With Regards to Peak Oil

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  • Sat, Aug 23, 2008 - 04:27pm



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    With Regards to Peak Oil

First I’d like to say, overall excellent work. There are parts where I have issues with what you say (for instance, you are always on the vertical part of a hockey stick graph…) but in general you convey the problems and concerns facing the modern economy quite well.

However, in this latest segment there is one thing that I cannot let by without saying anything. It isn’t a problem with the fact of peak oil, but rather, with the incorrect perception that the pattern of falling oil production after the peak is well known.

Unfortunately, while this curve of falling production is seen over and over again, the situations in which it has been largely seen distort the picture of the actual outcome upon the event of peak oil. Here, I will address these presumptions in turn:

Erroneous Presumptions of the Events after Peak

1) The first, and most wildly problematic presumption, is that the formation of the falling curve of oil can be modeled off of the falling curve of a liquid oil well. As some of us are aware, liquid oil wells, from which most modern oil, and nearly 100% of historic oil is extracted, represent only a fraction of all oil reserves — the vast majority being in Tar Sands like those seen in Canada.

Hence, when the liquid oil wells peak, it will not represent the world consuming 50% of all known oil reserves, but rather having consumed something closer to 10% to 20% of it. Albeit, the cheapest and easiest to get to oil (which is a good thing, because it improves the prospects of changing energy sources before the tar sands eventually peak).

As such, the most rational conclusion is that the final ending shape of future oil production will instead be governed by the growth and fall curves of a tar sand oil resource. Which we, alas, know very little about.

2) The second problem is that the growth and fall curves of oil production as a whole are extrapolated from the historical patterns seen in individual wells. However, making this jump from ‘individual wells’ to ‘oil as a whole’ using historical information makes the inheriant presumption that the frame of events remains the same. In other words, it naturally presumes that: the world will be roughly the same after peak, as before it.

In further detail:

* It is presumed that DEMAND will continue to grow as normal
* It is presumed that OIL PRICE will remain in normal ranges
* It is presumed that PRODUCER behavior will remain as seen during the pre-peak era

We know this presumption within this ‘theory’ is true, because all of the above is what has been generally true for most of modern history, and thus for most of the history of these individual wells.

But, as we should all know, one of the principle feature of any discussion of peak oil is that after the peak nothing will be the same. Most especially, of course, Oil demand, price, and producer behavior.

Instead, demand will shrink, prices will rise, and producers will act differently — for instance reopening old oil wells that are now once again profitable, or creating wells and exploring in zones relatively untouched because they couldn’t (but now can) generate oil at a profitable value there.

All of these will distort the picture of the oil production graph post ‘peak’.

How exactly will this distort the shape?

It’s very difficult to say. Most likely the combination of the above will create a relatively flat descending or rising curve until tar sands give out, or alternative fuels take over.

Why flat? because high prices will eat into future demand and slow overall growth in production (tar sand oil cannot be produced ‘cheap’). This makes it unlikely that tar sand production will ever grow as crazy fast as liquid oil production. A slight curve up or down represents a general ability, or inability, to replace lost traditional oil production with tar sand production growth, or instead a light longterm demand destruction.

To be honest though, the real outcome when ‘liquid oil peaks’ — if it hasn’t already — is largely unknown, and remain so until, most likely, the event has already taken place.

Thank you, and I look forward to the next Crash Course (even if I don’t completely agree with it!).

  • Sat, Aug 23, 2008 - 06:26pm



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    Tar Sands Problem

Srbarbour, your comments are well written and well presented. However, I just want to make certain that you understand just a couple of small facts about oil from tar sands.
Currently the tar sands represents around 1.5% of the world oil production output. Even if the tar sands production would quadruple, it would not even make a dent in the depletion of liquid oil production.

The oil production from tar sands is actually a mining operation, not a drilling and pumping operation. Production of oil from tar sands consumes a lot of other energy, primarily natural gas. Thus your return on energy investment – energy expended for energy gained – is much smaller. It is actually much more costly than pumping oil.

It is also important to note that refineries have to be reconfigured to process and refine what is known as “heavy oil” from tar sands. This is currently being done to a refinery in NorthWestern Indiana over a long period of time and at a high cost.

Finally, mining in the tar sands uses an enormous amount of fresh water (another valuable resource), and is very polluting to the environment.

Sincerely, the tar sand are not a cost effective replacement for liquid oil.

Thanks for allowing me to share my thoughts.

October Landon

  • Sat, Sep 27, 2008 - 05:12am



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    Why does oil peak?

Oil companies have, naturally enough, extracted the easier-to-reach, cheap oil first. The oil pumped first was on land, near the surface, under pressure, light and ‘sweet’ meaning low sulfur content and therefore easy to refine. The remaining oil is more likely to be off-shore, far from markets, in smaller fields and of lesser quality. It therefore takes ever more money and energy to extract, refine and transport. Under these conditions, the rate of production inevitably drops. Furthermore, all oil fields eventually reach a point where they become economically, and energetically, no longer viable. If it takes the energy of a barrel of oil to extract a barrel of oil, then further extraction is pointless, no matter what the price of oil.





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