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The Age Of Cheap Oil Is Over
The Age Of Cheap Oil Is Over
The longer I look at what is going on today with oil prices the less it makes sense to me. I know there are a lot of experts who blame this all on the “glut” of oil created by overly aggressive U.S. upstream companies that took all the cheap money they could get to “Drill Baby Drill”. However, the size and speed of the drop doesn’t seem justified when there is still plenty of room to store the short-term oversupply. Last week’s Department of Energy crude oil inventory report shows that we still have plenty of room in the storage tanks. In fact, the DOE reported a draw from storage of more than 3 million barrels for the week ended January 2, 2015.
Granted, oil storage levels are running above the previous 5-year average, but with a worldwide “glut” of oil production, why would refiners need to pull oil out of inventory?
There is some truth to the U.S. rapidly increasing oil production eating into Saudi Arabia’s market share, but to say we have some sort of global supply glut that cannot be absorbed by this market is nonsense. Humans are forecast to burn up 34.3 BILLION BARRELS of liquid hydrocarbon based fuels in 2015, so the “glut” argument seems to be quite a stretch to me. Plus, the demand for oil goes up by another 300 to 400 million barrels each year.
…click on the above link to read the rest of the article…
The Center’s Got To Give
The Center’s Got To Give
I was thinking about something along the lines of The Center Cannot Hold and Something’s Got To Give earlier, but then I thought there’s no way I haven’t used those titles before. And then it occurred to me that The Automatic Earth started 7 years ago this month. Just looked it up, it was January 22, 2008. Party next week!
Of course Nicole and I had been writing before that on the Oil Drum, who then didn’t want us to write about finance. They claimed we didn’t have the – academic, they were big on academic – credentials, as if that would ever stop me. Economists, the only people with the ‘proper’ credentials, are the last ones anyone should listen to, they engage in goal-seeked analysis only (no worries, Steve, you’re still no. 1 in our blogroll).
So we started The Automatic Earth, where we could write about what we wanted and thought needed to be addressed. In 2005 it may not have seemed important to the energy crowd, but they’ve all since seen that what we insisted on talking about back then was indeed a big event. 2007 brought Bear Stearns, and 2008 gave us Lehman. Not a minor trifle to write about in 2005. Plus, that means we’ve been doing this for 10 years already. No minor trifle either.
Meanwhile, peak oil has moved way back in the line of pressing events, the Oil Drum went so far south it’s out of sight and shale oil has just about everyone believing the peak oil theory was wrong all along. It wasn’t, not for conventional oil, which was all it addressed to begin with, but so things go. The financial casino trumped energy. But now those days seem over.
…click on the above link to read the rest of the article…
An Endless Sea of Energy
An Endless Sea of Energy
With crude oil prices in a strong corrective mode, energy depletion is understandably not on people’s minds these days. However, this is a scenario that many of us might have to deal with at some point in our lifetimes.
Yes, the world currently has more than abundant supplies of crude oil. US tight oil production has been rising exponentially, accounting for the biggest share of global growth since 2009. This is by any measure an amazing technological and logistical achievement. OPEC has simply been incapable to accommodate the resurgence of the US as a major producer; and falling prices may actually prompt some of its members to sustain outputs, otherwise lost revenues will be even larger.
We might be swimming in oil for now, but this should be no reason to become complacent.
As an example, an important fact that is often overlooked is that tight oil exploration is a different animal, and relatively recent in terms of its significance. Each tight oil well has very steep decline rates – in many cases 90% within 5 to 7 years, much steeper than conventional wells. This means that to sustain (let alone increase) production many new wells need to be drilled each year. And at US$5-10 million cost per well, this is not cheap either.
…click on the above link to read the rest of the article…
What Will 2015 do for Peak Oil?
What Will 2015 do for Peak Oil?
The Cornucopians are exuberant, they believe that collapsing of oil prices dealt the death knell for peak oil. An oil glut, they say, is what we have, not peak oil. But an oil glut is exactly what we would expect at the very peak. After all, that is what peak oil is, that is the the point in time when the world produces more oil than ever in history… and the most it ever will produce.
I am of the firm conviction that the world is at the peak of world oil production right now, or was at that point three or four months ago. I think history will show that the 12 months of September 2014 through August 2015 will be the one year peak. Whether the calendar year peak is 2014 or 2015 is the only thing still in question, or that is my opinion anyway.
The EIA says, in their Short Term Energy Outlook says US Crude oil will peak, at least temporarily, in May 2015.
Looking at the area breakdown for total US production:
…click on the above link to read the rest of the article…
The Next Decade Will Decide Peak Oil Outcome
The Next Decade Will Decide Peak Oil Outcome
The most attention-grabbing attempts to predict oil futures have come from geologists and environmental activists, who tend to look solely at production. An overlooked doctoral thesis by Christophe McGlade,Uncertainties in the outlook for oil and gas, in contrast, focuses on how both supply and demand might be constrained in the coming decades. Peak oil researchers should take note of McGlade’s thesis because he predicted, in November 2013, that oil prices would sink, and that they will stay low throughout the second half of this decade. I found this paper on Google Scholar and have no connection with the author, but I appreciate his careful consideration of peak oil arguments, and his ability to distance himself from the more narrow-minded aspects of both economic and geological thinking. Here’s a representative quote from the middle of the thesis, p. 216:
The focus of much of the discussion of peak oil is on the maximum rates of conventional oil production. Apart from issues over how this term is defined, results suggest that focusing on an exclusive or narrow definition of oil belies the true complexity of oil production and can lead to somewhat misleading conclusions. The more narrow the definition of oil that is considered (e.g. by excluding certain categories of oil such as light tight oil or Arctic oil), the more likely it is that this will reach a peak and subsequent decline, but the less relevant such an event would be.
…click on the above link to read the rest of the article…
Sydney plans to dismantle rail infrastructure built just 6 years ago (part 1)
Sydney plans to dismantle rail infrastructure built just 6 years ago (part 1).
Contents:
(1) Epping – Chatswood tunnel conversion works proposed
(2) Removal of tracks at Epping and Chatswood
(3) Operational flexibility reduced
(4) Removal of signalling
What can the world learn from Sydney’s future “Infrastructure Hub” established by G20 leaders in Brisbane in November 2014 and promoted in big hype by Australia’s Prime Minister Abbott who wants to become known as “Infrastructure Prime Minister”? Well, read this bizarre story:
How to disable and remove existing rail infrastructure
In year 10 of peaking oil production outside the US and Canada and while dropping oil prices indicate that the so-called US shale revolution is too expensive for the world economy, the NSW government has embarked on a risky, expensive rail project, the 23 km long North-West Rail Link (NWRL), including a 15.5 km long tunnel. In principle, rail is one of the solutions to the problem of peak oil, but not in the way it is done here.
Peak Oil from the Demand Side: A Prophetic New Model – Peak Oil BarrelPeak Oil Barrel
Peak Oil from the Demand Side: A Prophetic New Model – Peak Oil BarrelPeak Oil Barrel.
The most attention-grabbing attempts to predict oil futures have come from geologists and environmental activists, who tend to look solely at production. An overlooked doctoral thesis by Christophe McGlade, Uncertainties in the outlook for oil and gas, in contrast, focuses on how both supply and demand might be constrained in the coming decades. Peak oil researchers should take note of McGlade’s thesis because he predicted, in November 2013, that oil prices would sink, and that they will stay low throughout the second half of this decade. I found this paper on Google Scholar and have no connection with the author, but I appreciate his careful consideration of peak oil arguments, and his ability to distance himself from the more narrow-minded aspects of both economic and geological thinking. Here’s a representative quote from the middle of the thesis, p. 216:
The focus of much of the discussion of peak oil is on the maximum rates of conventional oil production. Apart from issues over how this term is defined, results suggest that focussing on an exclusive or narrow definition of oil belies the true complexity of oil production and can lead to somewhat misleading conclusions. The more narrow the definition of oil that is considered (e.g. by excluding certain categories of oil such as light tight oil or Arctic oil), the more likely it is that this will reach a peak and subsequent decline, but the less relevant such an event would be.
Keep Your Eyes On The Prize: Chris Martenson | Peak Prosperity
Keep Your Eyes On The Prize: Chris Martenson | Peak Prosperity.
At the essential center of the framework of the Crash Course is the almost insultingly simple idea that endless growth on a finite planet is an impossibility.
It is so simple it could be worked out by a clever 4 year-old. And yet it must not be so simple because the main narrative of every economy in every corner of the globe rests on the idea of endless, infinite growth.
Various rationalizations and mental dodges are made in people’s minds to accommodate the principle of endless growth. Some avoid thinking of it all together. Some think that perhaps we will escape into space, and continue our growthful ways on some other yet-to-be named planet(s). Most simply assume that some new wondrous technology will arise that can allow us to avoid pesky limits.
Whatever the rationalization, none stand up well to simple math and cold logic.
At the very heart of endless growth lies the matter of energy. To grow forever requires infinite amounts of energy. Growth and energy are linked in a causal way.
RESOURCE CRISIS: Peak Oil: the elephant in the room
RESOURCE CRISIS: Peak Oil: the elephant in the room.
In 2003, I invited Colin Campbell, the founder of the association for the study of peak oil (ASPO), to give a talk in Florence. After the talk, a small group of conspirators (1) collected in my office. We drank together something curiously looking like petroleum in color (not in taste, fortunately); a strong liquor that came from Ukraine and was named “Balzam.” After a few glasses of that dark stuff, we decided to start the Italian chapter of ASPO; “ASPO-Italy”. One of the conspirators of that fateful day, Luca Pardi, now president of ASPO-Italy, recently published a book on oil and gas with a curious title “Elephant country.” It is a word play on some silly remarks on oil by one of our leading politicians, Mr. Romano Prodi, who said that Italy “floats on a sea of oil“. But you can take the title of the book also as hinting to the old say about “the elephant in the room”. Peak oil is the true elephant in the room of our times; it is there, it is large, you can’t miss it, and yet it goes unperceived, unseen, invisible.
The invisibility of peak oil is all the more impressive if compared to how much more we know about it today than we did at the beginning. You can see that, clearly, in Pardi’s book, which is an excellent summary of the work done up to now on the subject. Compare it with my first book on peak oil, published in 2003, and you’ll see that, surely, we came a long way from then. Today, we have better models, better data, and generally a much better understanding of the concepts we summarize under the name of “peak oil.” And all these new data and models confirm our initial interpretation: peak oil is here. Yet, the problem of the elephant in the room remains.
Broken Energy Markets and the Downside of Hubbert’s Peak – The Automatic Earth
Broken Energy Markets and the Downside of Hubbert’s Peak – The Automatic Earth.
Euan: A few commenters have mentioned peak oil recently. I am cautious about making forecasts and predictions and prefer instead to observe and document the data as the peak oil story unfolds. I have in fact published a couple of charts recently illustrating aspects of peak oil, one showing a possible peak in the rest of the world that excludes N America and OPEC (Figure 1). The other showing the undulating plateau in conventional crude + condensate that has persisted since 2005 (Figure 2). In my last post on oil price scenarios two of those showed global oil production capacity 1 to 2 Mbpd lower in 2016 than 2014. If that comes to fruition, will we have passed peak oil but does it matter?
Figure 1 Global oil production has been split into three geo-political categories: 1) USA and Canada, 2) OPEC and 3) the Rest of the World (RoW). RoW production bears the hallmarks of having peaked in the period 2005 to 2010 and this has consequences for oil prices, demand and prosperity in parts of the world, especially the OECD. Most of the growth in oil supply has been in the USA and Canada where the market has been flooded with expensive oil. Data are crude oil + condensate + natural gas liquids (C+C+NGL) and exclude biofuels and refinery gains that are included by the IEA in their total liquids number.
The current “low oil price crisis” is providing a clear and new perspective on the nature of the peak oil problem. If low price does indeed destroy high cost production capacity then this will raise the question if the high cost sources can ever be brought back? IF low price kills the shale industry can it come back from the dead?
Peak Oil Review – Dec 22
1. Oil and the Global Economy
Oil prices were volatile last week with New York futures trading around $55 a barrel and around $60 in London with little change at week’s end. In the absence of any solid news on supply or demand, traders jumped in and out of the markets in a attempt to find a price bottom. On Thursday, London’s Brent closed below $60, the lowest close since May 2009, before rebounding, largely on optimism and technical issues, to close out the week at $61.38.
The issue of just where the bottom of the price decline will be found is the subject of much commentary. Most observers are saying that the markets will likely go lower next year as more supply is slated to come on line, and the markets are expected to remain weak. The UAE’s oil minister and President Putin both mentioned $40 a barrel in public recently. A more sophisticated analysis was published by Reuters pointing out the reasons we could see a new trading range, with a bottom at $20 a barrel and a top at $55. Under this scenario, US shale oil producers, who can be very fast on their feet due to the large number of wells they must drill every year to maintain production levels, would become the new swing producers.
The Archdruid Report: Déjà Vu All Over Again
The Archdruid Report: Déjà Vu All Over Again.
Peak Oil: Statements Aren’t Always Conclusive – Peak Oil Matters
Peak Oil: Statements Aren’t Always Conclusive – Peak Oil Matters.
Michael Lynch offered that comment early in a not surprisingly vague article arguing peak oil this past summer. [Not that vague is a new tactic for him. Five years ago, Chris Nelder offered a concise analysis of Lynch’s work, and not much appears to have changed]:
For those allergic to facts and reality, it’s easy to understand the consternation expressed by Lynch and his peers. Their antidote—make pronouncements and assume they will serve as the last word—is consistent with their avoid-evidence-at-all-costs approach to a subject with (I assume) unfortunate personal ramifications to their professional efforts.
No doubt adding to their consternation is the fact that some of us poor souls still rely on facts and evidence and reality to make determinations on matters of importance, and “amazingly” we believe that the concepts embraced under the peak oil umbrella are quite believable. We’re willing to review evidence, of course. Without any, however, we remain singularly unimpressed with puffed-up statements which deniers are quick to offer without substantiation.
…click on the above link to read the rest of the article…
RESOURCE CRISIS: Fossil fuels: are we on the edge of the Seneca cliff?
RESOURCE CRISIS: Fossil fuels: are we on the edge of the Seneca cliff?.
This observation by Seneca seems to be valid for many modern cases, including the production of a nonrenewable resource such as crude oil. Are we on the edge of the “Seneca cliff?“
It is a well known tenet of people working in system dynamics that there exist plenty of cases of solutions worsening the problem. Often, people appear to be perfectly able to understand what the problem is, but, just as often, they tend to act on it in the wrong way. It is a concept also expressed as “pushing the lever in the wrong direction.”
With fossil fuels, we all understand that we have a depletion problem, but the solution, so far, has been to drill more, to drill deeper, and to keep drilling. Squeezing out some fuel by all possible sources, no matter how difficult and expensive, could offset the decline of conventional fields and keep production growing for the past few years. But is it a real solution? That is, won’t we pay the present growth with a faster decline in the future?
This question can be described in terms of the “Seneca Cliff“, a concept that I proposed a few years ago to describe how the production of a non renewable resource may show a rapid decline after passing its production peak. A behavior that can be shown graphically as follows:
…click on the above link to read the rest of the article…
Peak Oil: So How Do We Prepare? – Peak Oil Matters
Peak Oil: So How Do We Prepare? – Peak Oil Matters.
A nice summary of where we are, what we face, and a question for which there is not much of an answer at the moment. In and of itself, that’s a problem.
Dispute over facts aside, another problem the author cites is likely to be an even more difficult challenge in our attempts to prepare for a transition away from fossil fuel dependence.
…click on the above link to read the rest of the article…
