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Peak Oil Ass-Backwards (part 3): Forget Austerity and Grexit – it’s Time for a Gretaway!

October 1, 2015

“Taaaaake myyyyyy moneeeeey! Pleeeeeease!”

So here we are on this precipice of sorts, staring upon the twilight of the industrial economy due to peaking energy supplies and thus peaking credit supplies (as explained in part 2 of this 3-part series).

Simply put, being on the peak oil plateau, and with fossil fuel supplies in general reaching their limits (and getting more expensive to extract), there’s going to increasingly be less and less of the stuff to go around. This means one of two things, the first being that what’s left gets spread around thinner and thinner between all the participants. However, since people of the West (and especially those in the richer parts) have become quite used to their energy-intensive lifestyles and seem to have zero intention of giving them up, this likely implies the implementation of the second approach: cut back on – if not cut off – the fuel supplies to people and nations on the lower rungs of industrial civilization. That way, as the fossil fuel pie continues to shrink, those on the higher rungs don’t have to reduce their share too drastically. In effect, this allows for those in the upper echelons of contemporary civilization to hold on to their Nyet-Flix feeds and iGizmos just a bit longer, until the triaging inevitably hits them as well and/or the bottom just completely falls out.

This triaging can be accomplished in more than one way, but for the time being two methods stand out as the most popular. The first is what we know as austerity – cuts are made upon people’s pensions, hours, welfare cheques, whatever, so that they have less credit (read: money) to buy and indulge in the spoils of industrialization. Unfortunately, living in this modern world of ours means that the basic necessities of life (such as food) also often fall under the umbrella of industrialization, so being triaged can entail much more than an inconvenient loss of iGizmos.

…click on the above link to read the rest of the article…

US shale oil too expensive, peaks 1H 2015

September 30, 2015

US shale oil too expensive, peaks 1H 2015

According to EIA data, monthly US crude oil production peaked in April 2015 at 9.6 mb/d.

Fig 1: US crude oil production to June 2015

http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_m.htm

The above graph shows that US crude production increased by around 4 mb/d between mid 2011 and mid 2015, mostly from shale oil which took off – with a delay – when oil prices exceeded US$ 80-90. That stellar growth has come to an end, also with a delay, after oil prices plummeted.

Let’s zoom into the period starting with January 2014:

Fig 2: US incremental crude production Jan 2014 – Jun 2015

The April 2015 peak was caused by higher GOM production resulting from production start-ups after lifting the drilling moratorium in 2010. Shale oil peaked one month earlier, after the winter drop. However, month by month production can change and future revisions of data are likely due to reporting delays. What is more important than the month of peaking is the fact that US oil production stopped growing.

(Note: Incremental production is calculated as production minus the minimum production in the period under consideration. The sum of the minimum production is the base production)

…click on the above link to read the rest of the article…

Low Oil Prices – Why Worry?

September 30, 2015

Low Oil Prices – Why Worry?

Most people believe that low oil prices are good for the United States, since the discretionary income of consumers will rise. There is the added benefit that Peak Oil must be far off in the distance, since “Peak Oilers” talked about high oil prices. Thus, low oil prices are viewed as an all around benefit.

In fact, nothing could be further from the truth. The Peak Oil story we have been told is wrong. The collapse in oil production comes from oil prices that are too low, not too high. If oil prices or prices of other commodities are too low, production will slow and eventually stop. Growth in the world economy will slow, lowering inflation rates as well as economic growth rates. We encountered this kind of the problem in the 1930s. We seem to be headed in the same direction today. Figure 1, used by Janet Yellen in her September 24 speech, shows a slowing inflation rate for Personal Consumption Expenditures (PCE), thanks to lower energy prices, lower relative import prices, and general “slack” in the economy.

What Janet Yellen is seeing in Figure 1, even though she does not recognize it, is evidence of a slowing world economy. The economy can no longer support energy prices as high as they have been, and they have gradually retreated. Currency relativities have also readjusted, leading to lower prices of imported goods for the United States. Both lower energy prices and lower prices of imported goods contribute to lower inflation rates.

…click on the above link to read the rest of the article…

Will declines in U.S. and Canadian oil production lead to a global decline?

September 28, 2015

Will declines in U.S. and Canadian oil production lead to a global decline?

At the beginning of this year I noted that all of the growth in world oil production* since 2005 has come from two countries: the United States and Canada. And, I suggested that since the growth in production in those two countries came from high-cost deposits–tight oil in the United States and tar sands in Canada–that the precipitous drop in oil prices would lead to declines in production in both countries.

I concluded that unless another area of the world suddenly started growing its oil production significantly that those declines would probably result in a worldwide decline in oil production.

Well, declines in the both the United States and Canada have arrived. It will be several months before we can know with any certainty whether those declines will translate into a persistent global decline. But this much we do know:

The International Energy Agency, a consortium of 29 countries tasked with tracking worldwide energy trends, said in its latest report that global oil production fell 600,000 barrels per day in July–and here’s the important part–“mainly on lower non-OPEC output.” That’s a reference to falling U.S. and Canadian production. One month does not make a trend. But the report notes that non-OPEC supply is expected to contract in 2016.

The report said that further declines in U.S. production are expected. Weekly estimates from the U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, bear this out. The EIA put U.S. production at 9.1 million barrels per day (mbpd) for the week ending September 18; that’s down from 9.6 mbpd in early June.

…click on the above link to read the rest of the article…

The Clock Is Ticking On The U.S. Dollar As World’s Reserve Currency

September 22, 2015

The Clock Is Ticking On The U.S. Dollar As World’s Reserve Currency

The View From Hubbert’s Peak

In 1971, the American President put an end to a 2,500 year trend; the Wall Street Journal called it “Nixon’s Worst Weekend.” Considering the old boy had some really bad ones, this must have been something special. In August of that year (on Friday the 13th) it was decided that the U.S. would no longer pay out gold for its paper dollars. OPEC Ministers took note, and in September they met, deciding it would be necessary to collect more paper dollars, if possible, since gold was no longer on offer and oil was the only asset they had to sell.

It would take another two years for those decisions to matter (during the October 1973 embargo in the wake of another Arab-Israeli war). The Oil Embargo marked the end of ‘free’ energy, and kicked off a massive rise in the price of oil because the U.S., the world’s swing producer since Colonel Drake’s Pennsylvania strike in 1859, had finally reached peak production at around 10 million barrels per day in 1970. This moment is the original Hubbert’s Peak, the beginning of decline for the U.S. oil industry, at least until recently. The surge in U.S. production since 2010 has stalled out around 9.5 mb/d and, due to the Saudi decision to give the American tight oil producers ‘a good sweating,’ that rate has begun to fall in the last few months.

It is certainly possible that U.S. production will surpass the 1970 peak, but with low prices it is hard to say when that will be; it is also hard to say how long that will last as tight oil wells have a devilishly high rate of decline. It is worth noting, as Arthur Berman has recently done in his fine article, that even the best producers are losing money now, and lots more are being lost by those who are not the best. Making it up on volume is a dog that does not hunt for $45.

…click on the above link to read the rest of the article…

What happened to peak oil? The cycle of a meme and of its antimemes

September 21, 2015

What happened to peak oil? The cycle of a meme and of its antimemes

The result of a Google Trends search for the term “Peak Oil”. The fading out of the concept may be due not so much to reasons related to the validity (or non validity) of the concept but, rather, to a memetic phenomenon equivalent to the development of an immune response in the human body. Not all memes have sufficient viral power to entrench themselves in the human mindspace.

Likely, you haven’t heard much, lately, about peak oil. If you did, it was because it was summarily dismissed as “wrong”. Indeed, as you see in the figure above, peak oil had a peak of interest around 2006, a second one around 2008, then it gradually declined.

Why this decline? You might say that it was because the recent drop in oil prices. Maybe, but note, from the figure, that the interest in peak oil started a steady decline just when oil prices went up to reach a plateau at levels over 100 $/barrel. Then, you might say that the decline is because peak oil didn’t appear when it was predicted. Maybe, but the record of the “peakist” approach is not bad at all when compared with of mainstream oil pundits. Had any of them anticipated such things as the burst of high oil prices that started in 2005? Did any of them foresee that the oil industry would have had to switch to expensive and difficult resources, that they had always shunned before, in order to keep production from falling?
…click on the above link to read the rest of the article…

Peak Oil Has More To Do With Oil Prices Than You May Think

September 20, 2015

Peak Oil Has More To Do With Oil Prices Than You May Think

The Origins of Peak Oil Awareness

The scientific study of peak oil began in the 1950′s, when Shell geophysicist M. King Hubbert reported on the evolution of production rates in oil and gas fields. In a 1956 paper Hubbert suggested that oil production in a particular region would approximate a bell curve, increasing exponentially during the early stages of production before eventually slowing, reaching a peak when approximately half of a field had been extracted, and then going into terminal production decline.

Hubbert applied his methodology to oil production for the Lower 48 US states and offshore areas. He estimated that the ultimate potential reserve of the Lower 48 US states and offshore areas was 150 billion barrels of oil. Based on that reserve estimate, the 6.6 million barrels per day (bpd) extraction rate in 1955, and the 52.5 billion barrels of oil that had been previously produced in the US, Hubbert’s base case estimate was that oil production in the US would reach maximum production in 1965. He also estimated that global oil production would peak around the year 2000 at a maximum production rate of 34 million bpd.

Hubbert calculated a secondary case that if the US oil reserve increased to 200 billion barrels (about which he expressed doubts), peak production would occur in 1970, a delay of five years from his base case. Oil production in the US did in fact peak in 1970, so Hubbert is widely credited with precisely calling the US peak, but few know that he was actually skeptical that the peak would take place as late as 1970.

The US has now surpassed Hubbert’s most optimistic estimate for US oil production. Through 2014, cumulative US production stands at approx. 215 billion barrels, with a remaining estimated proved reserve of 48.5 billion barrels (but with the caveat that this reserves estimate is based on crude prices near $100/bbl).

…click on the above link to read the rest of the article…

Whatever Happened to Peak Oil?

September 16, 2015

Whatever Happened to Peak Oil?

Whatever happened to “peak oil” – the assertion that the rate at which oil is extracted from the Earth is nearing a maximum or peak level? With falling oil and gasoline prices and a boom of new oil development in the United States and elsewhere, concern about global oil supplies have faded from public view.

But have concerns about peak oil really disappeared? What key factors have changed in the oil industry, and what challenges remain? Are we entering a new era of “abundance” or are the risks of the world’s dependence on oil rising?

Guests:

Jeremy Gilbert – principal, Barrelmore Ltd; former chief petroleum engineer, BP
John Kingston – president, McGraw Hill Financial Global Institute; former director of news, Platts (energy information division of McGraw-Hill)
Steve Andrews – co-founder, Association for the Study of Peak Oil USA

Key Questions:

Cost: What are the trends regarding costs to maintain global oil production now and in the future? Are costs of developing new oil rising or are fracking and other technologies driving production costs down? Do falling prices mean that oil is getting cheaper?

Demand: What are the trends regarding global oil demand? Will oil consumption peak because of a peak in demand as much as supply? How are demand and supply interconnected?

Supply: What is the outlook for global supply? How will trends regarding costs and price volatility affect global supply? How much does price affect the outlook for supply? Do prices need to keep rising to maintain supply?

…click on the above link to read the rest of the article…

Syria peak oil weakened government’s finances ahead of Arab Spring in 2011

September 14, 2015

Syria peak oil weakened government’s finances ahead of Arab Spring in 2011

While the attention of the world is on the refugee crisis we need to look at the causes of this mass exodus.

Fig 1: Refugees walking on Hungarian motorway towards Austria in Sep 2015

In May 2013 the Guardian had an article “Peak oil, climate change and pipeline geopolitics driving Syrian conflict” http://www.theguardian.com/environment/earth-insight/2013/may/13/1

In March 2015, a group of researchers led by climatologist Colin Kelley (University of California) published a study in the Proceedings of the National Academy of Sciences with the title “Climate change in the Fertile Crescent and implications of the recent Syrian drought”

“Between 2006 and 2009, the people of Syria suffered during the most severe drought that country has experienced since the beginning of its instrumental record. As water became scarce, crops failed and cattle died on a huge scale. As many as 1.5 million Syrians, out of a population of just over 20 million, moved from the countryside to the outskirts of already overflowing cities”
http://www.historicalclimatology.com/blog/is-climate-change-behind-the-syrian-civil-war

Fig 2: Sand tornado in Syria in September 2014

http://news.nationalgeographic.com/news/2015/03/150302-syria-war-climate-change-drought/

In this article we analyse to which extent peak oil contributed to a fiscal deterioration so that the Syrian government was forced to introduce unpopular policies (tax increases, removal of fuel subsidies, increasing cost of cement etc) which contributed to the unrest.

Oil production, exports and consumption

Fig 3: Syria oil production, exports and consumption

We see several tipping points

1996: peak production
2001: Crude oil exports start to drop sharply, albeit cushioned by rising oil prices
2006: Petroleum imports begin to increase at higher rate
2008: Increasing petroleum consumption approaches level of declining oil production
2011 Arab spring reaches Syria in March
2011 International oil companies suspend operations
oil embargo http://www.sanctionswiki.org/Syria
2012: Oil production falls precipitously as government loses control over Eastern oil fields.
2014: Oil production has completely collapsed

…click on the above link to read the rest of the article…

Jeffrey Brown: To Understand The Oil Story, You Need To Understand Exports

September 14, 2015

Jeffrey Brown: To Understand The Oil Story, You Need To Understand Exports

Peak Oil is very much alive

Despite the attention-grabbing economic volatility that is grabbing headlines, it’s important to keep our eye on the energy story firmly in focus. This is especially true as the headlines we regularly read about Peak Oil being dead ” are “manifestly false” according to this week’s podcast guest, petroleum geologist Jeffrey Brown.

As concerning as the fact that global oil production has plateaued over the past decade, despite trillions invested in trying to goose it higher, are Brown’s forecasting model for oil exports. His Export Land Model shows how rising internal consumption can swing (and has swung) countries from major exporters to permanent importers within a dizzyingly short period of time:

The crucial issue to understand about what has happened after 2005 is that we’ve had a very large increase in global gas production and natural gas liquids, but a much slower increase in crude plus condensate. So, what I think has happened is the actual crude oil production has basically flatlined while the liquids associated with natural gas production, condensate and natural gas liquids, have continued to increase. So, we ask for the price of oil, we get the price of Brent or WTI; but when you ask for the volume of oil, you get some combination of crude, condensate, natural gas liquids, biofuels. So, the fact is that substitution has worked and is working in that they’re bringing on alternative substitutes, but they’re only partial substitutes. The actual, physical volume of crude oil production has probably been flat to down since 2005. Over the past ten years, it has taken us trillions of dollars, basically, to keep us on an undulating plateau in actual crude oil production. What happens going forward?

…click on the above link to read the rest of the article…

Peak Oil Ass-Backwards (part 2): Crashing OilPrices Aren’t Due to an Oil Glut But to DemandDestruction and Peaking Credit

September 14, 2015

Peak Oil Ass-Backwards (part 2): Crashing Oil Prices Aren’t Due to an Oil Glut But to Demand Destruction and Peaking Credit

As I began to mention at the end of the first part of this three-parter, I’ve only just recently come to the conclusion that oil prices aren’t going to have a tendency to rise due to the tightening of supply imposed by peak oil, but to depreciate. This of course flies in the face of the common logic of supply and demand, but when factoring in the method by which the majority of our money is created, a deflationary effect can be seen to come into play. This has taken me an absurdly long time to clue into, for although I’d steadfastly amassed a bunch of pieces (various information), I hadn’t realized they were actually all part of the same puzzle.

With peak oil and fractional-reserve banking being the first two pieces of this puzzle, the third piece that I needed to factor in (which oddly enough I’d already written about) is the fact that money is a proxy for energy. As I wrote in a previous post, Money: The People’s Proxy,

Simply put,… the core function of money is that it enables us to command energy – the energy used to move our bodies with, to power our machines, to feed to domesticated animals whose energy we then use to do work (which nowadays generally means entertaining us), etc. In other words, it might be tough and/or inconvenient, but one can get by without money. You can’t get by without energy.

In other words, at their core, our economies don’t run on money, they run on energy. Moreover, it doesn’t even really matter what you use as your form of currency – coins, pieces of paper, gold, zero and one digibits, conch shells, whatever – because if you don’t have the energy to perform the work and/or create the products your society expects, the money is virtually useless and worthless.

…click on the above link to read the rest of the article…

PEAK OBEDIENCE

September 4, 2015

PEAK OBEDIENCE

Warnings about Peak Oil have circulated widely in recent years, and if accurate, they are important. Peak oil, however, pales in comparison to something that’s happening right in front of us… and something that is a good deal more dangerous: Peak Obedience.

If that concept strikes you as odd, I can understand why: We’ve all been living inside of an obedience cult. (And I choose these words carefully.)

In our typical “scary cult” stories, we find people who have given up their own functions of choice and who then do crazy things because they are told to by some authority. While inside their cult, however, it all makes sense; it’s all self-reinforcing.

So, inside a cult of obedience, obedience would seem proper; it would seem righteous; and more than anything else, it would seem normal. And I think that very well describes the Western status quo.

Obedience, however, should not seem normal to us. Obedience holds our minds in a “child” state, and that is not fitting for any healthy person past their first few years of life. It also presupposes that the people we obey have complete and final knowledge; and in fact, they do not: politicians, central bankers, and the other lords of the age have been wrong – obviously and publicly wrong – over and over.

So, obedience is not a logical position to take. But we all know why we take it; and that reason is fear. The mass of humanity obeys because they are afraid to do otherwise. All the “philosophy of governance” explanations are merely attempts to distract us from the truth: people believe they’ll be hurt if they don’t obey.

We are taught not to think in such stark terms, of course. Those “philosophy of governance” explanations give us reasons to believe that obedience is the good and heroic thing to do. Still, we know the truth.

…click on the above link to read the rest of the article…

A Transition for Humanity Into the Post-Petroleum Age: 10 Commandments.

September 1, 2015

A Transition for Humanity Into the Post-Petroleum Age: 10 Commandments.

On her blog, “Our Finite World”, Gail Tverberg outlines the likely prognosis for humanity, and our best possible choices, as we run up against the Limits of Growthhttp://ourfiniteworld.com/2014/02/17/reaching-limits-to-growth-what-should-our-response-be/ The case she unveils is, to say the least of it, sobering, but I am reminded of an article that I wrote some while ago http://scitizen.com/future-energies/the-10-commandments-guidelines-to-surviving-in-a-post-peak-oil-world_a-14-3709.html, which, with a few amendments and reconsiderations, I now re-post here. The original set of 10 commandments provided a simple set of rules for members of a small community to live in reasonable harmony with one another, and that is essentially the requirement for an oil-dependent society that has necessarily fragmented into smaller communities, once its supply of oil has been severely curtailed. At first sight this does seem like a prognosis of “doom and gloom”, as indeed it will be if there is no sensible scale-down of oil-fuelled activities. Indeed, a “wall” of fuel dearth will suddenly appear, and we will drive straight into it; or really be abandoned by the wayside of the petrol-fuelled journey of globalisation. So, here are some suggestions (not rules or commandments, but logical consequences and prospects for the era that will follow down the oil-poor side of Hubbert’s peak). Overall, it will be necessary to curb our use of oil in the same amount as its rate of declining supply. The world’s major 800 oil fields are showing an average production decline rate of -5%/year http://aspousa.org/peak-oil-reference/peak-oil-data/oil-depletion/ which determines the size of the “hole” that must be filled by a matching production rate of unconventional oil, just to preserve the status quo, let alone to permit a growth in supply. Clearly the depletion-rate will not be precisely linear, but certain courses of action are indicated.

…click on the above link to read the rest of the article…

Peak Oil Ass-Backwards (part 1): PeakOil, Meet Fractional-Reserve Banking

September 1, 2015

Peak Oil Ass-Backwards (part 1): PeakOil, Meet Fractional-Reserve Banking

(image by Viktor Hertz)

If the ongoing crash of oil prices over the past year – and now the stock market crashes of last week – have continuously taught me one thing, that would be that I’ve got very little clue regarding the economic implications ofpeak oil. To explain this I’ll have to take a circuitous, roundabout route here, but if you’ve been as afflicted as I’ve been then you might find the following a bit illuminating.

For starters, even though I learned about peak oil in 2005, fractional-reserve banking in 2006, and pretty much instantly proceeded to put two and two together, I still ended up falling for what I might unfairly call the “peak oil orthodoxy.” I’m not sure where I first came across this “orthodoxy” I speak of, but an example as good as any – and maybe even better than any – would be that of author and a former Chief Economist at CIBC (one of Canada’s Big Five banks), Jeff Rubin.

As Rubin explained it in his first of two peak oil books, because peak oil implies a curtailment on the supply of oil, and since the demand end of a growing economy is by definition increasing, the notion of supply and demand imply that prices will head upwards if supply is limited. Because of this, upon oil’s peak its price will eventually rise to such ungodly high levels that it’ll become unaffordable by many. Following that, its demand will therefore peter out, and so thanks to the new glut in supply the price will crash to equally ungodly low levels. Once things settle down and the consumer can once again afford the now lower-priced oil, the process will repeat itself since the new (and increasing) demand will once again bump up against the limits imposed by peaking oil supplies. As a result, another crash will occur. On and on the process repeats itself, but with the higher price spikes followed by higher troughs.

…click on the above link to read the rest of the article…

US Oil Production Nears Previous Peak

August 31, 2015

US Oil Production Nears Previous Peak

The EIA’s Monthly Energy Review came out a couple of days ago. The data is in thousand barrels per day and the last data point is July 2015.

US consumption of total liquids, or as the EIA calls it, petroleum products supplied, reached 20,000,000 barrels per day for the first time since February of 2008.

Something I never noticed before, consumption started to drop in January 2008, seven months before the price, along with world production, started to drop in August 2008. This had to be a price driven decline. Could the current June and July increase in consumption be price driven also?

US Production was down 96,000 barrels per day in July to 9,503,000 bpd. That is 190,000 bpd below the March level of 9,693,000 bpd.

Here is what the last 50 years of US production looks like. The peak was in 1970 or 1971, depending on what you call the peak.

In March 2015 we were still 351,000 barrels per day below the peak month of 10,044,000 bpd in November of 1970. But right now we are headed in the wrong way to break that record. In July we were 541,000 bpd from that record. Right now the 2015 average, January through July, is 9,534,000 bpd. That is 103,000 barrels per day below the 1970 average. But the 2015 average is likely to get smaller as the year plays out.

I have another chapter from Peter Goodchild’s Tumbling Tide: Population, Petroleum, and Systemic Collapse. I really like this book. The author comes closest to matching my sentiments than anyone I have read to date.

Tumbling Tide Chapter 10

The Pollyanna Principle

The problem of explaining peak oil does not hinge on the issue of peak oil as such, but rather on that of “alternative energy.” Most people now have some idea of the concept of peak oil, but it tends to be brushed aside in conversation because of the common incantation: “It doesn’t matter if oil runs out, because by then everything will be converted to [whatever] power.” Humanity’s faith in what might be called the Pollyanna Principle—the belief that everything will work out right in the end—is eternal.

…click on the above link to read the rest of the article…

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