At least, in the American media. Mostly small stories in the back of our newpapers about this significant event, a milestone on the road to Peak Oil.
“King Abdullah stresses the need to keep oil for future generations“, Saudi Press Agency, 13 April 2008 — Excerpt:
Custodian of the Two Holy Mosques King Abdullah yesterday emphasised the importance of keeping part of the Kingdom’s natural resources for the welfare of future generations. “When new discoveries were made, I told them ‘leave them in the ground because our children and grandchildren will need them’,” the Saudi Press Agency quoted the King as saying.
… During the meeting, King Abdullah highlighted the significance of oil revenue and said that as long as there is oil, the Kingdom would not experience economic problems. “I told them once, ‘may God give it long life’… they asked me what is that… I told them petrol. As long as petrol is there, we will remain well. Our country will not have any problems,” he said.
“Saudi King says keeping some oil finds for future“, Reuters, 13 April 2008 — Excerpt, with background information:
… OPEC held production steady at meetings in February and March despite calls for more oil from the U.S. and other consumers. OPEC officials blame the high price on factors beyond the group’s control such as the weak dollar, investment flows into commodities and speculation. Saudi Oil Minister Ali al-Naimi said last week that global oil markets were well supplied and there was no need to put more oil on the market, despite prices hitting a record of over $112 a barrel last week.
… Saudi Arabia has trimmed its output to around 9 million bpd to reflect lower customer demand, a Saudi oil source said on Friday. The kingdom had in previous months pumped around 9.2 million bpd. Crude demand traditionally dips at this time of year after the end of winter as refiners carry out maintenance and prepare to meet summer demand.
Saudi production capacity stands at around 11.3 million bpd, and is scheduled to rise to 12. 5 million bpd next year.
This is political peaking, perhaps the most dangerous form of Peak Oil — rapid onset, little warning, and no easy technological fixes. This is the equivalent to the assassination on 28 June 1914 of Archduke Franz Ferdinand, heir to the Austro-Hungarian throne. Both were small steps in a long historical process.
- The tensions leading to WWI had built over decades, and this was the spark that set off the conflageration.
- The leaders of Saudi Arabia have hinted about Political Peaking for several years; now they have explicitly stated it will happen.
Both of these are small events marking the start of countdowns to world-historic events.
Note: this was not totally unrecognized. The Association for Peak Oil (ASPO-US) immediately noted this (see here), as did many in the Peak Oil and energy industry. As did some astute geopolitical observes, such as John Robb.
What about the giant finds offshore of Brazil, Albert’s oil sands, and American’s oil shale?
The new “giant” fields off Brazil are rumors. Many fields “discovered” with one or two wells never played out. Even if true, this oil lies under 2 – 3 kilometers of water — and roughly 3 kilometers of salt and another kilometer of rock (that’s the upper layer, then you drill another few kilometers). This is on the outer edge of current technology. It will take years to verify the find, drill, and install production equipment. (see update #3 below)
There is a more important aspect. For conventional fields recoverable resources are the most important factor. No so for unconventional energy petroleum resources. Many of these have large reserves, such as those under the deep seas, in the polar regions, Venezuela’s heavy oil, Alberta’s bitumen (aka oil sands), and US kerogen (aka oil shale). For them the key questions concern the maximum feasible output flows and the cost of production.
These tend to require large up-front capital costs, have high costs of operation, and large environmental impacts. As a result, producing large flows is difficult. For example, by 2020 Canada’s bitumen mining *might* produce 5 million barrels/day — after tens of billions of capital costs, with incalculable costs to Alberta’s environment (much of it will look like the moon). Even that assumes sufficient water and natural gas inputs, both of which might be insufficient (nukes have been suggested as alternatives to the nat gas). But 5 million barrels/day will not offset the depletion of other N. American fields, let alone replace the peaking of the world’s supergiant fields — like Cantarell in Mexico, Burgan in Kurwait, or Gwahir in Saudi Arabia.
Conclusion
To understand Political Peaking — why, who, how — see The most dangerous form of Peak Oil. I strongly recommend reading it, perhaps the most important of the 177 posts on this site.
Or just wait. Your newspapers will discuss it, eventually.
Update #1
Welcome Instapundit readers! Current developments make his post on 12 April look spot on; Malcom Forbe’s advice look like genius! Not that we be the only ones with oil, but the oil we have will be of far greater value.
Complaints about the drilling bans in ANWR and offshore are a staple of right-wing talk radio. But I remember Malcolm S. Forbes, back in the 1970s, saying that we should drill as little domestic oil as possible. Pump the Arabs’ oil as long as it lasts, then — when oil has become really scarce and valuable — we’ll be the only ones with any left!
Update #2
The comments discuss things covered in previous posts about Peak Oil. Especially the “things will work out eventually” view. How true, but how irresponsible. The risk is not amegeddon (Peak Oil is not WWIII), but rather one to three decades of severe economic pain. The Hirsch “Mitigations” report shows that adaptation to Peak Oil will take at least two decades, and we have not yet started.
Two quotes make this point even better. First, was Keynes thinking about Peak Oil when he wrote this?
But this *long run* is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.
— “A Tract on Monetary Reform” John Maynard Keynes (1923)
Peak Oil is like a hostile army approaching us. How will we react to the danger?
With the enemy’s approach to Moscow the Moscovites’ view of their situation did not grow more serious but on the contrary became even more frivolous, as always happens with people who see a great danger approaching. At the approach of danger there are always two voices that speak with equal power in the human soul: one very reasonably tells a man to consider the nature of the danger and the means of escaping it; the other, still more reasonably, says that it is too depressing and painful to think of the danger since it is not in man’s power to foresee everything and avert the general course of events, and it is therefore better to disregard what is painful till it comes, and to think about what is pleasant.
In solitude a man generally listens to the first voice, but in society to the second. So it was now with the inhabitants of Moscow. It was long since people had been as gay in Moscow as that year.
— From War and Peace, Leo Tolstoy
Update #3
Here is an article describing the technical challenges involved: “Brazil Oil Trapped by 500-Degree Heat, Salt Barrier“, Bloomberg, 28 April 2008 — Excerpt:
Pumping oil from the Brazilian finds, parts of which are 32,000 feet (10,000 meters) below the ocean’s surface, will require boring almost twice as far down as the world’s deepest producing offshore well. … Similar drilling by Exxon and Chevron Corp. in the Gulf of Mexico cost $180 million to $200 million for each well. … Exxon Mobil abandoned a Gulf project that would have been the deepest well after pressure and heat shut down the venture in August 2006.
Update #4
Confirmation and follow-up to King Abdullah’s statement from Saudi Oil Minister Ali Naimi: “Saudi Aramco fuels national spending”, Petroleum Argus, 21 April 2008 — Excerpt:
“All the latest projections, at least up to 2020, do not require anything higher” than the existing capacity target, oil minister Ali Naimi tells Argus. “Unless we see really genuine demand, we have to pause right now and see what happens,” he says.
Update #5
“Despite new technologies, critical subsalt challenges remain“, Offshore magazine, 1 January 2009 — Excerpt:
Despite announcements of world-class discoveries ostensibly coming one after another, the massive subsalt plays in the deep and ultra deep waters of the Gulf of Mexico, Brazil, and elsewhere remain somewhat enigmatic with a host of technical challenges one British executive likened to “putting somebody on the moon.” Advances in seismic imaging, vibration-resistant downhole assemblies, steerable drilling systems, and other new generation technologies have helped level the playing field to an extent. Nevertheless, in an arena where well depths can exceed 30,000 ft (9,144 m), well-control problems related to imperceptible pressure regimes, the unpredictable incursion of tar that can slam the brakes on a drilling program, and excessive BHA-wrecking vibration are among the difficulties that make subsalt exploration one of the industry’s most technically demanding ventures.
Afterword
If you are new to this site, please glance at the archives below. You may find answers to your questions in these.
Please share your comments by posting below. Per the FM site’s Comment Policy, please make them brief (250 words max), civil, and relevant to this post. Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
For more information from the FM site
To read other articles about these things, see the FM reference page on the right side menu bar. Of esp relevance to this topic:
Some posts about peak oil:
- When will global oil production peak? Here is the answer! , 1 November 2007
- Peak Oil, part 3: discussing the solutions , 10 November 2007
- The most dangerous form of Peak Oil , 8 April 2008
- The three forms of Peak Oil (let’s hope for the benign form) , 23 April 2008
- Nigeria, a weak link in the global oil supply , 2 May 2008
- An effective rebuttal to warnings about Peak Oil? , 5 May 2008
- Two valuable reports about global oil production! , 30 May 2008
- When the King of Saudi Arabia talks about oil, we should listen , 2 July 2008
- Red Alert: the Saudi Princes have annouced the arrival of Peak Oil , 11 July 2008
- Good news about oil, but for our grandkids – not us , 14 July 2008
- An urban legend to comfort America: our massive reserves of unconventional oil, 29 August 2008
- An urban legend to comfort America: oil is oil, even if it is not oil, 10 September 2008
- What’s up with the price of oil?, 24 November 2008
- Let’s “hope and pray that Hirsch is wrong”, 10 January 2009
Bad news for Big Oil can be good news for alternative energy. If the Oil Companies, which have way too much capital anyway, are willing to throw away X billion dollars over a new extraction site, they might also be willing to spend (X/10) billion on alternative energy just as a long-term hedge.
That (X/10) billion is peanuts to the oil companies, but a massive lifeline to alternative energy. That kind of investment could be the difference between a hard landing and a soft landing.
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Fabius Maximus replies: Agreed. They need to realize that they are not in the oil business, they are in the liquid fuels business. This is the lesson of the business classic “Marketing Myopia“, Theodore Levitt, Harvard Business Review, (July-August 1960).
There is another way that the bad news for big oil can be good news for news for alternative energy. If oil stays high or ‘better’ yet continues to clime Alternative energy sources become a good investment even with no big breakthroughs in efficiency beyond the usual economies of scale. While the U.S. might be capital short just now there are still large pools on investment capital around. Much of it in east Asia where energy independence been a long sought goal.
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Fabius Maximus replies: I agree on all points. The dynamic you describe is an important part of the natural adaption process.
On the optimistic front (for once) there are several alternative (ie non-fossil) energy sources reaching, or haved reached maturity and capable of reliably and reasonably cheaply, providing electricity (depending on the local enviroment):
(1) Solar thermal (using sun power to generate electricity from turbines).
(2) Wind, very mature technology now.
(3) Geo-thermal (this has been mature for a while now, there are just limited places where is can be applied).
(4)Tidal, the major issues now look to be overcome and pre-production test sites are being undertaken right as we speak.
(5) Fission nuclear, now on the verge of a new generation of reactors that are even more economic and safer than the previous generations, though the latest current generation ones (as in France) are pretty impressive (though I still think the last UK gas cooled plants were the best overall of current generation designs).
For (1) and (2) there are some encouraging signs of being able to deal with the energy storage issues to smooth out varying supply issues.
And in the medium term, fusion nuclear power (its not long term any longer, someone who is 20 today will have at least some of their electicity generated by commercial fusion reactors before their children leave school).
In transport the renaissance in rail is amazing. We can see a day when air transport under 1,000km is completely replaced by rail. And we have barely stratched the surface in urban rail potentials, let alone goods transport.
Current generation diesel and coming diesel hybred vehicles offer the possibility of levels of fuel efficiency that almost seem like science fiction now (important for short distance goods transport), sorry though, individual mass passenger transport as in cars is going the way of the Dodo, though motorcycles will get a new lease of life.
If (and that may be a big if) we can get through the next 20 years in reasonable shape worldwide, then the future actually starts to look better. The caveat (as always) being that because of leadtimes we have to start now, today actually, yesterday would have been a lot better (20 years ago and we would not even be having these conversations). And the problems of shifting should not be underestimated, especially in the political and psycholgical arenas, there are far too many vested interests to discount the chance that we will not all go down with the first class passengers in the Titanic who are making the decisions.
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Fabius Maximus replies: This is the subject of the Hirsch report — how to get through the next 20 years without too much pain. The authors show that the adaption process will take at least 20 years — on a crash basis. Since we have not yet started, if oil production peaks tomorrow we have two decades of very difficult times ahead.
“sorry though, individual mass passenger transport as in cars is going the way of the Dodo”
Nonsense. People love the freedom of the automobile and will not give it up. Nor will they move en masse from the suburbs and exurbs to crowd themselves into dysfunctional cities again. What is this now, year 36 of the Death of the Car?
“though motorcycles will get a new lease of life.”
Unlikely. Ridership rates are high now with pseudo-adolescent Baby Boomers on their Harleys, and their Echo Boomer offspring on their sportbikes. It won’t rise much higher, if at all.
Having lived through the 1970s, and seen all of the same dire predictions then as now (except swap “Ice Age” with “Global Warming”), I will simply sit back and content myself with the knowledge that This Too Shall Pass and some new technology will emerge to make things even better than they are now. With the important caveat that the NIMBYs and the Watermelons have much greater sway now and will do their best to block any effective new technologies that might involve cutting down a bush somewhere.
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Fabius Maximus replies: Your last paragraph is true but means little. Ignoring the problem means risking a generation of severe economic pain. It is irresponsible in the extreme, as if relying on the “invisible hand” to carrry us over every bump in the road.
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Nor is Peak Oil in any way comparable to the climate change forecasts. Oil reserves are finiite, and we are rapidly exhausting them. The debate is when — now or 2050? The evidence is not based on data collected at the limits of instrument sensitivity, or complex and poorly tested models — but rather on hard data about oil prices and outputs.
I have to agree with DaveS. Cars aren’t disappearing, but they will take a different input source. There is already heavy development going on in the field of nano-batteries, super condensers, etc. A car powered on compressed air is supposed to hit the market here next year if it can get DOT passage.
Some 60% of all autos travel is on a daily commute of < 100mi. If every household replaced but one vehicle with an alternative auto much of the demand would shift to electricity as the ‘pump’. That juice can be provided by all manner of prime mover fuels — oil, gas, coal or nuke.
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Fabius Maximus: The issue is how long it takes to adapt to Peak Oil, and when we begin. Peak Oil is not like WWIII, leaving radioactive ruins in its wake. The risk is one to three decades of severe economic pain. Peak Oil will come, adaptation will take at least two decades on a crash basis, and we have not yet started.
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We are on the clock, and still sleeping.
Please read Update #2 above, addressing some points raised in these comments!
This might be helpful for electric power and thermal power for oil mining type production: WB-7 First Plasma
We will know in a few months if a full scale test reactor is worth the risk. BTW this is a verification of previous experiments so odds are good that a scale up will be seen as useful.
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Fabius Maximus replies: This is the last work of that giant in the world of physics, Robert W. Bussard (who passed over in October 2007). This is also known as the Polywell.
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As still in the experimental stage, it is probably of little relevance to our adaption to Peak Oil. Radical new technology usually takes several decades to perfect, commercialize, and develop on a large scale. On the other hand, projects like this are of the greatest significance for the long-term future of hAmerica — and all humanity.
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I agree, this deserves attention and funding. Government money is far better spent on this than biofuel subsidies.
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Thank you for mentioning this!
The Peak Oil Theory is being poo-pooed by many. The one comment that made it click/make since for me was that Peak Oil is not about running out of oil, it is the fact that we are running out of CHEAP oil!
Fabius,
With a crash program 24/7 365 we could have a power producing reactor in 3 to 4 years and series production in 6 to 10 years. Series production being 1,000 100MW units a year (100 GW total) ramping up to 10,000 units a year in 3 more years. Elapsed time to production of 1,000 GW a year? 10 to 15 years.
Current US electrical power production is on the order of 10,000 GW avg.
Polywell power plants due to their low thermal dissipation could be sited locally reducing transmission losses. BTW such a ramp up rate could easily track the conversion of the auto fleet to PHEV vehicles. In addition projected electrical costs would be (like wind) based on the cost of capital as the fuel cost is insignificant. Estimates run from 1/2 the cost of nuclear/coal to 1/10th. At those costs it wouldn’t pay to use oil for anything but chemical feedstocks and long distance travel.
There is also the definite possibility that what seems to work in experiments will not work in practice. Keep your eyes on this one. It will be an interesting ride. I cover the technology deeply here:
IEC Fusion Technology blog
There are also links on the side bar to active discussion groups.
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Fabius Maximus: There is little precedent for such rapid progress from experiment to large-scale rollout. So it is possible, but I doubt it. I agree this is promising and worth attention.
It isn’t quite fair to suggest that Dave S.’s comment about living through the seventies is some sort of wishing for an “invisible hand” to save us. The hand Dave is talking about is the same hand that has been “saving us” from one gloom and doom prophecy after another for at least 500 years. To rely on technological advances to save us from current cultural or economic issues is actually to rely on the single most reliable source of “saving” that has ever existed on this planet.
Dave is not saying “just sit around and wait, some mysterious ‘technology messiah’ will appear and save us” he is saying “Look at history, time after time technological progress has solved what appear to be intractable, civilization-threatening issues. There is every reason to think that several of the dozens of technologies being investigated today will pan out and will keep the world from starving to death from lack of oil.” And I completely agree with him.
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Fabius Maximus: This looks to me like the logical fallacy know as the “false dilemma.” There are a range of alternatives to lack of preparation for peak oil. As I have repeatedly stated, I consider the most likely to be a period of economic difficulty.
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When it starts and how long it lasts depends on the date we start preparing and when Peak Oil occurs. How severe depends on many factors, such as the shape of the production decline (length of plateau, and rate of decline) — and how much we have prepared before its onset, and the wisdom of our public policy responses.
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You may be agreeing with him, but with whom are you disagreeing? “gloom and doom prophecy” … “intractable, civilization-threatening issues” … “keep the world from starving to death from lack of oil” These resemble nothing I have said in my peak oil posts; many of them have explicitly argued against such characterizations.
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Nor am I sure what history you are referring to. Technological evolution has a short history, with few saves from “intractable, civilization-threatening issues”. Certainly not over the time-span of a few decades under discussion here, this probably does not allow development and rollout of radical new technologies.
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Structurally, Peak Oil is a problem much like flood control or an epidemic. We can see it coming, with a limited reaction time (relative to the time required to react). The solutions have to be implemented pretty much with what tools we have.
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It is possible that powerful new and fast to build technology will appear when needed, but imo it is foolish to rely on that. CTL, nukes, solar, wind, etc — these have to be force-grown using standard-issue public policy tools. That is incentives, subsidies, taxes — aimed at accelerating research, development, and implementation.
I’ve never done an exhaustive analysis, but my hunch is that historically, the more that the herd starts to agree with some Big Story, the more it is time to start thinking about how to bet against it. Timing of course is critical since, as the saying goes, the market can stay irrational longer than you can stay solvent.
Already, US oil consumption is falling steadily on the basis of the weak economy. From what I’ve read, that fall is more than offsetting any rise in consumption by China and India. As the price rises, I see no reason why that won’t put pressure on demand.
We are only a couple years into non-cheap oil. As businesses and people realize that $30 oil isn’t coming back they are adjusting. Small cars are in fashion and the Kill-a-Watt is going mainstream. IIRC around 20% of US oil is used for process heat; that can be substituted for, but it takes investment to do so. As industrial consumers realize the shift is permanent they will begin that retooling.
Oh, and look at all the coal out there. Nasty stuff to burn, perhaps, but the lights are not going to grow dim anytime soon. You can kiss any chance of China’s CO2 output going down goodbye.
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Fabius Maximus replies: This is a commonplace idea, with remarkably little support. Mostly a few magazine covers showing this relationship. I have never seen a study looking for magazine covers that disprove this relationship. just a guess, but there are probably a great many more counter-examples than examples.
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Thinking geopolitically, this idea seems somewhat strange. In September 1914 the “herd” “agreed with some Big Story” of WWI. Betting against war was not a good idea. Ditto 1940.
Fabius, I am on-board with all your predictions about peak oil. Sadly, the American people have bought into the “cheerleaders” we now have as leaders, that technology will take care of everything, just be happy. This way, peole shirk themselves of the responsibility we have as citizens to act as a team when addressing problems. And this one will never go away. Act now, and the pain will be minor, but wait, in the hope that it goes away, then it gets to catastrophic levels.
Before peak oil, global warming, deforestation and food (water) crisis can be fixed, the nations (and religions) of the world must have the moral courage to address the foundation of all of the other problems — OVER-POPULATION! In this country, we start by only giving tax breaks to two or less child families, and closing our borders (according to the Center of Immigration Studies (CIS) it will be hispanic illegals that push U.S. population to 400 millions by 2050 if remains unchecked). We cannot continue to be the spillover pond for the other nations who do not want to change their cultures or religions in the face of diminishing resources.
Over-population will also feed more and more wars as the gap between the haves and have nots grow. Don
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Fabius Maximus replies: I do not understand. All developed nations have fertility rates below — often far below — replacement level (the US is the exception due to high numbers of immigrants, who have higher fertility rates for the first few generations). Fertility rates are falling rapidly in most of the emerging nations. The unemerging nations tend to have wars and plagues.
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Current global population growth comes from momentum, existing young people having kids. This is not only difficult to stop, but might help cushion the economic shock to what appears to be a period of shrinking populations in the 2nd half of the 21st century.
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Also, the historical record does not strongly support the theory that resource scarcities increase violent conflicts.
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I strongly agree with your comments about re-gaining control of our borders. That is important imo for many reasons, both from social, economic and national defense perspectives.
Don, What ever happened to thermal depolymerization? The process that converts carbon based materials to, I think, light crude and an agriculturally nuetral solid.
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Fabius Maximus replies: Wikipedia has a good summary here. It is an interesting concept, still in the pilot plant test phase. Like so many interesting ideas, it is largely hype at this point. That is, the hype to results ratio is high, a typical phenomenon in American history.
For the near future, it seems most likely as a method of processing waste products (e.g., turkey guts). Substantial progress is necessary before it can handle large-scale resources, like kerogen (aka oil shale).
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Thanks for the succinct summary of the issue. All too often, whether in local newspapers, talk radio, or internet blogs these issues (oil, peak oil, resource nationalism) are glossed over and the “answers” given are standard canards: “Big Oil is ripping us off”, “Just drill more”, etc.
Whenever someone claims that we just “need to drill more” I turn it around on them and ask – Where? People seem to imagine that there are years and years of US supply of oil just lying under ANWR or off the coast of California. However, the USGS estimates (which are just as likely to be too high as much as too low) for recoverable oil in these places only account for at most a couple of years of US demand…. and of course actual oil production from these places (and I do assume that they will eventually be opened to drilling) will take places over *decades*, thus their annual contribution to supplying US demand will not be that large, certainly not large enough to get us (and our off-shored manufacturing capability relocated to Asia) off Middle East oil.
The ultimate answer is fairly clear when one studies this topic in detail – we need to rearrange our lives to live as efficiently as possible, all the while doing a full scale investment into solar, wind and nuclear energy sources.
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Fabius Maximus replies: Look at the quote by Malcolm Forbes in Update #1 above!
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Seems to me that several posts confuse Peak Oil, oil extraction rates not being able to keep up with demand, and “running out of oil”. I predict that we’ll continue to use oil, in declining quantities at higher prices, for many decades. As price goes up and drilling techniques improve, the amount of oil worth recovering goes up, but it’s not like it exists as underground oceans of black gold that we can pump as fast as we want. With supply problems, the price where supply and demand meet will spike upwards from time to time.
Declining oil production doesn’t naturally lead to rapid replacement of fossil fuel by nuclear, wind, solar, etc. The most direct substitutes are coal and natural gas. Absent global warming hysteria, we still have lots of fossil fuel. Just less of it’s available in the liquid form that’s most convenient for use as transportation fuel. Not to disregard potential environmental problems, but the religion of climate change takes coal, and to a lesser extent natural gas, off the table without doing adequate cost/benefit analysis. Coal to syngas to liquid fuel is probably cost competitive with petroleum at some price and natural gas is reasonably useful as is.
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Fabius Maximus: Nicely said. Agree on all points.
Truth of the matter is that Peak Oil is a myth. It implies that we know the EXACT amount of oil that is on this planet. We are currently using only the “low hanging fruits” from the oil tree. There are plenty more reservoirs we don’t know about.
This Peak Oil thing is the same kind of stuff that runs parallel (in terms of crap) to the 9-11 Conspiracy theories. Think about it, if there was Peak Oil…don’t you think that there would be a sustained effort by the oil companies to actually MOVE AWAY from a dying out product…
Peak Oil, no such thing. Stop fear-mongering.
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Fabius Maximus replies: Amazing what analysis can be produced by pure reasoning, without actually reading anything about the subject.
Peak Oil does not imply “that we know the EXACT amount of oil that is on this planet”. Only that the supply is finite. After a century or so of surveying the earth, geologists can produce rough estimates of oil reserves. The current range of estimates for peak oil run from 2005 to 2050 (clustering in the 5 – 15 year range). Since we extract aprox 85 million barrels/day, that is a big range.
Nor does peak oil mean zero oil. It means peak, with production declining at some unknown rate (estimates run 3% – 8%/year) — which means the oil companies will be in business for a long time. They will be pumping an increasingly expensive product, which will help pay their bills.
As for your last point, they are moving away from “from a {slowly} dying out product.” They are moving from extracting conventional to unconventional sources: polar, deep sea, heavy oil, bitumen (aka oil sands), kerogen (aka oil shale), etc. These require some combination of more sophisticated technology, higher capital costs, and higher operating costs vs. conventional petroleum sources. The oil industry will remain in business for the many years to come.
Peak oil is pretty obviously correct, although whether we are at it or not is questionable.
However, I think you are overly pessimistic about adaptation times. You ask for an example of rapid adaptation – just look at World War II. In 4 year the United States economy, industrial production and technology changed radically. The rate of technological progress, including the rapid use of that progress, was remarkable by modern standards. Today we cannot get a permit to build a power generating facility in those four years. If there is enough stress, a whole bunch of that friction will go away.
Furthermore, enough paint will cause currently prohibited technologies will suddenly look really attractive. The US has vast amounts of coal and could build coal plants quickly (under stress) We could make nuclear power reactors a lot faster than we did in the past, just by standardizing the design. We have an active nuclear industry – except that the customers are overseas.
The biggest technological problem is mobile energy storage. Progress has been painfully slow in that area fo 100 years. The theoretical maximum power density of an electrochemical battery is about 1/4 that of gasoline, and a typical high-tech battery gets only 1/10th of that. So those counting on electric cars are likely to be seriously disappointed (which is too bad – with good energy storage, electric cars are much better than internal combustion – even ignoring any environmental issues). However, liquid fuels can be made in bulk at far less than $100/bbl, and a WW-II or Apollo program style approach could get a lot of that infrastructure operating in not many years.
So yes, it’ll be painful, but I suspect it won’t take as long as you say. I hope!
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Fabius Maximus replies: It’s not what I think. This is the conclusion of the Hirsch et al “Mitigations” report prepared for the US Department of Energy. Please read it (see “Links to articles and presentations of some A-team energy experts” in the Other Posts section at the end), and then tell me if you disagree.
The analogy with WWII is a common fallacy. The rapid mobilization was possible because the Great Depression left so much of our industrial plant and workforce underutilized. That is hardly the case today, and a similar shift would likely result in a major loss of national income.
The technological change in WWII is not as great as common believed. The mass-produced weapons at the war’s end were mostly those at the start — just more developed (e.g., aircraft, tanks, radio, radar). But not radically changed. There were new technologies developed, mostly in small numbers (e.g., jet engines, cruise and ballistic missiles, true submarines, atomic bombs).
That is just what the Hirsch report recommends: crash development of current technology. Nukes, coal to liquid plants, electric cars, solar, wind, etc. Peak Oil, like world wars, will be largely fought with the tools we have at the start.
Alternative energy should be taken up as major invention which can be an alternate if not replacement to oil.
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Fabius Maximus replies: Probably most people agree with you. This sort of large-scale technological evolution takes decades, generations, however, to complete. It is engineering, not magic.
“The risk is not amegeddon (Peak Oil is not WWIII), but rather one to three decades of severe economic pain.”
Singularly, I agree, Peak Oil isn’t Armageddon, but when you consider other global factors you begin to wonder exactly where the world is heading. Wars (or threats of wars), oppression, famine, poverty, global recession (and its coming…), the middle east tensions, etc
I wrote on my blog last evening that the world appears to be imploding on itself, Oil is just ONE factor in a great big list of global problems that are just getting worse, for everybody..
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Fabius Maximus replies: I think this is a bit overstated.
* Poverty? Famine? The past five years have seen global income rise at the greatest rate since the invention of agriculture – as the billions in many emerging nations moved into the modern world.
* In the developed nations the environment has been getting clearner for several decades, resulting in fantastic improvement.
* Wars? Since WWII the world has enjoyed another Long Peace, with only a few local wars.
* Oppresion? How can one look at the past two decades and say oppression has grown worse? The fall of the USSR, liberating Eastern Europe. Elections in Russia and many other emerging nations. Think of Singapore and Korea in 1950 and today.
* Recesions and tensions — It will be a happy day when you I up and find these are gone from sight. I will be dead and in Heaven. At least, I hope it will be a happy day (there is an alternative scenario).
I have written that we are entering a period of global structural change, as the post-WWII geopolitical regime changes. The rise of 4GW, end of the US hegemony, Peak Oil, major demographic changes … we face new challenges. That is life, always. It does not mean things will get worse.
Hello, Fabius,
I think you overstate things a bit by saying, “severe economic pain” is on the way. Please define what you mean by the phrase. I, and I think most of your commenters, take it to mean “a second Great Depression”. If you mean a return to the Seventies, well, they were bad enough– I was a teenager then, so maybe those years weren’t as bad as I thought they were– but we got through them in good enough order. (Getting rid of that moral scold Jimmy Carter in 1980 helped immensely.) Clarifying your meaning of the phrase might reduce the heat-to-light ratio in this comments section.
Also, I think some of your commenters are missing a key point. We don’t live *on* Planet Earth. We live *in* a Solar System composed of nine planets, umpteen moons, a million asteroids, and one very large unshielded fusion reactor called the Sun. And there’s a whole Universe out there somewhere beyond the orbit of Pluto. I don’t think we lack for resources. It’s a fair question to ask how the heck we’re supposed to get out there to take advantage of them, but we’re devising better ways besides flying disintegrating totem-poles all the time– we could even have the first (crude and spindly) elevator to geosynchronous orbit installed around 2020. And as any physicist will tell you, even low Earth orbit is halfway to anywhere in the Universe, the governing principle being the speeds you have to attain to get anywhere at all.
I know that what I just wrote doesn’t have much to do directly with Peak Oil, Fabius. I’m just trying to inject some perspective on the subject. We may not be using oil very much in the year 2100; but then we won’t have to, either. And our descendants will be enjoying a much higher standard of living (however one cares to define that) than we do now.
There may be some rough patches ahead, but we’ll survive with style, I expect.
And in any case, coal and oil are far too valuable as feedstocks for the chemicals industry to ever set a match to. Hurrah for nuclear power!
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Fabius Maximus replies: Who can say what impact Peak Oil might have on the economy? We are talking about an event occuring somewhere between now and 2050, of unknown nature (how long the plateau? will the decline rate be 3% or 8%?). Our current economic structure is only a century old, so we have no experience with such events — so the past if of little help in forecasting.
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Also, it depends on when we start preparations, how long before Peaking. If we start now and Peaking occurs in 2030, the impact will probably be slight. If we do not start until after peaking AND there is no plateau (a “sharp” peak), the impact could be like the 1930’s — a decade-long global depression.
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We are discussing a 21st century event, which might be considered small by 2500 C.E. But it could be very big in the lives of us and our children, and the views of future generations will give us little comfort.
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As I said above, wonderful technology of the future is unlikely to help — any more than jet engines, cruise missiles, and ballistic rockets helped Hitler. These things are dealt with using the tools we have at hand.
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Looking far ahead, I agree with you and have written many posts about this (see this archive).
FM: “This is a commonplace idea, with remarkably little support. Mostly a few magazine covers showing this relationship. I have never seen a study looking for magazine covers that disprove this relationship. just a guess, but there are probably a great many more counter-examples than examples.”
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Thinking geopolitically, this idea seems somewhat strange. In September 1914 the “herd” “agreed with some Big Story” of WWI. Betting against war was not a good idea. Ditto 1940.”
One could just as easily argue that in 1914 the herd thought WWI would be over quickly, and that WWII could be avoided entirely in 1938, while in 1940 a lot of the US still thought we could stay out of it. Just as it thought interest-only mortgages were great in 2006 and no-revenue/no-clue businesses could win in 1999.
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Fabius Maximus replies: You have made one of my points. These “magazine cover” theories are slippery and subjective. With hindsight we can construct examples showing the herd wrong; I suspect it is difficult or impossible to do so contemporaneously.
My second point is more telling. What about counter-examples, times when the herd is correct? I suspect a study would show as many or more examples of correct “magazine covers.” Picking a few that support your case is just the material from which “urban legends” are made. Let’s have real evidence, please.
I had not read the reference. I have now. I wish you had had a link highlighting that specific report in the main article, as it is very good. I appreciate you pointing it out.
As an engineer, I have to disagree with your characterization of WW-II progress. In many technologies, is more analogous to today: we have the inventions of various alternate energy sources (and major ones – coal power and nuclear) already exist in industrial quantities. In WW-II, there was dramatic, rapid improvement in and deployment of radar, aircraft, nuclear technology, electronics, control systems, and others.
The atomic bomb is most amazing – it required the invention of major new technologies (from production of nuclear materials to the weapons themselves), and the creation of large industrial complexes. All of this took about THREE YEARS. That is less than the planning time for the wedges in the Hirsch report.
As for the bad news, if we have not hit peak oil, we will delay significant mitigation until we do, unless oil prices stay high. The reason is the enormous friction on capital energy investment caused by the NIMBY/BANANA phenomenon.
World War II style progress could be mode, but only after a political revolution that removed this problem, which would include abandonment of CO2 emissions reduction. Today, we are mitigating a problem with low impact (anthropogenic global warming) and low certainty, while the oil problem is certain (at some point – hopefully not today) and of dramatic impact.
I guess I am more hopeful in terms of the time to adjust to a liquid fuels crisis, because I think the impact of this crisis will result in a sea change in public opinion and a resulting more rapid mitigation.
Significant quotes from the article:
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Fabius Maximus replies: I think you have missed a key point, both of my comments and the Hirsch report on which they are based. Building two atomic bombs is a project several orders of magnitude smaller (a rough guess) than building power plants that generate a terrawatt of electricity. One can be done quickly, the other takes many years.
The rollout involves building the infrastructure to build the plants, both human and physical infrastructure. That takes time to build the political consensus, marshall the resources, and execute the plan. The Pearl Harbor shock achieved the first immediately, as would arrival of Peak Oil. Unfortunately, that is a worse-case scenario — that we begin preparing only after the onset of Peaking.
Dave, the mass use of cars, the suburbs and shopping centres are all very new, they’ve only been around 50 years or so and exist only because of cheap fuel. I recently looked at a map of Melbourne in the 60’s. There was the centre of the city and population fanned out following the lines of the railways, between which was largely bush. Car ownership was quite small and people didn’t use them that much (no one in their right mind would have driven to the shops).
Even in the 70’s I could go to areas in Glasgow and there would be virtually no cars parked, because people just didn’t have them. In China, even in the 80’s bicycles ruled.
Just because we have changed in one direction doesn’t mean we cannot change in the other.
People are changing behaviour now. The trains are totally packed as less people drive to work. A recent survey showed that AUS$1.75 per litre was the point where a majority would stop using their cars for commuting. We’re at $1.50 now (which hasn’t stopped some idiots proposing even more tollways, what for, as historical monuments).
And shopping centres. There comes a breakeven point where it is overall cheaper to go to a more local, probably higher priced, shop rather than drive the distance to a large, probably lower priced shopping centre.
I’m watching the growth of scooters and ever more bicycles being used. These are emerging trends that will continue to grow.
The housing crash has now hit here (10% down in 3 months overall). But I notice that the greatest falls are in the outer suburbs, away from services and public transport, some inner city areas have actually increased in value. Now I live 4km from the city, in walking distance to shops, trains and trams. I hardly have to drive. Whats going to happen when people do their sums and start trying to move closer to trains and trams?
Yes, we love our cars, I love Spitfires – but I can’t afford to buy one! They will hang onto them for a long time, but, they will turn them over far less, use them far less, have only one, go to work on the train or tram, eventually walk to the shops, buy a scooter or bicycle for commuting, vote for Govts that promise better public transport, those who can afford it will buy smaller more efficient cars, etc. Like the past, car use will be saved for special occasions, all your normal day to day transport will be done other ways.
Not all bad, I’m fed up with traffic jams, people will get fitter, pollution will drop, not nessarily a worse life, just different. With modern technology we can live pretty well at a 1960’s oil consumption level. Car workers will become unemployed, but they (provided there is proper planning and incentives put in place) will be employed making trams, buses and trains.
I’ll make a prediction, in 20 years, here in Melbourne, many of the new outer suburbs with Machouses will be empty or full of squatters. Yes people will cram into the city centres (and transport hubs), and will live in smaller houses, flats, etc, and be glad of it and maybe even have a better life.
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Fabius Maximus replies: I strongly agree. One of the interesting aspects of economic history is the continued belief that prices do not matter. The falling US dollar will not increase exports. Rising oil prices will not reduce consumption. It proves wrong every time, although with time lags. Behavior adjust slowly, as people reorder their business and living arrangements. Capital investment flows take even more time to have an effect, but make even larger changes.
I should add a clear, permanent behaviourable change happened with the 70’s oil shocks in Australia (and quite a few other places). For years the inner city had been emptying out and, taking Melbourne as an example, many of the inner city areas were basically slums, full of poor people. Even when I arrived here, some inner city areas were ridiculously cheap (and I so regret not following my own advice and buying lots)
Bang, people started moving back to the inner city areas. Gentrification happened. Houses renovated. Prices shot up. In more recent times huge amounts of apartment blocks have been built right in (and very nearby) the city. Following suite we now see supermarkets springing up in the city business district to support them!
Yes, people change. The whole inner city change happened because of just 2, relatively short, oil shocks. What do you think is going to happen with a permanent price change?
Some odd ball things will happen as well. We are starting to get growth in some regional centres as well. Take an example, I have a friend who commutes by train from Geelong every day. He walks to the train station, gets a train and it takes him right into the city where he walks to work. He actually has an easier (and cheaper) transit than some people who live geographically much closer in a suburb with no trains or trams and who have to sit in what could be best described as a slow moving car park every day to get to work.
Thanks FM, of course the falling dollar will increase exports. And if you live in the US that’s something to look forward to. Actually from the rest of the World it is something to look forward to, because the huge US deficits are destabiising the whole world economy.
Ok, you can get off on somethng like Vlads daily gloat.
But the bottom line? We are all in this world together and we have to fix things together. Balance is the key. If we are all really, really smart we could actually all get get rich together … nah won’t happen.
“Poverty? Famine? The past five years have seen global income rise at the greatest rate since the invention of agriculture – as the billions in many emerging nations moved into the modern world.”
To take just one of your comments, and not essentially to prove a point per se: “UN meeting to address food crisis“, BBC News (28 APril 2008)
The weakening dollar and the increasing costs of production, mainly due to the rising fuel prices and not just oil, but domestic fuels such as gas and electricity, are leading the world to a worse place, not a better one. The global picture, when one looks at it objectively, is gloomy..
As for oppression? perhaps oppression was too strong a word, but the essence is the same, take China in Tibet or the current troubles in North East Africa of Zimbabwe, all oppression of a fashion, and none good, in my opinion, for the world as a whole.
“I have written that we are entering a period of global structural change, as the post-WWII geopolitical regime changes. The rise of 4GW, end of the US hegemony, Peak Oil, major demographic changes … we face new challenges. That is life, always. It does not mean things will get worse.”
I agree completely, however good the prospects are the rich, (or the less poor), the world is made up of billions of people, rich, comfortable, struggling and poor, and the latter, (perhaps the latter two), are already finding life difficult. Is it ‘fair’ that a world that has enough to provide for all would rather let the poorest die off so ‘I can have more’?
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Fabius Maximus replies: A post goes up later today (tomorrow GMT) about the food crisis. There are no signs of food shortages, except from hoarding. Rising energy costs are responsible for only a fraction of the rise in food prices, and common factors are driving them both up. It is called inflation, and often appears during or at the end of periods of rapid economic growth.
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“Is it ‘fair’ that a world that has enough to provide for all would rather let the poorest die off so ‘I can have more’?”
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Again, I consider this wildly overstated. The global poor have experienced great improvement in their economic conditions around the world during the past 10 years — for those living in functioning states. That does not include many in, for example, Africa.
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We do not know how to help people living in failed states, wrecked by war (often genocidal), oppresive governments (and their suicidal economic policies). Both our moral codes and the nature of 4GW prevent colonization (even benign, to help them). External aid provides only a band-aid. Suggestions? Our desire to help does not mean that the means to do so exist. Sending them checks is a tried and failed method (many of the poorest states have recieved the most aid).
Update #3 about the new Brazil offshore oil discoveries
Here is an article describing the technical challenges involved: “Brazil Oil Trapped by 500-Degree Heat, Salt Barrier“, Bloomberg (28 April 2008) — Excerpt:
Update added to post: Confirmation and follow-up to King Abdullah’s statement from Saudi Oil Minister Ali Naimi: “Saudi Aramco fuels national spending”, Petroleum Argus, 21 April 2008 — Excerpt:
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Hi Fabius – Haven’t read this site yet but now I understand your resistance to seeing short term changes in the futures market when your mind is occupied with long term Amageddon.
You have brought up a VERY important topic, although I think the Saudis are being a bit disingenuos about there situation. They also have to consider doing their bit to maintain the world’s addiction to fossil fuels if their resource is going to be worth more than $20/barrel in the future. (Adjusted for inflation of course) Maybe they should keep pumping at a spot price of (currently approx) $125 and buy every company in Europe that is seriously developing alternatives.
Yeargin has been saying this for YEARS…that “peak oil” is above ground not below. And the politicos (both sides) and the greenies and their useful idiots in the press and population will have you think that you can wave a wand and sprinkle fairy dust and poof! biofuel, undeveloped technologies, wind farms (they kill birds though and are unsightly on Martha’s Vineyard), solar panels will appear magically and save us from a nuclear power holocaust.
If the worst case scenario you lay out happens, enviromentalism as we know it will be swept into the dustbin in the rush to do ANYTHING to keep the lights on. So the neo-luddites should be careful what they wish for. Big oil, distasteful or not is what drives modern societies’ wealth builders and allows enough leasure time to the average individual to give a s… what the greenies say. This is REALITY.
Anyway, as you know, I could write for hours but I will shut my big mouth for now. JLK
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Fabius Maximus replies: A few quick notes.
(1) “when your mind is occupied with long term Amageddon.”
Yes, you have not yet read much on this site, as this directly contradicts my most frequent statement about the coming events. A few examples…
* “That would be serious, but should not be confused with Armageddon.” from “The US economy at Defcon 2“, 11 March 2008.
* “But nothing like the Armageddon described in doomsters’ forecasts.” from “Peak Oil Doomsters debunked, end of civilization called off“, 8 May 2008.
* “This is a harsh scenario, but even so it is not Armageddon.” from “Consequences of a long, deep recession – part III“, 20 June 2008.
(2) “They also have to consider doing their bit to maintain the world’s addiction to fossil fuels if their resource is going to be worth more than $20/barrel in the future.”
That some in OPEC worry about high prices is a commonly repeated bit of folk wisdom, usually in the context of OPEC “losing control over prices” as they skyrocket. I would like to see some evidence of this. As a general rule, cartels exist to keep prices up — setting floor prices, not ceilings.
Every study of the subject I have seen says that decades will be required to develop large-scale production of alternative liquid fuel sources (most notably the Hirsch Report). By then most conventional sources will produce a small fraction of current levels, so there seems a weak basis for the Saudi Princes to worry.
(3) “If the worst case scenario you lay out happens …”
There are roughly three forms of “peak oil”, as I describe in “The three forms of Peak Oil (let’s hope for the benign form)“. I use the middle or moderate form, not the worst case.
(4) “… enviromentalism as we know it will be swept into the dustbin in the rush to do ANYTHING to keep the lights on.”
Agreed. The Greens might be holding demonstrations at which they shout “nuke the whales!”
From the post: “The new “giant” fields off Brazil are rumors. … It will take years to verify the find, drill, and install production equipment. (see update #3 below)”
Guess again. The Tupi field (the one under kilometers of water and deep in a hot salt bed (the most difficult to extract)) is currently producing from a test rig with production to start next year. So much for it taking years.
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Fabius Maximus replies: It is usual on this site is to provide a source when making claims like this. That simple measure would prevent you from making a fool of yourself in public like this.
* This post was written 14 months ago. The first oil was pumped last month: “Petrobras Pumps First Crude from Massive Tupi Field Offshore Brazil“, Rigzone, 1 May 2009.
* A test rig shows the existance of oil; it does not verify the size of a field. So far they have completed only 3 test wells (“Petrobras confirms potential Tupi oil reserves“, Reuters, 4 June 2009). Each provides additional data.
* As for production starting “in years”, that refers of course to commercial production (not tests). And it will take years: see this “Factbox” Reuters article dtd 1 May 2009:
Update to this comment: “Dry hole in offshore play shows Brazil oil risks“, Reuters, 8 July 2009 – Excerpt:
“That is just what the Hirsch report recommends: crash development of current technology. Nukes, coal to liquid plants, electric cars, solar, wind, etc. Peak Oil, like world wars, will be largely fought with the tools we have at the start.”
Well then we have a pretty good arsenal. See the following: Hydro electric plants Nuclear Fission plants Super Efficient Wind Turbines Solar Thermal Plants Solar Hot Water Pumped storage Long Distance HVDC power lines that can bring power from high quality renewable areas like the dakotas and the south west to high demand areas like the north east. Super Efficient Insulation materials Coal plants Coal to Liquids Gas to Liquids Natural Gas converted 18 wheeler trucks Natural Gas converted taxis Electric high speed trains (both passenger and freight). Fuel Cell powered ocean freight. Natural Gas powered Ocean Freight. Coal Powered Ocean Freight. Bioplastics. Bio fuel for jets. Electric trolley buses and streetcars. Electric 13.5 ton trucks with a 150 mile range and 60 mph with a charging time of 8 hours. Electric cars with a 150 mile range and a top speed of 60 mph and a charging time of 4 hours. Electric buses with a 100 mile range a top speed of 50 mph and a charging time of an hour. Electric mopeds with a cost of $900 and a range of 50 miles and a top speed of 20 miles. Battery swap stations to change your electric car’s battery in five minutes. Fertiliser from air and electricity. Computerised logistics systems to maximise utilization of shipping resources.
I could go on and on and on, but it’s enough to say that if this is a war we have plenty of ammo. Peak oil war? Bring it.
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Fabius Maximus replies: You have missed the point, quite amazingly. Most of those things do not exist in physical form. The few that do, are not yet in sufficent scale to mitigate a sudden onset of peak oil. It will take years — probably a decade or so — and hundreds of billions of dollars to build the infrastructure we describe.
If you had actually read the Hirsch “Mitigations” report instead of just making fun remarks, you would find a detailed discussion of this. Time. It’s all about time.
Update #5
“Despite new technologies, critical subsalt challenges remain“, Offshore magazine, 1 January 2009 — Excerpt:
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