« Planet Stupid | Main | Remedy du Jour -- August 27, 2011 »

08/27/2011

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

Alexander Ač

If there is another full-blown credit crisis (collapse of BoA? http://www.bloomberg.com/apps/quote?ticker=BAC:US), expect much sharper decline of oil and comodity prices. This is what I expect in the matter of weeks/months....

Alex

edgecliff

Kevin Drum at Mother Jones has filled in some detail which I found interesting. http://motherjones.com/kevin-drum/2011/08/our-oil-constrained-future It is, for me, a very pragmatic viewpoint which dovetails with your information quite nicely. Thank you.

Tony Weddle

Unfortunately, the site I used to go to for current prices on a range of oil grades hasn't updated it's list since early June (though its ticker on Brent and WTI is current). However, it's interesting that Brent has recovered much more than WTI and is now trading at what looks like a near record, about $26. Brent is only down 5.5% over the last month, whereas WTI is down over 12%.

Brent is at $111.

JC

Dave - can you give your best guess and rationale for the peak of oil?

Dave Cohen

Edgecliff --

Look at this older post. The Next Oil Price Shock -- An Update

http://www.declineoftheempire.com/2010/09/the-next-oil-price-shock-an-update.html

I had drawn up the dynamic Kevin Drum is talking about some time ago.

-- Dave

Dave Cohen

JC --

I have written literally hundreds of articles about peak oil, starting at The Oil Drum in 2005-2006, followed by my tenure at ASPO-USA in 2007-2009, and then here at DOTE since January, 2010.

I often find nowadays that other people repeat analysis & observations I made long ago. And then they take credit for them. They're not stealing, they're just a little late ;-)

I get the sense that people find this blog, and not knowing who I am (or was), they see me refer to "peak oil" and think -- what does this guy know about that? Ha!

There are lot of people making a living running around saying that civilization is going to collapse because of peak oil. Pay no attention to them. The oil supply is not going to fall off a cliff.

Do pay attention to the price of oil and the state of the global economy. I try to focus on these topics in my Saturday reports. If we have another demand shock, as we did in the run-up to the 2007-2008 price shock, there will be another price shock sometime down the road. At that point, you'll know that the world has bumped up against the crude oil supply ceiling once again.

Another point of confusion for just about everybody in the "peak oil movement" -- does this mean they're hoping for the end of the world? -- concerns substitutes for conventional crude. At present, there are five such substitutes --

1. tar sands oil
2. unconventional oil from shales (Bakken, Eagle Ford, etc.)
3. biofuels (substitutes for gasoline)
4. natural gas vehicles (not widely applied)
5. electric vehicles (minor effect so far)

The standard theory of the economics of non-renewable resources says that as time goes on, and you are bumping up against the oil supply limits, higher priced substitutes come on-stream to make up the shortfall. And we have seen that happen, to a limited extent.

Unfortunately, over the long haul, these substitutes will not fill the supply gap and the world will have to learn how to deal with permanent shortfalls in liquid fuels production. Biofuels production increases interfere with the food supply, and have a bad energy return (EROI). Oil from tar sands is very costly in terms of water, energy (natural gas), CO2 emissions and the environment. It's hard to ramp up production quickly. They are MINING to get this oil or using expensive IN SITU production methods where mining is not economic. And oil production from shales can not be ramped up quickly either. You've got to drill a lot of holes in the ground to produce more and more oil, given the steep well decline rates.

Other fixes (which are too expensive or impractical) include coal-to-liquids or gas-to-liquids. If these were viable solutions, the world would be building CTL and GTL conversion plants like crazy right now. But that's not happening. Nor will it happen, I predict.

One more source of confusion surrounds the question: what is oil?

For example, when you hear about 88 million barrels per day, you've got to understand that this number includes biofuels (mostly ethanol) and natural gas liquids (e.g. butane, propane). Natural gas liquids are not used much in transportation, and serve principally as inputs to the petrochemical industry. So it's definitely misleading to call these liquids "oil". This is just another of the myriad ways in which human beings happily deceive themselves.

That's enough for now.

-- Dave

william mcdonald

Dave, you really need to put up a video of Bruce Hornsby"s"That's just the way it is."

"Because they can't buy a job."

The comments to this entry are closed.