
    is also more likely, although I expect that big supply-side money fossil fuels will slow down
    any attempt to build our green energy infrastructure, which will be around for along time.

  25. Pingback: Must-see figures could put an end to the “peak oil” debate « InvestmentWatch

  26. Pingback: What Peak Oil? [Azizonomics] « Mktgeist blog

  27. Before electricity was invented I suspect there was similar angst whiting the whale oil industry about running out of whales as a source of fuel for lamps! Did I hear that Chicken Little has been found again?

  28. Well all very interesting but a few points are missed; the first is 90 million barrels of oil are used a day; Suadi Arabia produces about 10 million ballels of that oil; Alberta oil sands/shale produces 2 million and is pushing to produce even that; the reason they can even produce that amount is because they have access to lots of cheap water and gas.
    Basically I am sorry to say this but there is too much talk and not enough action. We are going to hit problems with enregy, water, soil and too many people while everyone argues if there is or isn’t a problem.
    We will cut down the last tree on Easter Island just as happened before because we are too scared to be poor.

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