As a geologist in the oil industry, this is one of the few articles I've seen on peak oil that absolutely nails the salient points. (And even gets the geology correct.)
To quote: "Most simply, peak oil is about rates, not amounts."
Yes, there are a lot of unconventional resources. They're just a lot harder, more expensive, and most importantly in this context, slower to produce.
On the upshot for me, and the downshot for the rest of civilization, oil (and to a large degree, energy) prices are likely to stay high for the near future for exactly this reason.
However, we haven't developed a viable alternative to liquid fossil fuels in terms of energy-density fast enough. That very, very deeply scares me.
The concept "peak oil" to me seems to misdirect the debate right off the bat. Obviously the question isn't "when do we run out of oil" but "how does oil supply given continually increasing demand affect oil price" and "what does rising oil price do to the rest of the economy?
Inflation-adjusted, the price of a barrel of crude oil was $23 in 1960, and has been averaging almost $88 in 2013. What does that do to, e.g., suburbs designed around 1960's oil prices?
Most of the interesting questions when it comes to oil have nothing to do with "what happens when it runs out?" The fun stuff is before then.
Well, the debate often gets off track, but the definition of the term "peak oil" is "when production stops increasing due to market demands and starts decreasing due to geologic control".
In other words, "when does long-term demand outstrip long-term supply?" The concept isn't to blame, it's just misinterpretation of it in the popular media.
At any rate, as you pointed out, the interesting question is "what does rising oil price do to the economy?".
In a free market, long-term demand will never outstrip long-term supply. Why? Because prices will rise to equalize them. As prices increase, long-term demand drops, and long-term supply increases, until they eventually equilibrate.
The problem with this description is that neither long-term demand nor supply is fixed but depends on long-term expected price.
In normal usage in economics the "long-term" refers to an equilibrium where supply matches demand. Demand never outstrips supply but instead drives up prices until a new equilibrium is reached at a lower quantity and some current petroleum users are forced into alternatives.
This is the essence of economics: the study of the allocation of scarce resources. Notice "study" as this is a completely natural process.
Where I would say that peak oil is about exactly the points you raised, and has nothing to do with running out of oil. The "peak" refers to the point where oil becomes so expensive that demand wanes and production starts to decline.
They are one in the same, really. The rate of extraction is driven by demand, which directly equates to price (supply and demand). As oil becomes harder to find, it becomes more expensive, but extraction rates can continue upward until the very last drop if people are willing to pay the price.
"Most simply, peak oil is about rates, not amounts."
See also, Arithmetic, Population, and Energy, wherein Dr. Albert Bartlett comments on the inability of most people to reason about concrete examples of exponential growth:
Thanks for mentioning Al Bartlett here. This video is very relevant to this post and worth watching. Al Bartlett is a brilliant man and does a wonderful job explaining the profound implications of misunderstanding exponential growth. Here is another link to his videos:
http://www.albartlett.org/presentations/arithmetic_populatio...
I think batteries with the help of nanotech will eventually reach energy density approaching liquid fossil fuels, will probably be another 10 years though.
BTW - A couple of my friends recently started a recruitment company for scientists in the Oil & Gas industry, I'm helping them out with their branding/site and hosting. Would love to get your insight on what they're doing right and wrong - http://discoverinternational.com
> However, we haven't developed a viable alternative to liquid fossil fuels in terms of energy-density fast enough. That very, very deeply scares me.
Electric cars are getting there, and there is always domestic natgas production in the US. It won't be fun, but that's what we get for dragging our feet. The US had this happen in the 70's (oil embargo). It's been 40+ years. Its our own damn fault.
Consumer vehicles are definitely getting there, at least for high income and/or high net-worth people.
And while that is a relief, it is still very troubling to think about the implications for our transportation infrastructure as a whole (where consumer vehicles represent a minority fraction.)
How will we power our ocean freighters, our freight trains, our 18-wheelers, and our high capacity airplanes without high energy-density hydrocarbons (or with prohibitively expensive hydrocarbons)?
I can imagine nuclear and electric solutions (hand-wavy or hypothetical) to some of these modes, but could they be implemented on a global scale in time?
It makes me wonder what our transportation infrastructure will look like 100 or 200 years from now.
-In what non-obvious ways will we look backwards to people of the future?
-Will these people envy how cheaply we moved goods across the globe?
-Will they laugh at how expensive it was to move things across the globe?
-Will they even have the luxury of thinking about these things?
Oh man I couldn't agree more. I still refer back to Jimmy Cater's 1977 speech were he warned about our dependency on oil. Not just foreign oil (which a lot of people mistakenly think he said) and yet after 30 years, we're still in the same place.
It's not an unmixed blessing, considering global warming. And there's nothing preventing people from synthesizing gasoline from other energy sources and atmospheric gases, it's just rather expensive.
I've actually looked into this in the past (synthesizing, for example, methane from the carbon dioxide in the atmosphere) but I haven't found anything that seemed achieveable from a DIY perspective. Do you know anywhere that I can get more information? It seems like this might be a good, carbon-neutral way to solve the problem of wind/solar fluctuation and (probably) would not require massive infrastructure changes (since you'd be synthesizing the stuff that cars and trucks are already designed to run on).
> The risk is asymmetric: starting a crash program toward replacement of finite fossil fuels too early has great up-sides and marginal downsides (opportunity cost); but failure to act has enormous downside for marginal upside. - See more at: http://physics.ucsd.edu/do-the-math/2011/11/peak-oil-perspec...
This is a more intelligent way of stating something I've been saying for years. I always explain my position on peak oil by offering an analogy of a fire escape. If the owner of a building chose not to install a fire escape (assuming they could dodge the law), then a fire in the building would be absolutely disastrous; the law would certainly come down on them for anyone who died, and there would major financial ramifications. On the other hand, if they installed a fire escape but it was never used, then the only downside would have been the initial installation cost. Between these two worst-case scenarios, one is so significantly worse than the other that taking steps to mitigate that risk is the logical thing to do, without regard to the likelihood of worst worst-case happening.
Doing nothing with respect to peak oil feels utterly insane.
The problem is, the United States is tying its own hands by not allowing the development of newer, safer, more efficient nuclear power plants. If we could, we would be able to retire the older, not-as-safe, less-efficient nuclear power plants - and the price of electricity would go down making it more affordable to use electric cars all while using less fossil fuels!
I'm all for having a cleaner, safer environment. But until people get over their "not in my backyard" emotions, and get rid of harmful environmental regulations, then we are forced to use the technology that that is more harmful to the environment.
Regulations that politicians pass after pressure from environmental groups that disagree with cleaner, safer technologies based on their beliefs.
If you ever manage to have a rational discussion with an environmentalist (extremely hard because they almost always turn to name-calling, change the subject, or other childish behaviors), you will discover that the root of their reasoning revolves around a belief rather than logic.
(On a side note, I find this humorous because almost all environmentalists I've met are atheists, and atheists claim they don't believe in a god because of logic than a belief. Thus I've concluded, people will almost always rationalize whatever they want to make themselves feel good.)
(People generally want the same thing - to be happy, safe, free, etc. Even people with extremely opposing viewpoints. Instead of discovering the real reason, they go with "well they're just a Democrat/Republican/religious/atheist/whatever" - the reason is usually much simpler/basic, it's just that most people don't want to the take the time to work to discover the root difference. Every Republican and Democrat I know both want everyone to be healthy, wealthy, and safe. Every atheist and religious person I know wants peace, goodwill, and to feel good about themselves. Every tree-hugger and gas-guzzler I know wants cleaner air, cleaner water, and not to kill polar bears. They all just disagree on how to get there.)
Do you have anything serious to add? If you want me to answer any questions, you have to show that you want a serious discussion. Just posting a cute question alone won't suffice. Doing so is a tactic to distract opponents which is pretty disingenuous.
> If you ever manage to have a rational discussion with an environmentalist (extremely hard ...
>Do you have anything serious to add? If you want me to answer any questions, you have to show that you want a serious discussion. Just posting a cute question alone won't suffice.
Wow, that is defensive and ignorant - my question was short (or 'cute') because it didn't need extraneous lexicon. I'm simply curious about which environmental regulations are considered harmful so I could research them and educate myself. So no, I wasn't adding anything, but it was a serious question. Conversely, you went off on a huge tangent about atheists, deists, Republicans, and Democrats and still somehow did not answer my question. So I'll assume you don't know.
> Doing so is a tactic to distract opponents which is pretty disingenuous.
Well sailor Casseres, if you want to have a rational discussion without distracting yourself, how about you just genuinely answer the question.
I answered your question in the first line: "Regulations that politicians pass after pressure from environmental groups that disagree with cleaner, safer technologies based on their beliefs." If local communities pass local regulations, that no longer make it profitable to build a plant there, they won't build a plant there. If every community does that where it would be profitable for a plant to be built, the plant doesn't get built. The Nuclear Regulatory Commission has renewed operating licenses and existing plants have purchased new reactors, but all of that is just about maintaining the plants that have already been around for decades.
The tangent was not about atheists, deists, Republicans, and Democrats. They were examples of "people with extremely opposing viewpoints."
I'm not sure where you got the idea that I'm a sailor. In my profile it does mention that I am a mariner. There is a difference in the maritime industry between the two terms. A sailor is an enlisted person or commissioned officer in the Navy. A mariner is not.
> If you ever manage to have a rational discussion with an environmentalist (extremely hard because they almost always turn to name-calling, change the subject, or other childish behaviors), you will discover that the root of their reasoning revolves around a belief rather than logic.
If you ever have a rational discussion with a human (or, for that matter, anything else that has a belief about what should be done), you'll find that -- its not limited to environmentalists. You can't get to a conclusion about what should be done without starting from an a priori belief about the criteria for what should be done, no matter how much logic gets used between the root belief and the conclusion.
Fortunately, we've been working on it for decades. The issue is not so much about whether or not to "do nothing" as it is about whether or not to devote how many more (and whose) marginal dollars toward it, and how.
The same logic applies to asteroid strikes, climate change and potential ecology collapses as well. Whatever the odds are, they are decidedly non-astronomic, and therefore should be taken seriously.
And the US had budget for things like asteroid strikes (at least until the sequester).
But it can only be taken seriously if the actors with sufficient power actually care about said future and not, for example, present profits to the exclusion of all else.
Agreed, which is why we should all believe in God, since although the possibility that he exists is slim to none, the risk of him actually existing is quite great to non-believers.
Which is why the problem is being solved by a mix of pricing and development of alternatives by the free market.
The problem is some people don't think what the market is doing is enough and demand intervention from government based on a line of reasoning similar to Pascal's Wager.
Apparently, oil companies developing resources, and Tesla and others developing alternatives is 'doing nothing'.
You are correct that some private firms are beginning to hedge their bets (or in Tesla's case, directly offer a competing product), but I was referring to government...as you guessed.
We've seen numerous examples of abuse of the free market - I don't think that a few companies pushing us past the point of comfort with respect to oil production is a far-fetched scenario. Personally speaking, I would like some level of government intervention.
The identification of my argument as being analogous to Pascal's Wager is interesting (that was a great read, thank you for linking), but is not compelling enough to dissuade me. If I'm reading the tone of your posts correctly, you do not agree that peak oil is something to be concerned about; what is your counter-argument?
Note this is from 2011 (pre fracking) so it misses quite a bit. And it doesn't plot home prices post mortgage crisis. Generally the whole 'peak oil' thing is of interest perhaps to people trading oil driller stocks (or not) but I have yet to see any way to apply any of the insights into something remotely interesting or predictive.
First off, 2011 was most definitely not "pre-fracking". The majors moved into unconventionals in a big way starting around 2006-2007, and the independents were doing it well before that.
However, unconventional gas resources don't particularly play into this calculation. Gas (as in methane) is a completely different resource in this context. The markets are different and the reserves are very different (there's a lot more methane). The "peak oil" debate focuses on liquid hydrocarbons.
There are several liquids-rich unconventional "fracking" plays (e.g. the Bakken in North Dakota), but they're not particularly common. Oil shale is a much bigger player in terms of volume, but again, you're looking at slow, expensive, environmentally costly production.
It's certainly more of a long-term problem, but it is something to be worried about. It's hard to replace liquid fossil fuels in terms of energy-density per unit volume. It's a problem that we as a society need to be working a _lot_ more on.
You're kidding, I'm sure. The end of the Oil Interval is the most interesting, possibly the ONLY interesting historical event that will take place in our lifetimes.
> The end of the Oil Interval is the most interesting, possibly the ONLY interesting historical event that will take place in our lifetimes.
That seems like a bizarre thing to believe. When humanity switched from wood to coal for heating, or from coal to oil, were either of those an identifiable "historical event"? If we switch from oil to other fuels in our lifetimes, this will happen so gradually that nobody will notice when it happens. Any more than we noticed as "an interesting historical event" the moment that everybody got an email address, or started using google, or bought a smartphone.
How about the math of supply and demand? Oil dominates because it's cheap & efficient. When it's not, other existing but relatively uncompetitive energy systems will become viable within a sensibly short time purely as a matter of demand & competition. Remember, oil (as we're speaking of it) was practically nonexistent not all that long ago, yet a vast robust infrastructure has sprung up around it.
Keep lofty-goal government subsidies out of it, as they distort the reality of what's viable, boosting lesser technologies while denying funds to what really will work as a matter of economics & physics.
In the meantime, put some of your own energy & money into getting "off the grid": make an alternative energy source viable by actually making it happen on a personal scale, not just hoping somebody somewhere will make it happen the way you want it to.
It would be interesting to see plots of per capita oil consumption against population over time to see to the proportions of which the problem is being driven by current lifestyle/modernisation trends and by global population growth.
Peak oil depends on oil price, the world is awash in oil at $110. Even up to 2005 oil's peak price was $60.
Peak oil also depends on consumption, with cars like Tesla coming out we'll see a sharp decline in consumption over the next 20 to 30 years, at $300/bl a Tesla starts to make a lot of sense.
The world will never run out of oil, its price will simply continue to increase until other alternatives become economically viable, as those alternatives become viable economies of scale and capital investment will make alternatives that much better.
This makes sense economically, but that doesn't address the difficulties we will face as oil becomes too expensive for common, important uses. Our fleet of oil-consuming vehicles won't magically convert themselves. The oil-backed electrical grid will take a hit. Food will become incredibly expensive (or more scarce) since the vast majority will come from far away, and have been transported via oil.
Oil won't be going up overnight. There will be a time period over which prices rise. As they rise various users of oil will reduce consumption as alternatives suddenly become cheaper. Hell, look at oil consumption in the US! I can't find the stats right now, but oil demand for personal transportation has been flat or dropping despite the increasing number of cars on the road.
If a gallon of gas ends up at $10 ten years from now, how much do you think people will complain about having to wait an hour to recharge their electric car? Not much I'm guessing.
Not just that. Most corn production heavily depends on oil-based inputs, such as fertilizer, fuel for machinery, and natural gas for drying and storage. Corn from the same county will become much more expensive, even without transportation costs.
Does natural gas exploration and exploitation have peak phenomena similar to petroleum? And does coal have its own reserves and peak phenomena?
Coal, petroleum, and natural gas are three large categories of energy hydrocarbons. If gas is cheap relative to oil or coal, then at the margin, some users will shift to gas. Prices of energy hydrocarbons will be correlated, over the long term.
Then, as coal, oil, and gas are all depleted (with their own separate peaks, perhaps), their prices will increase. Foods like corn which have many dependencies on low-priced energy (farm equipment, fertilizer, drying, and transport), will come under increasing upward price pressure.
Corn is used in perhaps a quarter of food SKUs in American grocery stores, so won't a lot of food prices go up as energy prices go up, as a consequence of peak oil (or coal or gas)?
Oil backed electrical grid? Where do you live exactly?
No one uses oil to generate any significant amount of electricity, most gas turbines are powered by natural gas, since it's cheap and plentiful. Gas turbines are only used to peak load not base load since coal is even cheaper than natural gas.
Most people spend more in fuel getting their groceries home than transporting them to the store. Food miles should be calculated by the distance to the grocery store from your home.
Not entirely true. Hawaii, for example, uses oil as the basis for most of their electric generation. They regret this now and are trying to move to renewables / natgas, but right now, they use oil.
There could however be a state where things just are not as convenient as they are now. There is no law of nature that says things have to stay as fun as they are now after we have depleted this unique resource that nature had to digest dinosaur bones for a few millions of years for.
Imagine running trucks 24 hours a day. With no sleep constraints, you can move almost twice as much stuff with the same # of cars. Increase utilization and speed which would have great impacts on efficiency.
This is provably false. If oil couldn't be produced fast enough to meet demand, the price of oil would not be $110 a barrel, it would be $110+x per barrel, where x is the maximum number of dollars people are willing to pay to use the available supply of oil.
This thinking generally leads people to miss OP's point, which is that the world will never run out of oil. Price will always fluctuate to meet demand (so long as we let the market set the price).
The oil business does not get disrupted by 3 kids in an apartment with $20K.
If you want to open an oil field or a refinery you need billions of dollars and a financial projection that says the oil will stay at $X dollars for at least Y years.
Since most people aren't convinced that oil will stay at $110 dollars for the foreseeable future they'd rather not risk billions of dollars.
If you can accurately predict oil prices stop reading hacker news and open a commodities account.
You misunderstood what I'm saying. It has nothing to do with economics or disruption. It has _absolutely everything_ to do with geology.
The hydrocarbons that become economic at higher oil prices fundamentally cannot be produced as quickly as conventional reserves. It's a matter of permeability. Not a matter of economics.
Also, I'd wager I'm far more aware than you think of the investments required to explore, develop, and produce a prospect. (I know nothing about refining, though.)
Sorry for the naive question but what is oil used for? Isn't most of it used for transportation? If so, isn't the problem a bit overblown given that we have electric vehicles?
There is one thing I always like to mention with the usual peak oil math (and resultant fear/glee concerning "the end of civilization" and such).
The traditional "Hubbert curve" shows exponential growth and decline in a any particular region of oil production. Peak oil theorists generally extend this to a world exponential peak/decline (the article doesn't directly say but it take the "we have to plan for the peak" position).
The exponential growth part makes sense because traditional oil of the ground is a really, "high quality", high efficient energy source (whatever the externalities).
The exponential decline at a given location make sense because the supply winds quickly replaced by some other even cheaper source.
But the thing is that since these aspect explain the shape of the Hubbert curve locally, these is no reason to expect the global decline shape to have any resemblance to the rise shape. Oil today is a efficient meaning you get a lot more energy out than you put in. We're already moving to less efficient, more costly forms of extract and the price has marginally increase.
There's no reason a-priori to think that any cliff would be involved with oil production peaking. Production gets harder, prices go up, consumption declines, technology produces relatively more at the higher rate, iterate a number of times and there you are. It's worth saying that shale oil is arguably much less energy efficient than traditional production but it is still efficient to get a profitable product to market (and does involve the, uh, transformation of a large land area).
The main reason to put effort into alternatives to oil is the externalities - especially since pricier oil is going to involve more energy and environmental impact in its extraction. THAT is quite arguably a crisis but unfortunately for people worried about these problem, there's no going to be a "peak point" where oil isn't practical from a purely economic standpoint.
Large evolutionary jumps in mankind's history have always been associated with use of more energy per capita. The stabilization of oil consumption, visible since 2000, means one of two things:
a) Humanity has plateaued in its energy usage; or
b) Some other energy source is increasing.
Any of these means oil has hit a peak (there'll be no cliff, though, as you explained). The alternatives are not acceptable (evolution stopped or, for the first time in five thousand years, stopped requiring more energy use).
Large evolutionary jumps in mankind's history have always been associated with use of more energy per capita.
This is typical of the hand-wavy peak oil arguments.
An increased richness of culture or an increased scientific knowledge clearly don't require ever-increasing energy consumption.
Oppositely, the reason previous evolutionary jumps involved more energy per capita has been that ... cheaper energy has always previously available (ie, this a correlation, not a causation).
Edit: A modern laptop uses less energy than a desktop machine of twenty years ago, yet the laptop's user certainly experiences a somewhat higher level of "civilization" or whatever one would call it. Just a simple counter-example to "evolution always requires more energy per capita" claim.
You are proposing one of the possibilities I deem unacceptable, albeit without explanation. Without going about a huge text, you are proposing that for the first time in 5000 years, this chart will go flat:
I agree, of course, that when production gets harder, prices go up and consumption declines.
The problem is a portion of that consumption is agricultural vehicles, employees getting to work and vans of food getting to wal-mart; and real-terms food price rises can lead to political instability, especially in poor countries.
So, one reason to put effort into alternatives to oil is to maintain food price stability and political stability.
The faster the oil/gas price increases, the more attractive electric cars become. Unfortunately, it could also mean US will never cut oil subsidies, unless they do it now, before the perceptible decline starts.
Hopefully, governments will at least resist the urge to increase oil subsidies to keep the prices the same. Instead they should be looking at building electric car infrastructure in their countries, faster, so when the gas prices start climbing, the population switches "smoothly" to electric cars, and doesn't feel much of a shock.
Whenever I hear of "oil subsidies", I follow up -- looking for what is meant.
It usually turns out that the subsidies are for small players prospecting, not the "big oil". Alternatively, there are subsidies for all businesses that oil companies take advantage of. Oil companies are less subsidized than solar companies, from what I've been able to see.
If you have other information sources, then I'd love to see them.
I wish we would lose the spin and just talk facts on these subjects.
Yeah. Last time I was in Europe the local gas tax was more than the entire price of gas in the USA. Our low gas tax is, in effect, a subsidy, because we (as a society) choose to ignore the externalized costs of burning gasoline.
Gas is currently 2CHF per liter (about $8 per gallon) in Zurich, in case you haven't been out of the USA lately.
You could call it externalizing the costs of burning gasoline, or you could call it internalizing the profit of burning gasoline. The rest of the world burning gasoline results in cheap credit for the US.
Yes, because the gas tax is not used only to discourage consumption, but to fund road construction and repair.[1]
The simple consequence of getting used to the idea of a tax revenue stream (because current and future spending depends on it), only to have that revenue stream be threatened (because of non-gas guzzling vehicles), leads to the blunt reaction of "hey, let's just tax them more".
To quote: "Most simply, peak oil is about rates, not amounts."
Yes, there are a lot of unconventional resources. They're just a lot harder, more expensive, and most importantly in this context, slower to produce.
On the upshot for me, and the downshot for the rest of civilization, oil (and to a large degree, energy) prices are likely to stay high for the near future for exactly this reason.
However, we haven't developed a viable alternative to liquid fossil fuels in terms of energy-density fast enough. That very, very deeply scares me.