Allen Fuller

Balancing Oil Supply and Demand: Oil Price Looks Like It's Bottoming

Invested in DXO about two months ago. Nearly doubled my money.

Peak Oil - Are We There Yet?

On Sep 19 10:19 PM Brian Pursley wrote:

> In response to Allen Fuller,
>
> I say oil is renewable because it is. See Eugene Island and the
> other wells that are refilling.

Oil is renewable if you are willing to wait millions of years.

The "refilling" of certain wells, most likely from reserves deeper in the crust, is an interesting phenomenon. Unfortunately, it is occurring at a rate approximately 100 times slower than our current consumption of oil. So, it's ludicrous to think we can just wait for a few wells to magically refill themselves and then suck it out again.

> Why did the US peak more than 35 years ago? Because that's when
> the radical environmentalists started their political engineering.
> The US peaked by design not by geology. We've only been drilling
> offshore in 2 states.

Your history is wrong. Oil peaked in the U.S. NOT because of radical environmentalists banning drilling etc. No, in fact, in the 1970s there was a DRILLING FRENZY as the oil industry tried to reverse the declines they were seeing. My sources show that drilling in this nation was at its highest around 1980. Yet this was unable to reverse the decline in the lower 48. Only new fields in Alaska allowed us to get a brief bump up in production, though we never achieved the rate of flow we had in 1970.

> How come this peaking pattern is seen in field after field and nation
> after nation around the world? What peaking pattern? Brazil and
> Russia certainly haven't peaked. I suspect it's because drilling
> isn't illegal there. Just a guess.

Russia is now peaking. Their production curve over the last few years shows a slowing in growth, and they are now on track for their first full year of actual declines.

Brazil's discoveries are tantalizing, but in the grand scale of things, only amount to a year or two of consumption. Besides, you have to drill through thousands of feet of rock and salt to get to it. Doesn't sound like the easy oil we have built our economy on. Some estimates indicate Brazil will peak, depending on how fast they produce, in the next decade or even sooner.

In many other nations that used to be great oil producers, we are seeing declines. The U.S., the North Sea (UK and Norway), now Mexico, Indonesia, Egypt, India, Syria, Venezuela (yes!), Yemen, and more. The full list of countries past their peak (by the way, they DON'T all have the environmental restrictions that supposedly, according to you, made the U.S. peak) now includes most of the oil-producing countries in the world. Only the true giant fields in a few nations, mostly in the Middle East, are keeping the world from hitting its peak. And even there, they are relying on old giants, not new discoveries.

> No such thing as so-called "fossil" fuel. In the history of the
> universe fossils have never miraculously or magically evolved into
> complex hydrocarbons: oilismastery.blogspot..../

The abiotic theory of oil production is pretty strongly discredited; look it up. Its proponents do NOT back their theory up with much in the way of verifiable statistics and facts. Even if it were true, again, the rate at which it supposedly gets produced in the crust, according to the theory's own proponents, is not enough to supply our current rate of consumption. So it's a red herring either way.

Peak oil is a historical fact, observable in the past at the level of oil fields, countries and regions; and it is pretty obvious to those who study the DATA and the FACTS that it is about to occur world-wide.

Peak Oil - Are We There Yet?

Also if peak oil is "garbage" then why did the US peak more than 35 years ago? How come we haven't been able to reverse this trend even with high prices and good technology? How come this peaking pattern is seen in field after field and nation after nation around the world?

Where are the mythical "400 billion barrels" in the Bakken formation? (The USGS came out and said that was a myth; real reserves are estimated at 4.3 billion, nothing to sneeze at but only a few months' worth at our current consumption.)

When are we going to see the "oil" from so-called "oil shale", and at what price? Where are we going to get all the water, and how can we possibly scale up production to the levels required? If you study these so-called solutions, they can only contribute a small part of our consumption over a long range of time.

I'm not a doomer; I believe we will have economic hardship but eventually we will move to true renewable sources like wind, geothermal, and solar. I hold out hope for fusion research as well. But it's time to admit reality regarding fossil fuels.

Peak Oil - Are We There Yet?

To Brian Pursley,

Why do you say oil is renewable? Of course, at a certain cost, a decent chemist should be able to manufacture it from raw elements or basic compounds like water, carbon dioxide, etc. But at that point you need more energy to create it than you would get out of it. Where is your energy going to come from?

All you have to do is look at the fact that DISCOVERIES peaked 40 years ago. You can't pump what you haven't discovered. If peak oil is garbage, then where is all the new oil being discovered? There's a lag time between discoveries and production too, so even if discoveries suddenly and miraculously jumped WAY up, you'd still have a gap before they can contribute to existing production, which is projected to start declining around 2010 or so.

Economists point out that higher prices will cause supply to increase. This is true up to a point; higher prices make previously uneconomic oil suddenly worth extracting. But at some point the price itself will cause so much hurt to the economy that it won't matter that we have "more" oil available at that price.

Geologist: In Terms of Supply and Demand, the Oil Peak Is Past

I agree with most of what Chris said. Even if Peak Oil is not happening in the next 5 years (it WILL happen... even the most optimistic analysts see it happening in the next 20-30 years at the MOST), the sooner we get OFF oil, the better we will be.

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.

Nobody Cares How the Energy Crisis Gets Solved

Correction, the wild estimates are the P5 figures, not the P95 figures as I incorrectly said in my post at 4:11. In other words, the estimates these political figures are throwing around have less than a 5% chance of being true... even before they start adding non-conventional and unproven sources like oil shale!

Nobody Cares How the Energy Crisis Gets Solved

The full "fact sheet" from the USGS on the Bakken is at pubs.usgs.gov/fs/2008/.... They include the P95, P50 and P5 estimates, but they are labeled F95, F50 and F5 instead, which is commonly done in the industry.

Find out the facts for yourselves, folks... don't believe these figures of "trillions" that are just thrown around for political gain.

Nobody Cares How the Energy Crisis Gets Solved

To add one more point about the Bakken estimation from the USGS... it is an estimate of 3 to 4.3 billion barrels of "technically recoverable" oil. They don't make any estimate for "economically recoverable" oil which is usually lower, and depends on the spot price of oil. As usual, the last drops of oil are the most expensive to get out, so at some point it becomes unprofitable and some of the "technically recoverable" oil is left in the ground.

Nobody Cares How the Energy Crisis Gets Solved

Since we "don't know" how much of the "2 trillion" barrels in the Bakken Formation is actually recoverable... we better be prepared for the low end of estimates. I'd rather be ready, and be pleasantly surprised, than bank my future on oil that ends up not being there or not being extractable at economically feasible levels.

Incidentally, I don't know where you get this 2 trillion figure for the Bakken formation. The USGS just this year put out an estimate of 3 to 4.3 billion: (www.usgs.gov/newsroom/...). Your figure is almost 1000 times higher!

Historically, these wildly optimistic projections do not come true; the actual economically recoverable oil tends to stay BELOW the P50 estimate. (Estimates of recoverable oil tend to come in 3 figures: the P95, P50 and P5 figures. A P95 estimate of 500 million barrels indicates a confidence of 95% that we would recover at least that amount of oil; in contrast, a P5 estimate of 90 billion barrels indicates just a 5% chance of recovering 90 billion barrels.)

However, I have noticed a lot of talk-show boys and the like trumpeting how we have TRILLIONS of barrels of domestic oil "just waiting around to be extracted". To get these figures they quite often throw together the most wildly optimistic estimates they can find, usually the P95 estimates plus wildly optimistic estimates of oil we could recover from non-conventional sources such as oil shale, which have not been successful commercially to date.

They cobble together these wild estimates and then throw the numbers around as if they were undeniable facts. All of this is POLITICALLY MOTIVATED. I say, beware. If we do end up with a crisis and we are not ready, it will largely be because of this disinformation. Again, I'm generally conservative but I really am getting disgusted with the political degradation of the discussion here on both sides including the Republicans.

Nobody Cares How the Energy Crisis Gets Solved

ozzy43, I don't think we need to be as pessimistic as the hard-core doomers. Recent weeks and months have shown that oil demand is a bit more elastic than some supposed, for example. Price signals may well curtail our demand to the level that our remaining oil, while still declining, is a gentler slide than some presuppose. (The curtailment of demand of course will be harsh to our economy.)

Remember after all that peak oil is not the sudden absence of oil. It will decline, but there will still be enough oil, in my opinion, to allow us to transition. Granted, our economy may be in shambles by the time we attempt serious switchover to alternatives, but it's not like there will be no oil with which to create the photovoltaics. That's what gets me about some people like Kunstler. They get a little too carried away with themselves and don't give hardly _any_ room for human inventiveness and ingenuity.

I agree that our lifestyles will have to be severely curtailed, but I think the impetus for that will first be economic depression before a seriously severe shortage of oil. I do see a transition to a post-oil economy, a very bumpy one at this rate, and ultimately, a lifestyle that provides for our needs but is far from the profligate lifestyles of the present.

The main barrier to our starting this transition is the refusal to accept reality by the majority and especially the politicians. I don't think this barrier can stand up for more than a few years longer.

Nobody Cares How the Energy Crisis Gets Solved

"Most Americans don't think much about our present energy crisis, we just want it to end."

If that's true, most Americans will be sorely disappointed. It will only end when we break our dependency on fossil fuels. And that probably means *gasp* a change in our lifestyles! Oops, that violates the concept of our God-given right to do whatever the &*# we please. Forget I mentioned that...

"6. How much money it will take to develop the oil shale deposits in the Rocky Mountains, just spend it."

What if it takes more money than we have? Where is the limit? What if we spend hundreds of billions and only get a relatively small flow from it?

"8. How many nuclear reactors, wind farms or solar panels we need to ensure a reliable electric supply, just build them all."

Now that's something I can agree with. We will need them all, and will probably still have to accept a lower energy budget than we are used to.

"9. How we use coal, as long as reasonable efforts are taken to minimize its adverse effects."

Actually, most Americans don't seem to care even if we don't do ANYTHING about its adverse effects, though they should. They should also care that our coal won't last us "200 years" like most people think it will. Exponential growth will cut that down to 60 years or less, people, it's basic math...

"10. How Items #1-9 are accomplished, so long as our government drops whatever else it's doing and allows it all to start today!"

AMEN to the idea of focusing on this as a national priority.

I don't agree with the idea that drilling more will save us. If we drill as part of the package, I won't mind. But if all we do is focus on drilling and only pay lip service to the rest, we are doomed. There's just not enough there for us to close the gap.

Nobody Cares How the Energy Crisis Gets Solved

sieraromero, I am ashamed that far too many of my fellow Americans have become as you say, but don't give up on us yet. There are still solid, thoughtful, hard-working, sacrificing, hopeful yet realistic Americans left in enough numbers that, I believe, our country still has a good future.

Back to the energy discussion, I encourage anyone interested in issues of resource availability to view Dr. Albert Bartlett's lecture on Arithmetic, Population and Energy.

The key concept is simple. Have you ever wondered how our economies could continue to grow infinitely into the future, in a finite world? That seems to be the view of most economists. Certainly we have improved efficiency and have overcome many of the limitations we have faced in the past. And we will overcome many more. Our human ingenuity is amazing. Yet if you project infinite growth into the future, it becomes obvious that you will eventually hit limitations that you cannot overcome. If our population grows at 2% per year, in several hundreds of years we will have one person per square meter on the earth. Now obviously that's not possible, so sometime before then, our growth will have to stop. Either we stop our growth intentionally, or we hit some fundamental limitation that we cannot overcome, and we crash. If you want to deny this, please exit the land of rational thought.

Nobody Cares How the Energy Crisis Gets Solved

A couple of final thoughts.

I hope we can all agree that we won't be burning oil forever. That at some point we will have to transition away from oil to other sources of energy, preferably renewable and clean ones, which don't run out.

THEN WHAT'S THE PROBLEM WITH MAKING THE STINKING TRANSITION NOW?!?

If peak oil predictions are right, then we may just save ourselves (though it may be too late by some predictions).

If peak oil predictions are wrong, we are prepared that much sooner. AND we save money in the long run.

Studies have shown that investing in renewable energy saves money over the long range. Even with relatively expensive solar panels, those who have "bitten the bullet" and installed them in spite of their high cost have usually ended up glad that they did, even economically speaking. The problem is that the payback is usually too far out for most people's economic thinking. All they can see is the big up-front cost.

As a society, shouldn't we be steering in the direction of technologies that have a long-term future? What is it with people that they want to just blow this all off, act like there's nothing wrong with burning up precious resources like there's no tomorrow, and only pay lip service to alternatives?

Finally, this is also a matter of national security. Our dependence on foreign oil is crippling. It bends our national policy, limits our options in dealing with certain countries, and exports our wealth. We use 21 million barrels per day, but only produce about 8 million per day.

If you think we can close that gap, more than doubling our current production, by drilling more and using our own national resources, you are dreaming. After U.S. production peaked in the 1970s, we started drilling frantically right and left, but that didn't halt the decline in oil production. Adding the "vast" oil riches of Alaska was the biggest thing we could manage, and that only provided a bump up on the downward slope of production. Drilling offshore or in the Arctic will be a similar bump on our downward slide. It would take HUGE national effort, plus luck (that all the optimistic projections are true) just to halt the current slide in production. And to make up the 60% gap between our production and our usage? Don't delude yourself.

Sure, go ahead and drill, don't leave ANY resources for our children, but at LEAST at the same time make an AGGRESSIVE effort to find alternatives! There is no other way we can become truly energy independent.

Nobody Cares How the Energy Crisis Gets Solved

Pretzel Logic, how appropriate a name.

You need to do your OWN critical thinking. Critical of the talk show boys you are probably listening to.

I'm pretty conservative, but have always thought conservatives should conserve resources as well as the values and traditions that made this country great.

What is conservative about spending our resources like there's no tomorrow, leaving nothing for our children and grandchildren?

You challenge the idea that there is an actual shortage in energy. Again, I say, engage your critical thinking and don't just accept the idea that our country has "plentiful" reserves of oil. It depends on what you mean by that. I heard one guy on the radio say we have a TRILLION barrels of oil in this country. That is laughable. Best industry estimates are that there are one trillion barrels of recoverable oil left in the WORLD. In fact, U.S. *proven* *recoverable* oil is around 21 billion barrels. LOOK IT UP. This guy on the radio was throwing together the most optimistic figures (not proven recoverable reserves, but the wildly high estimates of possible reserves, without regard to recoverability) along with oil shale, tar sands and everything else he could think of, to make his case. If you look at history, the oil we actually get out of the ground is much closer to the estimates of proven recoverable oil than to the estimates of possible oil that he was using.

In one sense he had a point, and so do you. "Oil" as a natural resource IS plentiful in the ground in various places. But the conventional, recoverable oil that drives our economy, that we used to be able to extract for such a cheap price, is becoming scarce. Unconventional oil can be recovered and used to some degree, but it costs more both in dollars and in energy. Thus, our crisis is one of a shortage of the cheap energy we've grown used to having.

Everything ozzy43 mentioned has a HUGE impact on the discussion. I hate to be personal, but it is clear he is far more educated than you are on the subject. EROEI (Energy Return on Energy Investment) is the measure of how much net energy you get after you spend the energy to get the stuff out of the ground and refine it. For unconventional sources, EROEI is very low. Most of the oil shale (not actually oil, but kerogen) for example, may not even have an EROEI that makes it worth extracting. Though some of it does, it takes huge investments in capital and time to get a relatively slow flow of oil.

The real charlatans are the ones spreading these lies about how we don't need to conserve, and how if we only drilled on our own land we would be home free. They are the ones encouraging that we use up our children's and grandchildren's resources LITERALLY like there's no tomorrow. They are the ones threatening our children's economic future.

I refer you to theoildrum.com, energybulletin.com, and various factual information you can look up for yourself on the Internet. Look for the fundamentals. Cut through the hype. The reality is that cheap oil is gone FOREVER... or at least until we find an alternative technology that is cheaper.

'Pickens Plan' Comes in the Nick of Time

Pickens' Plan is a great first step. There are some problems with it, but I think these can be addressed.

The biggest problem facing America is that we need 10 or 20 "Pickens' Plans" in the next 10 to 20 years. We need wind, solar, nuclear, ocean power, electric cars, improvements to our power grids, grid-scale energy storage, and yes, we DO need to drill for whatever oil we have left.

Currently, worldwide, we only find about 1 new barrel of oil for every 6 that we use up, and this is finally starting to catch up with us. Coal is a huge resource but if we switch everything over to it (e.g. coal to oil liquification) then we'll use up a supposedly 200-year supply much faster than we expect. Oil shale may help, but we can't extract it fast enough to replace all our oil. Moreover, it is expensive and consumes a lot of energy... leaving a much smaller "net" gain in energy than many people expect.

In the LONG run (and that's how we should be viewing things instead of this stupid stopgap mentality you see from politicians and partisans), if it's not renewable, it's not going to be an option, whether we like it or not. So that's where the biggest push should be. Take Nanosolar's approach, for example. They have just built, I think, the biggest solar plant in the world, and by some calculations, can provide solar electricity for cheaper than coal (over the life of the solar panel). However even though it's the largest plant in the world, we need 100 of them, not just 1. We also need to develop grid-scale energy storage technologies because the sun doesn't shine at night!

So yes, Pickens' plan is a good start. Let's do it and let's do 10 times more in the next 10-20 years.