IEA: We've Hit Peak

[Lord Zentei]

I'm well aware of the mechanics of all of that. Her point would have been better made with the total reserves, however.

"Total reserves" is an almost meaningless number as it includes all kinds of fudge numbers and guesswork. When it includes categories such as undiscovered reserves, inferred reserves, and possible unconventional reserves among others, it does not exactly inspire confidence in the numbers. At best these would be P10, also known as possible reserves, meaning there's a roughly 10% chance these reserves actually exist or can be recovered. 10% chance at best, one might as well draw numbers from a hat.

The only numbers which are worthwhile in a reserves discussion are the P90 or proven reserves numbers. These are the resources which we know to exist and can pull from the ground.

P50 (probable) and especially P10 reserve numbers are pie in the sky wishful thinking, like the 500 billion barrels of oil in the Caspian Sea and the trillions of barrels in Siberia.

And by the time the current proven reserves have been extracted, you deem that nothing remains? That is pie-in-the-sky. Proven reserves have been 10 or so years away from exhaustion for a long long time. Regardless of whether the inferred reserves are less than hoped, it is simply not honest to imply that gas will run out 10 years hence.

[Lord Zentei]

Unfortunately, I won't be able to continue in this thread, since my workload will be keeping me away from the board in the immediate future.

[J]

And by the time the current proven reserves have been extracted, you deem that nothing remains? That is pie-in-the-sky. Proven reserves have been 10 or so years away from exhaustion for a long long time. Regardless of whether the inferred reserves are less than hoped, it is simply not honest to imply that gas will run out 10 years hence.

There may be some reserves growth due to better extraction technology, better understanding of the fields and so forth, but it's not something we can count on. ChevronTexaco for instance had to write off nearly 700 billion cubic feet of natural gas reserves a few years ago so the reserves adjustments can most certainly go both ways. The proven reserves will be adjusted from year to year, and that's the number I'll go by since it's the gas which we actually know to exist and can produce. As of now, we have about 10 years left, as of next year, it may be 9 or 11 or still 10.

Now, as for inferred reserves, it's pretty clear you have no idea what they are. Inferred reserves are paper reserves; they've never been drilled nor even surveyed and are thought to exist based on topographical features. To give an example, let's say we found oil in Texas in the Houston A rock formation which happens to be a carbonaceous sandstone. The formation is drilled and they find it's a field which covers 2 square miles and has 20 million barrels of oil.

So now someone pulls out a map of Texas and says "hey, there's 500 square miles of carbonaceous sandstone in Texas, and if all that rock had the same amount of oil, there'd be 5 billion barrels in Texas". That 5 billion barrels is the inferred reserves figure. It's little better than a WAG. As I mentioned previously it's akin to drawing numbers from a hat. That's why it's useless unless you're an economist in which case it's very useful for fudging the numbers so you can make a fortune through buying long & short contracts after your associates make a press releases with the appropriately doctored set of numbers.

[Lord Zentei]

Just a final check-in in for my PMs before I finally head out of town (and thus, probably access) for the next couple of weeks or three.

<snip snip snip>

And this is it? "You don't know what they are"...? I'm well aware of how inferred reserves work, as you should know since we have spoken of these on previous occations.

And the notion that inferred reserves are good only for fudging the numbers and making a dishonest profit... wow, just wow. You remind me again why I have kept out of these Peak Oil threads of recent: discussions on this are clearly pointless.

[J]

I'm well aware of how inferred reserves work, as you should know since we have spoken of these on previous occations.

You clearly do not as you continue to insist they're worth something and should be counted towards recoverable reserves when in all likelyhood they do not even exist.

And the notion that inferred reserves are good only for fudging the numbers and making a dishonest profit... wow, just wow.

Not even the oil companies themselves count inferred reserves as part of their recoverable resource base. That should tell you something.

You remind me again why I have kept out of these Peak Oil threads of recent: discussions on this are clearly pointless.

You mean your continued refusal to acknowledge reality? Yes, it does grow pointless & tiring.

[J]

I believe an analogy will better illustrate why inferred reserves are total guesswork at best, and why counting them towards actual reserves is sheer folly.

Let's say you're a common thug, and one day you decide to mug a man who's wearing a black business suit. You discover that he has $50,000 in his wallet, which of course you clean out. The next day as you're walking past an office building, you notice 20 men in black business suits standing around in the parking lot. You come to the conclusion you'll be a millionaire if you mug all 20 men.

I leave it as an excercise for the reader to find all the holes in this "reasoning".

[Natorgator]

Once the price of oil keeps going up, won't it then become economically feasible to start extracting the oil sands of Canada and the oil shale in Colorado? Since there's as much oil shale in Colorado to be a Saudi Arabia I would imagine that would stave off disaster until alternatives can be fully realized. That or we can squander another 100 years so at least most of us will be dead by the time society collapses.

[J]

It's already economical to extract oil from the tar sands in Canada, well, as long as our natural gas reserves hold out. Large amounts of hydrogen, currently in the form of natural gas is needed to convert the tar-like oilsands into oil which can flow through a pipeline and be cracked and broken down into useful end products such as gasoline. We know the natural gas is limited, which is why there's proposals on the table to use on-site nuclear stations to produce the steam & heated water needed to extract the oil along with the hydrogen to upgrade it.

Oil shales, well, that's a whole different story. As of now, it takes more energy to extract oil from oil shale as compared to the energy content of the extracted oil. Just like nuclear fusion, the process loses energy and does not break even. As long as this holds true, and it likely will for quite some time, oil shales will remain just where they are. Afterall, industry pundits have been saying oil shale production is just around the corner for at least the last 50 years, just like the flying car.

[Natorgator]

[quote="J"Oil shales, well, that's a whole different story. As of now, it takes more energy to extract oil from oil shale as compared to the energy content of the extracted oil. Just like nuclear fusion, the process loses energy and does not break even. As long as this holds true, and it likely will for quite some time, oil shales will remain just where they are. Afterall, industry pundits have been saying oil shale production is just around the corner for at least the last 50 years, just like the flying car.[/quote]
Well, a net loss never stopped us before. Just look at what they're doing with ethanol.

[Beowulf]

Oil shales, well, that's a whole different story. As of now, it takes more energy to extract oil from oil shale as compared to the energy content of the extracted oil. Just like nuclear fusion, the process loses energy and does not break even. As long as this holds true, and it likely will for quite some time, oil shales will remain just where they are. Afterall, industry pundits have been saying oil shale production is just around the corner for at least the last 50 years, just like the flying car.

Any reason why they couldn't use nuclear plants to supply the energy for the oil shale reformation? Sure it's a net loss, but so are hydrogen powered cars.

[Admiral Valdemar]

Well, a net loss never stopped us before. Just look at what they're doing with ethanol.

Quite true. But we never had to really worry about energy before, and at the end of the day, a net loss is a dead end, no matter how cheap it is to recover (money really means nothing in the end). Think of it this way, using Wile E. Coyote, one of my favourite Looney Tunes characters. Since we started pumping oil for the first time since the mid-1800s, we've essentially had a Mr. Coyote chasing a road runner for a tasty treat and failing, but returning home to a banquet supplied by the local food store. No matter how many silly pie-in-the-sky projects we go after (road runners), there was always enough cheap energy (food) to greet us at the end of the day.

Now, however, the food store is empty and there are no resupplies. The road runner is looking mighty tempting now. So you expend all your energy trying to chase this mother lode, only to find that at the end of the day, you've wasted that energy for a few crumbs leftover from what you had before. Sooner or later - likely sooner - the coyote dies. We are the coyote and like any organism, the laws of thermodynamics mean we have to expend less energy acquiring the next supply of sustenance, else you run into a zero sum game. And that is lethal.

Any reason why they couldn't use nuclear plants to supply the energy for the oil shale reformation? Sure it's a net loss, but so are hydrogen powered cars.

Oh, but they are. Shell are quite adamant to get this project off the ground. I'd not worry about saving for a hydrogen car, because they'll never happen and if they do, they're utterly retarded.

As for using shale to just burn as one would coal, there's simply no way in hell the US can afford to perform the largest mining operation in history just to supply the essential industry that would need it. Estonia is the only example, and even they don't do it now and then only did it because they literally had nothing else to burn or otherwise use.

[J]

Any reason why they couldn't use nuclear plants to supply the energy for the oil shale reformation? Sure it's a net loss, but so are hydrogen powered cars.

Possible in theory, yes, possible in real life, well, we don't know yet. If the new in situ extraction techniques work as advertised and if they can be scaled up to commercial sized operations, then yes, nuclear plants can be used to make oil from oil shale. That's two big ifs so I wouldn't count on it until more data becomes available.

[Admiral Valdemar]

And even then, it won't be anywhere near the scale needed for the US alone, not even factoring in the world. That will cost billions and takes at least a decade for 6 figure barrel output.

[Natorgator]

And even then, it won't be anywhere near the scale needed for the US alone, not even factoring in the world. That will cost billions and takes at least a decade for 6 figure barrel output.

After doing more reading on this, I'm pretty convinced that it's just not going to work, barring some unforeseen breakthrough. Given the fact that Shell's in-situ process needs 1.2 gigawatts of power to run, the whole thing just doesn't seem very feasible. Not to mention pretty much any process to extract it is really, really environmentally nasty and if we have to resort to doing this it will be Not A Good Thing.

[The Duchess of Zeon]

And even then, it won't be anywhere near the scale needed for the US alone, not even factoring in the world. That will cost billions and takes at least a decade for 6 figure barrel output.

After doing more reading on this, I'm pretty convinced that it's just not going to work, barring some unforeseen breakthrough. Given the fact that Shell's in-situ process needs 1.2 gigawatts of power to run, the whole thing just doesn't seem very feasible. Not to mention pretty much any process to extract it is really, really environmentally nasty and if we have to resort to doing this it will be Not A Good Thing.

Environmental concerns are irrelevant, save that they further contribute to global warming. If our children only live until their 50's and on average have massive birth defects, that is an acceptable price to pay for the maintenance of industrial civilization.

Anything is an acceptable price to pay for the maintenance of industrial civilization, including working tens of millions of people to death in forced-labour camps, because without industrial civilization hundreds of millions will die.

[Guardsman Bass]

And even then, it won't be anywhere near the scale needed for the US alone, not even factoring in the world. That will cost billions and takes at least a decade for 6 figure barrel output.

After doing more reading on this, I'm pretty convinced that it's just not going to work, barring some unforeseen breakthrough. Given the fact that Shell's in-situ process needs 1.2 gigawatts of power to run, the whole thing just doesn't seem very feasible. Not to mention pretty much any process to extract it is really, really environmentally nasty and if we have to resort to doing this it will be Not A Good Thing.

Environmental concerns are irrelevant, save that they further contribute to global warming. If our children only live until their 50's and on average have massive birth defects, that is an acceptable price to pay for the maintenance of industrial civilization.

Anything is an acceptable price to pay for the maintenance of industrial civilization, including working tens of millions of people to death in forced-labour camps, because without industrial civilization hundreds of millions will die.

I think the point is that it just a bad decision to go for; you would probably be better to simply scale back cars down to a few corporate and government fleets running on the declining supply of oil in the US, while making everyone else either walk or ride the trains.

[The Duchess of Zeon]

I think the point is that it just a bad decision to go for; you would probably be better to simply scale back cars down to a few corporate and government fleets running on the declining supply of oil in the US, while making everyone else either walk or ride the trains.

What I don't think you realize is that I already factored that in when I said what I did. We're losing cars no matter what, clear?

[J]

Oh, some more wonderful joyous news. Brent Crude has reached an all-time high of $79.64 a barrel, about a dollar a barrel higher than the previous record set last year.

[The Duchess of Zeon]

Just to make it clear I am convinced that we will hit peak by 2011, and that within three years of peaking the whole world will have realized it and correspondingly the price of oil will hit $300/bbl + (probably a lot higher--that's just in 2005 dollar values. The dollar will depreciate, so it will be higher, though effectively the same in reality) and never go below $300 ever again. At that level, consumption will be curbed enough by economics that we'll limp along for a decade in a state of permanent 70's Carter-style stagflation. Perhaps if some super-optimistic reports for oil come true, we'll get two decades of stagflation. By 2035 at the very latest, however, the game is over; oil production will start fairly rapidly decreasing (as in the undulating plateau period we'll be seriously over-producing the wells to the absolute max to keep the oil undulating, using every technology we can to squeeze as much out as fast and rapidly as possible to avoid the decline starting sooner). As things fall off rapidly the whole oil economy will grind to a halt and collapse by 2040 at the very latest, which will be the absolute worst year in the history of the industrial world, nudging out 1918 as the previous holder of that title.

As I'm not optimistic, I think the stagflation period will end in 2025 and by 2030 we'll bottom out. That will prevent us from really effectually starting even desperate measures--NONE of the current crop of Presidential candidates are prepared to take real measures--which due to the political climate will not likely start until 2016, once the consequences of peak have been fully realized. Expect the 2013 - 2017 administration to like the Hoover administration. We'll then be trying to implement offsets from 2017 forward with some planning and rather ineffectual temporary measures before that. But eight years of even considerable effort just won't be enough by that point.

[Admiral Valdemar]

Cost is nothing. There won't be any oil for us by 2020. The exporters will have dried up and gone into anarchy by then, which we either invade or quarantine. Fact of the matter is, you have about a decade after peak exports before you run out of them, either willingly or not-so-willingly. The US depends on imports more than anything, without that fuel, the economy dives and with it any hope of saving the society with massive, impossible to finance projects for nuclear, coal or rail electrification. The latter was easy in 1908. Not so post-2008.

Above-ground factors matter, not pure geology. Oil will likely rise a lot, we may see $100 for Brent (even more for Bonny Light) this year. If oil reaches $200, that effectively kills your economy anyway, it's not like the US has the money. But even if it did, the wheels of change are already moving on how the big exporters do business, moving away from the petro-dollar, producing finished products rather than crude and capping their output so no more than 25% of final URR is ever exported. Like I say, if Mexico and the UK are anything to go by, you can enjoy double-digit declines in exports with total cessation within a decade.

[J]

I'm somewhat more pessimistic than The Duchess in that I believe we've already hit peak, and we're currently riding the riding the plateau before the fall. Saudi Arabia is no longer the #1 producer, Kuwait has admitted to some difficulties, and reading between the lines there's strong hints the rest of the OPEC countries are starting to run into reserves & production difficulties. I'm fairly certain the big fall will come within the next 5-10 years, and with it, the US and world economy. The plateau cannot last.

[Mange]

I guess we'll be running on woodgas soon again... Seriously though, would fuel rationing be a practical way of mitigating some of the immediate effects?

[Admiral Valdemar]

I'm somewhat more pessimistic than The Duchess in that I believe we've already hit peak, and we're currently riding the riding the plateau before the fall. Saudi Arabia is no longer the #1 producer, Kuwait has admitted to some difficulties, and reading between the lines there's strong hints the rest of the OPEC countries are starting to run into reserves & production difficulties. I'm fairly certain the big fall will come within the next 5-10 years, and with it, the US and world economy. The plateau cannot last.

Ja, I'll go with that. Ninety mega-barrels by end of next year? Sure. I'll have a gold plated oil rig to suck it out too. Manned by supermodels.

[Mr. T]

Some say stagflation, others say hyperinflaton will result, which is it?

What concerns me most is when we'll start to see rationing. We all know that we won't see it until theirs literally no other choice but to ration gasoline, but how soon?

It's one thing to say that peak oil will price the passenger car out of existence by the year 2020, quite another to say that by 2011 or so we'll institute 70's style alternate licence plate day driving or even complete oil hoarding by the government cutting off oil supply to the gas stations and instead only making petroleum available to agriculture, the military and public transit. When will this happen?

I realise how imprecise geology and economic predictions can be, but what will happen first, cars becoming unaffordable to drive or the government rationing oil so heavily that no one can drive anymore? Most importantly, when will this occur seeing as when it does, I assume it is the first step in the collapse of the modern economy, possible end of democracy (at least for a while) and institution of the command economy etc.

1.5 decades of stagflation as the Duchess is predicting doesn't sound all that bad so long as I can get in to an industry that won't hemorrhage jobs as oil triples in price and keeps going up; by the sound of it it just looks like I'd have to contend with relying entirely on public transit and having far less disposable income as more of it is eaten up by food and various staples products and electricity bills, which I could live with.

[The Duchess of Zeon]

86 mega barrels by the end of next year, 86.5 by the end of 2009, 87 by 2010, 87.5 by 2011.