Date: Thu Feb 19 2004 11:23
trotsky (Aurum, @'are we out of gas yet') ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
please note that this article is very long on rhetoric, and very short on facts. not only that, it contains factual errors, as well as serious omissions, merely to bolster it's 'case'.
the first few paragraphs of course merely cite the worries expressed by a number of oil geologists - so far so good, even though the tone is obviously condescending ( i.e. of the 'i know better' variety ) . Ronald Bailey as far as i could ascertain is NOT an oil geologist, so it might have been better if he kept an open mind and actually studied the material presented by the experts.
anyway, the crux of the matter is revealed right thereafter:
"There is a choirmaster to this chorus of oily doom: the late geophysicist M. King Hubbert. In 1956 Hubbert ( correctly ) predicted that U.S. oil production would peak in the early 1970s."
that's right - he CORRECTLY predicted the US oil production peak - and at the time he made the prediciton, NO-ONE believed him - he was ostracized by the oil industry and the scientific community, but he WAS RIGHT. Mr. Baley fogets to mention the rapidity of the production decline since the peak: so far, production is down by about 50% since then, in spite of a number of new discoveries.
then he goes on: " Lynch points out that the supply of oil is determined not only by geologic factors, but also by political, economic, and technological ones. "
well , that's true. one of the effects is e.g. that OPEC's quota system has very likely led to a VAST OVERSTATEMENT of reported Middle Eastern reserves, all of which jumped between 50% - 100% in the mid 80's without a single drill rig looking for any at the time. obviously, when quotas are based on reserves, it's in everybody's interest to overstate them.
"It's true that oil discoveries peaked in 1982,.."
no, it is NOT true. they peaked in the 1960s, i.e. 40 years ago.
"but Lynch argues that's because of politics, not geology. "The big factor in the decline in oil discoveries is that Saudi Arabia, Kuwait, Iraq, and Iran all nationalized their oil industries in the 1970s. Plus Iraq and Iran went to war and essentially stopped exploring for more oil," explains Lynch. "They have so much oil, why would they bother looking for more?""
well, even so, they have REPORTED a HUGE increase in reserves, and those are generally accepted as the 'truth' in all base cases looking at the Hubbert peak - in order to arrive at conservative conclusions.
"Scientific American doomster Colin Campbell has been predicting that the peak of oil production is three to four years away for the past 15 years."
again, this is NOT true. Campbell's work has ALWAYS pointed to a peak sometime between 2010 and 2020, and it is only recently that some other authors have actually begun to move the likely peak date FORWARD in time, instead of backward as is here alleged. this is due to the fact that Norway ( 4th largest exporter ) , the North Sea and Venezuela ALL have clearly peaked already, and are in steep decline.
"The fact is, we don't really know how much oil is left."
if he means we don't know down to the last barrel, he would be correct. however, the planet's oil geology is by now very well understood ( better than ever actually ) , and all base cases of the peak scenario incorporate generous estimates of the oil that has yet to be found - probably overly generous estimates in fact ( 1.2 - 1.5 giga-bbls ) .
""Available supply" is not merely a geological fact. It depends on technology and economics as well"
the peak oil cases acknowledge this - what he does not mention is that this is not ALL on what 'available supply' depends. the MAJOR factor , which is generally not considered by economists, is the net energy equation. it is NOT merely a question of 'how many dollars does a barrel of oil cost' - it's a question of 'how many barrels of oil does it cost to recover a barrel of oil'. if it costs more than one, it is totally irrelevant whether a barrel costs 5 bucks or 500 bucks. there will be no net energy benefit in the recovery.
"Illinois Institute of Technology, just published an estimate of eight trillion barrels of oil, gas, and oil sand reserves in the Oil and Gas Journal."
this estimate is a misleading exaggeration - since the bulk of it are actually the oil sands. currently, oil sands produce oil at a net energy loss, and even the most optimistic estimates say that an economically and physically feasable recovery of a mere 10% of the known resource can be expected. therefore, knowing how many bbls. are 'theoretically' included in the sands deposits is per se useless information - what's important is how much of it can actually be recovered.
"Annual global oil production these days is 24.5 billion barrels. At the current rate of production, oil supplies would last at least 90 years"
good grief! global annual DEMAND alone is currently almost 29 billion bbls. - if only 24.5 were produced, oil would already trade at 500 bucks, and we'd know without a shadow of doubt that the peak has come and gone. the 'would last 90 years' estimate is of course a typical layman's extrapolation of the previous misleading 'reserves' estimate - once 50% of a field's resource are gone, annual recovery tends to fall by 10%, and that compounds. i could cite several examples of this, but the last giant field that has been discovered ( Prudhoe Bay, 1969 ) should suffice: its annual production is down some 70% or so from the peak. politics, economics and technology had nothing to do with it - immutable laws of physics however had.
"Taking into consideration various scenarios for future energy use and based on those USGS estimates, the Energy Information Administration sees oil production peaking anywhere from 2030 to 2075."
first of all, the USGS estimates are doubted even by most optimists - but by golly, what ARE those "various scenarios of future energy use"? he doesn't say - but i can tell you that the peak scenarios all use the highly conservative LONG TERM demand growth trend of the past 50 years - which does NOT incorporate anything about the explosive growth in China's, India's and Russia's demand. iow, these estimates are very likely way too low.
" "Demand for energy is going to move away from heavy hydrocarbons," Lynch predicts. "Coal is first, oil is next." He expects that our old hydrocarbon friends will be replaced in our affection by natural gas, nuclear, and other forms of energy as those technologies improve. ""
first of all, natural gas is not a TECHNOLOGY. it is just another fossil fuel, and it's running out as well - US and Canadian production is falling off a cliff as we speak, IN SPITE of the largest drilling boom ever having occurred in '00-'01. none of our 'hydrocarbon friends' are a 'technology', and neither are nuclear, or other forms of energy - technology is not the same thing as energy. coal is one of the few fossil fuels that is actually still quite abundant, so the correct expectation is that we will go BACK to using more coal - because we won't have any other choice.
it's not a question of 'affection' it's a question of necessity. it has to be noted however that OVER 500,000 different products are made from crude oil - it's THE most important raw material in the industrialized world. not only that, it is fundamentally different in terms of its BTU from other forms of energy.
i quote from Jay Hanson:
"Different kinds of energy resources have fundamentally different "qualities". For example, a BTU of oil ( oil before it is burnt ) is fundamentally different than a BTU of coal. Oil has a higher energy content per unit weight and burns at a higher temperature than coal; it is easier to transport, and can be used in internal combustion engines. A diesel locomotive wastes only one-fifth the energy of a coal-powered steam engine to pull the same train. Oil's many advantages provide 1.3 to 2.45 times more economic value per kilocalorie than coal. "
lastly, the biggest mistake in the optimist's polyanna scenarios is that they simply forget about this:
"THE FIRST LAW OF THERMODYNAMICS tells us that neither capital nor labor nor technology can "create" energy. Instead, available energy must be spent to transform existing matter ( e.g., oil ) , or to divert an existing energy flow ( e.g., wind ) into more available energy. There are no exceptions to the thermodynamic laws!
THE SECOND LAW OF THERMODYNAMICS tells us that energy is wasted at every step in the economic process. The engines that actually do the work in our economy ( so-called "heat engines"; e.g., diesel engines ) waste more than 50 percent of the energy contained in their fuel.
ENERGY "RESOURCES" MUST produce more energy than they consume, otherwise they are called "sinks" ( this is known as the "net energy" principle ) . About 735 joules of energy is required to lift 15 kg of oil 5 meters out of the ground just to overcome gravity -- and the higher the lift, the greater the energy requirements. The most concentrated and most accessible oil is produced first; thereafter, more and more energy is required to find and produce oil. At some point, more energy is spent finding and producing oil than the energy recovered -- and the "resource" has become a "sink"."
about the only thing i agree with in Baley's article is that the market is the only mechanism that can be trusted to find a solution to the problem IF THERE IS ONE. in that, i differ from the average doom sayer markedly, who almost to a man believe that government intervention is 'necessary' to save us.
however, it is quite obvious that Baley has NO GRASP of the facts whatsoever - after all, he does not even know how much oil is produced ( he simply used OPEC's latest production quota as his 'world production' estimate ) .
iow, he's too ignorant to opine on the matter - he should have done some research first. |
