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Crossing the Rubicon - Peak Oil by 2020

by senilebiker Fri Aug 7th, 2009 at 06:28:22 AM EST

According to an article in the [past Monday, August 03] Independent, three quarters of the world's oil fields are past their peak, and world oil production will peak around 2020. Source: Independent

The article is based on an interview with Dr Fatih Birol, of the International Energy Agency, and discusses the result of the IEA's latest study on petroleum reserves.

from the diaries with slight edit - Nomad


The main takeaway is that the existing fields are depleting far more rapidly than previously thought, an annual rate of 6.7%, as opposed to 3.7% they had estimated in 2007. The net impact is to bring the date at which total oil production begins to decline forward by around 10 years, perhaps as early as 2020.

As Dr Birol says:

"One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day,"

This issue will have profound geopolitical implications, with a transfer of power to the producer nations, and will act as a major brake on the world economy. Like global warming, this is not something that can be taken care of tomorrow, but requires urgent action.

And where is the low hanging fruit? The US transportation sector.

According to US Government statistics, The US consumes 20 million barrels of oil per day, of which 12 million are imported. The total world production of oil is 82 million barrels per day, so the US consumes almost exactly 25% of world production.

Of these 20 mm barrels per day, 9.3 mm are converted to gasoline, not liquid fuels, but gasoline, and this accounts for 45% of total oil consumption. If you add in diesel and kerosene for aircraft, transportation uses 70% of the total oil supplied to the US.

Obama's energy program needs to tackle the issue of gasoline use much more aggressively that it is doing currently.

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Peak in 2020 is not impossible, but in my opinion it's pretty much the most optimistic scenario imaginable. 2010-2020 is my best guess.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Aug 3rd, 2009 at 09:37:28 AM EST
And it may turn out to already be behind us.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Aug 3rd, 2009 at 10:04:35 AM EST
[ Parent ]
And that was when they changed the baseline of measurement.  Light sweet crude had been the standard, due to its desirability over other grades of oil.  Now they throw crap crude (heavy sour crude, reconstituted tar sand, whatever) into the mix, to improve the numbers.  Its a little like adding lead to debase your gold coins.  

Peak All Petroleum Liquids 2008.  

Last I looked, we are well into 2009, so the use of future tense is really inappropriate--unless we get very, very lucky, and with the major fields in rapid decline that is defintely a long shot. .  

Well, the media will be speculating on "when peak oil will arrive" long after oil has become available only on the black market and you have to know somebody to arrange a buy.  

Meanwhile the real news is who is now admitting the state of decline, after years of stonewalling.  

Official pronouncements are now up to last year.  

I can't wait for the new spin.  Maybe tarsands will save us . . .

The "Rubicon" was crossed in 2001, when the US decided that the remaining oil would be fought for, and began implementing that decision.  All else follows.  

The Fates are kind.

by Gaianne on Tue Aug 4th, 2009 at 07:59:52 PM EST
[ Parent ]
The new spin in the US will be the oil shale out in Wyoming, Utah, and Colorado.  No idea where we're going to get the water for that in the region of the country where they...lack water, and just wait until the environmental catastrophes begin.

But that'll be the spin.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Aug 7th, 2009 at 08:11:34 AM EST
[ Parent ]
... semantic gamesmanship in terms of what is counted as "oil" (tar sands, etc.) ... so if we reach Peak "Oil and Similar Commodities" by 2020, that means that if we have not reached peak "conventional crude oil" in 2005, we will be hitting it shortly.

And of course as the average price of crude oil trends up, consumption of oil inside oil producing countries tends to rise, so "Peak Oil Available for Export" clearly hits before "Peak Oil Production".

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Aug 3rd, 2009 at 12:11:29 PM EST
[ Parent ]
Don't you think that the Obama adminstration's pursuit climate change policy, both within a hostile US Congress, as well as with major, oil-dependent trading partners such as China, is an aggressive means of transitioning from oil and other limited fossil energy sources?  He is picking up where Clinton and Gore left it after brokering the Kyoto accord, and he is finding substantial domestic and international opposition to that project, particularly from China and India, where increase in oil consumption has grown the most, I believe.

The US has accounted for approximately 27% of world GDP for decades (essentially unchanged over the last 40 or more years, which compares to an EU-27 decline in percentage of world GDP from 40% to just over 30% and an increase in Japanese, and later Chinese and Indian, proportions accordingly). If you're correct that the US accounts for 25% of consumption of total world oil production, it means that the US already uses less oil than its proportion of economic output, and this means that capping oil use by rising economic powers in China and elsewhere is likely to be a more important factor in smoothing the transition from oil to more sustainable energy sources.

In order to do that, Obama will have to abandon his "pro" rhetoric on free trade, which the WTO has already done, and begin to open a discourse which allows greenhouse gas reduction compliance to be a part of domestic trade policies -- that tariffs can be placed on exports from countries that don't do enough to reduce emissions of GHGs. That is what will produce that smoothest and fastest transition from oil to other energy sources and use infrastructures.  But that project also entails co-opting former colonial areas to once again surrender their interests to those of former imperial powers, and that's not an easy political objective, even for a whiz like Obama.

by santiago on Mon Aug 3rd, 2009 at 01:38:20 PM EST
But US GDP also contains the largest fraction of fictional cash flows and funny bookkeeping in any of the major trading blocs. What does it look like when you deduct Wall Street, London and Singapore from the GDP figures?

A large part of the Chinese GHG pollution goes towards producing stuff for The WestTM. What about proposing that as long as they cut GHG pollution but a set target (say 3 percent of 2010 levels every year), we'll make them whole on any current accounts losses they might incur.

And, of course, the most important thing we could do vis-a-vis China would be to give them unfettered access to state-of-the-art European energy conservation technology (possibly subject to export restrictions), rather than putting up artificial barriers to technology transfer.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Aug 3rd, 2009 at 01:53:16 PM EST
[ Parent ]
Both of those are potentially really good ideas. (I'm not a fan of extensive intellectually property rights, period, particularly in technologies with substantial social and environmental benefits such as energy efficiency and medical technologies. The claims of the need for monopoly incentives in these areas is way overblown, in my opinion.)  

However, if they have to reduce their exports, it means that they can't lend much money to the West to cover our current account deficits, which means that our capacity to help them with their current account losses is pretty restricted, so I think it might be a catch-22. I think they'll be smart enough to see through the shell game and just say, "hey, maybe we can just reduce trade with you and still increase our automobile usage through domestically-oriented growth at the same time, so go screw yourselves."

by santiago on Mon Aug 3rd, 2009 at 04:58:07 PM EST
[ Parent ]
Europe does not have a current accounts deficit with China.

Besides, the whole point of making China whole on a loss to their current accounts would be to keep the current system running, except with less production of junk that's shipped to The West. If China can afford to lend us money to cover our current accounts deficit with them by exporting, then they can also afford to lend us money to cover our current accounts deficit with them if we pay them for not exporting.

All these cash flows are just bookkeeping - what matters is the flows of resources and products. If we use fewer Chinese-made toasters and cars, then there is a slack in the resource flow that can be put to more productive use. The bookkeeping can always be juggled around to make it work, if there is a serious political will to do so.

And the Chinese are not stupid - they know that global warming will smash their political system - their population is concentrated on the coast, and migrating upwards three quarters of a billion people in-land is not going to be a trivial exercise.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Aug 4th, 2009 at 02:01:46 AM EST
[ Parent ]
Europe may not have a current account deficit, but "the West" in its entirety does.  And that means there are limits to how much the West can possibly compensate the Chinese for their loss of trade income, particularly since the only real net value to having a positive current account is to buy things in other countries instead of domestically. Compensation in that case entails giving the Chinese free stuff, and depending on what that stuff is, it might hinder domestic economic development as much as help it, and, because they're not foolish, Chinese authorities know that.  

Also, it makes sense, strategically, for the Chinese to slow their own transition to more costly forms of greener energy as long as they know that others are doing it more quickly and that they can expect lower costs of such transition in the future as technologies and methods become more mature. The problem, of course, is that it creates a prisoner's dilemma situation between the Chinese and already industrialized countries that can jeopardize any progress.

by santiago on Fri Aug 7th, 2009 at 11:58:44 AM EST
[ Parent ]
In the case of the West vs. China, the stuff we give them via our current accounts deficit is largely the colonial tribute that we're extracting from the Southern Hemisphere.

From the perspective of The WestTM, that train has sailed. If the dollar crashes, we'll lose the third-world debt service colonial tribute just as surely as if we simply hand it to China.

From the perspective of China, keeping the US$-based system, even beyond its useful life as a trading framework, allows them to kick the Weimar-style currency meltdown in the US a little bit down the road. And, probably more importantly, avoid being seen as the people who pulled the trigger on that meltdown.

As for green technology being expensive... well, that depends on what you mean by expensive. If they get the production licenses gratis from Europe, then the only resource in which high-tech energy sources are more expensive is man-hours. In terms of basically everything else - steel, coal, copper, rubber, etc. - rail is cheaper than car, efficient power plants are cheaper than inefficient, wind is cheaper than coal, solar is cheaper than oil, and so on and so forth and etcetera. And China has a lot of man-hours to go around.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Aug 7th, 2009 at 07:40:49 PM EST
[ Parent ]
What about proposing that as long as they cut GHG pollution but a set target (say 3 percent of 2010 levels every year), we'll make them whole on any current accounts losses they might incur.

It is not clear that the US Govt. can even make our own banksters whole for the losses they generated, so why should the Chinese believe we can make them whole?  Are they to believe we will put them before the banksters?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Aug 3rd, 2009 at 11:42:54 PM EST
[ Parent ]
Been mentioned by Jerome and others previously reported oil reserves are, to some greater or lesser extent, moonshine.

If true - me not know - the IEA'S "increased depletion" rate is meaningless, at best an accounting gimmick to bring the baloney into line with reality.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Tue Aug 4th, 2009 at 11:39:58 AM EST
Non OPEC non FSU oil reserves are more or less well regulated and well understood.  The increased depletion rate is certainly relevant.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Tue Aug 4th, 2009 at 01:48:35 PM EST
[ Parent ]
It was OPEC's reserves - Saudi Arabia in specific - that I had in mind.


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Tue Aug 4th, 2009 at 03:18:06 PM EST
[ Parent ]
I'm an economist by training, and as such I just assume  that the oil will run out sometime, and before that happens the price will go sky high.

Having said that, if the 6 billion people on this planet are going to survive this change, then we need to start thinking about it now. When the IEA starts to sound alarms, and when oil company execs  talk about it in public, then the message might just start getting through.

by senilebiker on Tue Aug 4th, 2009 at 04:13:55 PM EST
[ Parent ]
Your memory serves you well.

Oil reserves - Wikipedia, the free encyclopedia

There are doubts about the reliability of official OPEC reserves estimates, which are not provided with any form of audit or verification that meet external reporting standards.[19]

Since a system of country production quotas was introduced in the 1980s, partly based on reserves levels, there have been dramatic increases in reported reserves among Opec producers. In 1983, Kuwait increased its proven reserves from 67 Gbbl (10.7×10^9 m3) to 92 Gbbl (14.6×10^9 m3). In 1985-86, the UAE almost tripled its reserves from 33 Gbbl (5.2×10^9 m3) to 97 Gbbl (15.4×10^9 m3). Saudi Arabia raised its reported reserve number in 1988 by 50%. In 2001-02, Iran raised its proven reserves by some 30% to 130 Gbbl (21×10^9 m3), which advanced it to second place in reserves and ahead of Iraq. Iran denied accusations of a political motive behind the readjustment, attributing the increase instead to a combination of new discoveries and improved recovery. No details were offered of how any of the upgrades were arrived at.[19][20]

The following table illustrates these rises.

And OPEC has more then half of the world's estimated reserves. So yeah, any number is a stab in the dark.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Aug 4th, 2009 at 04:27:14 PM EST
[ Parent ]
Yes and no...

Seriously, go read that link. I don't understand all the technical details, but what I do understand looks rock solid.

And it says essentially one thing: Saudi Arabia should speak of Peak Oil in past tense only.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Aug 5th, 2009 at 05:30:44 PM EST
[ Parent ]
I think that is well... Well, I can't say with any kind of security that the Saudis won't be able to stay on the current plateau for more than a decade. They might well be producing as much in 2015, 2020 or 2025 as they do today. Now, if they increase production from current levels they won't be able to stay on a plateau for as long.

But guys, if there are two places in the world where there still is easy abundant oil, that's Saudi Arabia and Iraq.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Aug 5th, 2009 at 05:38:21 PM EST
[ Parent ]
"Stocks appear to have reached a permanently high plateau."

- Irving Fisher

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Aug 5th, 2009 at 05:57:35 PM EST
[ Parent ]
During my 2 year stay in Kuwait, I attended a couple of seminar symposiums on Kuwait long term plans and another on CCS ( Carbon capture and sequestration)

What becomes abundantly clear is that for the the Kuwait oil ministry, it is far cheaper to cap an old well, and drill a new hole in another field than to embark on secondary or tertiary recovery.

The result is that existing fields are capped with 50% of the oil still in the ground, and this oil is effectively lost for ever.

The economics are something like $6 a barrel for a new well, vs $45 per barrel for tertiary recovery.

As they estimate having 150 years of reserves, they don't really care.

by senilebiker on Thu Aug 6th, 2009 at 03:30:28 AM EST
[ Parent ]
I don't think any country runs recovery rates over 50 %... By the way, what happened to that Kuwaiti parliament review about their reserves bing overstated by 100 %, being 50 billion barrels instead of 100?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Aug 6th, 2009 at 09:35:13 AM EST
[ Parent ]
I meant to say that any numbers based on official reserve estimates are just guesses. And I guess that is what IEA does.

The way the bits and pieces from technical fields are gathered at the Oil Drum is another approach, and a rather impressive one.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Thu Aug 6th, 2009 at 03:53:36 AM EST
[ Parent ]
Over at The Oil Drum about a year ago Saniford did a very nice model of the Ghawar field using data from as late as  2004.  

(Saudi reserves may be "whatever they say they are," but Saudi oil actually exported can be pieced together with some precision.  From this you can work backward to the fields.  And Saniford had access to much more production data than that.)  

He had--as a prediction--Ghawar peaking within a year of 2005.  But that is not the kicker.  The punchline is that in 2004 Ghawar was already not half, but 2/3 depleted--with production being maintained by elaborate upgrades in technology.  This technological miracle is not exactly good news, as it means the fall from peak will be far, far steeper than the rise to peak.  Ghawar will be going down hard.  

The Fates are kind.

by Gaianne on Tue Aug 11th, 2009 at 06:09:40 AM EST
[ Parent ]
There was a study mentioned in one of the Robert Baer books I read, Sleeping with the Devil, in which it was argued that the data suggests Ghawar is mostly full of water at this point, and that the country's total reserves are probably only going to last a couple more decades.  By that, he didn't mean peak.  (I believe the book was written in 2003, and he was talking about it peaking within the next couple of years.  I think Ghawar peaked in 2004 or 2005.)  He meant, "The country will be broke and the crazies will be storming Riyadh."

The only two countries in the Middle East with any serious untapped resources, as far as I know, are Iran and Iraq.  Once again, even setting aside the issue of climate change and whether peak oil might be desirable in its ability to make us finally shape up rather than frightening, our alliances are completely nonsensical in that region.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Aug 7th, 2009 at 08:31:00 AM EST
[ Parent ]
The US don't do alliances, remember?

Real Men Go To Teheran.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Aug 7th, 2009 at 10:55:09 AM EST
[ Parent ]
Whatever. Luckily, we have plenty of natural gas.

A study completed by the Potential Gas Committee, a group of academics and industry specialists supported by the Colorado School of Mines, recently completed its biennial report on natural gas reserves. According to an article in the New American magazine, "estimated reserves rose to 2,074 trillion cubic feet (Tcf) in 2008, up from 1,532 Tcf in its 2006 report." The amount of energy contained in over two trillion cubic feet of natural gas is more than all the energy contained in all the oil in Saudi Arabia.

The New American Magazine writes, "current U.S. usage is about 25 Tcf per year, thus new reserve figures suggest at least 83 years at current usage. But this figure is certainly low."


http://www.huffingtonpost.com/t-boone-pickens/natural-gas-and-plenty-of_b_248242.html

What this means is that a shortage of fossil energy, and associated calls for energy independence, is NOT going to be a driver for reduction in CO2 generation, as some hope...

by asdf on Sat Aug 8th, 2009 at 09:25:19 AM EST
For example, you can already buy a perfectly good car that runs on your domestic natural gas supply...

http://automobiles.honda.com/civic-gx/

by asdf on Sat Aug 8th, 2009 at 09:29:27 AM EST
[ Parent ]
Being able to "go around standard gas stations" is a bug, not a feature.  The problem is being able to FIND a station at which to gas up.  Consequently, the vehicles are mostly restricted to local fleet service use.

I wish Pickens well on his endeavors in this regard.  Natural gas in the US appears to be abundant and is  less polluting than any other fossil fuel, but there are infrastructure problems to overcome.  These should not be too difficult for any gas station that is connected to or adjacent to a natural gas distribution system.  All that would be needed is a compressor and a dispenser system.  Put CNG "pump" over by the compressed air and water, please, for starters.

But this needs to be rolled out on a regional basis, at a minimum.  CNG stations would also need to be required for all gas stations adjacent to freeway off-ramps.  While it might seem ridiculous that one is not able to get gas at a gas station, that is currently the case.  Changing that will be like reforming health care.  Vested interests could give a damn if the countries economy is strangled by overpriced oil if the solution puts them out of business or results in a serious drop in their capitalization.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Aug 8th, 2009 at 04:15:11 PM EST
[ Parent ]
Canadian gas.  And natural gas fields do not decline:  They fall of a cliff.  

For now there is gas.  But no one knows when the end will be.  North America will simply run out--well before Asia.  

The Fates are kind.

by Gaianne on Tue Aug 11th, 2009 at 06:16:21 AM EST
[ Parent ]
We'll soon be able to run our cars on farts.

The peak-to-trough part of the business cycle is an outlier. Carnot would have died laughing.
by Migeru (migeru at eurotrib dot com) on Tue Aug 11th, 2009 at 06:21:55 AM EST
[ Parent ]
asdf:
new reserve figures suggest at least 83 years at current usage
That's
60 years assuming a 1% per annum growth rate of usage;
49 years at 2% growth;
42 years at 3% growth;
37 years at 4% growth;
33 years at 5% growth.

The peak-to-trough part of the business cycle is an outlier. Carnot would have died laughing.
by Migeru (migeru at eurotrib dot com) on Tue Aug 11th, 2009 at 06:28:42 AM EST
[ Parent ]


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