Three Nails in the Coffin of Peak Oil

[clv101]

Steve's hit the nail on the head with this point. Unless we are finding at this rate we can't keep up with the depletion rate on our older fields such as Gawar in Saudi Arabia which has been producing very large quantities for about 50 years.

It goes without saying that we're not about to reverse the net decline of conventional oil. However, that doesn't mean this find isn't hugely significant. It's likely to to have a major impact on the Brazilian economy and even globally, an additional ~million barrels per day for a couple of decades will shift the depletion curve to the right by several years.

In my view, it's a huge, significant both on the local and global scale discovery. But, of course, it doesn't change the broad depletion narrative.

[Little John]

Steve's hit the nail on the head with this point. Unless we are finding at this rate we can't keep up with the depletion rate on our older fields such as Gawar in Saudi Arabia which has been producing very large quantities for about 50 years.

It goes without saying that we're not about to reverse the net decline of conventional oil. However, that doesn't mean this find isn't hugely significant. It's likely to to have a major impact on the Brazilian economy and even globally, an additional ~million barrels per day for a couple of decades will shift the depletion curve to the right by several years.

In my view, it's a huge, significant both on the local and global scale discovery. But, of course, it doesn't change the broad depletion narrative.

At current global consumption rates, it will shift the global depletion curve to the right by 4 months. That's not huge, it's tiny.

[clv101]

At current global consumption rates, it will shift the global depletion curve to the right by 4 months. That's not huge, it's tiny.

that it's magnitude equates to 4 months of current supply is not a useful way to asses it's significance in my opinion.

Let's assume it'll flow at 1 mbpd. That means within around a decade's time global extraction will be 1 mbpd higher than it would otherwise be without this field's contribution. We don't know what conventional oil will be doing by then, what the production rate will be or how fast it'll be declining. Since 2005 conventional has been fairly flat in the 72-76 mbpd range. Within a decade net decline may have become firmly established. If, say, the trend is 200 kbpd /yr then this field alone shifts the depletion curve 5 years right. If the trend is 500 kbpd /yr, we move 2 years to the right.

[biffvernon]

And the global warming trend moves to the left?

(Did Descartes realise what use would be made of his invention?)

[Little John]

At current global consumption rates, it will shift the global depletion curve to the right by 4 months. That's not huge, it's tiny.

that it's magnitude equates to 4 months of current supply is not a useful way to asses it's significance in my opinion.

Let's assume it'll flow at 1 mbpd. That means within around a decade's time global extraction will be 1 mbpd higher than it would otherwise be without this field's contribution. We don't know what conventional oil will be doing by then, what the production rate will be or how fast it'll be declining. Since 2005 conventional has been fairly flat in the 72-76 mbpd range. Within a decade net decline may have become firmly established. If, say, the trend is 200 kbpd /yr then this field alone shifts the depletion curve 5 years right. If the trend is 500 kbpd /yr, we move 2 years to the right.

It can be described as 4 months supply in terms of using it all up at once in the absence of any other source, or it can be described as spread out over several years as a tiny fraction of an overall supply taking into account all other sources.

In other words:

* Represented as a singular global source, it is a tiny four month's supply such that the total supply depletion curve is moved by four months.

or

* Represented as a fraction of the global supply of all other sources, it is a tiny fraction of that supply for a number of years such that the total combined supply curve is moved by four months when the tiny fractional increase to that combined supply of this single source over the years is summed.

Either way it is described, the global depletion curve is moved by four months, assuming current global consumption rates, by an addition of 12 billion barrels to global reserves.

As for what global consumption rate will be in a few years time and how any changes to that consumption rate will affect the supply depletion curve, that is an irrelevant consideration since it will be what it will be irrespective of the specific matter under consideration here.

[Ralph]

Economics is not fit for purpose since it is driving us towards catastrophic global warming. The failure to internalise environmental pollution will be the death of us.

Well, that could be. But it doesn't have anything to do with what Euan claiming is the death of peak oil. Economics obviously seems to have cured that problem to some extent. So the economists are probably happy, I realize those who refuse to acknowledge the substantial changes are another group altogether.

[Ralph]

Meanwhile, back to the thread title..

Well, there goes the climate.

The thread title isn't about climate. It is about why the peak oilers themselves (written by one) think the idea failed, and by extension why sites like TOD fled the field of battle.

[Ralph]

Are we finding one of these fields every 4 months?

Considering the amount in total inventory according to the IEA, the little extras aren't "bad" in the resource sense, but considering that the right answer is to not use it....so we found more....MORE isn't the problem, we've already found too much.

[kenneal - lagger]

The problem is that economics thinks that you can although it doesn't actually realise that this is the result of their thinking.

I find myself completely flummoxed by the meaning of that sentence.

No economist with a functioning brain will ever claim that if you have 1000 barrels of oil on the entire planet, that his/her social science will magically create more.

Current economics says that if a resource becomes more expensive because of short supply new investment will be deployed to find more of that resource to benefit from the increased price. Current economics does not recognise the finite nature of the planet or, if they do, they do not recognise that we are getting near to Limits To Growth due to resource constraints.

Not one. It seems to me that if this is what YOU think economics mean, but THEY certainly don't, then we battling some sort of impression you have of economics, a strawman if you will.

I take my knowledge of current economic thinking from Energy and the Wealth of Nations: Understanding the Biophysical Economy by Charles a Hall and Kent a Klitgaard, from the Feasta website, from the Positve Money website, people such as Chris Martensen and from various pronouncements made in the media by economists.

Economics says that if a resource is getting short its price will rise so that investing in it becomes more attractive.

It also says people will use less as the price rises. And that some will choose to use something else instead. These all work together, and each is capable of affecting the price.

You have taken that phrase out of the explanation of which it was part to prove I know not what.

That increased investment will guarantee more of the resource becomes available.

You appear to be assuming that investment can create resource. It cannot, as we have already discussed. There are no guarantees, obviously.

I am certainly not assuming that although current economic thinking assumes that. It is obvious to anyone who believes in the finite nature of the world we live in but not to most economists who believe in infinite growth.

Economics takes only minimal account of the higher energy needed to extract that resource or the fact that energy might become harder to find.

What does "minimal account" mean? Name a single process within the human economic system which does not account for the energy input when the basic principle of economics hits? I have a product...I will sell it to you for a price. If we can agree on that price, I will sell it to you. Everything which went into that product, every BTU, be it biochemical, electrical, liquid fuel, crude or natural gas based, every fiber, piece of rubber, plastic or cloth was taken into account when I sold you that item.

Economics accounts for energy merely as a cost. It does not account for the fact that energy is a fundamental part of every thing we do. I have quoted before the basic equation of economics which says that "output is the product (in the mathematical sense) of capital and labour" which dates from the seventeenth century. Nowadays labour is virtually irrelevant as the major input is energy. If we didn't have energy in its current abundance and at its low cost no amount of labour could maintain our current lifestyles.

It takes no account of declining ore concentrations or the massive problems of getting ultra lean ores from 5000 feet underground.

It takes PERFECT account of the cost of such extraction. In the same way as I mentioned above.

See my previous explanations. It accounts only for the cost but does not acknowledge that the paucity of our current mineral ores and the continuing reduction will cause a problem in the future.

Economics is no longer fit for purpose in the 21st century.

It has been functioning just fine through 13% of this century so far. Are you claiming that if I had you a pound note you cannot take that pound note to the store and buy a pound worth of goods with it? A pounds worth of gold? A pounds worth of bread?

Certainly this still works in America, I am surprised the Isles have broken down so far that economics doesn't work. How do you pay for internet access?

You are talking about finance or monetary matters there not economics as generally accepted. Introducing a strawman as you say.

Economics is no longer fit for purpose as it doesn't recognise the problems that economic production is causing the natural environment that we live in. As Biff said it externalises some of the major outputs from economic production.

It doesn't account for the costs of air pollution or of waste disposal for instance. Polluting the air is not costed whereas the costs of cleaning up that polluted air would be counted as a plus for GDP. The same with the pollution of the ground water in Alberta by tar sands production or the pollution of drinking water by fracking companies. Again, any cleanup would be counted as a plus for GDP. The pollution of the sea by waste plastic is not accounted for as a cost but any cleanup would be a plus again.

Economics is failing to find a way of modernising the banking industry, which is still in imminent danger of collapse even though billions of pounds/dollars have been pumped in. Whole countries are in danger of collapse, still. I will not go on as I could do.

One of the main reasons why economics is failing us is because most economists have no idea of the power of the exponential function as the now late Professor Albert Bartlett said. They have no idea of the result of doubling times in the use of resources that the exponential growth imposes.

The current 7% growth rate of the BRICS countries, about half the world's population, means that they will double their historic use of resources over the next ten years. The fact that they have done so in the last ten years only adds to the problem. This increasing use accounts for the growing scarcity of resources before the 2007 crash and their then high price. It also accounts for why the price of oil has not plummeted after the crash like it did after previous crashes.

Economics/markets take time to react to price signals but the current rate of change will cause a huge problem, as the Hirsch Report has indicated, when these high growth rates of huge masses of people catch up with our declining resource base. Our economic and banking system can't take the sudden massive recession that this sort of clash will impose.

I repeat, "Economics is failing us in the 21st century."

[Ralph]

Current economics says that if a resource becomes more expensive because of short supply new investment will be deployed to find more of that resource to benefit from the increased price. Current economics does not recognise the finite nature of the planet or, if they do, they do not recognise that we are getting near to Limits To Growth due to resource constraints.

They are called cost supply curves, what the economists use, and they explicitly recognize a finite world, as for NO PRICE can a commodity be obtained i.e. you "run out".

Where did you learn your resource economics from? Peak oil social commentators? See that bend in supply? It is becoming an asymptote, i.e., you are running out.

Econ 101.

It is obvious to anyone who believes in the finite nature of the world we live in but not to most economists who believe in infinite growth.

If economists believed in infinite growth, they wouldn't build asymptotic cost/supply curves. As demonstrated previously, certainly the IEA counts a finite number of things to build liquid fuels from, and at a certain cost. They don't assume infinite growth either, and quite explicitly put numbers on their assumptions.

Economics accounts for energy merely as a cost. It does not account for the fact that energy is a fundamental part of every thing we do.

Of course it accounts for it being a fundamental part of everything we do, and it then assigns the cost.

Nowadays labour is virtually irrelevant as the major input is energy. If we didn't have energy in its current abundance and at its low cost no amount of labour could maintain our current lifestyles.

Some people are quite happy to proclaim peak price on oil, it being so much easier than handling the nasty reality of increasing liquid fuels production. They do not argue about "low cost" of that energy, quite the opposite. So are you right, or are they?

As far as lifestyle, please. You aren't riding a bicycle to power your laptop are you, the UK being so poor now?

It takes PERFECT account of the cost of such extraction. In the same way as I mentioned above.

See my previous explanations. It accounts only for the cost but does not acknowledge that the paucity of our current mineral ores and the continuing reduction will cause a problem in the future.

See the cost supply curve. It accounts for what you claim isn't accounted for PERFECTLY.

Economists really aren't stupid, they just look that way sometimes.

I am surprised the Isles have broken down so far that economics doesn't work. How do you pay for internet access?

You are talking about finance or monetary matters there not economics as generally accepted. Introducing a strawman as you say.

I'm pretty certain neither you nor I are economists, so what you mean by "generally accepted"? What guys like Charlie Hall write, or economists who do it so well for a living they are paid to, versus playing at being oil folk like Charlie does?

It doesn't account for the costs of air pollution or of waste disposal for instance. Polluting the air is not costed whereas the costs of cleaning up that polluted air would be counted as a plus for GDP.

If you are unhappy with the rules and regulations concerning GAP metrics, it would seem prudent to require full cycle analysis of such things. You would certainly get no complaint from me, it sounds like a great idea.

But it ISN'T because humans skip these steps that the world will end, or that economic theory doesn't work. Because economic theory generally does work, you could do this full cycle modeling, but it rapidly becomes an advocacy issue. The reason why is because cost/benefit analysis must be thorough, and it must be fair.

For example, the benefit of being able to post to forums using electricity and fossil fuels and plastics is obviously higher to you than the cost such things generate in the form of air pollution and waste disposal. Otherwise you would stop doing it...assuming you believed in the system you just put forward.

One of the main reasons why economics is failing us is because most economists have no idea of the power of the exponential function as the now late Professor Albert Bartlett said.

Go look at that cost/supply curve again. What do you think best describes how an asymptote is approached? While Albert was undoubtedly the life of the party, his idea also works quite well on this exponential.

Calculate oil production flat or declining, and the doubling of this and tell me, how many years would it take to completely replace the work done by all fossil fuels on the planet?

I repeat, "Economics is failing us in the 21st century."

But it isn't failing us badly enough to stop people from using fossil fuels, growing the world economy, or even convincing the average citizen of the first world to change.

Invisible to all but doomers maybe? Sort of like peak oil?