The Reward for Being Right About Peak Oil: Scorn Heaped With Derision

Right before the end of the millennium, the clues started piling up. The world had been scoured many times over in the quest for the ultimate bounty, gushers of light sweet crude. Discoveries of new oil had peaked in the decade of the 1960s and had been falling ever since. Supergiants, the oilman's term for those wells capable of pushing out a million or more barrels a day, were no longer being found, and the ones in extraction were starting to accelerate in their decline, from Prudhoe Bay to Ghawar Field to Cantarell Field.
Sure, there was other "oil" out there, but it was trapped in very deep water, or stuck in tight rock formations that had to be fractured at great expense for the oil to come out. These plays could be worked, but only if the price of oil stayed very high, and even then the flow rates would never match those of the supergiants and giants that the world depended on for its tens of millions of barrels required each day for the economy to keep humming.

So former oil geologists like Colin Campbell and Ken Deffeyes started ringing the alarm bell. "Hey!" they shouted at the top of their lungs, "we can't maintain this flow of oil forever! Even if we use all the non-conventional sources like tar sands, Arctic oil, etc the amount is going to get less and less over the course of this century. And those other kinds of oil are a lot dirtier and carbon-intensive than the oil we've been using!"

What did they predict? And how close were they to being right? Let's take a quick look, lest we get overwhelmed with the cornucopian hyperbole that bombards us every day.

The price of oil will rise dramatically, possibly by an order of magnitude.

Check.

Got that one right. Oil went from $10/barrel in 1999 to about $100/barrel today.
Suddenly that made all that hard-to-extract oil that we'd known about for decades in places like Alberta and North Dakota look attractive.

Extraction will plateau for a decade or so as conventional oil starts to dwindle and we throw everything we can at unconventional sources like tar sands, tight oil, ultra deep water, etc.

Check.

In 2004, production reached 73 million barrels per day (mbpd). Annual average expenditures on oil exploration doubled from 2004 to $600 billion annually in 2012. For doubling our cumulative effort at oil extraction, we've managed to raise production to 75 mbpd, as the oil price has tripled since 2004.
It seems logical to assume that an additional two million barrels a day global increase will require another doubling of expenditures and another tripling of prices, which would mean $10/gallon gas here in the U.S. China increases its daily oil consumption by two mbpd about every four years.

The economy will contract and enter a period of stagnated growth. More vulnerable economies will crash profoundly.

Check.

U.S. employment has yet to reach its 2008 levels. Economies like Greece and Spain have collapsed by as much as 25 percent.

Oil exports will begin to fall, especially as the price rises and extracting nations becoming richer, because this means they will be wealthier and consume more of their own oil.

Check.

Worldwide oil exports peaked in 2006 at 45.6 mpbd and have declined by over 2 mbpd since. Saudi Arabia has the highest growth rate in oil use. Consumption has risen by one mbpd to almost 3 mbpd over the last decade, and exports have fallen by over one mbpd.

If current trends worldwide continue, available oil exports could reach zero by around 2032.

Currently the U.S. extracts about seven million of the 18 million barrels of oil we use, so assuming we could hold extraction at that level, we would need to cut oil use by two-thirds in twenty years.

The Reward for Being Right About Peak Oil: Scorn Heaped With Derision (Cont)

New resources will be more expensive and carbon-intensive.

Check.

The previous assumption of maintaining oil extraction in the U.S. is very unlikely to hold true. Deep water and tight oil (like what comes from the Bakken and Eagle Ford) have extremely high depletion rates. Deep water wells deplete about 10-20 percent a year. Tight oil depletes at about 40 percent annually the first few years. Think about that latter number, where most of our new oil extraction is coming from. What if you had a part-time job but within two years you would only be making about a quarter of your current income. Probably need a new part time job, right? But that one does the same thing. Before you know it, you need 40,000 part time jobs. But even that doesn't help, because they're all still depleting at 40 percent. Give a thought to how much you would have to work to maintain your original income after five years, then ten years, then twenty years... How many of you out there are thinking you'll eventually end up rich? Well, if you're an economist or work for an oil lobby like CERA or API, you're totally convinced you've hit the jackpot. But don't let their malarkey and access to primary media outlets jam up your ears and eyes so bad you can't see the truth.

Oil extraction worldwide is peaking right now, and the sources of oil we're turning to are much more carbon-intensive than the ones we're leaving, meaning even if we use the same amount of oil and gas, we're still increasing our rate of adding greenhouse gas poisons to our atmosphere. You know, our atmosphere -- that invisible thing all around us that keeps us and everything else on our planet alive? Friends, readers, don't believe the hype. The age of oil is coming to an end, but this can be a very good thing if we realize it and make forward-looking choices to leave this dark cloud of exhaust behind us.

The sooner we make a commitment to transition our economy to renewable energy, the better off we'll be in every respect.

Link -
http://www.huffingtonpost.com/stephen-hren/the-reward-for-being_b_2959628.html
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Trends In The Cost Of Energy

Energy is the largest component of the world's Gross Domestic Product. It is a measure of our state of civilization. Its availability determines our standard of living, but also threatens to undermine it: the excessive use of stored energy through burning fossil fuels is a cause of Climate Change. Now, the depletion of these fuels will force us to reinvent how we can continue to advance our civilization in a sustainable manner.

The phenomenon of climate change was identified first in the nineteenth century. By the end of the twentieth century, a consensus evolved in the scientific community as well as among progressive political establishments about the need to limit global warming, but a global response has proved elusive until now.

Over the last half century a number of significant changes to our energy outlook have emerged. In 1949 M. King Hubbert, an Exxon engineer, predicted that oil production in the US would peak in 1971.

This prediction was correct within days. The Global Hubbert's peak (GHP) has been followed by a decline in fossil fuel reserves.

Comparison of Various Technologies
The technologies we will compare in this article are nuclear, coal, oil, and natural gas; and solar PV and wind among the renewable options.

Nuclear Power
The politically most sensitive energy source is nuclear. In recent years, bowing to public wishes, Germany has decided to shut down all nuclear facilities. Two years after the Fukushima accident, Japan is still uncertain about restarting its reactors. Chernobyl and Three Mile Island all are within recent memory.

Nuclear power does not emit any carbon containing gases, so it does not contribute to climate change. Operating in principle for 24 hours, it is a suitable power source for clean base load electricity. Sources of concern are accidents and the unresolved issues of disposal of spent fuel and decommissioning nuclear power stations at the end of their life

When the first nuclear reactors were built, proponents declared that nuclear power would be too cheap to meter. It did not turn out that way. Today, it is difficult to understand the true cost of nuclear power. A first reference represents a most optimistic view of nuclear power. This paper created enough interest that there has been an ongoing discussion since it was first published on April 2 2010. The conclusion of the paper is that the cost of nuclear power is under $0.04 per kWh. The value of nuclear power shown on Figure (3) before 2000 shows this number. This analysis does not adequately take into account the concerns expressed above about nuclear power.

A further reference comes from the experience of the most active player in the nuclear power industry, Electricite de France (EDF). EDF has built and operates the largest number of nuclear power stations in the world. In the reference quoted they announce more than a factor of three cost overruns on the Flamanville plant. The plant now is planning to start operation in 2016 and forecasts $0.12/kWh electricity cost.

It is difficult to arrive at a reliable cost of nuclear electricity. The best numbers I can extract is an average price of $0.10/kWh for 2010, and $0.12/kWh for 2020. The general conclusion of the experts is that nuclear power will not represent more than the present fraction in the electricity mix (presently at below 20% in the US).

Fossil Fuels

Figure 1. Timeline of the usage of fossil fuels

Figure 1) is a dramatic representation of the time line of the history of the use of fossil fuels.

The peak of the bell shaped curve, representing Huppert's peak, falls close to the year 2000. The half width of the blip is 100 to 200 years, making it imperative that we find an alternate energy source to fossil fuels in our children's lifetime.

Climate Change is principally caused by increased CO2 and other greenhouse gases in the atmosphere, due to man made and all other effects. Increased CO2 leads to an increase in the earth temperature.

Coal
Coal is the most abundant stored fossil energy on earth. The estimated extractable reserves are about 1 Trillion tons. There is enough coal to provide power to the globe for more than a century. The US has one of the largest reserves in the world. The problem however is that coal is also largest green house polluter of all the energy sources (Table 1). In 2012 coal was the fuel for 40% of the world's electricity and 26% of the global primary energy. The use of coal for electricity generation in the US is being replaced by natural gas. In 2012, for the first time the generation of electricity by natural gas was equal to the electricity generated by coal.

At a price of $30 per ton, the cost of electricity generated by coal is about $0.03 per kWh. The price of coal today can reach $150 per ton. At these prices the cost of natural gas generated electricity becomes competitive with that generated by coal. These cost calculations do not include the cost of externalized environmental and health costs, which amount to about $0.14 per kWh for coal.

Trends In The Cost Of Energy (Cont)

Oil
Ever since the age of the automobile, fossil fuels (primarily oil) have been the world's preferred energy source. Returning to Figure 1), and Hubbert's Peak, the bell shaped curve starting around the year 1900 indicates the use of fossil fuels.

If we burn all the stored fossil fuels, we would end up with an atmosphere primarily of CO2, instead of oxygen. That would be the ultimate climate change.

The world's crude oil reserves at the end of 2012 are about 1,600 billion barrels. The consumption for the same year was reported at 32 billion barrels (10e13kg). With these numbers the existing oil reserves would last 50 years. Of course both the size of reserves and consumption levels are moving targets. Whatever the supply and consumptions numbers are, available oil reserves are finite and we are beyond Hubbert's peak. The remaining oil should be kept for industrial and consumer applications, and not burned to produce heat and pollution.

Natural Gas
Natural gas is one of the forms of recoverable stored hydrocarbons. Total natural gas reserves are estimated to be 10e15kg. Natural gas has received special attention in the last decades, since the size of US reserves has become apparent. Potentially, these reserves can make the US energy independent.

Natural gas, due to its molecular makeup produces less CO2 than other fossil fuels. However, there are significant environmental consequences associated with the hydrofracturing (fracking) process to extract the newly identified natural gas reserves. The water that is used in fracking and the subsequent disposition of that water has to be taken into account in the evaluation of how clean natural gas is.

Natural gas today can be cost competitive with coal to produce electricity. But the pricing of these two fuels is very volatile. In 2012 the cost of natural gas reached parity with coal for the production of electricity, but in February 2013 a recent report of the IEA forecasts coal to be the dominant fuel again for electricity at least until 2015.

The natural gas industry has attracted so much capital that at least for the time being the price of natural gas will remain competitive.

Wind
Among the different sources of renewable electricity generation, wind was the first to reach large-scale cost effective penetration of the energy industry. Cumulative electricity generation from wind reached 300 GW by 2011. Wind capacity is large enough so that the transmission capacity of the existing grid is limiting the growth of wind generation.

The intermittent nature of wind makes it even less predictable then solar. A suitable energy storage medium will be necessary to enhance the value of electricity generated from wind (and solar).

Wind energy generation has already found its proven role in the electricity mix. As a viable renewable energy, its future competitiveness in relation to fossil fuels will only improve.

Solar PV (Photovoltaic)
The percentage of PV in the energy mix very much depends on the availability of suitable storage. Presently, there is a strong focus on the development of battery technologies. Batteries are not likely to reach the energy densities available in fossil fuels. However the availability of very low cost PV electricity opens up a different approach to energy storage. Consider the potential use of aluminum as a fuel. A mixture of Al and water can produce Hydrogen at room temperature. The main problem is that the amount of Hydrogen generated is still below the weight or volume capacity of fossil fuels. The other big problem is that the cost of hydrogen generated this way still higher than by other means. However if the cost of PV electricity can be brought down to $0.01/kWh, Hydrogen from Al generation becomes cost competitive with fossil fuels.

Conclusion
The energy industry is in transition. From the basket of energy technologies available today the industry will change gradually to clean renewable energy. The transition period will take several decades, depending the positioning of the capital and the timing and amount of investment. Ultimately the dominant element in the energy mix is expected to be solar PV.

In solar PV there will be a refocus on thin film based PV, with a further increase of efficiency to the 50% range and a decrease in module cost to under $0.20/watt and $0.01/kWh. This is a realistic goal by the middle of the century. Such low electricity costs will also bring novel solutions to energy storage. Investors in the energy industry will be well served to note this change in direction!

Link -
http://seekingalpha.com/article/1324411-trends-in-the-cost-of-energy?source=emai...
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In my opinion, we are already short on time, as the transition period is at least several decades and we don't have that sort of time left, to transition in an orderly manner! 

Some comments drawn from various sources . . .
The peak oil theory has gone out the window for various reasons.

Updated view, with USA declaring tar sands open, now CSG and more recently shale oil and gas, the peak oil equation well beyond 2025 and if asked 2050 and beyond.

Shale gas and oil the reason. Not cheap, not energy cheap either, so price of oil will remain big as developing these deposits costly, likely base is $65- and as it approaches and if it ever goes through there, lower as it did in GFC 1, the traditional oil fields over time less and less and more of the new types of hydrocarbon energy takes over and drilling deep onshore, fracking and then refineries for Kerogen oil which is what oil shale produces not cheap.

But the addition of likely 20,000- trillion shale gas deposits and 200 billion barrels of shale oil add another lease of life to the peak oil timeline.

As far as Australia is concerned, with the 2020-30 expansions Australia will see in this field and with 1,000 trillion cubic feet of gas we will be a very large LNG exporter for many many years.

What If Total U.S. Oil Production Peaks In 2016?

The US Energy Information Administration ("EIA") recently released a report predicting total US oil production will peak around 2016, level off for a few years, and in 2020 begin a gradual decline toward 6 million bpd. Notice that lower-48 onshore, indicative of shale oil production, will level off in the 2016-2022 time frame, and then begin a decline to 4 million bpd by 2040. This will likely come as a surprise to many who have been conditioned by the media to believe the US shale revolution will lead us to energy independence ad-infinitum.

http://seekingalpha.com/article/1936431-what-if-total-u-s-oil-production-peaks-i...
http://www.eia.gov/forecasts/aeo/MT_liquidfuels.cfm
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When even a government "mouthpiece", like the EIA, says Peak Oil is here, then you know it is already a fact, because government bodies invariably put on a better public face than Reality would dictate! 

The Gulf of Mexico, as well as the Mexican mainland, are coming up with oil & oil-equivalent reserves to challenge the Saudis.
Until we develop hydrogen & storeable renewables to an economically competitive level, both in term of production & distribution, we don't have anything to worry about as regards oil . . .except the price. And the price will be paid.

Gasoline Volume Sales, Demographics And Our Changing Culture

Gasoline prices and increases in fuel efficiency are important factors, but there are also some significant demographic and cultural dynamics in this data series.

The latest 12-month MA is 8.0% below the all-time high set in August 2005. We are fractionally above the interim low of 8.3% set in December 2012.



The next chart includes an overlay of real monthly retail gasoline prices, all grades and formulations, adjusted for inflation using the Consumer Price Index.


As we would expect, the rapid rise in gasoline prices in 2008 was accompanied by a significant drop in sales volume.

The moving average for the latest month is about 7.7% below the pre-recession level and 4.6% off the November 2010 interim high. For some historical context, the latest data point is a level first achieved over fifteen years ago, in July 1998.

Some of the shrinkage in sales can be attributed to more fuel-efficient cars. But that presumably would be minor over shorter time frames and would be offset to some extent by population growth.
However, if we look at Edmunds.com for data on the top 10 best-selling vehicles, energy efficiency doesn't seem to be a key factor, to judge from the percentage of pickup trucks and SUVs.

The next chart adjusts the 12-month MA of sales volume for population growth based on the monthly data for Civilian Non-Institutional Population over age 16 from the Bureau of Labor Statistics, via the St. Louis FRED repository. What we see here is that gasoline sales on a per-capita basis are 7.7% lower than it was at the end of the Great Recession.

The latest per-capita daily average is 20.9% below the 1989 high.


What does this analysis suggest about the state of the economy? From an official standpoint, the Great Recession ended 54 months before the most recent gasoline sales monthly data point. But if we want a simple confirmation that the economy is in recovery, gasoline sales continues to be the wrong place to look.

In addition to improvements in fuel efficiency, the decline in gasoline consumption is attributable in large part to some powerful secular changes in U.S. demographics and cultural in general:
1) We have an aging population leaving the workforce, which we clearly see in the sustained contraction in the employment-population ratio.

2) There is growing trend toward a portable workplace and the ability to work from home (I'm a typical example).
3) Social media have provided powerful alternatives to face-to-face interaction requiring transportation (Internet apps, games, the ubiquitous cell phone for talk and texting).
4) There has been a general trend in young adults to drive less (related to points two and three above). See this PDF report for details.
5) The U.S. is experiencing accelerating urban population growth, which reduces the per-capita dependence on gasoline.

As I've continued to observe, we are living in interesting times.

Link -
http://seekingalpha.com/article/2049803-gasoline-volume-sales-demographics-and-o...
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I Concur, with the fact that we live in "interesting times"!

But, there would no doubt be a few other adjectives that could also be applied, such as "Dangerous".