Back in the 1970s, Randy Newman was one of my favorite artists. The 1970s Newman is still one of my favorites, but the current version has mostly lost the sense of irony and humor that made him special. It's been pretty much downhill from Faust (1995) as far as I'm concerned. Newman has done lots of film scores since then and a few albums, and most of that music isn't very good. I've been alive long enough now to see the same thing happen to many artists—great when they're younger, bitter and spent when they're older. (But then, life has a way of wearing you down, so I understand.)
Today I'm going to play stuf from Little Criminals (1977) and Faust. It's still great music. The first three selections are from the former, the last two are from the latter.
You Can't Fool The Fatman
Rider In The Rain (with Linda Ronstadt and Ry Cooder)
Optimism is a natural tendency of the human mind, and is expressed through various positive cognitive biases which researchers have discovered over the years. It should not surprise us then that this tendency is exaggerated in some individuals whose brain chemistry causes them to overdose on optimism all the time, much like thrill-seekers who get "high" on excessive risk-taking. Unfortunately, there is no antidote in either case, and even more unfortunately, humans are so dense and undiscerning that they can not see what's really going on when it becomes all-too-obvious that some person's Big Brain has gone completely haywire.
One such optimist is Leonardo Maugeri, a former oil executive (ENI, Italy) and now a Research Fellow with the Geopolitics of Energy Project of the Belfar Center for Science and International Affairs at the Harvard Kennedy School. In contrast, I am a Research Fellow with the Planet Stupid Project of the George Carlin Center for Delusional Thinking and Human Affairs at the Pittsburgh Gee Whiz! School
Those of us who used to write about oil years ago remember that Maugeri was a delusional optimist then, and it is therefore unsurprising to learn that he is the same way now. His new report Oil: The Next Revolution — The Unprecedented Upsurge of Oil Production Capacity and What It Means for the World was greeted with much fanfare after it was released earlier this week. And although it has been a slow week here at the George Carlin Center, I find that I am listless in the mornings when I'm not writing. So I looked at the report, knowing more or less exactly what I would find there.
It turns out the next oil revolution will be led by Iraq and the United States (with lesser roles for Canada and Brazil). Maugeri did a "bottom up" study examining new projects starting up or in the works, and found that—
... more than 49 million barrels per day of oil (crude oil and natural gas liquids, or NGLs) is targeted for 2020, the equivalent of more than half the current world production capacity of 93 mbd...
After adjusting this substantial figure considering the risk factors affecting the actual accomplishment of the projects on a country-by-country basis, the additional production that could come by 2020 is about 29 mbd. Factoring in depletion rates of currently producing oilfields and their “reserve growth” (the estimated increases in crude oil, natural gas, and natural gas liquids that could be added to existing reserves through extension, revision, improved recovery efficiency, and the discovery of new pools or reservoirs), the net additional production capacity by 2020 could be 17.6 mbd, yielding a world oil production capacity of 110.6 mbd by that date, as shown in Figure 3 [below]. This would represent the most significant increase in any decade since the 1980s.
Maugeri's Figure 3. The orange bars represent potential new capacity adjusted for various risk factors.
The alert reader with a functioning memory will recall that I stated a basic rule in my recent post How Much Of A Threat Is Peak Oil?
Cornucopians (like Maugeri) don't know how to subtract.
It turns how Leonardo does know how to subtract; he just doesn't know how much to subtract. He uses a low decline (depletion) rate in current production, and when he adds in what is standardly called Reserves Growth, the picture looks very rosy indeed. For example, see page 20 of his report.
Regarding Iraq, I had recent occasion to write about them in the post mentioned above and in my last Saturday Oil Report. After adjusting for risk, Maugeri assumes that Iraqi production capacity will be 7.6 million barrels-per-day in 2020. I had said it will be 6 million barrels-per-day if every that can go right does go right. I don't want to argue about this crap. Let's wait until 2020 to see who is right and who is wrong.
It is in his projections of United States production where Maugeri's Happy Train goes off the rails. We are talking about the Shale Oil Revolution again. So-called "tight oil" is petroleum found in low-porosity shale rock reservoirs. Before I quote Leonardo's report, allow me to present a recent projection by the Energy Information Administration (EIA). Reuters reported on it in UPDATE 1-U.S. "tight oil" output to double by 2035-EIA.
U.S. output from eight tight oil prospects covered by the report will more than double to 1.23 million barrels per day by 2035 from 2011 levels, the EIA said, breaking out specific data on tight oil production for the first time in its 2012 Annual Energy Outlook.
In 2012, tight oil output will reach 720,000 bpd, or 12.5 percent of domestic production, it said.
The estimates — based on a "reference" case, which assumes current technological and demographic trends will continue — show that total U.S. oil output will reach a peak of 6.7 million bpd in 2020, the highest since 1994. About 18 percent of this will come from tight oil.
OK, that's the assessment of the EIA, which is not known for its pessimism. Now let's look at Maugeri's assessment.
I've circled the important shale plays. Adding them up, we will get another 3.67 million barrels-per-day by 2020. Maugeri does not distinguish between crude oil and natural gas liquids. These numbers have already been adjusted down for risk.
I do not have a straight-up apples-to-apples comparison because Maugeri includes natural gas liquids in his projection, but the Bakken is predominantly a crude oil play, and so is the Permian, and the Eagle Ford is also oil rich. Keep these facts in mind. Unlike Maugeri, the EIA is referring to crude oil only. Here's the scorecard, using some basic math—
We will get an additional 1.2 million barrels-per-day from all tight oil plays by 2020 (EIA)
We will get an additional 1.5 million barrels-per-day from the Bakken/Three Forks alone by 2020 (Maugeri)
We will get an additional 3.67 million barrels-per-day (crude oil + gas liquids) from the circled plays by 2020 (Maugeri)
And thus we understand that Leonardo's projections for U.S. shale oil production by 2020 exist only in his malfunctioning, overly optimistic brain, which is a realm of Pure Fantasy as compared with the more realistic (but still optimistic) EIA.
And now, having gone through this pointless and ultimately futile exercise, it is time to make a cup of coffee and comtemplate the day and my future. I hate arguing about future oil production, I really do. A big part of me says what will be will be, and that's all there is. What if Maugeri were right? In that very unlikely case, humans would only destroy the biosphere faster.
I was half-listening to NPR's Talk of the Nation on Monday afternoon when I heard some remarks which got my full attention. Host Neal Conan was talking with various guests at the Aspen Environmental Forum on getting people to pay attention to the realities of global warming. I have numbered and emphasized the crucial passages.
George Divoki — Well, when I look at climate change, I'm always most impressed with the physical data. Given what is happening to glaciers around the world and given the fact that it is now an almost certainty that the Arctic pack ice will disappear in the 21st century, that is the sort of information and certainly what Craig is finding out and what I'm finding out are good stories to tell about climate change. But when you see that sort of data being reported by the media and the public just basically accepting, oh yes, soon we won't have a polar ice cap in the summer, it just indicates to me that somehow the story needs to be brought to the forefront and the consequences of that ice loss; 50 years down the road, what will be happening in North America due to that ice loss needs to be brought up.
Neal Conan — We're at the Aspen Environment Forum, and you're listening to Talk of the Nation from NPR News. And Richard Harris, I wanted to go back to you on that point in Washington, D.C.
Richard Harris — Yeah. What in particular?
Neal Conan — Well, how are we going to get - these people are studying specific aspects of this, but how do you collect it all into some powerful argument that seems to make some difference in people's lives?
Richard Harris —
That is a very tricky question to answer because actually there's some literature - in the psychology literature - that says if you scare people too much, they'll just turn off and they'll say global warming isn't happening. So you have to be careful to stick to the facts. You have to be careful when you are able to talk about things that are in the future with what degree of confidence you have that you're actually - the forecasts are likely to come to pass.
And what also the psychological literature says is give people some hope, find, you know, suggest ways that you - we can cope with these situations.
And so just sort of piling on more and more gloom and doom does not actually end up stirring action in many cases. It actually may have the opposite effect. And I bring to mind the - what's happening in North Carolina right now, the fight over how much is sea level going to rise. And there's been a move in the state legislature there to say we won't accept any forecasts that say that it's going to raise any faster than it ever has been.
And even though many competent scientists say, well, it's actually going to rise much faster than that when you look at what's happening to melting ice, not sea ice, not in the Arctic but in Greenland and in Antarctica and just sort of the fact that the ocean waters swell up as they get warmer. So that's, I think, really quite a telling view of the kind of backlash that you can get.
Let's consider NPR science correspondent Richard Harris' two main points as called out above.
The psychological literature does indeed say that if you scare people too much, they'll just turn off and say global warming isn't happening. And it's true, that's what people do, and of course this characteristic human behavior is not helpful as we face the future. Denial only makes a bad situation worse. Those who have not reacted this way to dire climate forecasts have remained upbeat because they believe—they've been told by "experts" they trust—that solutions to the climate problem are readily available and cheap to implement. (For example, see my post Understanding Paul Krugman's View Of The Future.)
Optimists are becoming less sanguine as time goes on and no actions are taken, but if people actually understood what is required to fix global warming, many of them would probably react the way the North Carolina Senate did when they voted to ignore future sea level rise.
The second point Harris makes is more important for my purposes today. The psychological literature says you need to give people some hope, suggest ways we can cope with these situations. Again, that's what the literature says because it's true.
People require hope, regardless of whether such hope is realistic (i.e. does not involve impossibilities). That is why I use the phrase "obligatory hope" on DOTE, a phrase I stole from the great environmental writer David Quammen, who used it in his wonderfully insightful essay Planet of Weeds (Harpers magazine, October 1998).
Hope is a duty from which paleontologists are exempt…. If hope is the thing with feathers, as Emily Dickinson said, then it’s good to remember that feathers don’t generally fossilize well. In lieu of hope and despair, paleontologists have a highly developed sense of cyclicity. That’s why I recently went to Chicago, with a handful of urgently grim questions, and called on a paleontologist named David Jablonski. I wanted answers unvarnished with obligatory hope.
And yes, I do pile up the "gloom and doom" on DOTE without offering you the obligatory hope I often ridicule. As Harris says, doing so does not spur action, and may have the opposite affect—people shut down, they give up. So I need to explain myself. We need to make a distinction between false hope and genuine hope. What is the difference between the two? Let's keep things as simple as possible.
Necessarily, false hope advocates more of the same behavior which created the problems we are trying to solve. It is easy to enumerate examples—the answer to accumulating too much debt is more debt, the answer to human deployment of destructive technology is more destructive technology, the answer to fixing the broken political system is to work within the broken political system, and so on. Paul Krugman is a master of false hope, which is why I criticize him. So is climate activist Bill McKibben, who I have also criticized for the same reason.
Necessarily, genuine hope requires changing the destructive, self-defeating behaviors which created the problems we are trying to solve (e.g. global warming). Genuine hope derives from our confident assurance that 1) we humans will figure out the "right" solutions to our problems, and more importantly 2) do the right thing. Without meaningful action on the "right" path, genuine hope does not exist. If we consider global warming, or human destruction of the oceans, or the current mass extinction, the "right" solution—actually, the only solution—is to shrink the human footprint on Earth, which means reversing growth in populations and economies to work toward eventually settling into some "stable" state.
Now that we've made and understood this all-important distinction, I can tell you why I do not offer up hope on DOTE. I refuse to offer you false hope, and I do not see any reason for genuine hope. As I look around at the world we've created, I do not see the required behavioral changes on scales that matter. What I do see is lots and lots and lots of false hope as defined above. I have received no assurance that humans are going to do the right thing, or have even figured out what it is. I have developed theories of course to explain this crucial observation. I sometimes write about them on DOTE. For example, I believe the human urges to grow and increase material (physical) comfort are innate (and thus unalterable in the general case). There is abundant evidence to support this view, and falsifying evidence appears to me to be non-existent.
I am simply an empiricist without illusions, a mere observer of the Human Condition. Nothing I've pointed out on this blog is not also available to you as an observer. I've told you where to look, and how to look, but it's also true that you can lead a horse to water, but you can't make it drink. For example, I have tried to teach you to look out for the obligatory (but false) hope in various forward-looking articles on crude oil, the economy, the environment, and so on.
Finally, I want to leave you with one additional thought. All human nonsense has an expiration date. All false hopes will some day evaporate like a spatter of rain in the noonday sun. That's the funny thing about Reality—it always gets the last word.
If you don't believe the things I tell you now, my response is basically a shrug of the shoulders—so what? If you don't believe what I'm telling you now, just wait for it. In short, everything comes out in the wash—eventually.
Unless you're living in a cave in some remote backwater, you've heard that China's economic miracle does not look quite as miraculous as it used to. Coal consumption is one reliable indicator of what's really going on there, and inventories are climbing rapidly as unused coal piles up in ports like Tianjin and Qinhuangdao. Such developments may delight climate activists, but Chinese government officials can't be happy about the situation. So there seemed to be little that was controversial in New York Times reporter Keith Bradsher's recent story Chinese Data Mask Depth of Slowdown, Executives Say.
HONG KONG — As the Chinese economy continues to sputter, prominent corporate executives in China and Western economists say there is evidence that local and provincial officials are falsifying economic statistics to disguise the true depth of the troubles.
Record-setting mountains of excess coal have accumulated at the country’s biggest storage areas because power plants are burning less coal in the face of tumbling electricity demand. But local and provincial government officials have forced plant managers not to report to Beijing the full extent of the slowdown, power sector executives said.
Electricity production and consumption have been considered a telltale sign of a wide variety of economic activity. They are widely viewed by foreign investors and even some Chinese officials as the gold standard for measuring what is really happening in the country’s economy, because the gathering and reporting of data in China is not considered as reliable as it is in many countries.
Indeed, officials in some cities and provinces are also overstating economic output, corporate revenue, corporate profits and tax receipts, the corporate executives and economists said. The officials do so by urging businesses to keep separate sets of books, showing improving business results and tax payments that do not exist.
As straightforward as all this seems, we are not surprised to learn that Bradsher's commonplace observations about government data reporting have been disputed (Business Insider, June 25, 2012).
Ting Lu, China economist for Bank of America Merrill Lynch [pictured left], is out with a note in which he says while China's slowdown has been worse than anticipated, and while "we" have also complained about data quality, "we have some very different views from what the NYT article claims", which "stirred markets today"...
He ... questions the logic since, "China's local officials might be incentivized to over-report some macro indicators such as GDP and FAI, but they have little incentive to over-report use of energy including electricity as Beijing imposes increasingly restrictive regulations on energy use per unit of GDP on local governments." Further, Ting writes that leadership transitions in most regions are done and GDP growth is not as relevant for provincial governors to get a spot in Beijing...
[My note: if energy consumption is closely tied to GDP, the solution is simple: you simply inflate both.]
Ting also says the room for manipulation isn't as big as the New York Times piece suggests when it cites a "top corporate executive" who says that electricity consumption in Shandong and Jiangsu fell over 10 percent YoY in May.
Ting says exact May data for Shandong isn't available just yet but according to the Bureau of Energy is in positive territory.
In Jiangsu its was up 4.2 percent. "Is it possible for Jiangsu’s provincial officials to over-report power consumption by 14.2% in May?" asks Ting. "As one of the most developed provinces in China with relatively good governance, officials there simply do not have the guts for such a massive manipulation. Actually, Southern Jiangsu did report negative yoy growth of industrial power use at -1.0% in May, but Northern Jiangsu posted a high growth at 14.3% (Central Jiangsu’s growth at 3.2%)."
Finally, Ting seems to question Bradsher's integrity as a journalist...
[My note: many details of Mr. Lu's critique are available in this Business Insider story.]
Could the unimpeachable Mr. Lu possibly be correct regarding his confidence in the integrity of Chinese provincial officials? Could Mr. Lu be correct that Mr. Bradsher of the New York Times is little more than a dishonest hack? Or does Mr. Lu have his head crammed so far up his ass that he has not seen the sun shine since 1987?
Sometimes we humans get confused. It is good to take stock, to get our bearings, to make sure we know where we stand. Mr. Lu's remarks attacking Mr. Bradsher caused me to doubt, if only for a moment, that we are still living on Earth. Isn't this the place—
where governments, even the most forthright, honest governments like that of the United States, routinely lie about how the governed are doing to make themselves look good?
where power corrupts, and absolute power corrupts absolutely?
where large, complex societies are always governed by rigid hierarchies?
where telling the powerful what they want to hear is a way a life?
where brown-nosing (toadying, back-scratching, sucking up to, etc.) is a fine art?
where it is imperative to kiss the ass of the powerful if you want to keep their job?
where going against the grain is punishable by a mandatory 100,000 dollar fine and 5 years in jail, or death, whichever you think is worse?
And last but not least—
where it always far more important to look good than it is to feel good?
Thus we see that what Mr. Bradsher wrote make a lot of sense, whereas Mr. Lu is living in the dark as just described. Thus we get sensible but predictable quotes like these in Mr Bradsher's story—
Some still express confidence in the official statistics. Mark Mobius, the executive chairman of Templeton Emerging Markets Group, cited the reported electricity figures when he expressed skepticism that the Chinese economy had real difficulties. “I don’t think the economic activity is that bad — just look at the electricity production,” he said.
“The government officials don’t want to see the negative,” so they tell power managers to report usage declines as zero change, said a chief executive in the power sector.
Manipulation of official statistics would also provide a clue why some wholesalers of consumer goods and construction materials say sales are now as dismal as in early 2009.
Officials at all levels of government are under pressure to report good economic results to Beijing as they wait for promotions, demotions and transfers to cascade down from Beijing.
Economies double in size in 10 years at a growth rate of 7%. (This is Al Bartlett's famous exponential function.) On paper, if not on the ground, if China's official growth is 7% per year for 20 years, the Chinese economy will be roughly 1 and ½ times the size of that of the United States. On paper.
It is reassuring (albeit depressing) to find out yet again that, yes, we are still living on the Earth, a place where some things make sense and some things don't. Now if we could just get Mr. Lu and millions of other flunkies, shills, lackies, bootlickers and idiots to see the plain truth of this, we might, as a species, start making progress toward turning this ship of doom around and start sailing in the right direction. But don't hold your breath.
A new theory has surfaced which purports to explain the deforestation of Rapa Nui (Easter Island) by Polynesians many centuries ago. According to this new account, which has been put forward by archaeologists Carl Lipo of Cal State Long Beach and Terry Hunt of the University of Hawaii, humans did not cut down all the trees on Easter Island. They blame rats for this devastation. Rats stowed away on the boats Polynesians used to reach the island. Bunsen Burner has the story in Easter Island’s large statues hold clues to Rapa Nui’s mysterious past.
Easter Island, famous for its iconic stone heads, has a mysterious past. Known as Rapa Nui in the language of its Polynesian natives, scientists and historians agree that the island was once lushly forested, but the cause of its transformation into the rocky and barren outcrop it is today is a point of debate.
As explained in a recent article in National Geographic, there are two major theories about the island’s transformation. In his 2005 book “Collapse,” UCLA anthropologist Jared Diamond argues that the decline of the island’s forest ecosystem is an example of what he terms “ecocide,” or the devastation of a fragile environment via overuse by humans. Diamond argues that the Polynesians arrived on the island in about AD 800, and began making unlimited use of the island’s forests for fuel and construction. Given the island’s isolated and windy location in the middle of the Pacific, once the forests were gone, the topsoil was quickly blown away. Thus scoured, the rocky land could not recover its original flora.
Archaeologists Carl Lipo and Terry Hunt, of Cal State Long Beach and the University of Hawaii, respectively, suggest another story. They believe that the Polynesians did not arrive until AD 1200, giving the settlers a much shorter time in which to harvest the island’s forests. However, Lipo and Hunt argue that the devastation of the island’s ecosystem was not the result of the human settlers directly, but rather was the work of a stowaway that came along with them—rats.
Based on such evidence as the short time in which the island’s forests disappeared, and physical signs such as marks on recovered palm nuts, Lipo and Hunt say that devastation by an introduced species is more plausible than simple human overuse.
More plausible than simple human overuse?
With no natural predators, and with a plentiful food source in the nuts produced by the island’s palms, the rats quickly overran the island and destroyed its natural balance.
In the wake of this devastation, Lipo and Hunt argue that the settlers are best considered not as rapacious destroyers of the environment, but as ingenious workers who had to make the best of an unintended bad situation...
And now I suppose we can say without fear of contradiction that humans in today's world are not rapacious destroyers of the environment—that would be a wrongheaded view! No, instead it would be best to describe today's humans, all seven billion of them, as ingenious workers who have to make the best of a bad (and certainly) unintended situation. (The "ingenious workers" part refers to how they made and moved the heavy stone statues.)
Climate activist Mark Lynas posted about this alternate Universe on his blog, and allowed Jared Diamond to respond to this new "theory" the devastation of Easter Island. Here's what Diamond said about the rats—
Unfortunately, [Lynas' and other] postings don’t recognize the compelling reasons why Hunt’s and Lipo’s conclusions are considered transparently wrong by essentially all other archaeologists with active programs on Easter Island. I’ll summarize the reasons, for readers interested in these issues:
Rats — the initial reason for positing a role of rats in Easter’s deforestation was that some preserved seeds of Easter’s extinct palm tree, found in caves, show marks of gnawing by rats; and that a study of Hawaii attributed deforestation there to rats.
However, evidence that rats played no significant role in Easter’s deforestation includes the following:
Rats occur not only on Easter but also on every other one of the hundreds of other Polynesian islands, most of which nevertheless did not end up deforested. Over 90% of preserved palm seeds outside caves were not gnawed by rats.
Easter’s forest consisted not only of the palm but also of at least two dozen other species of trees and other plants, all of which also became extinct on Easter although most of them are not known to suffer seed predation by rats and continue to exist in the presence of rats on other Polynesian islands.
The Hawaii study does not demonstrate, but merely speculates about, a role of rats in deforestation on Hawaii. Had rat predation on seedlings caused deforestation on Easter, there should then have been no regeneration of young palm trees, but continued survival of mature palms capable of living for many centuries. Instead, palm trees continued to regenerate for centuries in the presence of rats, but eventually all palms, young and old, disappeared by AD 1600.
The reason for their disappearance is obvious: they were cut and burned by humans, as shown by burned palm stumps, cleanly-cut-off palm stumps, burnt palm leaves, and burned soil in many parts of Easter Island. See the attached paper by Mieth and Bork, which Hunt and Lipo did not even cite in their book.
And now let us turn to deforestation in contemporary times. It seems there is a dispute about what the role of intensive deforestation has been in causing rising CO2 emissions. Brad Plummer of the Wonk Blog wrote the story up in The mystery of tropical deforestation — in two maps.
Scientists have long known that countries [???] in the tropics are cutting down their rain forests and digging up peatlands to make room for agriculture — and at a rapid rate.
[My note: Humans don't cut down trees. Countries cut down trees.]
These trees and soil contain huge reservoirs of carbon, and, as they get cleared and burned, they release heat-trapping greenhouse gases into the air. But how much carbon gets kicked up, exactly, has always been a bit of a puzzle.
In its 2007 report, the Intergovernmental Panel on Climate Change estimated that tropical deforestation accounted for roughly 20 percent of the world’s global-warming emissions. But there was an asterisk next to these estimates. They were based on self-reported data from countries themselves. Some nations, like Brazil, do a solid job of tracking deforestation. Other countries, particularly poorer ones in Africa, lack the resources and manpower to monitor their rain forests. They essentially have to guess, extrapolating from data that’s often years out of date.
So, more recently, scientists have turned to satellite monitoring to offer a clearer picture of which forests are actually being chopped down. In a new study published in Science, a team of nine researchers — led by Nancy Harris of Winrock International — pored over satellite data and estimated that tropical deforestation accounted for about 10 percent of all greenhouse gas emissions between 2000 and 2005.
That’s lower than previous estimates...
Good News!
More valuable still, the researchers were able to create a more precise map of where the most intensive deforestation was occurring. Roughly 55 percent came from Brazil and Indonesia. Note that this map doesn’t measure the loss of peatlands, which can account for half the greenhouse-gas emissions in Indonesia in some years.
Well, I hate to throw a wrench into the works here, but I've got an alternate theory about how tropical deforestation comes about.
It's rats who are killing those trees! They're eating all the seeds. It's not us!
Ignore that guy with the chainsaw pictured above. Ignore the people who paid him to cut down those trees so they could create another profitable palm tree plantation. (Palm oil is used predominantly for cooking, but also to make biodiesel.) Ignore the corrupt Indonesian government officials who were paid to look the other way. No, no, no! Rats are the ones causing all this ecological devastation.
OK, I've got a theory. All I need now is some evidence—any evidence will do!—to support it. Otherwise, my "rats theory" will be yet another futile attempt to get humans off the hook. Just like Easter Island.
With oil prices falling precipitously, this seems like a good time to reassess the widely anticipated phenomenon known as peak oil. How much of a threat is it as we look into the future?
There are basically two camps about the peak of global oil production.
Cornucopians — Not only is the glass half-full, it is brimming over. There is no threat whatsoever to industrial civilizations. The Stone Age didn't end because we ran out of stones.
Doomers — The glass is half-empty and we're draining it fast. Industrial civilizations are going to collapse soon because there won't be enough oil to go around. A new Stone Age is right around the corner.
Both these "schools of thought" are wildly incorrect. It's not an accident that this kind of dichotomy exists. It's not an accident that these opposed views closely resemble the political squabbles so prevalent in the United States today. You know, Progressives versus Conservatives ... blah, blah, blah. These are emotionally-based positions which have little to do with Reality. Naturally there are many more Cornucopians than there are Doomers because mindless optimism is the default human position (mistake) in all matters, not just oil.
I can demolish both positions in two sentences.
Cornucopians do not know how to subtract.
Doomers do not know how to add.
Of course when I say these people don't know how to add or subtract, I am describing the psychological requirements of these groups. Cornucopians can not acknowledge that oil fields peak and decline, and that global oil production might do the same. Doomers can not acknowledge that technology, exploration and wars in Iraq bring new resources on-stream. By and large, members of both groups know jack shit about the global oil industry.
Every other week, I describe some aspect of the upstream oil industry in my Saturday Oil Report. (The latest one was published yesterday.) Few people read these reports or learn anything from them because they already know in advance, unencumbered by data and its reasonable interpretation, what the peak oil outcome is going to be. (Some people do read these reports and learn from them, for which I am grateful.)
With respect to oil, as in all human politics, people fall into opposed camps. Their irrational beliefs about peak oil (or anything else) maintain group membership and coherence, and bolster their pre-conceived (but unconscious) psychological preferences. They are not trying to align their beliefs with Reality—that's not what people do. See my recent post Homo Sapiens — The Storytelling Animal. In short, Cornucopians or Doomers have got a story and they're sticking to it. Nobody reading this thinks people are rational problem-solvers, right?
What's the real deal with peak oil? First, there's this very important graph.
World Crude Oil Production, data from the EIA. Crude oil only. No biofuels, no natural gas liquids. See my post A Peak Oil Update.
How long might this plateau in oil production be maintained? For Cornucopians, the answer is not as long as you think. For Doomers, the answer is longer than you think. At least 5 years, perhaps 10, or even 15 (a very outside chance).
Of course this is merely a supply graph. Who knows what global demand will look like. Right now, it doesn't look like demand will be robust, and that could remain true for many years to come. If we're falling into a prolonged global recession, OPEC will cut their production. (You can see the supply dip in 2009.) The world will never produce 76 million barrels of oil each and every day for a prolonged period of time. Probably 76 million daily barrels is a pipedream.
Without getting into the details, what can we conclude about peak oil going forward? You don't have to be a rocket scientist to understand that—
Oil will never be cheap again. Even if demand falls off a cliff, producers require high prices to get new oil onstream to replace production declines. If demand is robust because the world economy is booming, as unlikely as that sounds right now, oil will get very expensive again in a hurry.
Industrial civilizations are not going to go out of business because oil is very expensive during the boom times and pricey (but not exorbitantly expensive) during the lulls. Peak oil acts more like a brake (one of many) on global economic growth when times are good. As usual, we'll know more in 10 years than we know right now.
I don't worry much about the disasters I write about. The writing is on the wall as far as I'm concerned. But if I were to worry about all these human disasters, where would I rank the threat of peak oil? I don't know. It's certainly a concern, and I do write about it, but I write about lots of stuff. Certainly the longer term is fraught with difficulty if humans are depending on crude oil to fuel economic growth in the 21st century as it did in the 20th.
I was careful not to name names today. I did that intentionally. The people who can understand what I said today will understand it. The ones who can't won't. These latter are likely to be Doomers or Cornucopians. If I did name names, people would go off on me because I'm clearly fucking with their with emotions, their irrational beliefs, their heros, and finally their group and individual identities. So I didn't name names because I don't like getting hate mail or emotion-laden malicious comments.
As usual I leave it up to you to figure out whether what I said today makes sense. You will see that it makes sense or you won't according to your abilities as just described.
In keeping with my stated goal of playing music that I listen to at home, I am featuring jazz pianist Brad Mehldau this week. I think he's the most interesting piano player working today. We're lucky to have him.
Here's the playlist.
August Ending (from the album House On Hill, 2006)
Although we have clear sailing with respect to the price of oil, the global economy is unraveling. That's definitely a problem. Allow me to state the obvious—you can not have both a booming global economy and low oil prices at the same time.
As oil prices decline, the idiots have come out en masse to explain it. Here's an MSNBC story I found this morning, but there are many other similar stories. It seems that we're swimming in oil.
The world is now pumping 91.1 million barrels per day, the most ever. OPEC production, at more than 31.5 million barrels in May, is also higher than normal.
No, sorry. The world is pumping 73-74 million barrels-per-day of crude oil, just as it has since 2005. (Probably a little over 74 right now.) Moonshine (ethanol) is not crude oil. Natural gas liquids are not crude oil.
Are you ready? ... are you set? ... wait for it ... here it comes!
IHS CERA Chairman Daniel Yergin, speaking from the St. Petersburg International Economic Forum, said the high production level made sense just several months ago, when speculation around Iran reaction to sanctions sent prices higher.
“It was a quite remarkable period when you go back four months ago. Oil prices got as high as $128 and people were talking about $160, and now it’s at $90,” he said.
[My note: Yes, he really said this inane shit. That's how he talks.]
“It shows three things: the relentless increase in supply, particularly led by the Saudis, who have been producing very steadily at high volumes since last year and the beginning of this year. Secondly, it reflects the growth of oil from countries as diverse as Iraq and the United States,” said Yergin.
“The supply situation is very different than it was three months ago when Iran was threatening to close the Strait of Hormuz, and the other thing is the bad economic news and weak demand,” he added.
While supply is indeed up a bit because OPEC has chosen to pump more crude oil and thus reduce the world's effective spare capacity, the main driver behind lower oil prices is declining demand. But this sycophantic son-of-a-bitch Daniel Yergin always wants to tell us that we're drowning in oil, or soon will be, and MSNBC is naive enough to quote him. For fools and whores in the mainstream media, Danny-boy is always the expert of choice.
Normally I wouldn't bother with Yergin, but let's look briefly at Iraq. He cites them as a source of "the growth of oil" along with the United States. In short, we want to answer the question—
BAGHDAD — Despite sectarian bombings and political gridlock, Iraq's crude oil production is soaring, providing a singular bright spot for the nation’s future and relief for global oil markets as the West tightens sanctions on Iranian exports.
The increased flow and vital port improvements have produced a 20 percent jump in exports this year to nearly 2.5 million barrels of oil a day, making Iraq one of the premier producers in OPEC for the first time in decades.
The recovery of Iraq’s oil industry after decades of wars, sanctions and neglect began in 2009 and 2010 as security improved and Baghdad signed a series of technical service contracts with foreign companies like Exxon Mobil, BP, China National Petroleum Corporation and ENI of Italy. The companies brought in modern seismic equipment and modern well recovery techniques to resuscitate old fields.
The deals have been only modestly profitable for the foreign companies, but foreign executives express cautious optimism that Iraq can eventually produce oil in amounts that could put it in an elite group of exporters with Saudi Arabia and Russia sometime in the 2020s.
Iraq produces around three million barrels a day, and few analysts believe it can reach its goal of 10 million barrels a day by 2017, a target Baghdad recently reduced from a previous estimate of 12 million barrels a day by that year. But Hans Nijkamp, Royal Dutch Shell’s Iraq country chairman, estimates that Iraq could produce 6 million to 10 million barrels a day by early next decade, “which is really substantial.”
If oil production is about 3 million barrels-per-day, and exports stand at about two and a half, I wouldn't call that soaring. But production in Iraq is rising as new oil comes on-stream and infrastructure is refurbished, and most of that crude oil is available for export because the country lies in ruins after the American invasion and 8 years of war. So was the war a success?
I'm afraid you're going to have to wait another decade to find out. Hans Nijkamp of Royal Dutch Shell believes Iraq could be producing 6 million barrels-per-day by the early 2020s. (Forget the 10 million.) That could happen, but only if every single thing that can go right does go right. This is the opposite of Murphy's Law. Because of the turmoil in Iraq over the last 30 years, they have the world's only remaining easily exploitable reserves, and those reserves are substantial.
A reader asked me last week if I would raise the oil alarm level if prices fall sufficiently to threaten some sources of supply. Yes, I would. For example, each barrel of North Dakota Bakken Shale oil costs somewhere between 55 and 70 dollars to produce. If prices fall into that range, or even below that, that Bakken oil will be endangered. One virtue of Iraq's oil is its low producer price.
Where will oil prices be in two weeks? Perhaps they will fall further? Yes, that's possible. We shall see.
After three consecutive days with temperatures in the 90s, I've got nothing left. I don't have much to say after yesterday's effort anyway. Talk about anything you want today. The floor is yours.
The Big News is the dramatic slowdown of the global economy. I've written frequently about That Sinking Feeling over the last few weeks. I've got little to add today.
LONDON, June 21 (Reuters) - The downturn in the euro zone's private sector is becoming entrenched and Chinese factories are finding the going increasingly tough, business surveys showed on Thursday, painting a darker outlook for the world economy.
June was the fifth consecutive month that activity across the euro zone has declined, dragging down heavyweights Germany and France and putting pressure on the European Central Bank to take further action to support the economy...
The euro zone's private sector contracted at its fastest pace since June 2009, when the bloc was mired in a deep recession, according to Markit's Flash Composite Purchasing Managers' Index for June.
A combination of the services and manufacturing sectors which is seen as a guide to growth, the PMI fell to 46.0, slightly better than the fall to 45.5 predicted by economists in a Reuters Poll...
Unhealthy data from China, the cornerstone of the oil market, dictated heavy losses for basic resources equities and oil prices. The HSBC China manufacturing PMI fell to 48.1 June, edging down from a final reading of 48.4 in May. It was the eighth straight month of a reading below 50. HSBC's data also pointed to weakness in the months ahead.
