Geologist: In Terms of Supply and Demand, the Oil Peak Is Past 60 comments
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By Eli Neusner
Jeffrey Brown is an independent petroleum geologist and analyst, who also manages an exploration program in West Texas. He has a major interest in the subject of "Peak Oil" and has used mathematical models to project a very grim future for the world's oil supply. We caught up with Jeffrey at his office outside Dallas.
Eli Neusner, reporter, HardAssetsInvestor.com (HAI): You've published some controversial research in the past. What is the gist of your analysis?
Jeffrey Brown, petroleum geologist (Brown): The basic thrust of my research is that the world has already arrived at Peak Oil - which is a condition in which the worldwide supply of oil cannot keep up with demand. We have used proven mathematical models to show that the top five net oil-exporting countries - which are Saudi Arabia, Russia, Norway, Iran and the United Arab Emirates, and which account for one-half of current world net oil exports - are showing an ongoing decline in net oil exports, continuing a trend that began in 2006. To give you an idea of where we're headed, Mexico - another former top producer - will see its oil exports hit zero in 2010.
HAI: How can you be so sure?
Brown: Because of the models and because we've seen it all before. Our mathematical model shows that once oil production in an oil-exporting country starts declining, the resulting decline in net oil exports can be quite rapid, and the oil exporter tends to show an accelerating net export decline rate. It's irreversible. The top five oil-exporting countries will approach zero net oil exports around 2030, going from peak exports to zero in about 25 years.
Many large producing regions have shown production patterns that are consistent with the models. The lower 48 peaked in 1970. Texas peaked in 1972. Alaskan oil production slowed the U.S. oil decline, but U.S. oil production never equaled its 1970 peak. Today, Prudhoe Bay, the largest American oil field, is now at about one-fifth of its peak production and declining rapidly. Did we stop finding oil in Texas or in the rest of the lower 48? No. However, it is impossible to replace old, very large oil fields, with a collection of the much smaller fields, such as those we've been finding in Texas since 1972.
HAI: Are there other examples of regions that have experienced peak oil production?
Brown: Yes; just take a look at what happened in the North Sea oil fields, where, despite using the best technology and with no restrictions on drilling, production has been falling steadily since peaking in 1999 at 52% of total recoverable reserves. North Sea oil production is now about one-fourth below its peak. As a result, the United Kingdom, which was a net oil exporter in 1999, exporting more than 1 million barrels a day, is now a net importer.
HAI: But don't the oil fields of the top five exporters have enough supply to last us for decades? Aren't they continually finding new oil fields?
Brown: Unfortunately, whatever new fields come on-line are only incremental improvements in the level of supply. Russia's big fields are in decline and their new fields aren't coming on-line fast enough. Russia peaked in the 1980s, then it rebounded and now it's resuming its production decline. Saudi Arabia showed an uptick this year, but it's still below its 2005 rate of production. There was a big find in Brazil recently, which some say has the potential for 600 billion barrels of oil. But even that will take 7-10 years to come on-line and it will only postpone Peak Oil by a few years. Brazil is still a net importer, and whatever new oil it finds will go to supporting its domestic economy.
HAI: What does it all mean for net importers like the U.S., and what can we do about it?
Brown: Oil is basically a horse race between declining demand and declining production, and right now declining production is winning. Declining net oil exports will inevitably result in continued rapid increases in the price of oil. As we all know, the price of oil doubled between May 2007 and June 2008. Over that same period, the average monthly price increase was 6%. Oil's taken a breather over the past couple of months, but last September and October, oil kicked up 10% per month, and we expect the same this year.
In terms of what we can do, we'll have to decrease our dependence on oil and reduce our overall energy consumption. I know I'm not the first person to advocate that, but I'm afraid it's going to take large-scale measures, including writing off a big swath of our investment in suburbia. That's a lifestyle that we can no longer support, with its dependence on inexpensive and abundant fossil fuels. We'll have to reduce our dependence on the automobile and increase our investment in electrified transportation, such as electric light rail, streetcars, commuter rail and subways. We're going to have to return to the way we used to live: in dense, urban housing along electrified mass transit lines. This, combined with a crash wind and solar power program, as well as a big push for more localized food production, will help us make the transition to our inevitable future without oil.
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This article has 60 comments:
Even if you think "peak oil" is rubbish, I can think of several reasons we should encourage a move away from oil:
-Having our recessions scheduled for us by OPEC. Oil rises and we have a recession, each and every time! Iran is untouchable because they could cause a depression in the U.S. by stopping exports for a week.
-Balance of payments and the national debt: For years, we have exported dollars/debt in exchange for foreign oil. That is not likely sustainable. We are risking a dollar devaluation that will put our standard of living in line with the rest of the world.
-Pollution. Gasoline is a carcinogen. Smog. Periodic oil spills.
-The need to spend a trillion dollars and a thousand or so lives a year in military protection for middle east oil producers.
-Supporting the America-hating fundamentalist theocracies in the mid-east with our money. Iran, Saudi Arabia, Yemen, etc.
-If we had cheaper alternatives for transportation, consumer spending on cars (depreciation, fuel, insurance, interest, tires, repairs...) could be devoted to more productive purchases (savings and retirement, education, health, recreation...) thus helping our economy.
-The lifestyle of multi-hour daily commutes is not so luxurious after all, especially when it bankrupts you. How about more family/leisure/sleep time every day?
-Motivation to stop ignoring the problems that have made our inner cities like those of third-world countries. Crime, education, infrastructure, crappy culture... etc.
The free market is starting to move in the right direction, but if peak oil happens by 2010 as seems most likely, then it will be too little too late. As much as I prefer laissez faire policies in general, this is one that is too important to everything-- our economy, our national security, our prosperity, even our survival-- to leave solely in the hands of the whims of the market. The government should have been leading the market in the right direction 20 years ago, with a much more aggressive energy policy that promotes renewables and discourages waste.
We don't have 20 years so the best we can do is get aggressive now. Yet even now people want to deny what is going on.
On talk radio, I hear fairy tales of a "trillion barrels of domestic oil" that we could tap now if only the "radical environmentalists" would get out of the way. This is, to put it mildly, wishful thinking. For example, they claim the Bakken formation may have 400 BILLION barrels of oil. However, the USGS came out and pretty much said that's a myth. Their estimate of technically recoverable oil is 4.3 billion-- nothing to be sneezed at, but nothing that will save us either.
It's time to bite the bullet. It's time for electric cars and improved public transporation. It's time for solar and wind, nuclear, geothermal, and everything else that we can pursue. Postponing what we must eventually do anyways only heightens the risks.
Coal has terrible pollution problems, and it is not renewable.
Nuke is more promising, but we need to develop closed cycle plants that reuse their own combustible, like the Russians are experimenting with (certainly more achievable than fusion). Nuclear decay goes a long time, and if we can use each stage of the nuclear decay, then the combustible of one power plan will last longer that the Human race.
But all this will not solve a bigger problem: food. Our food production is so dependent on oil that transportation will be a remote problem once feritilizers and diesel will not be available in enough quantities. You can think of nuke powered agro machinery, but I don't think we know yet how to synthesize nitrogen fertilizers without fossil fuels (NG).
So we need to protect and spare our domestic oil reserves, instead of drilling for oil like headless chickens.
Adapt, or perish.
The worst case for the USA is presently its financial crisis, which could collapse the monetary system and lead to our collective inability to purchase imported oil. That could happen at any time now.
So, our window may only be less than 4 years wide to get off our butts and change our old habits. Not much time for 300 million to act in a coherent way, but we should try something, behaving as if our lives depended upon its success.
Time...
Oil will rule and the cost will sky rocket so believing in a miracle is not in the cards.
We must move quickly to wind, solar and everything else. In doing all this it will be 10 years with our fingers crossed.
We will see boom times just by changing our infrastructure to a plan advocated by Mr. Pickens.
Thing is we have to do it at some point why not yesterday.
In the short term keep the message alive by talking to everyone about this issue. I don't think Matt Simmons would mind someone else spredding his message.
Finally, Jim Klingdale has a wonderful and spirited site that is a must visit. You won't be disapointed.
Norsk Hydro has been using the arc process for fixing nitrogen for years, going back to before WWII; they were also producing heavy water for a German enrichment program, that resulted in a sucessful commando raid to dump the heavy water.
The arc process works the same as lightning does, causing nitrgen to combine with oxygen to make nitric oxide (NO); the NO reacts with more nitrogen and water to make nitric acid and residual NO to continue the cycle. The only way to make ammonia commercially requires high pressure (1,000 atmospheres) and a nickel catalyst to convert a mixture of nitrogen and hydrogen to ammonia. The hydrogen conventionally is created by controlled burning of methane to produce CO and water and free hydrogen. Hydrogen can also be produced by electrolysis, and by a shift reaction between coke and steam. the latter two require fossil fuel input.
The overall comments recognize both the need to return to townhouses and to rail transport.
Electricity needs still need to be met with uranium fueled reactors. The comment regarding recycling spent fuel is well made; the primary component in this is plutonium, which President Carter banned totally during his term as president, with no published justification to my knowlege. It is possible that the concern that the plutonium would have too be purified before its blending into fuel would permit its diversion to nuclear devices, or that its high toxicity made its handling too dangerous. Both concerns stand in stark contrast to the use of plutonium in fission devices, which presumably can continue today.
I have long thought that the flight to suberbia was a subconcious desire to expand municipal target areas to the point that the fringes could survive nuclear attack, as well as a chance to get "elbow room". I can still remember when factory work forces lived close to their work, and walked to and from work daily. I also recall amusing myself, while awaiting my bus, by counting the number of commuter vehicles, out of any hundred, that had more than one occupant; the score was usually one or two instances! If all commuters just doubled up, a significant reduction in fuel demand would follow!
End of this Jeremiad.
We discussed future transportation, the lobbyists for the trucking and airline industry are to powerful. We talked about high speed rail for moving goods as well as people. Now some of the rail corridors are either abandoned or made into bike paths. The sky can only accommodate so many planes. There more people every year and now here we site moving goods with trucks from east to west, such stupidity what a bunch of idiots we have in office all of them. JUST THINK OF THE WASTED OIL. I know we have enough oil for the next 400 years but, that doesn't mean we should be wasting it. Finally we are going to wind and solar, maybe high speed rail next, but the trucking and airlines are to stupid and powerful, they want to cripple the country first.
Prof Rick Smalley - Our Energy Challenge
Columbia University Nanoscale Science and Engineering Center presents "Our Energy Challenge" by Nobel laureate Professor Richard Smalley of Rice University.
video.google.com/video...
Power point presentation Smalley is using in the above lecture
smalley.rice.edu/empli...
At 85 million barrels per day and a CERA claimed decline rated of 4.5% per year one existing production Neil King Jr, oil reporter for the Wall Street Journal, pointed out that represents an annual decline of about 4 million barrels. And that is just so happens that Iran produces 4 million barrels. So to keep production flat year over year the oil industry must bring to market the equivolent of a new Iran every year.
Anyone been watching the Olympic's swimming events? At 86 million barrels per day (a 1000 barrels per second) you could fill 5,600 Olympic pools of oil every day or enough to fill 2,044,000 pools in one year. Lay those end to end and you'd have a train of 'em 63,500 miles long.
At 85 million per day if you laid each barrel on the ground to make a pipeline, your pipeline would be 28 inches in diameter and reach 1.6 times around the world. And since the since the world uses that volume every day the crude flowing through this pipeline would be traveling at a speed greater then twice the speed of sound.
One more visualization. This is by John Hofmeister, president of Shell, before the House: the US economy uses 10,000 gallons of oil every second (240-250 barrels or about 1/4 the world supply), It, the US economy, uses 60 billion cubic feet of natural gas every day. And if you stack those cubic feet on top of each other they'd reach from the earth to the moon and back again...25 times. That's every day. And the US economy uses 20 railcars of coal evey minute. That's a 100 railcar train every 5 minutes.
If you want to watch The End of Suburbia the producers have put it on youtube www.youtube.com/watch?...
Here's more videos
oildepletiondebate.blo...
Great to do list.
The technology is certainly there to reduce demand through ride sharing, cooperative dinners & gardening, etc. But as long as people can keep fighting for the almighty dollar, they will.
What I mean by this is that so much of people's time is presently spent trying to survive by working long hours at one or more jobs rather than taking community based classes on food storage, or learning more about the soil, etc.
The fact is, most people must be told what to do or see others in their social order and groups doing a certain thing or behavior before they change their own.
This is what Bright Neighbor aims to help solve. If any of you live in Portland, feel free to ask for a Beta invite at Bright Neighbor.com to see what the buzz is all about.
Now I've heard everything! (involuntary laughter) You might as well say that human life, dogs, bugs, trees are concentrated solar energy. And for those of you who think the free market has failed, note that the oil business is the most extensively and ridiculously overregulated activity on the planet and 3/4 of production comes from state owned NOCs.
> jack
you are spot on, great commen and or reply....
Not to mention that there is a HUGE push to alternative fuels (a trend that is not going to go away). Give it time and oil will be OBSOLETE (and long before we use it all up). The "chicken littles" of energy need to chill out.
not true
Oil Discovery Trend graphs
BP: www.theoildrum.com/upl...
Exxon: www.daveseslbiofuel.co...
USGS: Are We Running Out of Oil?
pubs.usgs.gov/of/2000/...
Alternatives? Not everyone shares that opinion
Bill Reinert, Toyota’s alternative fuel manger on ethanol
video.google.com/video...
video.google.com/video...
With the world using the equivolent of over 2,000,000 Olympic pools every year, does anyone really believe well replace just half that amount with something like ethanol?
And coal? yes it's possible to use coal for synfuel but the burning question is at what costs to the consumers' pocketbooks. IOW you'd still have the problem of consumer spending an even greater percentage of the income of auto fuel then the affect $4 gasoline had on their budgets.
Here is my prediction. Just as the build up of LNG terminals is not designed to lower the NG prices but instead take advantage of NG prices that makes terminals feasible, just as the Canadian tar sand projects are not designed to bring the crude oil price down but instead take advantage of them, you will find at your surprise that syncrude plants will produce syncrude juuuust below the world market price of crude oil. If there is a positive difference between sales price and cost it will be pocketed by the owners of the process. And if not, we are lucky if this technology and the infrastructure that goes with it does not have to be subsidized with tax money.
bakkenshale.blogspot.c...
Time For A Reality Rant
You know, I get just a little tired of companies trolling for investors and general media reports that keep bringing up the hundreds of billions of barrels that supposedly exist in the Bakken everytime the formation is mentioned. My question to them is "so what?" Instead, why not tell me what percentage of that figure is recoverable, as isn't that what's really important? For the ignorant, these reports make it sounds like all that previously unknown oil is just waiting down there for whomever wants to put a straw into this vast underground pool like Spindletop and then just let it flow. That is hardly the case.
bakkenshale.blogspot.c...
process was paid for by USGOVT (that's you the taxpayer) in the time period 1977-85. the houston oil millionaires are against the process because it provides no royalty income to them, also because their high priced reserves in the ground become less valuable. we had this same problem in 1953 of protecting value of oil-company domestic reserves against imports and against synthetics based on captured german technology. anybody here remember the louisiana MO plant? that program was killed by ddeisenhower on orders from the houston oil millionaires.
> jack
People continually want to blow sunshine up our exhaust pipes by using wind power. Gentlemen, we are investors and as such we are experts in the fields of energy as compared to the average American. Let us start acting and Blogging as such.
Please, no more solar/wind chatter etc. when the discussion is on Peak Oil. It does not apply. Mr. Brown knows this. That is why his comments on suburbia are poignant and worrying when he discussed Peak Oil--its transportation fuel and nothing more or less.
Anybody for a garden of tomatoes in the back yard?
I'm changing over to CNG transport myself. There's enough of that left for my lifetime.
You guys and the kids will have to figure out what's next.
www.rollingstone.com/p...
www.guardian.co.uk/the...
"...switching to energy-efficient light bulbs won't save us. To Lovelock, cutting greenhouse-gas pollution won't make much difference at this point, and much of what passes for sustainable development is little more than a scam to profit off disaster. "Green," he tells me, only half-joking, "is the color of mold and corruption."
Now even if you don't believe in global warming, any 2 of the other 3 horsemen will do the trick. And no, I'm not a doomsday cultist, just a realist.
Good luck with that plan. The NIMBYs and City Councils won't let you do jack until its too late...which it already is if you get passed your fear and look at flow rates. Will we ever run out of oil? Hell no. But it will cost you. My advice: go long SLB and RIG as the NOCs need them more than they need the XOM and BPs of the world.
Great article. As usual, comments are even better than the article.
The talking heads on TV make it sound as though oil will be replaced by the alternatives, tomorrow, or next week at latest. Meanwhile, don't invest in a buggywhip factory as we said in the 30s.
Oil will be around until affordable alternatives get here.
I suppose CNG at 1.50 is pretty much the same thing on an inflation adjusted basis.
I hate that inflation adjustment jargon, though. Gee, that means TV's must have cost $5,000 back then!
Good luck to you guys. I hope you figure this out.
We'll use up ours first. Then, if we have to, we'll take other peoples'.
(What is it about the words "National Defense" that you don't understand?)
So let's hope we get on to AFFORDABLE alternatives before this sorry scenario actually plays out.
Scuss me, but I consider myself a conservative as opposed to a (hypocritical) "progressive socialist" - and I am a big promoter of Peak Oil theory.
I suppose the conservative lable is confusing. You can use it to describe the Bush types. In my case I belief we should be conserving and living much more modestly. Must like what James Kunstler talks about.
Hopefully, that removes me from being in the evil grouping.
POP1 - When Peak Oil Happens
POP2 - When folks realise POP 1 is about to happen sometime real soon.
We have reached POP 2.
Yes and no. Electric cars are on the way, which will allow electrical energy to be used for transport. Ultimately, Energy is Energy, no matter what form it might be in at the moment.
Also, for an excellent Peak Oil Video that just came out today, check out www.chrismartenson.com... This is MUST SEE.
As for Nuclear, check out: americansolareconomy.b... Nuclear is not a viable solution. Solar, Wind, Geothermal; these will be primary sources of replacement Energy.
Dr. Chris Martinson's series is excellent, but more importantly, people need to understand that the U.S. government is insolvent and this is just one of the many factors along with peak oil that will drastically change our future:
www.chrismartenson.com...
www.chrismartenson.com...
As an adjunct to his video series on the internet, people should also see the new documentary I.O.U.S.A.
These are scary times.
That critique concerning Mat Simmons that you left a link to is 3 years old. Since that time, global production has remained flat for conventional oil since that time. How do you explain that?
Dr Sadad Al-Husseini
Brown University PhD, former head of Saudi Armco’s production & exploration
November 1, 2007 interview
Page down to: Listen to the interview with Sadad al-Huseini.
www.davidstrahan.com/b...
www.energybulletin.net...
In a revealing interview with journalist David Strahan at this year's Oil & Money Conference, former head of Saudi Arabian exploration & production Sadad Al-Husseini told the world that he now believes that the current level of world oil production will likely never be exceeded. Al-Husseini's view coincides with that of T. Boone Pickens, who stated at ASPO-USA's Houston conference that the world oil production peaked in 2006. The 85 million barrels per day of liquids available to the markets now is all we're ever going to get if these oil industry veterans are correct. With demand rising and supply flat, prices must rise. Accordingly, Al-Husseini believes that oil prices will rise by $12 per barrel per year from here on out, assuming a "base" price level of about $70 in 2007. The nominal price is now just above $92/barrel, so the difference must be due to the usual suspects cited by the mainstream media, including speculators, the weak dollar, rising Asian demand, resource nationalism, geopolitics in the Middle East, disruptions in Nigeria, and Iraq.
Society of Petroleum Engineers 2004 debate
Who is more the credible industry insider to this debate? In the Q&A Lynch or Simmons?
interface.audiovideowe...
If a peak-oil supply shock were to occur, we could then extract the last of our continental reserves and use that energy to build the rail and renewable energy infrastructure that we would need for the next 100 years. On the other hand, if that supply had already been used up, we couldn't even run the equipment required to build the post-petroleum infrastructure (or agriculture!).
Does anyone even think long-term strategy in this country any more - or do we insist on instant gratification, even if it is just 10 cents off per gallon?
Not only that, but it will simply not be economical to service these far-flung and not-very-dense suburbs and exurbs - not with public transit OR private cars. We will have to build up our long-neglected urban cores (and stop ignoring our urban problems such as crime, culture, and education along the way). Suburbs and exurbs will be populated by the elderly, then eventually rot down as urban areas did in the last 50 years.
I think the suburbs will limp along at $10/gal. People will just get European-style cars and spend as much as they were before. I think it would take $20/gal to make suburbia obsolete.
But hey, $4/gal was unthinkable 7 years ago.
The steel, railroad, motorcycle, defense, and security industries would benefit. Maybe heavy construction too. Then again, it is entirely possible that the US will deny reality and never make the needed changes - thus going into economic decline. If you think that will happen, invest in Europe. They're way ahead of the game regarding petroleum independence. Check out Deutch Bahn's rail network - it even links small towns! They are considering an IPO too.
Well it is possible to make carpet from corn oil. You just can't make enough to fill the demand.
The next time you drive on the highway try to imagine all the miles of asphat on all the roadways in the US...and then the rest of the world where all that tar had been pumped out of a well from somewhere in the world. How many barrels of tar did it take? And then these roadways have to be resurfaced from time to time.
If you were going to use concrete for roadways you still have to heat the cement to 2800 degrees in the manufacturing of this product. The liquid lava flowing out of Hawaii's volcanos' is 2200 degrees. So every square inch of an four-lane interstate highway system made with concrete used cement heated to temp 600 degrees high than that lava
On Aug 25 01:11 PM Chris B wrote:
> If the world is running out of oil, why would it be a wise move to
> extract all our offshore and national parks oil now? Won't those
> assets just increase in value and strategic importance if we leave
> them in the ground? Why burn it now to knock ten cents off the price
> per gallon, if we are looking at supplies suddenly running out at
> some point in the future?
>
> If a peak-oil supply shock were to occur, we could then extract the
> last of our continental reserves and use that energy to build the
> rail and renewable energy infrastructure that we would need for the
> next 100 years. On the other hand, if that supply had already been
> used up, we couldn't even run the equipment required to build the
> post-petroleum infrastructure (or agriculture!).
>
> Does anyone even think long-term strategy in this country any more
> - or do we insist on instant gratification, even if it is just 10
> cents off per gallon?
On Aug 25 10:20 PM oilproducer wrote:
> "Given that we live in a world made of plastics, does anyone know
> what we are going to use as a substitute for oil in the chemical/industrial
> complex?"
>
> Well it is possible to make carpet from corn oil. You just can't
> make enough to fill the demand.
>
> The next time you drive on the highway try to imagine all the miles
> of asphat on all the roadways in the US...and then the rest of the
> world where all that tar had been pumped out of a well from somewhere
> in the world. How many barrels of tar did it take? And then these
> roadways have to be resurfaced from time to time.
>
> If you were going to use concrete for roadways you still have to
> heat the cement to 2800 degrees in the manufacturing of this product.
> The liquid lava flowing out of Hawaii's volcanos' is 2200 degrees.
> So every square inch of an four-lane interstate highway system made
> with concrete used cement heated to temp 600 degrees high than that
> lava