Peak Oil

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ocelot
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Apr 15 2014 16:03

But enough of this "my links trump your links" Aspergers nonsense. Back to politics...

ralfy wrote:
ocelot wrote:
That's the reactionary core of this whole anti-politics right there. It's the idea that the productivist crisis of capital, that manifests simultaneously as an energy, ecological, economic and social crisis, is physically based, rather than a product of the historically specific social relations of capitalist production.

I say reactionary on a number of levels.
[...]
Second by claiming that the crisis is purely technical, and therefore has no connection to the exploitation and oppression of people - and its solution is therefore not to be found in people's struggles for emancipation from wage slavery or political oppression. Further that these struggles are a diversion from the "real problem".

The point is not to see peak oil as merely technical but to see that in light of oppression and other factors.

Seeing the issue as not "merely" technical, but "that [technical] in the light of oppression and other factors" is still seeing it as a technical-geological issue, rather than one produced by the social relations of capital. As you make clear later on...

ralfy wrote:
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Fourth, by a catastrophism that claims "nothing can be done", which tells people to remain passive and cynical and asserts their lack of power to change the situation.

My view is the opposite. By showing that something can be done, people will be complacent and assume that someone will come up with a solution easily.

Again, you can only see technical problems and technical solutions in isolation. If there are no technical solutions to capitalism's resource-usage crisis (which is an environmental crisis caused by over-supply of fossil fuels, not undersupply - Monbiot's comment that "there is more than enough oil in the ground to deep-fry the climate" is essentially correct), you assume that must also mean there are no technical solutions, full stop. The real problem is the technical solutions are less profitable than fossil fuels - the problem is political-economic, not technical.

The "something that can be done" is to overthrow capitalist relations and replace profitable fossil fuel burning with sustainable, but unprofitable renewables. One thing's for sure, overthrowing capitalism is not going to be done by convincing people that "someone will come up with a solution easily". It's also not going to happen by conspiranoids/"doomers" telling people that "nothing can be done" and its all basically a problem of geology and physics - which naturalises and eternalises the specific relations of capitalism in a completely reactionary, Malthusian way.

ralfy wrote:
In addition, even with resources are shared equally, there will still be not enough, simply because resources are limited:

https://en.wikipedia.org/wiki/List_of_countries_by_ecological_footprint

That is, bio-capacity will be limited by available resources and population, and the earth has a particular carrying capacity. At the same time, that bio-capacity can be decreased by increasing population combined with environmental damage.

The notion of a physical limit ratio of "hectares per person", i.e. "biocapacity", is utter reactionary Malthusian bollocks. It assumes present consumption patterns of people living in a wage-labour, commoditised, privatised social system, as somehow ahistorical and natural. Down this road lies primitivist genocidal thinking and ignorant conspiranoid pseudo-science.

ralfy wrote:
Quote:
The peak oil conspiracy is entirely compatible with a fascist politics - and in fact Technocracy is, imo, an engineers fascist fantasy.

* disclaimer: not that I'm advocating nuclear, n.b.

Why do you keep referring to it as a conspiracy? Crude oil production peaked in 2005. Oil discoveries peaked in 1964. U.S. oil production peaked in 1970. Per capita oil production peaked in 1979.

Except it didn't. You just keep redefining the definition of "crude oil" to keep your conspiracy alive.

It's a conspiracy because you believe if only the world knew the indisputable "facts" about peak oil (911, the lizards, the global Jewish Conspiracy, take your pick...) then they would be forced to do something, things just couldn't continue as they are any more... ("WAKE UP, SHEEPLE!") - or alternatively, you don't even need people to act, because the automatic breakdown (Zusammenbruch - some Marxists do this shit as well) will change everything without having to go through the hard work of actually building real movements with real power/agency for change. NB, you seem to vacillate between these two contradictory poles - on the one hand you are afraid of people remaining complacent, on the other hand, there's nothing to be done - so what's wrong with complacency then?

ralfy wrote:
Finally, in order to prove that peak oil is not a fact, one needs to show that oil is an infinite resource.

Strawman. And symptomatic of utter political fail.

No-one has said that oil will not eventually run out. We just have said that it's production has not yet peaked. See all the actual figures (which I graphed above). We are also saying that fossil fuels will not run out before we have released enough CO2 into the atmosphere to make running out of fossil fuels the least of our worries. So eventual peak oil (whenever it finally comes) is irrelevant, in terms of the resource-usage threats posed by capitalism.

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ocelot
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Apr 16 2014 12:50

Guardian: Fashion-conscious men warned we may have reached 'peak beard'

Sorry. Couldn't resist.

ralfy
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Apr 18 2014 02:38
S. Artesian wrote:
Really? Capital spending for petroleum and coal production in the US tripled between 1937 and 1970. Significant right? Must have been the pre-impacts of peak oil, right? Except you know what? Capital expenditures for all manufacturing in the US increased 22 fold in that same period. So what? Correlating increased capital expenditures with ease or difficulty of production is a bogus endeavor. What counts is profitability, and the allocation of profits among producers.

Listen to Kopits' lecture and you will see recent data on capex.

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The easy oil is gone? Why? Because in the classic Ricardian (non)sense-- "the most fertile land is farmed first" or the "easiest minerals are extracted first"??-- which assumes some sort of linerar progression of production and technology. Except that's not how it has actually worked. Capital costs per barrel of oil extracted in the US were higher at the outset of production than in later years because while the oil may have been closer to the surface, the overall development of the productive apparatus was not "easier."

You are not disproving my argument.

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Accessing the "easiest" sources is dependent upon the level of technological development. Accessing Pennsylvania oil in the 1870s was not easier or cheaper than accessing Spindletop in 1901.

The point being there is a relationship between supply, reserve, and the technology of accessing the supply, which is to say the economics of accessing the supply.

What you are looking for is production rate and demand. The first has flattened out, which is what peak oil is about, and which is why we are now resorting to shale oil. The second continues to rise.

According to the IEA, we will need the equivalent of one Saudi Arabia every seven years to meet demand. To meet a growing global middle class, we will need one every three to four years. More details can be found in my previous links.

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Capital expenditures are not determined by the finiteness of supply, but by the profitability of production. Same reason US production peaked in 1970-- profitability; the rate of profit had turned down for the US oil majors in 1969.

It's determined by both, and latter affected by the price by which the market is willing to buy more oil. Again, see the lecture linked earlier for details.

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Exactly what? Are you now arguing that peak oil determines transportation costs, rather than market conditions, tanker operating costs, tanker capacity, rail capacity, pipeline availability?

Of course. How do you think crude oil is transported worldwide?

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Nope. Not until you provide the data directly, with the reference cited, for your claims about production costs. Including amortization.
expanding?

All these were given to you earlier. It's now your turn to prove otherwise. The only data you gave came from a FAQ from EIA referring to 2007-2009 data. Consider more recent data.

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You can find discussion of these in the annual reports of the petroleum majors, or on the EIA website. Help yourself.

Production for the five major players have dropped 25 pct.

The EIA data you have provided so far refers to 2009 data.

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Huh?? If you have a drop in oil production and that's an effect of peak oil, that means it cannot have occurred before the peak, since the approach to the peak is a consistent upward move in production.

One of the effects of peak oil is higher oil prices. Oil prices can go up when oil production cannot meet demand. That can happen without oil production dropping.

That's why oil prices tripled and we are now using shale oil. Conventional production has flattened out. See my first link in this thread for details. The info comes from the EIA.

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If production is increasing, but cannot keep up with consumption, that is not an impact of the peak, that's an impact of the allocation of capital.

Please explain how capital is not being allocated correctly.

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This sort of comment makes the value of further discussion questionable. Petroleum production is at or near 89 million barrels/day. You want to eliminate tight oil, deep water oil, tar sands production from that number? Peak oil is supposed to represent an insurmountable obstacle to hydrocarbon extraction. PERIOD. No amount of investment, no amount of "unconventional sources" is supposed to be able to offset the immediate, imminent, already evident (pick one or more) arrival of the peak. Oh... and check out the spare capacity among OPEC producers-- I think it is at or near 10%-- that's conventional production spare capacity.

Peak oil refers to a peak in production for any source. Conventional production has peaked, as predicted by Hubbert and confirmed by the IEA and the latest chart shown to you from the EIA. Why do you think we are now using shale oil to meet demand that crude oil can't?

As for spare capacity, my understanding is that it has been less than 10 pct for more than a decade:

http://www.businessinsider.com/oil-spare-capacity-2013-2011-2

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Really? You think. Well here are the total oil supply WORLD average daily figures for various eight year periods:

1993-2000-- 67.6 million bbl/day to 76.8 million/day, equal to 11.4% increase
2001-2008-- 77.5 million bbl/day to 84.7 million/day, 9.3% increase
2005-2012-- 84.1 million to 89.4 million, 6.3% increase

Total 1993-2012- 32.2% increase in consumption

That's supply, right? The total refers to consumption.

Rate of increase is slowing, as is the increase in the absolute quantities, so obviously if we are feeling peak oil now it's because of...........absolute limits, right? So let's see if there's a decline in production not proportionate to the slowdown in consumption.

1993-2000 67.1 million/day to 77.7 million, 15.8% increase
2001-2008 77.7 million to 85.4, 9.9%
2005-2012 84.5 to 89.3 5.7% = 33% increase in production

So for a 20 year period, production matches or exceeds consumption. So where's the peak here? Remember, you're claiming we are past the peak.

The peak is taking place for conventional production. See the EIA data presented here for details:

http://crudeoilpeak.info/world-crude-production-2013-without-shale-oil-is-back-to-2005-levels

Conventional production has peaked at 73.4 Mb/d.

Unconventional production will not last. See my previous links for details.

Consumption continues to grow. See the link about peak demand for details.

The expected production rate needed to meet future demand is between one Saudi Arabia every seven years (see the IEA 2010 report for details) to one Saudi Arabia every three to four years (see the Guardian article shared earlier).

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Sure thing. The USA, for one, the rest of the world for the other. See Chapter 4 of Gorelick's Oil Panic and the Global Crisis, "Counter-Arguments to Imminent Global Oil Depletion."

I'll start you off:

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The headline of the March 16, 1956, issue of Petroleum Week read, "Is Oil Nearing a Production Crisis?" and stated in bold lettering, "A prominent Texas geologist predicted last week that the upward spiral of US production may end about 1965, to be followed by a decrease of from 5% to 10% a year thereafter." The prominent Texas geologist was M. King Hubbert

The peak of course occurred not in 1965, but 1970, and Hubbert had underpredicted the peak value, production per year by 25%.

And after the peak? Hubbert predicted production in 2008 would be .5 billion barrels when real production was about 1.55 billion barrels.

And we could go on and on-- but this about sums it up: "Departing from the exponential trend of the Hubbert curve through 1980, the actual trend of oil production has since been replaced by a linear one that has been fairly consistent over that last 26 years. It turns out that oil production from 1983 through 2008 has growing simply in proportion to the global population increase."

Do not forget Hubbert's peak is based on a curve, a bell curve where production rates increase at a non-linear rate. The difference? The difference is according to Hubbert's prediction, world production should have been at 50 billion barrels per year in the current period, which corresponds to his peak period. Production has not matched that curve, and now stands at about 32 billion per year.

So those who support Hubbert's peak, his methodology, his curve, and claim he was right in calling the peaks, have to account for that the curve has not been accurate, predicted production rates have not been accurate; predicted declines in production rates from so-called peaks have not been accurate. Other than that, Hubbert got it right, I'm sure.

U.S. oil production peaked back in 1970, as Hubbert predicted.

In 1976, Hubbert argued that crude oil production would peak in 1995 + 10 years, or 2005.

In 2010, the IEA confirmed that crude oil production peaked in 2005.

Just recently, EIA data showed that crude oil production peaked at 73.4 Mb/d.

ralfy
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Apr 18 2014 02:40
S. Artesian wrote:
Quote:
Sorry, but I couldn't find the info for the oil & gas industry in the URL supplied. The tables I found were for much broader industries. Maybe I didn't look in the right place. Any chance of some more detail?

You go to the page. See the hypertext where it says "Historical QFR data PDF format"? pick a quarter of year. Then since the QFR combines petroleum and coal, go the page that has the balance sheet data for that classification. Check depreciation, amortization, depletion vs. total operating exprenses. Do that for 2002, do that for 2013, (you might have to go to the page that has the link to the current data. It's there.

What you did not provide in your citing of the BP report is the relation of depreciation to operating expenses.

As for finding costs-- those are not production costs. Nevertheless I identified the increased finding costs and even with that added in the costs are about half of what Ralfy says they are.

You have not provided any reference or any data to support your claim that amortization is the largest cost the oil producers incur, nor that those costs are driving the price of oil.

I am not referring to "finding costs" but to total costs, assuming that they will be passed on to oil buyers.

ralfy
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Apr 18 2014 02:50
ocelot wrote:
EIA: AEO2014 EARLY RELEASE OVERVIEW
Quote:
[...]
Major highlights of the AEO2014 Reference case include:
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Growing domestic production of natural gas and crude oil continues to reshape the U.S. energy economy, with crude oil production approaching the historical high achieved in 1970 of 9.6 million barrels per day
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Ongoing improvements in advanced technologies for crude oil and natural gas production continue to lift domestic supply and reshape the U.S. energy economy. Domestic production of crude oil (including lease condensate) increases sharply in the AEO2014 Reference case, with annual growth averaging 0.8 million barrels per day (MMbbl/d) through 2016, when it totals 9.5 MMbbl/d (Figure 1). While domestic crude oil production is expected to level off and then slowly decline after 2020 in the Reference case, natural gas production grows steadily, with a 56% increase between 2012 and 2040, when production reaches 37.6 trillion cubic feet (Tcf).The full AEO2014 will include cases that represent alternative oil and natural gas resource and technology assumptions.
[...]
With strong growth in domestic crude oil and natural gas production, U.S. use of imported fuels falls sharply
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In the AEO2014 Reference case, U.S. domestic energy production increases from 79.1 quadrillion Btu in 2012 to 102.1 quadrillion Btu in 2040, and net use of imported energy sources, which was 30% in 2005, falls from 16% of total consumption in 2012 to 4% in 2040. In the AEO2013 Reference case, domestic energy production reached a total of 98.5 quadrillion Btu, and energy imports is projected to decline as a percentage of consumption to 9% in 2040. The larger increase in domestic energy production in AEO2014 is primarily a result of higher projections of production of natural gas and biomass/other renewables. Crude oil production (including lease condensate) increases from 13.9 quadrillion Btu in 2012 to a peak of 20.5 quadrillion Btu in 2019 before dropping to 16.0 quadrillion Btu in 2040.

Of course this is for the USA alone. But then again I believe it is an article of faith amongst peak oilers that peak oil happened in the US in 1970, no?

U.S. crude oil production peaked in 1970. See the brown region in the chart.

Also, look at the trend for total production.

ralfy
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Apr 18 2014 03:33
ocelot wrote:
But enough of this "my links trump your links" Aspergers nonsense. Back to politics...

Giving evidence is part of proving one's point.

Quote:
Seeing the issue as not "merely" technical, but "that [technical] in the light of oppression and other factors" is still seeing it as a technical-geological issue, rather than one produced by the social relations of capital. As you make clear later on...

But it is a geological issue, unless you believe that crude oil production can be ramped up easily, and is not being done only for political reasons.

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Again, you can only see technical problems and technical solutions in isolation. If there are no technical solutions to capitalism's resource-usage crisis (which is an environmental crisis caused by over-supply of fossil fuels, not undersupply - Monbiot's comment that "there is more than enough oil in the ground to deep-fry the climate" is essentially correct), you assume that must also mean there are no technical solutions, full stop. The real problem is the technical solutions are less profitable than fossil fuels - the problem is political-economic, not technical.

The reason why these technical solutions are less profitable is because their energy returns are lower. That's not a political or economic issue.

Also, Monbiot's article refers to Maugeri. Consider various assessments of Maugeri's arguments. For example,

http://www.davidstrahan.com/blog/?p=1570

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The "something that can be done" is to overthrow capitalist relations and replace profitable fossil fuel burning with sustainable, but unprofitable renewables. One thing's for sure, overthrowing capitalism is not going to be done by convincing people that "someone will come up with a solution easily". It's also not going to happen by conspiranoids/"doomers" telling people that "nothing can be done" and its all basically a problem of geology and physics - which naturalises and eternalises the specific relations of capitalism in a completely reactionary, Malthusian way.

FWIW, when I argue that nothing can being done, I am referring to capitalism (free market, state) as unsustainable. And it is primarily unsustainable because of peak oil, among others.

That's why when you read my post about that, I talk about localization, the use of renewable energy, etc. That's the result of capitalist systems falling apart.

Finally, keep in mind that it's not just peak oil that's a matter of physics and geology. Even global warming and environmental damage involve the sciences.

Again, I am not arguing that we should ignore politics or economics. It's just that the topic of this thread is peak oil, and I don't think a change in governments, increasing money supply, etc., will ramp up conventional production indefinitely.

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The notion of a physical limit ratio of "hectares per person", i.e. "biocapacity", is utter reactionary Malthusian bollocks. It assumes present consumption patterns of people living in a wage-labour, commoditised, privatised social system, as somehow ahistorical and natural. Down this road lies primitivist genocidal thinking and ignorant conspiranoid pseudo-science.

The physical limit is based on science. In fact, the same science is used to study peak oil and, global warming, and environmental damage.

Higher or lower levels of consumption will not change that biocapacity. And the fact that consumption has to decrease to meet biocapacity proves my point further.

The only way to disprove this is to show what technologies will allow for continuous increase in resource consumption exceeding bio-capacity.

Finally, what you are referring to in your last sentence is the reaction to this scientific fact and not the fact itself.

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Except it didn't. You just keep redefining the definition of "crude oil" to keep your conspiracy alive.

It's a conspiracy because you believe if only the world knew the indisputable "facts" about peak oil (911, the lizards, the global Jewish Conspiracy, take your pick...) then they would be forced to do something, things just couldn't continue as they are any more... ("WAKE UP, SHEEPLE!") - or alternatively, you don't even need people to act, because the automatic breakdown (Zusammenbruch - some Marxists do this shit as well) will change everything without having to go through the hard work of actually building real movements with real power/agency for change. NB, you seem to vacillate between these two contradictory poles - on the one hand you are afraid of people remaining complacent, on the other hand, there's nothing to be done - so what's wrong with complacency then?

The chart in the EIA executive summary which you shared recently proves my point.

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Strawman. And symptomatic of utter political fail.

You're not disproving my argument. By showing that it is a political issue, you are implying that peak oil in terms of geology is wrong.

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No-one has said that oil will not eventually run out. We just have said that it's production has not yet peaked. See all the actual figures (which I graphed above). We are also saying that fossil fuels will not run out before we have released enough CO2 into the atmosphere to make running out of fossil fuels the least of our worries. So eventual peak oil (whenever it finally comes) is irrelevant, in terms of the resource-usage threats posed by capitalism.

According to the same EIA, crude oil production peaked in 2005. See the article I shared in my first post.

According to the EIA report you shared earlier, U.S. crude oil production peaked in 1970. Also, look at the trend line for U.S. total production.

ralfy
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Apr 18 2014 03:37

This was shared earlier, with lots of details and references to multiple organizations, including the EIA:

"Former BP geologist: peak oil is here and it will 'break economies'"

http://www.theguardian.com/environment/earth-insight/2013/dec/23/british-petroleum-geologist-peak-oil-break-economy-recession

Also, in reference to global warming:

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

http://www.theguardian.com/environment/2011/nov/09/fossil-fuel-infrastructure-climate-change

Thus, we see the effects of both peak oil and global warming.

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Apr 18 2014 08:48
ralfy wrote:
Quote:
It's a conspiracy because you believe if only the world knew the indisputable "facts" about peak oil (911, the lizards, the global Jewish Conspiracy, take your pick...) then they would be forced to do something, things just couldn't continue as they are any more... ("WAKE UP, SHEEPLE!") - or alternatively, you don't even need people to act, because the automatic breakdown (Zusammenbruch - some Marxists do this shit as well) will change everything without having to go through the hard work of actually building real movements with real power/agency for change. NB, you seem to vacillate between these two contradictory poles - on the one hand you are afraid of people remaining complacent, on the other hand, there's nothing to be done - so what's wrong with complacency then?

The chart in the EIA executive summary which you shared recently proves my point.

The problem is you don't have any politics and thus you don't really have any point. Just an obsession. And you clearly hope that the object of your obsession will somehow magically substitute for politics ("is scientific, innit?"). It won't.

ralfy
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Apr 19 2014 01:53
ocelot wrote:
The problem is you don't have any politics and thus you don't really have any point. Just an obsession. And you clearly hope that the object of your obsession will somehow magically substitute for politics ("is scientific, innit?"). It won't.

Please explain what aspect of politics will reverse the physical realities of oil (not to mention other material resources such as fresh water and various minerals) and energy return.

S. Artesian
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Apr 22 2014 02:56
ralfy wrote:
ocelot wrote:
The problem is you don't have any politics and thus you don't really have any point. Just an obsession. And you clearly hope that the object of your obsession will somehow magically substitute for politics ("is scientific, innit?"). It won't.

Please explain what aspect of politics will reverse the physical realities of oil (not to mention other material resources such as fresh water and various minerals) and energy return.

You have demonstrated precisely nothing of "the physical realities of oil."

S. Artesian
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Apr 22 2014 19:59

"Easy oil" is not "gone," hence Iraq's refusal to pay $5/barrel to the majors to extract oil from their fields that can be extracted for $2 barrel or less.

Crude oil production did not peak when or how Hubbert predicted; production has not declined as Hubbert predicted; the depletion of reserves has not declined as Hubbert has predicted... but don't let anything like the facts get in the way of your ideology.

ralfy
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Apr 23 2014 12:22
S. Artesian wrote:

You have demonstrated precisely nothing of "the physical realities of oil."

On the contrary, I've shown precisely that.

ralfy
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Apr 23 2014 12:27
S. Artesian wrote:
"Easy oil" is not "gone," hence Iraq's refusal to pay $5/barrel to the majors to extract oil from their fields that can be extracted for $2 barrel or less.

Crude oil production did not peak when or how Hubbert predicted; production has not declined as Hubbert predicted; the depletion of reserves has not declined as Hubbert has predicted... but don't let anything like the facts get in the way of your ideology.

Easy oil is gone, as shown in Charles Hall's argument.

Crude oil production peaked, as shown in EIA data presented to you.

Hubbert predicted that correctly, as shown in the 1976 interview shared earlier.

The IEA confirmed that in 2010, and BP data shows the same.

Peak oil has to do with rate of flow, not reserve depletion.

My arguments are not based on ideology but on facts.

S. Artesian
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Apr 23 2014 12:46

Peak oil has everything to do with reserve depletion; read the literature. Read Campbell, Deffeyes, Laherrere.

Oil production did not peak in 2005. It has increased since then. You don't happen to like that the increase comes from tight oil supplies; or other "unconventional sources" like tar sands.

Further discussion with you is pointless.

ralfy
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Apr 24 2014 03:20
S. Artesian wrote:
Peak oil has everything to do with reserve depletion; read the literature. Read Campbell, Deffeyes, Laherrere.

Oil production did not peak in 2005. It has increased since then. You don't happen to like that the increase comes from tight oil supplies; or other "unconventional sources" like tar sands.

Further discussion with you is pointless.

Reserves cannot be used up wholly for obvious reasons. Rather, production rate goes down when as oil becomes increasingly expensive to access, and that will take place long before reserves are fully depleted.

That's why crude oil production peaked in 2005. See the second and third charts featured here:

http://crudeoilpeak.info/world-crude-production-2013-without-shale-oil-is-back-to-2005-levels

The data comes from the same EIA mentioned frequently in this thread.

Crude oil production has stayed in a 73.4 Mb/d plateau since then.

Hubbert predicted that in 1976:

https://www.youtube.com/watch?v=ImV1voi41YY

and the IEA confirmed it in 2010:

http://www.resilience.org/stories/2010-11-11/iea-acknowledges-peak-oil

The fact that we are now resorting to shale oil proves my point further. Otherwise, crude oil production should be increasing readily, and there would be no need to use shale oil.

Shale oil will not last:

http://www.slate.com/articles/health_and_science/science/2013/02/u_s_shale_oil_are_we_headed_to_a_new_era_of_oil_abundance.html

Even the EIA acknowledges that shale oil production will peak after only a few years:

http://www.cnbc.com/id/101276526

What about total oil and gas production, both conventional and non-conventional? The IEA reports that it will increase by only 9 pct during the next two decades:

http://www.worldenergyoutlook.org/publications/weo-2010/

and that's assuming that crude oil producers go for maximum depletion rates, something which is not likely given increasing capital expenditures (as explained in the lecture shared earlier). As it is, production for the five major players have dropped by 25 pct since 2004:

http://www.theoildrum.com/node/9946

Meanwhile, as the same report reveals, demand is expected to increase by around 2 pct every year, which mean the 9-pct production increase will obviously not be enough.

Finally, oil sands, coal, and other sources of non-conventional production will contribute to increasing CO2 emissions:

http://www.theguardian.com/environment/2011/nov/09/fossil-fuel-infrastructure-climate-change

which means we face both peak oil and the effects of global warming.

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May 1 2014 14:57

sans commentaires...
FT: Booming output sends US crude below $100

Quote:
US crude dipped below $100 a barrel for the first time in almost a month as domestic oil inventories rose to a fresh high.
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Oil production in the US has been booming thanks to output from shale rock formations such as the Bakken in North Dakota, and inventories have been hitting peaks.
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Figures released by the Department of Energy showed that crude oil inventories had increased by 1.7m barrels from the previous week to 399.4m barrels – the highest level since records began in 1982.
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Nymex June West Texas Intermediate fell almost $2 in afternoon trading on Wednesday to $99.49 per barrel, its lowest since late March.
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“There are indications that the US crude market is oversupplied to the extent that it’s having difficulties digesting the barrels, bringing the market under pressure,” said David Wech, an analyst at JBC Energy in Austria.
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The DOE’s Energy Information Administration data showed that inventories on the US Gulf coast, where many refineries are situated, rose 2.7 per cent from a week before to 215.3m barrels, an all-time high.
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Stocks in Cushing, the delivery point for WTI in Oklahoma, fell to 25.4m barrels – lower than last week and almost half the 49.8m a year ago. Pipelines between Cushing and the Gulf have moved oil stocks for a year.
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Refinery utilisation – an indication of how much capacity refineries use to process crude – is 92.9 per cent on the Gulf coast, prompting fears that stocks will pile up and drive the price down further.
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“Refinery utilisation is already at seasonal record levels, with barely any room to process more crude,” Mr Wech added.
[...]
ralfy
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May 5 2014 19:06

That's for WTI. For Brent, it's more than $108. Meanwhile,

"Shale Drillers Feast on Junk Debt to Stay on Treadmill"

http://www.businessweek.com/news/2014-04-30/shale-drillers-feast-on-junk-debt-to-stay-on-spending-treadmill

ralfy
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May 7 2014 03:12

Also,

"Total SA: Peak Oil Is Catching up to Big Oil"

http://www.fool.com/investing/general/2014/04/23/total-sa-peak-oil-is-catching-up-to-big-oil.aspx

Note the points raised after the capex chart.

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ocelot
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May 7 2014 12:04

Which are simply that costs of production, in terms of capex, are going up.

But what does that actually mean? It means that supply is not currently tight enough to allow producers to pass on rising costs via rising prices. And yet, rather than scale back capex into new production, restoring their free cash flow, dividends, p/e, etc, they consider the investment in new production worthwhile as they predict continuing demand for the product.

The naive view of rising production costs is the techno-optimist one that eventually petrochem costs will rise above current renewable costs and market forces will lead to a switch from oil to renewables within the "business as usual" dynamic. As I previously pointed out above, this does not take account of the different investment/transaction/return profile of oil as contrasted with renewables. Namely that oil provides a stable income stream in that each marginal unit of power requires a purchase of a marginal unit of commodity, whereas once renewable investments are sunk, marginal costs are effectively negligible and the argument for the power produced being a public good, are much harder to resist. Which is why, ultimately, the non techo-optimist prediction is that oil production will continue to rise, even with rising production costs, and will not, in and of themselves, lead to a widespread switch from fossil fuels to renewables by market forces alone.

And lets not forget, that if there's one thing capitalism is not about to run out of, it's accumulated liquid investment capital. Rising costs are not a problem, it's falling returns that are the issue - and the historical evidence is that the former does not lead directly to the latter in the way the bourgeois ideological view of economics as natural history would lead one to believe.

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ocelot
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May 8 2014 12:45

Interesting related piece:

Reuters: End of oil boom threatens Norway's welfare model

A bit of a multi-target piece. As well as the stuff about rising costs, both generally in the global industry, and specifically in Norway, there's some hilarious boss-wailing about "lazy" Norwegian workers who don't want to work (join the club!) and a gratuitous Scottish referendum side-swipe for good measure. Something for everyone here.

(There's also a little bit of local Irish interest with the revelation that Statoil, the Norwegian state-owned oil producer who has a big share in the Shell pipe project in Rossport, are concerned enough to make sure that gas projects in Norway are processed off-shore. So it's "shell to sea" for the scandies but a pipe's good enough for paddy...).

ralfy
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May 9 2014 05:23
ocelot wrote:
Which are simply that costs of production, in terms of capex, are going up.

That's peak oil. Capex is going up because new oil is becoming more expensive to obtain. This is even more pronounced for shale oil, where more wells have to drilled each time just to maintain production rates.

Quote:

But what does that actually mean? It means that supply is not currently tight enough to allow producers to pass on rising costs via rising prices. And yet, rather than scale back capex into new production, restoring their free cash flow, dividends, p/e, etc, they consider the investment in new production worthwhile as they predict continuing demand for the product.

Prices aren't dictated by producers. The explanation is given in the Kopits lecture.

Quote:

The naive view of rising production costs is the techno-optimist one that eventually petrochem costs will rise above current renewable costs and market forces will lead to a switch from oil to renewables within the "business as usual" dynamic. As I previously pointed out above, this does not take account of the different investment/transaction/return profile of oil as contrasted with renewables. Namely that oil provides a stable income stream in that each marginal unit of power requires a purchase of a marginal unit of commodity, whereas once renewable investments are sunk, marginal costs are effectively negligible and the argument for the power produced being a public good, are much harder to resist. Which is why, ultimately, the non techo-optimist prediction is that oil production will continue to rise, even with rising production costs, and will not, in and of themselves, lead to a widespread switch from fossil fuels to renewables by market forces alone.

A techno-optimist view involves technology solving anything, either by keeping costs down or by allowing an easy transition other energy sources.

A realist view argues otherwise.

Quote:

And lets not forget, that if there's one thing capitalism is not about to run out of, it's accumulated liquid investment capital. Rising costs are not a problem, it's falling returns that are the issue - and the historical evidence is that the former does not lead directly to the latter in the way the bourgeois ideological view of economics as natural history would lead one to believe.

Exactly! Oil prices are not dictated by producers but by the market, and that market cannot tolerate very high prices. At the same time, producers are getting squeezed by higher capex.

That's why oil production for the five major players have dropped by 25 pct since 2005. That's why crude oil production has remained in a 73.4 Mb/d plateau even with a tripling of oil prices.

More details are given in the lecture shared earlier.

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ocelot
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May 9 2014 11:29
ralfy wrote:
ocelot wrote:
Which are simply that costs of production, in terms of capex, are going up.

That's peak oil.

No it's not.

(global) Peak oil, as defined by Hubbert, is the peak of global oil production (as measured in Thousands or Millions of Barrels Per Day), after which output declines. That is, a global version of the peaks that have been seen in various local oil and gas fields around the world - for e.g. the North Sea, where production today is today 2/3rds below it's peak.

The global oil out put has not peaked - as demonstrated in the actual output figures. The fact that you continue to deny a simple fact is evidence that your belief system is theological rather than scientific.

ralfy
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Jun 1 2014 17:54
ocelot wrote:
ralfy wrote:
ocelot wrote:
Which are simply that costs of production, in terms of capex, are going up.

That's peak oil.

No it's not.

(global) Peak oil, as defined by Hubbert, is the peak of global oil production (as measured in Thousands or Millions of Barrels Per Day), after which output declines. That is, a global version of the peaks that have been seen in various local oil and gas fields around the world - for e.g. the North Sea, where production today is today 2/3rds below it's peak.

Yes, it is. Production peaks and then declines because oil is more difficult to extract, and it's more difficult to extract because it requires more processing or is deeper.

That difficulty translates to higher oil production cost and capex.

Quote:

The global oil out put has not peaked - as demonstrated in the actual output figures. The fact that you continue to deny a simple fact is evidence that your belief system is theological rather than scientific.

Global crude oil production peaked in 2005. The data comes from EIA. Check the second chart in this article:

http://crudeoilpeak.info/world-crude-production-2013-without-shale-oil-is-back-to-2005-levels

Global oil production per capita peaked in 1979: The data comes from multiple sources, including the EIA, the IEA, and others. See the chart in this article:

http://cassandralegacy.blogspot.com/2013/07/peak-oil-what-peak-oil.html

S. Artesian
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Jun 2 2014 06:55

Right, global crude without tight oil is back to 2005 levels-- so what? That's like saying global oil production without Spindletop, Saudi Arabia, etc etc etc peaked in 1907.

factvalue
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Jun 2 2014 14:12

But isn't..I thought Shale etc. is just another bubble, innit?

“Insiders Sound an Alarm Amid a Natural Gas Rush”, The New York Times, 25 June 2011.

http://www.nytimes.com/2011/06/26/us/26gas.html?pagewanted=all&_r=1&

Wolf Richter, “Dirt Cheap Natural Gas is Tearing up the Very Industry that’s Producing It”, Business Insider, Portland, 5 June 2012.

http://mobile.businessinsider.com/capital-destruction-in-natural-gas-2012-6

“Shale Gas Will be the Next Bubble to Pop - An Interview with Arthur Berman”, 12 November 2012; www.oilprice.com

http://oilprice.com/Interviews/Shale-Gas-Will-be-the-Next-Bubble-to-Pop-An-Interview-with-Arthur-Berman.html

“Exxon: ‘Losing our Shirts’ on Natural Gas”, The Wall Street Journal, New York, 27 June 2012.

http://online.wsj.com/news/articles/SB10001424052702303561504577492501026260464?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303561504577492501026260464.html

“US shale gas glut cuts BG Group profits”, Financial Times, London, 26 July 2012.

http://www.ft.com/cms/s/2bd8af54-d6f7-11e1-8e7d-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F2bd8af54-d6f7-11e1-8e7d-00144feabdc0.html%3Fsiteedition%3Duk&siteedition=uk&_i_referer=http%3A%2F%2Fmondediplo.com%2F2013%2F03%2F09gaz#axzz2Lv7vprgJ

“Debt-plagued Chesapeake energy to sell $6,9 billion worth of its holdings”, The Washington Post, , 13 September 2012.

http://www.washingtonpost.com/business/economy/debt-plagued-chesapeake-energy-to-sell-69-billion-worth-of-its-holdings/2012/09/12/6b973420-fd0e-11e1-b153-218509a954e1_story.html

“The economics of oil dependence: a glass ceiling to recovery”, New Economics Foundation, London, 2012.

http://www.neweconomics.org/publications/entry/the-economics-of-oil-dependence-a-glass-ceiling-to-recovery

factvalue
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Jun 2 2014 16:01

After the recent debacle in California where reserves were estimated to have been “inflated” by 2500% (a writedown of 96%) under new Security and Exchange Commission (SEC) rules introduced in 2009 that allow gas companies to claim reserve sizes without any independent third party audit, I think a little caution may be in order.

According to research by David Hughes at Post Carbon Institute - http://www.postcarbon.org/drill-baby-drill/ - for the two tight oil ‘plays’ in the US – the Bakken/Three Forks play in North Dakota and Montana and the Eagle Ford play in Texas – that provide more than 80 per cent of the country’s production, indicating the rarity of good fields, well-decline rates are between 81 and 90 per cent in the first 24 months. The annual costs to maintain production nationally are estimated at $35 billion. Oil production is projected to peak in 2017 and then collapse – providing a resource bubble lasting about ten years.

In the Arthur Berman article cited in the post above, a former Amoco (BP) geologist cites the same Eagle Ford shale site (in Texas - the “mother of all shale oil plays”), pointing out that the “annual decline rate is higher than 42%” so that just to keep production flat they will have to drill “almost 1,000 wells in the Eagle Ford shale, every year... Just for one play, we’re talking about $10bn or $12bn a year just to replace supply. I add all these things up and it starts to approach the amount of money needed to bail out the banking industry.”

According to Sir David King’s group at Oxford (David King and James Murray, “Climate policy: Oil’s tipping point has passed”, Nature, London, no 481, 26 January 2012.) production at these wells drops off by as much as 60-90% within the first year. They found that despite reported increases in unconventional oil and gas production by fracking, depletion of the world’s existing fields is still running at 4.5-6.7% a year. They categorically dismissed notions that a shale gas boom would avert an energy crisis.

ExxonMobil’s CEO, Rex Tillerson, complained that the lower prices due to the US natural gas glut, although reducing energy costs for consumers, were depressing prices and were thus often insufficient to cover production costs resulting in dramatically decreased profits. Although, in shareholder and annual meetings, the company had officially insisted it was not losing money on gas, Tillerson candidly told a meeting at the Council on Foreign Relations: “We are all losing our shirts today. We’re making no money. It’s all in the red”

The British BG Group was forced “to take a $1.3bn writedown in its US natural gas assets” due to the gas supply glut, “leading to a sharp fall in quarterly and interim profits”. By November 2012, after Royal Dutch Shell saw its earnings fall for the third consecutive quarter by “24% on the year”, Dow Jones reported the “negative effects in their earnings”, underscoring “how disruptive the shale boom of the past few years has been to the sector.”

According to the FT article above, producers have been spending “two, three, four and even five times their operating cash flow to fund their land, drilling and completion programmes.” To sustain this “deficit financing”, too much money “was borrowed, on complex and demanding terms. Wall Street should have provided reality checks to the shale gas people; instead, they just provided cashier’s cheques with lots of zeroes at the end.” And this bubble will continue growing due to increasing US dependency on gas-fired power. “Given the steep decline rates of shale gas wells, compared to conventional wells, drilling will have to continue. Prices will have to adjust upwards, a lot, to cover not only past debts but realistic costs of production.”

Arthur Berman suggested that “you may have a couple of big bankruptcies or takeovers and everybody pulls back, all the money evaporates, all the capital goes away.” In other words the premise of “peak oil” — the point at which geological constraints and economic factors combine to make the fluid fossils much more difficult and expensive to produce and so less profitable — is far from undermined by the shale gas/tight oil boom.

ralfy
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Jun 3 2014 01:22
S. Artesian wrote:
Right, global crude without tight oil is back to 2005 levels-- so what? That's like saying global oil production without Spindletop, Saudi Arabia, etc etc etc peaked in 1907.

Shale oil has lower energy energy returns and will only last a few years. More details in my previous posts.

And if crude production goes down, it will pull down total oil and gas production. Meanwhile, global oil and gas demand continues to rise.

ralfy
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Jun 3 2014 01:23

"Why the Oil Industry is Running Into Major Trouble"

Quote:
Over the last year, some deep truths about oil and the oil industry have begun to bubble to the surface. Not necessarily that they were ever hard to see, but they were easy to obscure and maybe more importantly, without too much effort, ignore. No longer. Spread across the oil companies' quarterly reports and the pronouncements of government agencies from the U.S. Energy Information Agency to the International Energy Agency are the hard facts that the era of cheap oil is over. It's impacting the U.S. and global economies and forcing a fundamental rethinking and restructuring of our economic activities and thinking.

http://www.alternet.org/economy/why-oil-industry-running-major-trouble

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ocelot
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Jun 3 2014 15:53
ralfy wrote:
Meanwhile, global oil and gas demandoutput continues to rise.

Fixed

ralfy
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Jun 4 2014 02:39
ocelot wrote:
ralfy wrote:
Meanwhile, global oil and gas demandoutput continues to rise.

Fixed

Obviously, production has to rise to meet increasing demand. The problems:

- Crude oil production peaked in 2005, and expensive shale oil is now being used to meet increasing demand.

- Shale oil is expected to last for only a few years, and according to the IEA U.S. shale oil technology cannot be easily replicated elsewhere.

- Crude oil producers face increasing capital expenditures. As it is, production for the five major players has dropped by 25 pct since 2005.

- Shale oil producers also face similar problems. For example, just recently the EIA cut estimates of recoverable oil from Monterey by over 90 pct. Very likely reserves for U.S. shale oil are over-estimated.

Worse, producers face rising capital expenditures and lower energy returns. All of these were explained earlier.

- As for demand, it has to rise by 2 pct to maintain economic growth, the equivalent of one Saudi Arabia in new oil production every seven years. To deal with a growing global middle class, it has to be one Saudi Arabia every three years. Again, all of these were explained earlier.