IEA report reminds us peak oil idea has gone up in flames

[UndercoverElephant]

Peak oil isn't about running out of oil.
Peak oil is about running out of cheap oil.

In that context economists are exactly the people you need to be talking to.

Cheap oil?

"Peak oil is the point in time when the maximum rate of petroleum extraction is reached, after which the rate of production is expected to enter terminal decline."

http://en.wikipedia.org/wiki/Peak_oil

So, once it looked like the internetz weren't quite up to snuff, I tried the originator of the idea.

http://www.energybulletin.net/stories/2 ... ssil-fuels

and he didn't say cheap either. Did you have someone specific in mind who created "peak cheap" rather than "peak production"?

I think you've missed the point, and I suspect you've missed it on purpose, but I'll give you the benefit of the doubt.

What JSD is saying is that the relevance of peak oil - economically, politically and historically - is that it marks the end of the era of cheap oil and the start of an era of ever-more expensive oil. JSD was responding to a mistake made by peak oil newbies, and also by the wilfully-ignorant and the propagandists who have no genuine interest in understanding this topic. That mistake is to equate peak oil with "oil running out".

Two things can be expected to happen as we pass peak oil - and both have already become a reality. The first is an increase in exploration/production from ever-more expensive fields (those in deep water, deep underground, or both, and/or in remote/hostile locations.) This keeps oil production ticking over (doesn't increase it much, but does make up for some of the declines in conventional production from old fields), but it drives up the price (if it did not do so then the oil companies wouldn't bother). The second is "demand destruction" as people choose, or are forced, to consume less of oil-derived products.

The net result of both of these things, economically, is that the underlying value of oil, and consequently the price of other forms of energy and of food, will continually be driven upwards, leading to long-term economic decline. From the POV of economics, it is pretty simple: every time it looks like the global economy is pulling out of the current depression (because that's what it is, and only money-printing and near-zero interest rates are hiding this fact - sort of) then the price of oil/energy will head northwards, which in turn will snuff out the recovery. This will continue until there is some sort of major change/catastrophe alters the way our civilisation operates.

In short: our existing global economic system is broken, and peak oil ensures that it cannot be fixed.

Peak oil = economic ruin for the industrialised world.

[Yves75]

Peak oil (not the cheap oil, but the production one) isn't a theory, itis just a really bad non linear regression fit to time series data. With a bump somewhere along the path I suppose, otherwise the entire bell shaped curve assumption wouldn't be in the mix.

There are two aspects to peak oil :

1)the fact that any production curve has to go through a maximum as the integral of this curve is the total of stuff extracted and that this total is finite.

2) Using the logistics function as Hubbert did to model the typical human behaviour induced way of extracting ressources, this leading to the bell shaped curve.

1) holds in all cases

For a given field or region, 2) may not hold for various reasons, a good example is the UK North sea oil with its two peaks. And of course 2) is never a perfect fit.

What is a behind the scene traction? Having dealt with government agencies, my first tendency is to discount their ability to have people of appropriate experience at the right levels. They can afford economists and whatnot, but not usually the upstream petroleum or exploratory petroleum professionals.

I think in this case you are wrong and a bit naive, first the IEA is properly funded, second this report is sufficiently important for "tractions" to occur.

And they did as described below :
http://petrole.blog.lemonde.fr/how-the- ... ts-mission

As to the IEA proper funding, you can read Fatih Birol interview below :
http://www.europeanenergyreview.eu/site ... hp?id=3970

I have a large team of 40 people with whom we write the WEO together, along with input from about ten external experts. We have fact-finding meetings and workshops. We also send out draft versions to about 200 peer reviewers.

Besides, plenty of expertise is out there typically through ASPO groups.

Americans are told all sorts of things, as is everyone else. There were certainly people who knew exactly what was going on, whether or not they told the general populace about it is another question (as is, would the general populace understand anyway).

If I recall there were certainly a fair number of shrieking meemee's going on back then, I find it unlikely that peak oil wasn't included in all the catterwalling at the time as well.

Here the point is that maybe 99% of Americans aren't even aware that their oil production peak occured in 1970.
And also about the fact that the "arab embargo" being used as a name for the first oil shock has been a very "practical" saying for the "cover up".

Note that the declaration of the embargo had a very clear effect on the barrel price, which was already increasing following US peak and dropping of Bretton woods, so that yes it is linked, even if in term of number of barrels taken out of the market the embargo was an almost complete non event (plus the fact that Saudi Arabia was cheating the embargo towards the US throughout, this also being a very little known fact these days).

And this "embargo" was practical on both sides :
1) for the US or the west in general to put the blame on "the Arabs" for the barrel price rise, when in fact this rise was of course also in the interests of western majors, and in fact necessary to start the more expensive plays : Alaska, North Sea, GOM. And also pushed by American diplomacy.

2) for the major Arab producing countries to show to "the arab street" that they were "doing something" for the palestinians (so that for instance if it had been known that KSA was cheating the embargo towards the US, sending tankers to the US Army in vietnam in particular, they would have been truly pissed)

[Halfbreed]

What JSD is saying is that the relevance of peak oil - economically, politically and historically - is that it marks the end of the era of cheap oil and the start of an era of ever-more expensive oil. JSD was responding to a mistake made by peak oil newbies, and also by the wilfully-ignorant and the propagandists who have no genuine interest in understanding this topic. That mistake is to equate peak oil with "oil running out".

I didn't make that mistake. I was just noting that cheap doesn't factor into, what should I say, the "classic" definition of peak oil? The instant cheap becomes involved, the economists take over and the rate really doesn't matter much. I found a video about it at the ASPO USA website, and it seems like a fundamental disconnect between absolute volumes and volumes at a given price. Seemed like it was about absolute volumes, but if the definition has now changed to an economic one, all of the oilfield trash can just go home and stop thinking about it I guess.

Two things can be expected to happen as we pass peak oil - and both have already become a reality. The first is an increase in exploration/production from ever-more expensive fields (those in deep water, deep underground, or both, and/or in remote/hostile locations.) This keeps oil production ticking over (doesn't increase it much, but does make up for some of the declines in conventional production from old fields), but it drives up the price (if it did not do so then the oil companies wouldn't bother). The second is "demand destruction" as people choose, or are forced, to consume less of oil-derived products.

The net result of both of these things, economically, is that the underlying value of oil, and consequently the price of other forms of energy and of food, will continually be driven upwards, leading to long-term economic decline. From the POV of economics, it is pretty simple: every time it looks like the global economy is pulling out of the current depression (because that's what it is, and only money-printing and near-zero interest rates are hiding this fact - sort of) then the price of oil/energy will head northwards, which in turn will snuff out the recovery. This will continue until there is some sort of major change/catastrophe alters the way our civilisation operates.

In short: our existing global economic system is broken, and peak oil ensures that it cannot be fixed.

Peak oil = economic ruin for the industrialised world.

So you are saying peak oil happened, the economic system is broken, but not broken much based on the reality of..well.. in America anyway, everyone is still driving off to grandma's house? I don't know, letting the economists in the door means that the IEA and EIA demand/supply assumptions are right, beause the economists are. I liked it better when it meant oil production rates rather than getting "them" involved.

[Halfbreed]

What is a behind the scene traction? Having dealt with government agencies, my first tendency is to discount their ability to have people of appropriate experience at the right levels. They can afford economists and whatnot, but not usually the upstream petroleum or exploratory petroleum professionals.

I think in this case you are wrong and a bit naive, first the IEA is properly funded, second this report is sufficiently important for "tractions" to occur.

Naive? In what sense? For starters, properly funded does not mean that the correct personnel are hired, governments simply don't compete very well with high priced talent in private industry, for example, try and find petroleum engineers among the oil and gas inspectors in any state in America. And real resource professionals at the EIA? I know of two. $100 million government program, and there are two. One has no industry experience whatsoever. That isn't naive, it is just fact. The pay scale for those of us who dosome of this for a living just isn't encompassed by government pay scales, therefore we don't work for them. Unless we don't know much (kids out of school who can't find work elsewhere), have extenuating personal circumstances requiring we stay near or with a particular job (children with preexisting medical conditions we can't afford to lose health insurance for), etc etc.

And I still don't know what "tractions" are.

Besides, plenty of expertise is out there typically through ASPO groups.

Oh, there is expertise in the ASPO groups for sure. But the quality of Hubbert's scientific thought on this topic hasn't yet been matched by anything I've seen so far, and modern resource scientists like that don't tend to show up among the ranks of ASPO.

Here the point is that maybe 99% of Americans aren't even aware that their oil production peak occured in 1970.
And also about the fact that the "arab embargo" being used as a name for the first oil shock has been a very "practical" saying for the "cover up".

Americans being ignorant isn't a coverup, it's Americans being ignorant. Unfortunately, we tend to be that way on more than a few topics.

[Yves75]

Naive? In what sense? For starters, properly funded does not mean that the correct personnel are hired, governments simply don't compete very well with high priced talent in private industry, for example, try and find petroleum engineers among the oil and gas inspectors in any state in America. And real resource professionals at the EIA? I know of two. $100 million government program, and there are two. One has no industry experience whatsoever. That isn't naive, it is just fact. The pay scale for those of us who dosome of this for a living just isn't encompassed by government pay scales, therefore we don't work for them. Unless we don't know much (kids out of school who can't find work elsewhere), have extenuating personal circumstances requiring we stay near or with a particular job (children with preexisting medical conditions we can't afford to lose health insurance for), etc etc.

And I still don't know what "tractions" are.

The job of the IEA, if it was truly doing it (and it probably is doing it in fact, but this is different from what is put in the report), is more about number crunching and cross verifications than having petroleum engineers.
About "tractions" I mean what is reported in the link provided above about the 1998 report, did you read it ?
That is basically being told to leave the "peak oil question" in the air and being rather optimistic, more than providing their "best" estimation according to their data.

For instance this year their "tight oil" prediction is more optimistic than the more optimistic one of the EIA (US agency).
This is also the message that has been relayed by the media, although the core of the report isn't that optimistic at all.
I wouldn't be surprised about this having been more or less "discussed", and in that case, you could also add that this is linked to very serious financial interests and investments.

Oh, there is expertise in the ASPO groups for sure. But the quality of Hubbert's scientific thought on this topic hasn't yet been matched by anything I've seen so far, and modern resource scientists like that don't tend to show up among the ranks of ASPO.

Frankly, and this isn't trying to diminish Hubbert's work, and courage to bring up the message at all, but in "scientific terms" there is nothing that complicated around peak oil, the core of it being applying a ressource extraction model using historical prod and estimated reserves data for the fields.
What makes the quality of the previsions then, isn't the quality of the "science", but more the quality of the data (knowing that this quality is in many cases limited anyway, such as for gulf countries or even Russia.
And regarding high level experts within ASPO, I think people like Tad Patzek clearly fit the description.

Americans being ignorant isn't a coverup, it's Americans being ignorant. Unfortunately, we tend to be that way on more than a few topics.

My point was that the message never really went through, and the fact that "arab embargo" or "opec embargo" is used simply as a name for the first oil shock, makes things even worse.
And clearly a bit of a "pity", as it being known as such could for sure have changed the approach taken.

[UndercoverElephant]

What JSD is saying is that the relevance of peak oil - economically, politically and historically - is that it marks the end of the era of cheap oil and the start of an era of ever-more expensive oil. JSD was responding to a mistake made by peak oil newbies, and also by the wilfully-ignorant and the propagandists who have no genuine interest in understanding this topic. That mistake is to equate peak oil with "oil running out".

I didn't make that mistake. I was just noting that cheap doesn't factor into, what should I say, the "classic" definition of peak oil?

There never was any "classic" definition. What there was was the writings of a rag-tag bunch of Cassandras, about both the technicalities of peak oil itself, and the likely economic and political consequences. Not all of these people agreed with each other about what would happen, or when, and some of them made some major mistakes, especially with regard to the future price of oil. Almost nobody expected the entire global monetary system to explode in response to the first major spike in oil prices, but that is what happened. I guess oil geologists can't also be expected to be experts on banking and economics. Anyway...oil did not go to $400 a barrel because $150 a barrel was enough to trigger economic chaos and demand destruction.

Two things can be expected to happen as we pass peak oil - and both have already become a reality. The first is an increase in exploration/production from ever-more expensive fields (those in deep water, deep underground, or both, and/or in remote/hostile locations.) This keeps oil production ticking over (doesn't increase it much, but does make up for some of the declines in conventional production from old fields), but it drives up the price (if it did not do so then the oil companies wouldn't bother). The second is "demand destruction" as people choose, or are forced, to consume less of oil-derived products.

The net result of both of these things, economically, is that the underlying value of oil, and consequently the price of other forms of energy and of food, will continually be driven upwards, leading to long-term economic decline. From the POV of economics, it is pretty simple: every time it looks like the global economy is pulling out of the current depression (because that's what it is, and only money-printing and near-zero interest rates are hiding this fact - sort of) then the price of oil/energy will head northwards, which in turn will snuff out the recovery. This will continue until there is some sort of major change/catastrophe alters the way our civilisation operates.

In short: our existing global economic system is broken, and peak oil ensures that it cannot be fixed.

Peak oil = economic ruin for the industrialised world.

So you are saying peak oil happened, the economic system is broken, but not broken much based on the reality of..well.. in America anyway, everyone is still driving off to grandma's house?

The US is living in an economic fantasy world. The illusion of normality has been maintained by a combination of near-zero interest rates, limitless money-printing and the fact that money is fleeing the eurozone like nobody's business. This has made life artificially rosy in non-eurozone western nations. For now.

America's rendezvous with reality is coming. In most of Europe, the process has already properly begun.

I don't know, letting the economists in the door means that the IEA and EIA demand/supply assumptions are right, beause the economists are. I liked it better when it meant oil production rates rather than getting "them" involved.

Both are relevant, but ultimately what matters if the price of oil and everything that depends on it, especially food. In fact it's not even about oil in particular, but a more general problem regarding population levels, consumption levels, resource depletion, the capacity of the rest of the biosphere to absorb with the waste we produce (including CO2) and the way human societies and economies are organised. Peak oil is of particular relevance, especially in the western world, and extra-especially in the US, because of our relative dependency on oil. But things like climate change, fresh water availability, soil degradation, deforestation, loss of fisheries and depletion of other critical non-renewable resources are all part of the same story.

Peak Oil does not exist in a vacuum. All other things are not equal. We would be heading for a catastrophe even if all the world's depleted oilfields were magically refilled. In fact the future would look even bleaker. Which brings us nicely back on topic - in a very real way, we have too much oil, or at least far too much fossil fuel of one sort or another.

[ceti331]

Peak Oil does not exist in a vacuum. All other things are not equal. We would be heading for a catastrophe even if all the world's depleted oilfields were magically refilled. In fact the future would look even bleaker. Which brings us nicely back on topic - in a very real way, we have too much oil, or at least far too much fossil fuel of one sort or another.

IMO.. fossil fuels are the central issue- we had the infinite growth illusion because when we overused anything else, we could plug the gap with a fossil fuel solution. WIthout that we'd have noticed local overshoots and figure out sustainability pretty quickly as many societies did in the past

[Halfbreed]

And I still don't know what "tractions" are.

The job of the IEA, if it was truly doing it (and it probably is doing it in fact, but this is different from what is put in the report), is more about number crunching and cross verifications than having petroleum engineers.

Not just engineers. How about resource estimating specialists, geologists, scientists and economists familiar with how the industry goes about exploring for, developing and distributing the product? If all they do is number crunching, without understanding, then their product is useless. Resource availability changes based on price and technology, if you simply assume this happens randomly, you overestimate. If you assume it doesn't happen, you underestimate. Without expert technical people, you can't do anything but the extremes, or if you do, you might as well roll some die and take your answers from them.

About "tractions" I mean what is reported in the link provided above about the 1998 report, did you read it ?
That is basically being told to leave the "peak oil question" in the air and being rather optimistic, more than providing their "best" estimation according to their data.

I went through the ones I could read, and commented on it. I am unsure what your 1998 reference was, so no, I wasn't able to read it. I will go back and try it find it as soon as I finish posting.

For instance this year their "tight oil" prediction is more optimistic than the more optimistic one of the EIA (US agency).

That would be expected if they don't understand what is driving tight oil and gas production in the United States.

This is also the message that has been relayed by the media, although the core of the report isn't that optimistic at all.
I wouldn't be surprised about this having been more or less "discussed", and in that case, you could also add that this is linked to very serious financial interests and investments.

You are making a case to pitch the entire report out wholesale, for different reasons than I might, but we certainly would agree on the end result.

Frankly, and this isn't trying to diminish Hubbert's work, and courage to bring up the message at all, but in "scientific terms" there is nothing that complicated around peak oil, the core of it being applying a ressource extraction model using historical prod and estimated reserves data for the fields.

Oh, I might disagree with that. A bottom up analysis of producing fields and their expected rates through time, projecting out fields not yet discovered and of unknown size, understanding the geology in all areas, both explored and unexplored, and the entire tight oil/gas resources certainly is complicated. Complicated enough that you just can't best fit time series data and think it is a substitute for knowing the particulars anyway.

What makes the quality of the previsions then, isn't the quality of the "science", but more the quality of the data (knowing that this quality is in many cases limited anyway, such as for gulf countries or even Russia.
And regarding high level experts within ASPO, I think people like Tad Patzek clearly fit the description.

Tad certainly is participating, and certainly the EIA and IEA and USGS and BLM and MMS and and Polish Geologic Institute and everyone else involved in trying to figure out how future resources will work out. Certainly ASPO doesn't have a lock on these types of people, but they do appear to be more than a little light on certain expertise. Economists for example, particularly those with experience with resource extraction. If UE is right, and cheap is more important than flowrates, they should be chock-a-block full of those.

Americans being ignorant isn't a coverup, it's Americans being ignorant. Unfortunately, we tend to be that way on more than a few topics.

My point was that the message never really went through, and the fact that "arab embargo" or "opec embargo" is used simply as a name for the first oil shock, makes things even worse.
And clearly a bit of a "pity", as it being known as such could for sure have changed the approach taken.

Americans being thick, and the message not getting through, is closely related to their ignorance, and isn't a coverup. Really, how can anyone fix stupid? So they fell for the embargo line, okay, but it only matters all these years later to a few, and if they pick up the right book, this isn't difficult to understand. But Americans don't want to because it doesn't matter much. Life went on, the price of crude went back down, and we are all still here burning crude like we have 40 years supply. Which people are still claiming we do! Americans haven't changed much I suppose.

[Halfbreed]

There never was any "classic" definition. What there was was the writings of a rag-tag bunch of Cassandras, about both the technicalities of peak oil itself, and the likely economic and political consequences.

Oh now wait a minute. In any given research document, the authors use footnotes so that the readers can track back through their logic to make sure they represent the footnotes appropriately. Do that in peak oil, and you arrive at Hubbert's 1956 seminal paper on the issue. That is the beginning, that is what anyone doing a research paper would consider the starting point. A classic in this case. While there are modern versions, the actual giant of a scientist on this topic was Hubbert.

Anyway...oil did not go to $400 a barrel because $150 a barrel was enough to trigger economic chaos and demand destruction.

Which an economist would say was expected, as was the reaction to it. Certainly this would allow in the concept of "peak cheap oil" but when the price hasn't risen to much higher than other periods of crisis (with the accompaning shoe ready to drop) it becomes just so messy, the cheap part. What is cheap, and how do we measure it? Oil was cheap in 1930, but that didn't appear to jumpstart world economies much, post great depression. Prices were high in the 70's, and part of the overall bad times then, but that wasn't peak oil then, just expensive oil, and the price then went back down. The more places like the US are mandated by law to use less...that is a new game, and what if it does as the IEA predicts? Demand dries up, there is obviously plenty of supply, any economist will tell you what is supposed to happen next to price...and when it happens, does that mean peak cheap oil is over?

So you are saying peak oil happened, the economic system is broken, but not broken much based on the reality of..well.. in America anyway, everyone is still driving off to grandma's house?

The US is living in an economic fantasy world. The illusion of normality has been maintained by a combination of near-zero interest rates, limitless money-printing and the fact that money is fleeing the eurozone like nobody's business. This has made life artificially rosy in non-eurozone western nations. For now.

For now. Okay...and for now can last....my lifetime? Yours? Our grandchildrens? The end of the world has been around the corner since the day some chimp picked up a stick and beat another chimp with it, beginning the great age of tool use. Waiting for something manmade to suffer the natural consequences of manmade stuff (it breaks) has been dealt with before. Humans are nothing if not fans of recycling the same old nonsense, with the usual consequences.

http://en.wikipedia.org/wiki/Tulip_mania

Peak Oil does not exist in a vacuum. All other things are not equal. We would be heading for a catastrophe even if all the world's depleted oilfields were magically refilled. In fact the future would look even bleaker. Which brings us nicely back on topic - in a very real way, we have too much oil, or at least far too much fossil fuel of one sort or another.

Sounds like we need more economists involved to tell us exactly what will happen with this abundance, maybe we need climateologist economists?

[Yves75]

Sounds like we need more economists involved to tell us exactly what will happen with this abundance, maybe we need climateologist economists?

If anything we need less economists, as it is precisely the "economics thinking" that got us there for a big part.

There is no notion of price in the "limits to growth" report and modeling for instance, this doesn't forbid you to consider the respective possibilities and interactions between natural ressources feed, industrial output, population, etc.

Otherwise, not really time to answer in detail.
But the job of the IEA isn't (and couldn't be) to send geologists/engineers all over the place to audit ressources/reserves in the ground.
It is of course also not what Hubbert did in 1958 when he predicted US peak for 1970, what he did was using the data he had and fit his model to it.

And again the IEA does have the necessary experts/number crunchers and most probably some of the best data. Then what is put in the report is another thing, below the story from Lionel Badal about what happened to the 1998 report :
http://petrole.blog.lemonde.fr/how-the- ... ts-mission

Blaming ignorance or incompetencies is a bit easy, it isn't about that, I mean do you realize that most recent (and a lot of not so recent) wars revolve around that for a major part ? And there are also of course very smart people in the US administration, diplomacy, and western oil majors.

[UndercoverElephant]

For now. Okay...and for now can last....my lifetime? Yours? Our grandchildrens?

It lasts until the oil producers decide to stop selling oil for worthless pieces of paper called "US dollars". The US dollar will be the last part of the fiat money system to implode. At the moment all eyes remain on the eurozone, and that is the main thing keeping the UK and the US in a situation resembling "normality."

Ask somebody in Greece or Spain and they will tell you that normality has already left the building, and that they don't like the new normal very much.

[mobbsey]

What JSD is saying is that the relevance of peak oil - economically, politically and historically - is that it marks the end of the era of cheap oil and the start of an era of ever-more expensive oil. JSD was responding to a mistake made by peak oil newbies, and also by the wilfully-ignorant and the propagandists who have no genuine interest in understanding this topic. That mistake is to equate peak oil with "oil running out".

The cheap oil issue depends upon the elasticity of oil prices anyway. Many economists assume that energy prices are inelastic (people will always pay more because it is an essential for life) and therefore alternatives -- such as more expensive renewables -- can always be prices in.

However, and as borne out by data from developed nations for the past few years, energy prices are elastic -- people are significantly changing their behaviour and consuming less as a result. This is the origin of the CERA fallacy of "peak demand". In fact if oil/energy prices are elastic, and as energy use is directly related to the genesis of economic growth, what you get is a recessionary spiral as prices rise -- but they can only rise so far before a general economic collapse takes place and a new price equilibrium is established at a lower level of consumption.

So, peak oil and production, or peak production and cheap oil, or however you euphemistically describe it -- the falling availability of energy per unit of GDP (and in that definition we can encompass falling EROEI too) prefigures a general reduction in economic activity... which of course is not what the political class want to here!