I would suggest the post-peak profile of the Hubbert curve can?t be used as a forecast. It is simply a result of geologically constrained production in an otherwise business as usual environment, the area under the curve being the remaining recoverable reserve. If we accept that post peak will be anything but business as usual then we can dismiss the post peak profile. No one can tell what impact resource wars, global depression etc will have on the abilities of the oil majors or national oil companies to bring oil to market.
If the collapse of the Soviet Union is a reasonable proxy for a post peak global collapse (this could even be optimistic since there wasn't a serious war involved) then oil production could fall away very rapidly indeed. FSU production fell by 50% in under 5 years.
See this graph from Laherrere:
I guess this was economic collapse leading to oil production collapse, but couldn't the global case see peak oil causing economic collapse which in turn destroys oil production?
Also important is regional variations in post peak oil supplies. Although global oil production may decline at an aggregate of 3% (as Campbell generally suggests) it does not mean that for each country that supplies will drop by 3%. It is very possible that, say, poorer countries will be outbid so that year on year, one country may experience a 10% decline in supplies while another may only experience 1% decline - or may even have an increase.
These supply rates will also be affected by conflict, political struggles and infrastructure challenges.
It would also be interesting to look to the point when all the countries that exported oil stop exporting as they struggle to meet their countries own internal needs.
The tail-off of the downslope will probably match the Curve closely in the same way that the beginning of the upslope did. But the first half of the downslope will be as bumpy and unpredictable as the upslope was after the 1970s with its embargoes and depressions.
Last edited by WolfattheDoor on 14 Aug 2006, 16:20, edited 1 time in total.
WolfattheDoor wrote:The tail-off of the downslope will proabably match the Curve closely in the same way that the beginning of the upslope did. But the first half of the downslope will be as bumpy and unpredictable as the upslope was after the 1970s with its embargoes and depressions.
I think that Chris's point is that it may well not. The upslope was, generally, a global economy expanding into increasing energy supplies (with a concomitant increase in technology and expertise). And so far, this has also been true of every country that has peaked. So despite the fall in its own production, there has always been more oil for any country which has peaked to recover the other half of its oil reserves.
However, within a few years time, the global economy will be receding. Things will be breaking (have a look at the fragility of microprocessors article). Since, by definition, most of the remaining oil will be hard to get, it's quite possible that things will break enough for a lot of it not to be recoverable - hence a cliff, and not a curve,
Peter.
Last edited by Blue Peter on 18 Aug 2006, 16:02, edited 1 time in total.
It's all a question of whether you think there will be one big crash or many, and where on the downslope it/they will be. Looking at how the world has coped so far with $70 barrels (unthinkable a few years ago), I suspect we will cope initially with the downturn as recessions reduce demand. I think there will be crashes at some point, rather like the fall in the late-1980s but I don't expect a catastrophic crash.
A series of hills and valleys leading to a slow, quiet tail-off.
I too believe that the economy will go through a whole serious bad and worse depressions followed by small recoveries. The in-between recoveries will each time run out of steam due to shortages of energy and also due to collapsed markets not recovering at the same rates around the world.
It would be very enlightening to be able to run some basic scenarios through some of the UK economic models. Has anyone any kind of access to such a model, even a simplified version, maybe at a University?
Suppose we allow the economy to try and expand at 2 or 3 % per year, but then impose resource limit (oil) at a particular level and watch.
I suppose that the model would simply predict that at certain level of increase in oil price, more oil would be produced due to the demand and supply rules programmed in. But if this was a University model, maybe such rules could be tweaked to disallow that.
Our interconnected economies could collapse really quick and a lot of stuff could become rightout unavailable. Extremely vulnerable supply-chains are not unique to microchips, a simple thing as a pen takes a hell of a lot of infrastructure to produce today. And dont get me started on food!l
Then the deepwater oil might become impossible to extract at all.
I dont say that I think it's the way it will go, just one possible way of many.
In terms of economic recession and recovery, I am of the hope that when the economy regrows, it regrows in a way that is based on environmental and energy sustainability. Although incredibly difficult, it is not impossible, although it would be impossible to reach the levels of economic 'growth' that we are at today. However, it is the size of this growth that many would say is the problem!
This is another interesting aspect to this debate, which I've just copied from a poster called 'Bubba' on TOD (is this allowed?),
Peter.
This info was in the form of a post that has been in the editing queue for a while, but it is relevant to the lead article in this post
Project Economics for the IOCs - Or why increasing prices will ultimately have no (or limited) impact on global supplies
Classical economics tells us that these quarterly-reported record cash flows and profits that the oil industry is experiencing in connection with $70/bbl oil will cause a reaction on both the supply and demand side and ultimately dampen the long term price increases. However, the price of oil has been increasing pretty steadily since the beginning of 2002, and if we look at the production response from the IOC's, we see no supply response. Why is that?
Ultimately, the answer to that question is relatively complicated, and depends to a large degree on the way oil companies run economics on future projects.
The big international oil companies (IOCs - ExxonMobil, Shell, BP, ChevronTexaco, Total, etc) are only interested in mega-projects.Ultimately they have to invest their cash flow (or give it back to the shareholders), and they have to find projects that are material to the company. They might be able to drill a couple oil wells onshore in Texas and make a quick 100% return on investment, but such an investment is like giving a single drop of water to a giant to slake his thirst. Ultimately the giant needs to find a much larger source of water or it will die.
Much has been written recently about these mega-projects. One thing is for sure - they take a long time from concept to payout, from discovery to production. They require billions of dollars of capital (as much as $20 billion in the case of Sakhalin II). They tend to be fraught with cost overruns.
How do you plan for a project that has a 15 year lag from concept to payout where analogs have shown that the project will likely cost much more than my engineers are telling me today? The answer is very conservatively. You plan for the downside. You don't plan with the thought - How much money will I make if the price of oil is $100/bbl? Instead you plan, based upon your experience that oil might go back to $15/bbl, and test your project's economics on this downside scenario.
In a world of stable prices this all works out OK. But with oil prices going up an average of $10 to $15/bbl/year how does this all play out?
Well first of all, although individuals in the oil industry talk about Peak Oil (I even saw a Peak Oil poster on the wall in our office the other day!), and there is much private discussion about the likelihood of high prices continuing long into the future, official corporate policy is that "Everything is Fine" and oil prices will come back to earth in the near future (thank you very much Daniel Yergin!!!)
In my own company we have a large number of mega-projects in the planning stages. Most of these projects would not have any production on stream before 2010. The production lives of these projects would mostly be between 2010 and 2030. When we forecast profitability for these projects they always look very marginal. Why?
Well we use a conservative price premise (let's say something less than $45/bbl) for selling the oil during this 2010-2030 time period. In the mean time, we are requesting cost estimates from vendors and contractors who deal on a much shorter time scale. Their investment horizons are between now and 2010. They are living in a $70/bbl world heading north. Their services are in demand. Their customers are flush with cash. It has been more than 20 years since this situation has existed. Consequently, they are going to charge a substantial premium for their products and services.
So what do we have - a supplier living in a $70/bbl world trying to get while the getting is good, and a buyer living in a $20 to $45/bbl world pretending that "Everything is Fine" and that life-as-we-know-it will go on forever. So each year we re-look at these projects, re-run the economics, changing the product price from $18 to $25 to $35 etc. but also having gotten new cost estimates, and the profitability never looks any better. Consequently, we sit on our hands and mope about not having any good-looking projects to move forward with.
So despite all of the remonstrations by these companies that they are doing all they can to supply oil to the market, the reality is that, though they may be spending more money than they had forecast a couple years ago, they are not moving projects through the development and construction process any faster than they would be if oil was at $25/bbl.
PowerSwitchJames wrote:In terms of economic recession and recovery, I am of the hope that when the economy regrows, it regrows in a way that is based on environmental and energy sustainability. Although incredibly difficult, it is not impossible, although it would be impossible to reach the levels of economic 'growth' that we are at today. However, it is the size of this growth that many would say is the problem!
Yes, yes, I also have hopes for a balanced future, that's for sure. Otherwise I would not be writing here.
A terrible complication is the lack of historical precedents though. I know of only one complex society which managed to scale down, and that was the Eastern Roman empire with centre in Byzans. They were on the brink of collapse in the 400's just like the Western Roman empire, but they managed to scale down and simplify and lasted another 800 years. Then the Turks came along and had them for breakfast.
Otherwise there are no historical precedents known to me. All other collapses of complex societies have resulted in "dark ages".
MacG wrote:
Otherwise there are no historical precedents known to me. All other collapses of complex societies have resulted in "dark ages".
I think we have a good possibility of a TEC but I can also see that we might have a recession / depression and come out the other side with some kind of society (perhaps less advanced than today?s). How we act today determines where we will end up and we have a slight advantage over other complex societies; we know what could come our way and we can plan for it.
I do not think of a new dark age as a forgone conclusion, we can change our own fate and a number of us work for a better post peak future.
clv101 wrote:I would suggest the post-peak profile of the Hubbert curve can?t be used as a forecast.
Since it's a model of unconstrained production, the top is likely to be "chopped off" as oil companies realise there's no profitability in creating/servicing infrastructure that will effectively yield small amounts of total volume and thus ROI. Similarly this will happen on the descent.
My understanding is that the curve from 1850 to date is based on actual data and is economically constrained (ROI) and that the curve into the future forecasts the maximum possible production of crude oil at this point in time, given the necessary investment in infrastructure. Future production will be constrained economically (reduced demand), by resources (rigs, pipelines, tankers, refineries), government dictat (conservation, legislation, hoarding), the weather and ultimately EROEI. Any time production is below the predicted curve gives an opportunity for it to be above the curve or for the tail to be longer, if the area underneath it is to remain the same and that that total area is a function of the accuracy of URR.
"If the complexity of our economies is impossible to sustain [with likely future oil supply], our best hope is to start to dismantle them before they collapse." George Monbiot
My understanding is that the curve from 1850 to date is based on actual data and is economically constrained (ROI) and that the curve into the future forecasts the maximum possible production of crude oil at this point in time, given the necessary investment in infrastructure. Future production will be constrained economically (reduced demand), by resources (rigs, pipelines, tankers, refineries), government dictat (conservation, legislation, hoarding), the weather and ultimately EROEI. Any time production is below the predicted curve gives an opportunity for it to be above the curve or for the tail to be longer, if the area underneath it is to remain the same and that that total area is a function of the accuracy of URR.
Isnt this a good thing though?
If didnt have these bottlenecks (for example rigs , skilled workers etc) , then we would over exploit the resource even more!
Perhaps these bottlenecks are good , since it may increase the chance of slower decline?
I agree though that political and economic events are more of a threat to the decline rate than actual resource availability.
clv101 wrote:
I would suggest the post-peak profile of the Hubbert curve can?t be used as a forecast.
Absoluutely. Politics and economic cycles are not suddenly going to stop!
Theres bound to be ( I would suggest) at least as much jiggle on the way down as there was on the way up. The suggestion that there will be a 'sawtooth' descent, as a result of a series of global recessions and recoveries ( each time the recovery bumping up as far as the geologically constrained production limit, then collapsing back to recession) seems like a reasonably possible scenario.
The totally unpredictable joker in the pack is technology. We have no way of knowing what that might bring.
