Posted on 05/26/2005 10:09:46 AM PDT by liberallarry
Oil: Caveat emptyWithout any press conferences, grand announcements, or hyperbolic advertising campaigns, the Exxon Mobil Corporation, one of the world's largest publicly owned petroleum companies, has quietly joined the ranks of those who are predicting an impending plateau in non-OPEC oil production. Their report, The Outlook for Energy: A 2030 View, forecasts a peak in just five years.
In the past, many who expressed such concerns were dismissed as eager catastrophists, peddling the latest Malthusian prophecy of the impending collapse of fossil-fueled civilization. Their reliance on private oil-reserve data that is unverifiable by other analysts, and their use of models that ignore political and economic factors, have led to frequent erroneous pronouncements. They were countered by the extreme optimists, who believed that we would never need to think about such problems and that the markets would take care of everything. Up to now, those who worried about limited petroleum supplies have been at best ignored, and at worst openly ridiculed. Meanwhile, average consumers have taken their cue from the market, where rising prices have always been followed by falling prices, leading to the assumption that this pattern will continue forever. In truth, the market price of crude oil is completely decoupled from and independent of production costs, which average about $6 per barrel for non-OPEC producers and $1.50 per barrel for OPEC producers. This situation has nothing to do with a free market, and everything to do with what OPEC believes will be accepted or tolerated by the United States. The completely affordable market price--what consumers pay at the gasoline pump--provides magisterial profits to the owners of the resource and gives no warning of impending shortages. All the more reason that the public should heed the silent alarm sounded by the ExxonMobil report, which is more credible than other predictions for several reasons. First and foremost is that the source is ExxonMobil. No oil company, much less one with so much managerial, scientific, and engineering talent, has ever discussed peak oil production before. Given the profound implications of this forecast, it must have been published only after a thorough review. Second, the majority of non-OPEC producers such as the United States, Britain, Norway, and Mexico, who satisfy 60 percent of world oil demand, are already in a production plateau or decline. (All of ExxonMobil's crude oil production comes from non-OPEC fields.) Third, the production peak cited by the report is quite close at hand. If it were twenty-five years instead of five years in the future, one might be more skeptical, since new technologies or new discoveries could change the outlook during that longer period. But five years is too short a time frame for any new developments to have an impact on this result. Also noteworthy is the manner in which the Outlook addresses so-called frontier resources, such as extra-heavy oil, "oil sands," and "oil shale." The report cites the existence of more than 4 trillion barrels of extra heavy oil and "oil sands"--producing potentially 800 billion barrels of oil, assuming a 20-25 percent extraction efficiency. The Outlook also cites an estimate of 3 trillion barrels of "oil shale." These numbers have figured prominently in advertisements that ExxonMobil and other petroleum companies have placed in newspapers and magazines, clearly in an attempt to reassure consumers (and perhaps stockholders) that there is no need to worry about resource constraints for many decades. However, as with all advertisements, it's best to read the fine print. ExxonMobil's world oil production forecast shows no contribution from "oil shale" even by 2030. Only about 4 million barrels of oil per day from Canadian "oil sands" are projected by 2030, accounting for a mere 3.3 percent of the predicted total world demand of 120 million barrels per day. What explains this striking disconnection between the magnitude of the frontier resources and the minimal amount of projected oil production from them? Canadian "oil sands" are actually deposits of bitumen (tar), which are the result of conventional oil degradation by water and air. Tar sands are of a completely different character than conventional oil deposits; making tar sands usable is a capital-intensive venture that requires special procedures such as heating to separate the tar from the sand, mixing the tar with a diluting agent for pipeline transport, and constructing specially equipped refineries for processing. The most serious constraint, though, is natural gas supplies. Production of oil from tar sands requires between 400 and 1,000 cubic feet of natural gas per barrel of oil produced, depending on the extraction method used. Natural gas production, despite a near doubling of drilling activity, is flat or decreasing both in Canada and in the United States--which has prompted prices to triple over the past few years. Given these high gas prices, it almost makes more sense just to sell the natural gas directly rather than use it to produce oil from tar sands. Extracting oil from the 3 trillion barrels of oil shale cited in the Outlook presents its own challenges. The term "oil shale" is also quite misleading, since there is no oil in this mineral, but rather an organic material called kerogen, which is a precursor of petroleum. To extract oil, the shale (typically between 5 and 25 percent kerogen) must first be mined, then transported to a plant where it is crushed, then heated to 500 degrees Celsius, which pyrolyzes, or decomposes, the kerogen to form oil. After processing, most of the shale remains on the surface in the form of coarse sand, so large-scale mining operations will produce immense amounts of waste material. An estimated 1-4 barrels of water are required for each barrel of oil produced, both for cooling the products and stabilizing the sand waste. To satisfy these water requirements, petroleum companies once contemplated diverting the Columbia River--a feat that can be excluded today on political and environmental grounds.
With non-OPEC oil production reaching a plateau and frontier resources not viable, ExxonMobil proposes that increased demand be met in two ways. The first is greater fuel efficiency. (That alone should convey the seriousness of this report: When have you ever heard a petroleum company make a plea for vehicles that use less gas?) New cars in the United States are expected to go 38 miles on a gallon of gas in 2030, instead of the current value of 21 miles per gallon. This goal is actually quite modest, as new cars sold in Europe since 2003 already achieve 35 miles per gallon. The other way ExxonMobil believes demand will be satisfied is from vastly and rapidly increased OPEC production: "After 2010, the call on OPEC increases quickly, requiring OPEC to add more than 1 MBD [million barrels per day] of capacity every year," notes the Outlook. "OPEC's resources are large enough to achieve this rate of expansion, and we expect that investments will be made in a timely manner." This assessment is somewhat ominous. OPEC has not expanded production capacity much at all recently. Moreover, such production increases are only possible from Iraq, Saudi Arabia, Kuwait, and the United Arab Emirates. For these countries, and indeed for most OPEC members, petroleum and petroleum products are their only significant export. As such, they have a vested interest in obtaining the best possible price for their non-renewable resources. OPEC nations would be quite unlikely to increase production as rapidly as needed unless compelled to do so. To put this shortfall in perspective, in 2003 Algeria produced 1.1 million barrels per day; a new Algeria would need to be brought on line in the Persian Gulf each and every year beyond 2010 just to keep up with the projected increase in demand. Consequently, once non-OPEC production reaches a peak, conventional world oil production could peak shortly thereafter, and prices (never explicitly mentioned in the Outlook) would rise in accordance with the laws of supply and demand. What all this means is that the petroleum industry is approaching a turning point. Conventional petroleum production will soon--perhaps in five years, ten at best--no longer be able to satisfy demand. For their part, American consumers would do well to take a cue from their Western European counterparts, who enjoy a comfortable lifestyle despite a per capita use of petroleum that is half of that in the United States. The sooner the United States begins this transition away from oil, the easier it will be. That's a far more attractive option than trying to squeeze oil from stone. Alfred J. Cavallo is an energy consultant based in Princeton, New Jersey. His article "Oil: Illusion of Plenty," appeared in the January/February 2004 Bulletin. May/June 2005 pp. 16-18 (vol. 61, no. 03) © 2005 Bulletin of the Atomic Scientists |
The Old Testament is full of doom and gloom. Depression, devaluations, bankruptcies, wars, famines, pestilences, are all real and have occured many times in the past, are occuring today and will occur in the future.
Predictions are often wrong but sometimes right.
The author of the piece is *not* Exxon-Mobil, but a scarcity advocate who is latches onto a conservative estimate and makes it his only data point
I linked to the report and pointed out your error previously. Do you have a learning disability?
It's Bunk ... 3 words: Alberta tar sands.
You must think you're dealing with idiots. Do you really believe that the authors who wrote the reports for ExxonMobil, the Administration, and the Wall St. investment house were unaware of tar sands and their economics?
Peaks will happen because of economics, not geology. The stone age didnt end for lack of stones; the oil age will end, not for lack of oil, but because the economic alternatives are better.
Physical shortages are never independent of technology and economics. Any informed person who attempts to predict the future understands this...and it greatly complicates his task. But it's crazy to think that advances in technology will always overcome any challange...and you're flat out wrong when you claim that shortages never had adverse consequences.
When it goes to a trillion dollars a barrel they can start looking on Mars so no need to worry, right?
If pigs could fly it would be a different world.
Uh, if demand is "booming" then the price will be paid to support the needed investment to sell the product.
Demand is booming at current prices. Raise prices and you cut demand. Raise prices enought and boom turns to bust.
Basic economics. And it mean Basic.
"The author of the piece is *not* Exxon-Mobil, but a scarcity advocate who is latches onto a conservative estimate and makes it his only data point"
"I linked to the report and pointed out your error previously. Do you have a learning disability?"
Uh, no, you and the author of the article have a problem - selective reading. You linked to an article, not the Exxon mobil report. The article selectively took the pessimism from Exxon mobil, discounted the optimism, and came to their desired biased conclusion. Quoting from the article:
"The other way ExxonMobil believes demand will be satisfied is from vastly and rapidly increased OPEC production: "After 2010, the call on OPEC increases quickly, requiring OPEC to add more than 1 MBD [million barrels per day] of capacity every year," notes the Outlook. "OPEC's resources are large enough to achieve this rate of expansion, and we expect that investments will be made in a timely manner." "
So Exxon-Mobil *actually* is saying that production *can* increase, but the article author doesnt believe it.
Pity. He mentioned Iraq, but *didnt* mention that Iraq is one country that is producing at low rates (for obvious reasons) but has reserves that at current production levels could last almost 100 years!!
Yes, they definitely *could* and will increase oil production in Iraq at some point.
"Do you really believe that the authors who wrote the reports for ExxonMobil, the Administration, and the Wall St. investment house were unaware of tar sands and their economics?"
As noted in the article, their production contribution was understated, and there is a *reason* for this: Conventional oil production is CHEAP. Exxon-mobil is *actually* saying that between now and 2030, we will continue to be extracting cheap mideast oil as our main oil source.
Tar sands based oil production is more expensive ... and yet, thanks to OPEC, we spending more on oil than it costs to produce the cheap oil, and Saudi sheiks get the difference. Exxon-mobil knows that once oil goes back down to $20 (and it will), the tar sands are not economical.
Really, you cant have it both ways - you cannot say 'we are running out of oil' and assume the price will rise based on the scarcity of cheap sources of oil, while ignoring these other sources. Exxon mobil is *not* saying we are
running out of oil... on of their charts says: "Large oil resources exist" ... and shows where.
Our economy will do just *fine* having to spend $40 per barrel on oil. We've been there, done that.
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If you read the *actual* Exxon mobil report, you would find that it refutes the doom-and-gloom and supports my comments that reserves exist to satisfy demand at current prices:
http://www.exxonmobil.co.uk/UK-English/Newsroom/UK_NR_Speech_EO_150904.asp
"Having discussed our assumptions on conventional oil, lets discuss the prospects for unconventional oil development. For comparison, on the left is an estimate of conventional oil-in-place compared with our estimates of Extra Heavy Oil and Oil Sands in red and Oil Shale in blue.
In yellow, the absolute level of conventional oil in-place is not knowable, but is estimated to be between six and eight trillion barrels. Of this, the current estimated recoverable amount is in the three trillion barrel range. The industry is now able to recover a little more than double what it could back in the early 1920s. The biggest step change came with the development of secondary and tertiary recovery technologies.
In comparison, estimates of unconventional resources are also very large.
Current estimates of Extra Heavy Oil and Oil sands are over four trillion barrels in-place. This is expected to go up as interest in these particular resources increases. Resources are more highly concentrated than conventional oil, with large deposits in Canada, Venezuela, Russia and the Caspian. While resources of this type have been in production since the 1960s, the amount of cumulative production to date is so small relative to the size of the resource base it does not show up on the red bar. With recovery factors in the 20-25 per cent range, 800 billion to 1 trillion barrels may be produced over time - an amount equivalent to the total of all conventional oil produced to date.
Shale oil, another very large type of unconventional resource, has not received much attention since the 1970s and '80s. In-place oil shale deposits are estimated to be in excess of three trillion barrels. Like EHO and Oil sands, high quality oil shale tends to be somewhat highly concentrated. The largest known deposit is the Green River formation in Western USA with over 1.5 trillion barrels of equivalent oil in place. Recovery factors will be dependent on emerging technology but very large volumes of oil from shale are likely to be produced some day. Recent technology efforts are focused on in-situ recovery which involves heating the oil shale in place and recovering it with conventional production technology. If successful it would be lower cost than past mining-like recovery approaches."
In case you dont yet get it - plenty of oil, ie trillions of barrels, is out there, recoverable at prices of under $30 a barrel or so.
I'll address the rest of your stuff when I get an answer.
Kozak, well stated.
This is the most important point:
"In the long run, an economy that utilizes petroleum as a primary energy source is not sustainable, because the amount of oil in the Earths crust is finite. However, sustainability is a misleading concept, a chimera. No technology since the birth of civilization has been sustainable. All have been replaced as people devised better and more efficient technologies. The history of energy use is largely one of substitution. In the 19th century, the worlds primary energy source was wood. Around 1890, wood was replaced by coal. Coal remained the worlds largest source of energy until the 1960s when it was replaced by oil. We have only just entered the petroleum age.31"
We already have the technology to vastly replace oil, it is just a matter of the economics changing based on technology and addressing political errors based on misunderstanding of technology.
That technology that will replace oil for transport use is nuclear-power-generated electricity.
If and when we get battery technology improved, and/or deliver electricity on roadways via induction methods, we could have practical electric vehicles. Or we could simply get hybrids to have plug-capability and get 80% of the way there.
Either way, we will be replacing oil as our energy source in a few decades, well before oil actually runs out.
The only thing stopping us is the fear of nukes.
A) Your original link is to an article from Bulletin of Atomic Scientists. That is what I am critiquing as being overly doom-n-gloom.
B) I didnt know what you did in post #29.
C) What I am referring to in making direct comments about what Exxon-mobil guy was actually saying directly is the exxon-mobil presentation, as given here:
http://www.exxonmobil.co.uk/UK-English/Newsroom/UK_NR_Speech_EO_150904.asp
When you have charts like:
"Oil and gas remain as primary energy sources" you are NOT predicting the end of oil soon.
He - rightly - points out that there've been a lot of estimates done in the past, by the most highly qualified experts, which have turned out to be wrong. This is because it's extraordinily difficult to estimate the size of a resource which not only cannot be accurately measured but hasn't yet been discovered and whose size depends not only on its physical existance but also on the technology and economics of its recovery.
His arguments and examples imply that estimates of supply have been consistantly low because the impact of new technology has not been factored in correctly...and he deals with Huppart in great detail, pointing out that, although Huppart correctly estimated the date of peak oil in the U.S. he was wrong by a factor of 2 or 2.5 about the size of peak production. From this he concludes that oil will last much longer than the "pessimists" think. But this is bad reasoning. Huppart could only be right about the date if demand was as badly underestimated as supply. And Demming does cite one counter-example; Huppart was "ridiculed" for suggesting that supply would peak so early.
Since it is not the absolute size of the resource we are interested in but rather how well supply matches demand at an acceptable price I am not conviced that Deming has much to say.
This is not about the end of oil. It's about the end of cheap oil. All the major players are well aware of the complex relationship between recoverable oil, geology, technology, and economics. Your assertion that "all" we need is money and political will and that the only thing holding us back is big oil's desire for profits is both too obvious and insulting. Big oil is obviously trying to maximize profits but its insulting for you to think you're the only one aware of it or that everyone is stupid or on the take.
I sure don't remember claiming I had sole knowledge of these rather obvious facts.
You did note the quotes around the word, "all" (sic)?
My point is exactly about "cheap oil". Maybe you find the laws of supply and demand insulting also?
I've been directly involved in the oil patch and I speak from personal experience.
Sorry if that pi$$e$ you off.
You didn't pi$$ me off. It's sometimes hard to find someone beginning at 1 when the thread is at 140. I'll go back and see whether I misundertood.
No worries.
This article can't be correct. I thought that there was:
Oil, Oil Everywhere
The Wall Street Journal Opinion Journal ^ | Sunday, January 30, 2005 12:01 a.m. EST | PETER HUBER AND MARK MILLS
Posted on 01/30/2005 10:24:37 AM CST by Woodworker
http://www.freerepublic.com/focus/f-news/1331914/posts
Also, another solution:
Anything into Oil(solution to dependence on foregn oil?)
DISCOVER Vol. 24 No. 5 ^ | May 2003 | Brad Lemley
Posted on 04/21/2003 7:57:41 AM CDT by honway
http://www.freerepublic.com/focus/f-news/897232/posts
the 2 reasons we are dependant on foreign oil are totally excessive taxes on oil from ground to pump of which most are hidden and environmentalists that have locked up hundreds of years worth of oil as untouchable in California.
Read through your links - the key point is:
"The market price of oil is indeed hovering up around $50 a barrel on the spot market. But getting oil to the surface currently costs under $5 a barrel in Saudi Arabia, with the global average cost certainly under $15. And with technology already well in hand, the cost of sucking oil out of the planet we occupy simply will not rise above roughly $30 a barrel for the next 100 years at least."
"Messrs. Huber and Mills are co-authors of "The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy," just out from Basic Books."
We can well afford the $30-50 / barrel range, our economy grew despite the oil price spike, fearmongering is uncalled for -
Energy is abundant is a more valid message IMHO.
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