Posted on 04/14/2013 10:46:26 AM PDT by nickcarraway
Theres a new twist in the peak oil debate. Is it good news for the climate?
Peak Oil Question Remains, Debate Continues
Ever since M. King Hubbert advanced the theory of peak oil in 1956, experts and non-experts alike have been debating about timing and relevance. (See here, here, here and here.) Hubberts argument seems like a no-brainer. Oil is a finite natural resource, so there must come a time when oil production peaks and begins to decline. The question is, when? And for a world economy that is largely fueled by oil, that when question is quite germane. If peak oil hits while oil demand is rising, it could spell worldwide economic disaster.
The world of oil punditry is replete with predictors of an imminent arrival of peak oil. (See here, here, here and here.) Folks bullish on oil, on the other hand, have long held that that time is way in the future, that there is plenty of oil in the ground and that whenever supply begins to be outstripped by demand, new technologies will be developed to get at what had been deemed to be economically unrecoverable.
History Shows That When Oil Prices Rise, Oil Production Responds
The historical verdict, so far, seems to be in favor of the oil industry bulls. Each time dwindling supplies and/or surging demand have caused oil prices to rise, the economics of high oil prices have spurred the development of new sources to quell the imbalance.
The latest ups and downs in the economy and the oil industry seem to follow that scenario. Remember the skyrocketing gasoline prices of 2005 and 2006 before the July 2008 peak? As in previous oil shocks, there were warnings that peak oil had arrived and that we should all get ready for even higher prices at the pump.
But that didnt happen. First we were saved by the economic crash of 2008 which some argue was actually a direct result of peak oil. The crash caused demand for oil and therefore prices as well to fall. Lots of folks, myself included, assumed that the reprieve from the economic slowdown was temporary and that oil prices would rise, possibly even more sharply than before once the global economy got going again.
(Source: U.S. Energy Information Administration)
Fortunately that hasnt happened. The economic recovery, while tepid, is underway. And while oil prices have recovered somewhat, they have not hit the July 2008 peak, let alone shot above it. (See related: Outlook for U.S. Gas Prices: A Bit Lower This Summer)
So whats going on? As you might expect, there are a variety of opinions. Some continue to warn that a spike in prices at the pump is just around the corner for example see these predictions (here and here).
Others claim that we are seeing the same demand-and-supply response that weve seen in the past. The runup of oil prices in 2007 and 2008 sparked new investments that have increased production and moderated prices. And this argument is supported by data showing an approximate 10 percent uptick in world oil supplies since 2009.
A New Paradigm Proposed
But now two new reports Global Oil Demand Growth The End is Nigh by Seth Kleinman et al. of Citigroup and The End of an Era: The Death of Peak Oil [pdf] from Robin Wehbé et al. of the Boston Company argue that something entirely different and rather unprecedented is underway. Both reports argue that we have entered a new era, one characterized not by the spectre of a supply peak, but by a demand peak that will assure that demand will not outstrip supply for quite some time to come.
The reasons for peak oil demand:
Fuel economy. Recall the new fuel efficiency standards (known as CAFE, short for corporate average fuel economy) promulgated by the Obama administration with the support of the automotive industry? They will certainly have a moderating influence on U.S. oil demand. But the United States isnt alone. Fuel economy standards are tightening throughout the world, including in China, the European Union, Japan and Canada. Fuel efficiency is expected to rise for trucks as well. The net result global fuel efficiency on cars and trucks, which has languished for decades, will increase annually by about 2.5 percent. Substitution of natural gas for oil. The authors project that the revolution in natural gas supplies wrought by shale extraction will have a major ripple effect on the oil industry. Huge new supplies of natural gas [pdf] will continue to lead to low prices in natural gas and that in turn will lead to substitution of natural gas for oil. (Indeed this has already begun.) As a result. well see a shift in the following: Transportation, especially for trucks and other large vehicles currently powered by diesel. Power generation. Though not very common in the United States, oil is still used to generate electricity. For example some 8 percent of New York States electricity is generated from oil, and in 2008, worldwide, about a trillion kilowatts of electricity (out of a total of 19 trillion kilowatts) was generated from oil. Kleinman et al. predict that is about to change as old oil-fueled power plants are replaced by gas-fired ones. Petrochemicals too. Currently the petrochemical industry primarily uses oil as a feedstock. But natural gas, especially so-called wet gas, contains ethane, which can also serve as a feedstock for chemical synthesis. Low natural gas prices have already begun the substitution that the authors predict will accelerate into the future. Of course for this to happen on a global scale, natural gas must become a global commodity that can be traded and transported from producing regions to consumers. No problem, say Kleinman et al. the answer will be liquid natural gas (LNG). They opine:
[O]nce the next wave of LNG export projects comes to market global LNG markets should loosen materially. This raises the prospect of lower spot prices, and a greater incentive for gas for oil substitution to spread and accelerate globally. Hence, the assumption that substitution outside of the US starts to accelerate post 2016.
But thats not all. The Boston Company goes even further, arguing that the emergence of peak oil demand is being also driven by an unprecedented shift in consumer behavior. For years the accepted wisdom has been that consumer demand was inelastic with respect to price in other words, even if prices change, demand remains much the same. The Boston Company report points to data since 1970 showing that each time the price of oil rose above 3 or 6 percent of gross domestic product, demand was reduced or quickly curtailed. Thus, they argue, price, not supply, now limits demand.
Suffice it to say and Ill note this is par for the course when it comes to the peak oil debate not everyone agrees with these predictions (see chart).
Citigroup forecasts a very modest increase in demand that plateaus near 2020 (see also Fig. 1, page 2) while BP and the International Energy Agency (IEA) project a larger, steadily increasing demand of 0.7-0.8 percent. I expect the projected demand growth in the U.S. Energy Information Administration (EIA) forecast will be revised downward in the report due out this spring. ExxonMobil projects a 1.5 percent annual increase in demand from 2010 to 2025. (See End Note for sources.**)
Could Climate Be a Winner?
At least on the face of it, the projections of Citigroup and the Boston Company if they pan out would be good news for the climate. The world is replete with hydrocarbons and it may very well be true that, as the oil bulls have been telling us, technological innovation will make it possible for us to economically pull all the hydrocarbons in their various forms out of the ground to burn them if we so choose. And it certainly seems like advances in fracking and horizontal drilling have moved us a big step closer in that regard.
The questions we should be asking ourselves are: Do we want to pull all this stuff out of the ground, and How much is too much before the climate price is too dear to pay for cheap oil?
The fact that oil demand may be flattening out is a positive sign for the climate; at least the near-term pressure to pull all the oil out of the ground as fast as possible has lessened. (A caveat here: some of the oil demand flattening is due to switching from one fossil fuel oil to another natural gas, which while cleaner than oil, still puts carbon dioxide in the atmosphere when burned.)
Interestingly enough, this peak oil demand phenomenon, if it comes to pass, will have occurred of its own accord without a global accord on carbon emissions. Is the system somehow correcting itself on its own? If so, the system better get busy because theres a lot more to do not just flattening demand but actually turning the demand curve downward, and not just for oil but for all hydrocarbons. Tall order. Maybe the systems response will be to engineer a global climate treaty. And if that happens, who gets the credit?
__________________ End Note ** Sources for chart: Global Oil Demand Growth The End is Nigh, Seth Kleinman et al., Citigroup, March 2013. Energy Outlook 2030, BP, January 2013 (data [xls]). North America leads shift in global energy balance, IEA says in latest World Energy Outlook, International Energy Agency, November 2012. International Energy Outlook 2011, U.S. EIA, September 19, 2011. The Outlook for Energy: A View to 2040, ExxonMobil, 2013.
Please notice I was referring to Water Wells. The only problem with fracking water wells is that there may be no increase in water production. This possibility is discussed beforehand and is spelled out in the contract. There have been no problems with fracking water wells in my little community.
OOPS
“Water fouled with fracking chemicals spews near Windsor”
By Mark Jaffe
The Denver Post
Posted: 12/09/2011 01:00:00 AM MST
Updated: 12/09/2011 09:03:24 AM MST
“..PDC has reported two other spills near Greeley in the past few weeks. Both contaminated groundwater, according to a state database of spills...”
http://www.denverpost.com/environment/ci_22586154/water-fouled-fracking-chemicals-spews-near-windsor
Evidently the Windsorites experience with fracking differs from that in your “little community”.
Tell us again about how Anthropomorphic effects upon climate are responsible for the new ice age in your “little community”.
That was pretty funny.
>>If Chickenpooper drank some fracking fluid it can’t be dangerous.
How do you know it was fracking fluid and not koolaid imported from Californistan?
” The economic recovery, while tepid, is underway.”
Right,roger that. Underway. Cool.
It’s certainly not the conservative state I grew up in anymore.
How do you know it was Fracking Fluid?
Do you believe everything the libtar(D)s with their snout in the state’s bureaucratic trough tell you?
Your "credibility" is linked to a speculative newspaper article? Agenda related, maybe?
From the article you linked..:
... About 90 percent of U.S. wells, and almost all in Colorado, are hydrofractured or fracked by forcing a mixture of water, sand and trace chemicals into a well to crack rock and release oil and gas. Industry executives and state regulators, including Colorado regulators, have said there were no documented cases of fracking directly polluting groundwater....
The EPA study "gives a probability, not a conclusion, said Douglas Hock, a spokesman for Calgary-based Encana Corp., the operator in the Pavillion field.
The origin of the chemicals is still not certain, Hock said....
How can one tell if your "kudos" are legitimate when you mis-spell the FReepername of the one you claim to attribute all this beautiful posted info???
I grew up outside of Boulder. To tell if a liberal/communist is lying check to see if his lips are moving.
“Oil is a finite natural resource,”
And just where is there the slightest bit of proof that oil is any more finite than light from the sun?
Do “Peak-Oil” proponents still believe in the hypotheses of liquified dinasaurs or quadrillions of tillions of tons of minute organisms all collecting in the same place in some life ending but unexplained prehistoric die-off?
>>Agenda related, maybe?
As opposed to the (not)agenda-driven resting of the credibility of one’s “little community” upon a sandy claim by the (D)imowit governor that he drank Fracking Fluid. Uhuh.
When does Governor Chickenlooper plan on having Fracking Fluid on tap at the Wynkoop brewery?
>>To tell if a liberal/communist is lying check to see
>>if his lips are moving.
Were governor Chickenlooper’s lips mooving when he drank the fracking fluid?
Observe the recent record of the kleptocrats attached to the “green” energy bidness in Colorado:
http://www.google.com/#hl=en&sclient=psy-ab&q=pat+stryker+abound+solar+fraud
I wonder if they’d drink Fracking Fluid was well if it was on tap down at the Wynkoop?
Indeed. Does the term rock-oil not suggest something? They have been talking about this question since Col. Drakes time.
mark
And with technology improving, there will always be more that we can find, develop, or make economically viable (eg oil sands).
It's a nice little logic game, but the Peak Oil idea fails to hint at the potential fact that we may not yet have discovered even 0.001% of what exists at this moment. We certainly haven't worried about Peak Gold or any other mineral that has been eagerly taken from the ground for thousands of years... and yet somehow, because we MAY have found almost half of what we can use, we should immediately work to abandon the trillions of dollars of wealth we have under the ground. Idiotic. Use it now while it has utility... or else we abandon trillions of dollars for NOTHING.
“State regulators say at least 84,000 gallons of water contaminated with oil and chemicals used in hydraulic fracturing spilled from a broken well-head in a field about 4 miles north of Windsor.”
http://www.denverpost.com/environment/ci_22586154/water-fouled-fracking-chemicals-spews-near-windsor
Please point out the above facts that are “speculative”?
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