

The Case for Endless Oil - cwan
http://www.businessweek.com/magazine/content/10_03/b4163046952385.htm

======
brc
While I'm in no position to comment on the accuracy of the article, being
neither an energy analyst or oil industry specialist, I'm getting a bit tired
of the vicious ad-hominen attacks in blog comments about articles such as this
one. It's ok to do reasoned debate, but calling everyone who disagrees with
you 'in payment of big oil' is very childish. This same feature cuts across
all climate-change and peak-oil articles on both sides of the argument. You
can't win an argument by name calling and shouting, unless you're in the
playground with other 5 year olds.

~~~
abrown28
actually you can win by name calling and shouting. If you're side is noisy and
unruly enough that the other side backs down you win. You are probably still
wrong but you did get your way.

------
brazzy
How dumb does one have to be to use the word "endless" when talking about a
very limited resource?

The potential for technology to increase yields and the discovery of
additional deposits are nothing new. They were included in the original "peak
oil" prediction in 1956 and are part of every serious analysis. The problem
is: new deposits are overall _not_ discovered as fast as old ones get used up.
Meanwhile the consumption _rate_ has been increasing all the time...

~~~
cwan
I'm not sure how "dumb" it is to consider the economics of resource
consumption/exploration/extraction. On a practical level, the last drop of oil
will never be consumed or x resource mined because substitutes develop and
markets are forward looking.

While this article doesn't talk about the substitutes specifically, have a
look at the availability of natural gas as just an example of why energy
prices will go down. What I think they suggest here though is that politics
and technology make it more available. Now as for "serious analysis", it's
impossible to predict what new technologies will show up in the future as the
massive _new_ abundance in natural gas in the last couple years (compare to
just 4-5 years ago) shows.

Now consider the emerging technologies that could have a major impact on
reducing both cost and carbon dioxide emissions (e.g. thorium, pebblebed, thin
film solar, concentrated solar, non-corn biofuels, etc.). To bet that we'll
"run out" of oil/peak oil is to place a bet against our ability to innovate
and adapt.

~~~
mschy
Nearly all instances of "we'll run out of oil" are calls to action to innovate
and adapt to ensure that the problem never comes to pass.

Claiming it's a bet against that is disingenuous at best.

~~~
cwan
> Nearly all instances of "we'll run out of oil" are calls to action to
> innovate

Hardly. In my experience, most alarmist calls about the finite nature of oil
or resource xyz come with it a series of proposals to regulate or "conserve"
whereas prices in and of themselves provide incentives to increase supply
either through greater extraction/technology or substitutes.

~~~
kiba
Not sure why people downvotes his comment.

Price systems are natural means of conserving/rationing resources.

~~~
mschy
Every serious proposal to "conserve" oil that I've seen consists of two core
components:

1) An incentive to use a preferred technology

2) A disincentive against using an unfavored technology

The basic functionalities of commodity markets aren't questioned by anybody.
Implying otherwise is nonsensical.

------
whyme
Six years back or so natural gas was worth a lot - then all of the sudden
there were huge discoveries offshore while at the same time technology
improved such that onshore shale formations previously not economical became
cheap and prolific. Now natural gas is cheap, cheap, cheap and no one goes
around saying we're running out.

Oil is no different. Oil isn't endless, and we are nowhere near reaching peak
oil (maybe we have in conventional oil, but even that's debatable). It's
really just a matter of how economic it is to produce even the known resources
and how well they are managed. Many countries (the bigger oil producing ones)
tend to damage access to the resources by producing too fast (due to the
discount factor to time/money). There's opportunity to get that back in the
future with new technology and time.

To give an example comparing the natural gas situation to oil, Canada is
making huge strides in reducing the cost of producing heavy oil, it used to be
$50+ per barrel and is now down to $19-33 per barrel. With oil prices at $80
per barrel you can see the profit margin is large enough to make money.

Most oil companies take the majority of profit from oil and re-invest into
buying more properties, investing most of it into discovering new resources.
They wouldn't be doing that if they thought there was none left to find. Check
out the top producers of oil and look at their investments vs. their profits
and you'll see.

As a side note... I don't see why much of the oil demand can not be off loaded
to natural gas should the gov't + manufacturing companies choose to invest
that way. Vehicles can run, houses can be heated, and plants can all operate
on natural gas.... Natural gas has proven to be more environmentally cleaner
than coal, they even produce less environmental damages than the facilities
used to produce electric and corn oil alternatives. So I really don't get all
the hype. It's all just market fixing/speculation for the most part and lack
of quality information.

~~~
skybrian
Canada's also turning parts of Alberta into a wasteland.

<http://www.flickr.com/photos/pembina/sets/72157621954583656/>

------
Semiapies
Leonardo Maugeri (cited in the article) wrote an article in _Scientific
American_ last year on this:

[http://www.scientificamerican.com/article.cfm?id=squeezing-m...](http://www.scientificamerican.com/article.cfm?id=squeezing-
more-oil-edit-this)

I'm skeptical of his plan at the end (tax oil globally at _just_ the right
amount to blunt climate change and encourage alternatives without making
unsubsidized food-crop biofuels viable) for many obvious reasons, but I see
nothing wrong with his points about oil itself.

------
Asa-Nisse
The problem is really stated in the article. As prices worldwide goes up the
incentive to pump up more expensive sources of oil increases.

However, the price of transporting and fertilizing food is not a cost we
really have the luxury of tampering with. 1 Billion people live on a dollar or
less, since those same people are very effected by the food price it's them
that pay the highest price of dearer oil.

~~~
mortenjorck
1\. Price goes up -> 2\. production increases -> 3\. supply outstrips demand
-> 4\. price goes down -> 5\. production decreases -> 6\. demand outstrips
supply -> loop to 1

This is how the cycle has always gone throughout the oil age and how it will
always continue until oil is made obsolete.

Oil obsolete? Steps 1 and 6, fortunately, are where the alternative energy
advances are always made. While not continuous, they are cumulative (despite
occasional attempts to distort this alternative market by incumbent forces).

Ultimately alternative energy will win, the scrappy startups will evolve into
fat-cat incumbents, and then their markets will follow the same six-step cycle
above, just like oil.

~~~
Asa-Nisse
How will you make fertilizer from alternative energy?

That said, I dont think its a cause for worry right now, but it will be a
issue in the future.

~~~
evgen
The Haber-Bosch process creates ammonia (a solution that can then be oxidized
to create nitrates and nitrites) by passing nitrogen from the air and
hydrogen, currently stripped from hydrocarbons, over an iron catalyst. If a
"hydrogen economy" were to actually appear this same H2 would be used to
produce ammonia (and you could actually cut out several steps in the current
process that are necessary to eliminate any trace of carbon monoxide during
the conversion of methane into H2, CO2, and water.) If alternative energy can
be used to create hydrogen in a cost-effective manner then you are golden as
far as fertilizer is concerned.

------
muriithi
Our neighbors Uganda discovered oil just an year ago. Estimated size of the
reserves 6-8 billion barrels.

------
jcnnghm
T. Boone Pickens would disagree. In his book The First Billion is the Hardest,
he asserts that we've already reached peak oil. His reasoning was that
reserves held by oil companies are being depleted faster than new reserves are
being discovered. While he isn't exactly disinterested given his investments
in natural gas and wind energy, he does offer a unique perspective as a former
oilman. Perhaps this is why he stressed the foreign policy benefits of
domestically produced energy, rather than the economic ones.

However, the article does show the economic reality of dwindling oil supplies.
As easy sources dry up, higher cost reserves become economically feasible. The
higher the cost is driven, the more attractive alternative energy sources
should become. An all electric car should be an easy sell as long as the range
is adequate (~80 miles), and the cost isn't exorbitant (< $40k). They should
cost an order of magnitude less ($0.10/gallon equivalent) than fossil fuel
powered vehicles to operate and require less maintenance.

~~~
RyanMcGreal
> As easy sources dry up, higher cost reserves become economically feasible.

True, but those reserves are higher cost for a reason: they're harder to
extract and have a lower production rate. Frankly, it doesn't matter how much
oil there is if you can't bring it to market fast enough to meet demand.

~~~
jcnnghm
Yes it does, because if you can't bring it to market fast enough to meet
demand, prices will spike reducing demand. When the prices spike, oil
companies are willing to spend more resources to extract oil as quickly as
possible in order to sell off their reserves at the highest possible price.
This inevitably leads to significantly more supply than demand, and falling
prices. At which point capacity is taken offline to prevent oversupply, and
the cycle repeats.

If prices are high enough, the market will find a way to extract their
reserves fast enough. There could be temporary short falls, but they'll be
just that. Should the price remain high, it will give new entrants an
opportunity to compete.

~~~
ghshephard
Micro-Econ Nit: Increasing prices do not impact demand, rather they have an
impact on quantity demanded. Availability of more affordable substitutes such
as electronic cars will effect demand.

The argument that quantity supplied of petroleum will continue to rise fails
to take into account that at a certain price point, substitute sources of
energy make more economic sense.

------
greenlblue
This articles provides an interesting counterpoint to the one about China
ruining the talks about global warming.

------
Kilimanjaro
Two things: There is no peak oil at all, and oil prices are being manipulated
as a volatile market for better profits (terrorism, hurricane season, etc)

There are billions, quadrillions and gazillions of oil and gas reserves, only
in Saudi Arabia.

wikipedia: aramco

Come back after you read the whole page and understand how hard we are being
'pumped' in the ass by BigOil.

