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Life....after Peak Oil


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But, more importantly, it suggests that light sweet might be a canary in the coal mine: a predictor for what depletion of the whole liquid fuel sector might have in store for us. If the light sweet depletion stays at moderate annual percentages, that suggests there'll be time for gradual adaptation as we all start driving hybrids, building windmills and nuclear power plants, and digging up more coal. But suppose light sweet falls off a North-sea style cliff (10% plus per year); if Matt Simmons is right about Ghawar then it surely must. Then we shall know that we are in for a very nasty experience, but with a little warning before the medium and heavy oil follow the light trend.

Is North Sea Oil really dropping at 10% per year, I thought we were at the point where UK Oil import matched Oil Export value, so next year we could be 10% short. Could anyone put a figure on the value of that 10% as it will be a double whammey for Brown in lost revenue and worse balance of payments.

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There is this basic problem. If you get energy at $10/barrel as much as you can use, the economy can flourish. But once you hit a definite limit on energy input then that has to be disruptive, because the whole set-up is based on these inputs:

36% oil

23% coal

20% gas

12% renewable

7% nuclear

2% hydroelectric.

All non-oil energy sources are to some extent derivatives of oil. I mean, you probably could build a nuclear plant without using oil, but not with plant currently available. You'd have to invest in different vehicles and reallocate resources to provide alternative energy and that takes time and money and carries the opportunity cost of alternative uses. So the cost of the nuclear plant goes up and so does the cost of energy, that means the standard of living may fall.

I think you underestimate the flexibility of the market here. Infrastructure changes over time, and there is usually a degree of slack in the system.

Lets say oil availability falls gradually. Existing oil based infrastructure loses money very quickly, and there is a boom in the industry of building non-oil based infrastructure. Because of the boom, those building non-oil based infrastructure will be able to lay their hands on more investment and will be able to outbid others for the remaining oil. Those with oil-based assets lose out, those building non-oil based assets get rich. Kind of a bit like the housing market in some respects!

That is why there is a price which is "too high" for oil. As the price of a barrel goes up, we see oil majors share price soaring also. There will come a point, though, where the oil price will go up but oil shares will fall, because of the realisation that the price is sufficiently high to dent demand, then people will look to invest in alternative infrastructure.

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Some random thoughts...

The western world is fairly capitalist and I'd argue that it's this mechanism that 'makes decisions' rather than the governments. If we've reached peak oil then the cost to extract it will increase, meaning that the price per barrel must increase to retain profitability.

As this continues it will eventually become more profitable to produce energy in alternate ways. BP and co will slowly ramp down oil production and ramp up alternates to reflect this profitability. Nuclear is one possibility.

It's likely that the cost of energy will remain high: everything else being equal the cost of whatever starts to replace oil when it hits (say) $150 will be $149. The only thing to hope for there is some breakthrough in e.g. cold fusion.

Demand will react to the sustained high prices. Again it's a self-correcting mechanism: alternatives to energy consumption will become comparatively cost-efficient (I'm looking to rent in a more expensive area so I can walk to work, for example).

So that all happens automatically. The role of the government is to regulate energy production so that e.g. nuclear fission is not carried out in an un-safe manner. As an extreme example, let's say BP find an alternate source of energy that's unlimited and cheap but extremely polluting.... what to do? I'll label it 'soylent green' if that helps the point.

In general, assuming that the government is incapable of running a planned economy, it should let the freemarket reach its own equilibrium - EXCEPT where this would be bad for the environment, society, humanity, etc.

Edit: Similar points to RD. :)

Edited by Nijo
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Total Gas production in million cubic metres

2000 114,557

2001 112,567 -1.7

2002 109,816 -2.4%

2003 108,088 -1.6%

2004 100,966 -6.6%

Offshore Crude Oil Production '000 Tonnes (M3*Density) Per Year (UK Share)

2000 114,830

2001 106,547 -7.2%

2002 105,369 -11.1%

2003 96,868 -8.1%

2004 86,784 -10.4%

Onshore Crude Oil Production '000 Tonnes (M3*Density) Per Year (UK Share)

2000 3,234

2001 2,944 -8.9%

2002 2,654 -9.9%

2003 2,187 -17.6%

2004 1,924 -12.0%

http://www.og.dti.gov.uk/information/statistics.htm

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Speaking of gas production, I got a letter from British Gas the other day saying that they have to increase prices as they're running out. They have to find other (more expensive) sources, apparently.

Just thought I'd share.

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clv,

Care to expand a little - are you refrring to the oil barrel one, did you write it/post it before?

I wrote the original piece pointing out how OPEC have revealed global light sweet crude extraction has fallen on my website (www.vitaltrivia.co.uk) that The Oil Drum article and a few others are referring to. My hits have gone through the roof this week!

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bp ect will be in trouble

its a lot easier to build electricity generators ect, and its not a stranglehold, its easier than being a tv manufacturer.

And that is the whole point, we are dependent on a commodity that a few people control.When we switch over to alternative fuels no-one will own the commodity as there is no commodity.

all you need is a truck generator and some wood, a few batteries and you have your own electricity.No-one will control this, towns will have there own guys fitting and erecting the equipment, like they used to do with satelite dishes.

The only buisnesses in the world that never fail are those controlling commodities, be that oil, gas, water, diamonds ect.there is no-one that can control the manufacturing of generators.

The likes of bp ect might as well stop trying to design and impliment diffrent energy sources becuase they wont control the outcome, its realy putting freedom back into the hands of the masses.

i cant wait get rid of the filthy poluting crap now.

every house in the uk can produce enough electricity to run the house and a car quite easily, just takes a bit of investment

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all you need is a truck generator and some wood, a few batteries and you have your own electricity

And where will you get the fuel to run the generator? Or are you going to have the kids run around in a big 'hamster wheel' to produce electricity?

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Ethanol is only used to dilute ordinary petrol.

Harvesting and refining the sugar beet/cane uses a great deal of ordinary fuel.

Even less useful for cold countries like ours.

Forget about large-scale bio-fuels. There simply isn't enough land on the planet to produce more than a fraction of global liquid fuel requirements.

At the moment we're using 87,000,000 barrels a day of oil. The only other thing we can produce 87,000,000 barrels a day of is water.

Plus you can only harvest crops for so long without fertiliser of some sort before completely exhausting the land.

Edited by Withnail
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Plus you can only harvest crops for so long without fertiliser of some sort before completely exhausting the land.

Actually, scientists are increasingly worried about this.

In fact, there was a report written by some of the top US scientists in this field stating that they felt that soil in the US was no longer capable of providing the required minerals for a healthy diet - i.e. not enough minerals in the soil hence not enough minerals in fruit and veg.

The report was written in 1903.

Today, more and more scientists are looking at the increases in heart disease, cancers and such-like and making a direct link to the decline in minerals in the soil, and hence in food, over the past 100 years.

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At the moment we're using 87,000,000 barrels a day of oil.

87m barrels a day ? The Exon Valdez tanker only held 1.48 million barrels.

So that 21,162 Exon Valdez's per year!!! Imagine them all in one port... All holding quality easy-to-distill crude.

What could possibly replace this as an energy source? The scale of this problem is staggering.

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Here's some recent data on US gasoline.

Looking at this graph from the EIA we can see that gasoline stocks are at an all time low which is bad enough:

gtstusm.gif

Actual gasoline reserves in millions of barrels aren't very important to anyone though, what's important is how long those reserves last, which obviously depends on the rate of consumption. Looking at this graph and we can see that gasoline demand (read consumption) is at all time highs.

gtpsusm.gif

Dividing a record low volume of gasoline by record high consumption shows that what stocks are available are going to last short length of time. That's one of the reasons why people are worried and oil prices are high.

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NOW $67.75 Per BARREL

Market Watch Aug 24

Crude futures hit new, higher levels

Storm lifts natural gas past two-year high; gasoline up 4%

By Myra P. Saefong, MarketWatch

Last Update: 4:11 PM ET Aug. 24, 2005  [ Page 1 | 2 ] 

E-mail it | Print | Discuss | Alert | Reprint | 

SAN FRANCISCO (MarketWatch) -- Futures for crude oil closed in uncharted territory well above $67 Wednesday, lifted by an eighth-consecutive drop in U.S. gasoline supplies and a tropical-storm threat to production in the Gulf of Mexico.

Natural-gas futures jumped past $10 during the session -- their loftiest level in more than two years -- and gasoline futures climbed 4% to a one-week high.

Crude for October delivery rose to a high of $67.40 a barrel on the New York Mercantile Exchange before closing at $67.32, up $1.61, or 2.5%. Prices surpassed the previous record of $67.10 for a benchmark contract. The September contract hit that record on Aug. 12, the same day the October contract reached a an all-time high of $67.75

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No... so what grade of crude is that and is there the capacity to refine it?  Unrefined crude is no good to man nor beast.

US refineries are usually peak operations in the summer, and reduce output over winter to match demand, so there is capacity. Furthermore stocks of other fractions are very higher (both lighter and heavier) so to be honest I don't see what your point is here.

Also you refer to "record highs" but only show 1 year graphs containing primarily seasonal variation.

I'm willing to accept the peak oil issue but attempting to spin the story so heavily does damage the credibility of your stories IMHO.

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US refineries are usually peak operations in the summer, and reduce output over winter to match demand, so there is capacity.  Furthermore stocks of other fractions are very higher (both lighter and heavier) so to be honest I don't see what your point is here.

Also you refer to "record highs" but only show 1 year graphs containing primarily seasonal variation.

I'm willing to accept the peak oil issue but attempting to spin the story so heavily does damage the credibility of your stories IMHO.

There's no spin there, I was just pointing out how shocking the latest gasoline stocks (released yesterday) were - the reason why oil prices hit a new record of $68. It's not even really a peak oil story! I use the term record high since I believe the blue bar represents the maximum and minimum levels over the last 5 years (I've seen it described as that in the past). Whenever the current data gets to the edge of the blue bar you've got a record for that time of year.

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How much energy would be required?

About 29% more than is produced according to the most pessimistic source, a lot of others are more positive, I suppose it depends on a number of factors.

Jan 15th 2004 | SHERIDAN, WYOMING

From The Economist print edition

IT'S the one topic all presidential candidates agree on in the run-up to the Iowa caucuses: ethanol production is a very good thing and should be handsomely subsidised. Forget that this grain alcohol has always been something of an economic and environmental joke. It comes from corn (or maize), which is mostly what Iowa is famous for.

The current subsidy to the industry is worth around 50 cents a gallon—or around $1.4 billion a year. The fig-leaf covering this largesse is the idea that ethanol is a clean fuel. In the 1980s, it was touted as an alternative to leaded petrol. It got another push from the 1990 Clean Air Act; to cope with the requirement for cleaner emission standards, states made the petrol industry add more oxygenates to their fuel to make it burn better. Ethanol emerged as the main such additive.

Meanwhile, the economics of ethanol production have taken a turn for the better. Efficient enzymes have led to more cost-effective fermentation, and genetically modified high-starch corn has a better yield (and so needs less processing in the plant and fewer herbicides in the field). Today there are 75 plants distilling a record 2.8 billion gallons, with a dozen more facilities under construction.

A press release from the US Department of Agriculture summarises its report on ethanol efficiency. The findings of the report are contested by David Pimentel in an article in the Encyclopedia of Physical Sciences and Technology (a press release from Cornell University summarises Mr Pimentel's work). See also the Clean Air Act.

But is ethanol really that green? A debate has been stirred up by David Pimentel, an entomologist, who argues that each gallon of ethanol takes 29% more energy to make than it eventually produces. In 2002 the United States Department of Agriculture (USDA), which administers the subsidies, released a report claiming the opposite: “Corn-ethanol yields 34% more energy than it takes to produce it, including growing the corn, harvesting it, transporting it, and distilling it into ethanol.”

This might have seemed the end of the matter. But Mr Pimentel claims that the USDA study is flawed. It omits about half the inputs in corn production, including the cost of water to grow the stuff, and by using averages it avoids pointing out that some ethanol plants are extremely ungreen. It may indeed be energy-efficient to distil ethanol in eastern Minnesota, which has lots of rain and is home to the nation's cheapest corn. But in dryer Nebraska around 80% of the corn has to be irrigated, normally by natural-gas powered pumps, and much of the water comes from the fast-dropping Ogallala aquifer.

Other scientists are now trying to poke holes in Mr Pimentel's numbers. But do not expect the scientific debate about the highly subsidised crop to make a blind bit of difference to the politicians. The hand-outs for ethanol will rise again if a new energy bill goes through Congress.

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There was some talk earlier of the impracticality of electric vehicles. I've finally got around to doing some calculations.

Petrol has an energy density of 13,000 Wh/kg, and a density of 0.73 kg/l. Most cars have a 50 - 55 litre fuel tank, and so contain about 40 kg of fuel. So, a fuel tank will hold around 500 KWh worth of energy.

Petrol engines have an efficiency of 30%, compared with 90% for an electric engine, so we need 165 KWh battery capacity. The current cutting-edge battery technology is lithium sulphur. Pilot production has hit energy densities of around 400 Wh/kg (compared with 150 - 200 Wh/kg for current lithium ion batteries), and is projected to reach 600 Wh/kg. So you'd need a 275 kg battery pack to replace a typical car's fuel tank.

I'm not sure of the exact weights, but most four cylinder petrol engines weigh around 120 kg. There was a project to build an electric Lotus Elise that used a drive system weighing 26 kg. Adding up, means that a petrol powered car's engine and fuel supply weigh around 160 kg, whilst an electric car's is around 300 kg. The difference is 140 kg, around 10% of the weight of a Golf, possibly less if transmissions (electric cars can have single ratio gearboxes) and exhausts are taken into account.

Of course, you still need to generate the electricity to power it, and it'll take a lot longer to recharge than to refuel a conventional car, but it's not entirely unfeasible with near-term technology.

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I agree, materials science is not a huge distance from producing what I would call a practical car. But not what Jeremy Clarkson and other saddos for whom their car is a personality extension (in their own eyes anyway).

Petrol engines are quite flexible, in that they function well at 10mph and 100mph, and can get between the two fairly easily. Electric motors with similar characteristics might not be able to do that for some time. They won't be suitable for people to have a Formula 1 fantasy whilst driving along the B505 for some time yet.

edited for a very crucial missing "not"!

Edited by Leodhasach
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Petrol engines are quite flexible, in that they function well at 10mph and 100mph, and can get between the two fairly easily. Electric motors with similar characteristics might not be able to do that for some time.

I think the problem is with power storage not conversion, electric motor technology is now very far advanced. Think of a train's traction motors which can produce a huge torque at zero roadspeed and go up to very high speeds still efficiently producing power. Furthermore a train traction motor is direct geared to the wheels not through a variable ratio gearbox which would be possible in a car.

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