When should we expect the energy payback of new oil production to be 1.0?

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GGreaves's picture
GGreaves
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When should we expect the energy payback of new oil production to be 1.0?

Using the data in chapter 17a, we see that following.

year oil energy pay back
1930 100
1970 25
1990 14
2008 3

Graphing this we get a nice progression that looks exponential. With an exponential curve fit (R^2=0.94) we find that the oil energy payback reaches 1.0 in 2045.  This means no more new oil production makes sense after that.  Or said another way, the beginning of the end of oil.  This seems  like a more useful and impactful way to show this data.  Comments?

 

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Maybe

Possibly longer if you factor in other than petro derived energy sources that could be used for extraction.

cmartenson's picture
cmartenson
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I think that's a very reasonable timeframe

Very interesting....I hadn't thought of it that way, and I think it's useful.  

One problem is the EROEI 'data' is a bunch of handwaving right now as more direct and complete measures have not yet been undertaken, but it's roughly right.

While there may be oil elsewhere in shale deposits to be had, in the case of the US we will be 20+ years past the peak of shale oil by 2043 and we'll be down to the absolute dregs by then.  Perhaps there will be a few high yielding deposits in currently protected ocean shelf areas, but otherwise we'll be down to sucking with all our might on such lousy areas as the Utica and Mississippian formations that cannot be prosecuted at current oil prices because their yields are horrible.  

Which is a fancy way of saying their EROEI's are terrible.  But we will go after them when/if oil hits $200+ at today's dollar value (could be higher under debased dollar terms) which I expect sometime in the near future after the US shale production peaks in ~2020...

...so I think 2043 is a perfectly reasonable starting point for a discussion of when oil EROEI might hit 1.00

ferralhen's picture
ferralhen
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i'll be 90 if i make it to

 i'll be 90 if i make it to 2043. we really are getting close. so when does anyone think humans will start to cut back in ernest? will just the elite have gasoline?  chris you must have some ideas of how this could play out, especially based on changing news headlines.

TechGuy's picture
TechGuy
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I don't think that the

I don't think that the estimate of EROEI is 3 in 2008. There is still a lot of old fields that are still much better EROEI than Tar Sands and LTO. I think if the EROEI was 3 then our economy would collapse. I would imagine we need more than 3 just to feed and shelter everyone.

"so when does anyone think humans will start to cut back in ernest? will just the elite have gasoline?"

Consumption per capital the developed world is already happening. Westerners are driving less and driving smaller cars, Growth is consumption is occuring in some developing parts of the world, but most of these people had no access to Oil. so they are going from Zero to perhaps less than one barrel per year per capita. This is being fuelled by the Chinese debt ponzi and gov't subsized oil prices, which is unsustainable. It appears that the Chinese Economic bubble is popping or going to pop soon as we begin to see big Chinese companies defaulting on debt. Perhaps the Chinese economy will crash later this year or next year causing global consumption to fall significantly. That said, I cannot rule out war as China may choose to send its unemployeed to fight a regional war to secure energy resources (Japan Islands, Phillipine Islands, and as of this week China is now threating Indonesia over some islands that make have offshore oil). If you recall back in the 1930's Japan starte invading neighbors in order to secure resources for its economy,

 

 

 

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Quercus bicolor
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new production
TechGuy wrote:

I don't think that the estimate of EROEI is 3 in 2008. There is still a lot of old fields that are still much better EROEI than Tar Sands and LTO. I think if the EROEI was 3 then our economy would collapse. I would imagine we need more than 3 just to feed and shelter everyone.

Ggreaves' question is about new production.  In that case, he's right on, although there might still be some new production that comes in higher than 3:1  Yes, there are still mature or declining fields with much better ratios, but they are gradually fading. 

When the best new production we can come up with has a 1:1 EROEI, there will be no new production because there will be no point in developing those fields.  At that point, existing fields will gradually decline until production reaches insignificant quantities.

Stan Robertson's picture
Stan Robertson
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EROI isn't the problem.

At present wellhead prices for natural gas, it is uneconomical to drill in pure gas plays. Most of the horizontal drilling and fracking that is presently occurring in the U.S. is occurring in liquid rich gas/condensate reservoirs or light oil shales. These plays are generally better than break even deals. The bulk of the costs are for leases, labor, pipe and equipment and fuel costs are generally less than 10% of the total. That gives them an EROI of at least 10, but typically more like 20.

The technology producing these EROIs might be expected to improve, but the quality of drilling prospects will probably decline to offset that somewhat. What I expect is a reasonable EROI for a long, long time; however, the lack of high quality drilling prospects will prevent the U.S. from ever becoming self sufficient in liquid fuels via drilling. We are still importing half of what we use and that is likely to continue as long as imports are available.

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Request for help: an article on 'oil scarcity ideology'

Hi,

My cousin is about to graduate from a masters program in Public Policy at a prominent Texas university.  I have periodically shared with him ideas about limits to growth and the three Es, and he's smart and open minded.  I believe that one of his professors wrote the following article, which he sent to me:

Oil Scarcity Ideology in US National Security Policy, 1909-1980 

I just received it today, and I'll read it and write some responses to him, which I may be able to get him to forward to the author.  If anyone else is interested in reading the article and sharing responses, I'd be grateful. I chose to post this in this thread, since it's the most recent thread on a hot topic related to energy limits.  If anyone feels like it's hijacking the interesting discussion of EROI, then I can take the conversation to a different thread.

Thanks!

Hugh

 

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Stan Robertson
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HughK wrote: Hi, My cousin is
HughK wrote:

Hi,

My cousin is about to graduate from a masters program in Public Policy at a prominent Texas university.  I have periodically shared with him ideas about limits to growth and the three Es, and he's smart and open minded.  I believe that one of his professors wrote the following article, which he sent to me . . .:

Oil Scarcity Ideology in US National Security Policy, 1909-1980 

Hugh,

The gist of Stern's argument is that since global actual oil shortages never occurred in the past, they are therefore unlikely to occur in the future. While he is correct about the past, (you should also read Daniel Yergin's The Prize) he apparently does not understand that the quality of remaining resources is the crux of the matter. There is very little low hanging fruit remaining to be picked for oil supply.

As I see it, the next five to ten years will tell us what to expect. Declines of older fields will continue to bite harder and that will cause oil price increases. Since it might not take much in the way of higher prices to tamp down demand we might remain in a slow economic slide for another twenty years. That is about the best case of "the next twenty years will be different from the previous twenty". It could be much worse.

Stan

HughK's picture
HughK
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Response to 'Oil scarcity ideology' paper

Hi Stan and all,

Thanks for your reply, Stan.  Here is what I sent to my cousin regarding the article

Oil Scarcity Ideology in US National Security Policy, 1909-1980 

Here are my reflections:
1.  I believe that peak oil is very real and yet I don't support foreign adventures to get more oil.  A lot of the Limits to Growth crowd - probably a solid majority - does not support US military intervention in order to acquire resources.

2.  Somehow, the author managed to use the term "peak oil" over 30 times in the paper, yet he never once mentioned M. King Hubbert, who is the primary theorist behind the concept of peak oil.  At the end of this message, I'll include Hubbert's predictions for the time of oil peaks and how they have played out.  The fact that Stern neglected to include the central thinker in the concept of peak oil undermines his credibility on a topic he claims is related to peak oil. On page 35, Stern asserts that "peak oil forecasts were really implicit economic forecasts...over and over these forecasts proved wrong."  No, that's not right.  Hubbert was very close on timing (see below), and Stern never even mentions Hubbert's name.

3.  On page 19-20, Stern says the following: "Thus a new iteration of the scarcity syndrome began in the 1970s, catalyzed as before by expectations of peak oil and rapid demand growth.76 Most influential among resource exhaustion forecasts was the Club of Rome’s, which predicted supply crises not only for oil but for all commodities.77"  Here is the principle graph generated by the 1972 Limits to Growth study (Club of Rome), which was an early use of computer modeling.  Here it is, in modern graphics:

Limits to Growth graph here

And here is a great article called Revisiting the limits to growth after peak oil (by Hall and Day)  This article is a must read as far as I am concerned.
Notice that the Limits to Growth model does not predict major consequences due to limits to growth until sometime between 2010 and 2020, when a lot of the good curves, such as services per capita and food per capita turn down.  Again, as with peak oil, it seems that Stern is making claims about the Limits to Growth study that are not quite accurate.

4.  American imperialism, like most other imperialism, is driven by a number of things, including but not limited to, a desire for more resources.  I don't accept the claim that America's military adventures for foreign oil were motivated primarily by fear of scarcity any more than I  would accept a claim that America's military adventures for foreign sugar (Hawaii, Cuba, Dominican Republic, Philippines) were primarily driven by a fear of peak sugar.  Rather, as nations become more powerful, they tend to expand their empires, in a self-reinforcing manner.  (Until they run out of steam, anyway.)  This dynamic is not primarily dependent on fears of scarcity of a single resource. [Note to PP:  My 3rd point here is sort of weak in that oil is a very valuable, almost unique resource, the master resource.  I don't know if fear of scarcity was the primary driver for American military adventure in oil-rich countries, or simply the desire for more, combined with political pressure from influential oil companies.]

5.  Stern claims that technology can make a major difference in oil supply.  This shows a lack of understanding for the concept of Energy Return on Investment (EROI).  See the Hall and Day article I cited above for a discussion of EROI.

6.  You said the following in your first email:  "Did you know that the US caused the oil crisis in 1973?  I just learned that we convinced OPEC and US oil companies to increase prices because we had recently gone off the gold standard and we wanted to bolster the strength of the dollar. "  This claim seems problematic to me, but I will try to spend some time researching it.  Can you give me the source?  If you look at the 1970's you will see the only decade that saw a sustained rise in oil prices before the year 2000.  Here's a great chart on that:
Historical oil prices graph here
Source: http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_...

This is how I currently understand the relationship between the gold standard, the US dollar and oil in the 70's:
In the late 1960's, US government spending was increasing rapidly as Johnson fought the war in Vietnam and oversaw the increase in social welfare under the Great Society.  This created a fiscal and monetary imbalance and the US dollar was perceived by many to be losing value.  So, the French and others started to ask for their US dollars to be converted to gold, which was part of the Bretton Woods System agreed upon after World War II.  This became unsustainable and in 1971, Nixon closed the gold window, meaning that the US dollar would no longer be backed by gold.  OK, so I think we agree on that part, but this is where I start to see things differently.  Then, Kissinger went to King Faisal of Saudi Arabia and asked him to only accept US dollars for oil.  Later, Saudi Arabia led all of OPEC to adopt the policy of only accepting USD for oil and the petro-dollar was born.  The high oil prices of the 1970's were caused by the following:
1.  The fact that the world's largest oil consumer - the US - had passed its domestic peak in 1970/71 and now had to import more from overseas, which entails a lot more costs.
2.  The fact that the USD, no longer backed by gold, lost a lot of value, hence the increase in nominal oil prices in the 70's.
3.  I agree that the embargo of 73 and even the supply disruption around the Iranian Revolution of '79 had more influence in terms of fear regarding oil prices than in terms of actually cutting off major sources of supply.  But, the fact that the US was more dependent on foreign oil made us feel more vulnerable, and this seems to have affected prices. Plus, the fact that we had to ship the oil halfway across the globe before we used it, as opposed to getting it from Texas, had a very real effect on prices.  FYI, the Texas Railroad Commission was the OPEC of the oil world in the 1930's and 1940's. 

OK, it's late here.  I'm going to bed.  Below is some info regarding M. King Hubbert's predictions.
.........

Here are M. King Hubbert's predictions in Nuclear Energy and the Fossil Fuels(1956):

Hubbert's prediction for the US peak of conventional crude oil (Figure 21):  Somewhere between 1966 and 1971.
Actual US peak of conventional crude:  1970 or 1971.
Note: If you want, we can discuss recent production gains in the US later.  For now, all I will say is natural gas liquids are counted as "total oil production" even though they contain 2/3 the amount of energy as crude oil, and that the non-conventional oil plays such as the Bakken have a much lower energy return on investment (EROI)

Hubbert's prediction for the global peak of conventional crude oil (Figure 20):
The year 2000
The actual year of the global peak of conventional crude oil: 2005/2006

Not bad for a 1956 prediction.

OK, that's what I sent him.  I've engaged with him now on limits to growth issues a couple of times, and while he's not yet very interested, he's fairly open minded and may take a few nibbles either here, with the Crash Course book or at another limits to growth website.  Thanks, again, Stan, for taking the time to look at the article.

Cheers,

Hugh

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Dave Kimble's picture
Dave Kimble
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You can't do that

You can't do that mathematically, as "looks exponential" doesn't mean it IS exponential. The basic data is only very rough guesswork at best, and there are only 4 data points, so projecting the data forward 37 years is invalid.

 

Despite tight (shale) oil not being profitable according to Exxon, Chevron and Shell, if you can get a loan to get started drilling, you can produce oil. It follows that banks, who are shrewd investors, certainly know it is not going to be profitable in the long run, but lend anyway. Why? Because the USG and the Fed are encouraging them to. They (including the drillers) all know it won't make money in the long run, but they can avoid having to admit Peak Oil is real for another year or two, and that's enough to justify throwing some more confetti down the toilet.

 

Although financial profit is not strictly the same thing as energy payback, the same logic applies to both. So oil production won't necessarily stop when energy payback = 1.0 .

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