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Falling Down
Monday, November 20, 2006
No, not the 1993 movie starring Michael Douglas as an unemployed and divorced defense industry engineer who reaches his boiling point after getting stuck in LA traffic.
As you'll recall, after abandoning his car, William 'D-Fens' Foster takes a baseball bat to the candy aisle of a convenience store after an uncooperative clerk rubs him the wrong way. He then interacts with gang members, guns, and finally Robert Duvall as a retiring police officer who just wants to get to his daughter's birthday party.
Ah ... the early 90s in Los Angeles ... a time when a little baby housing boom was going bust, defense workers were wishing for a return of the Cold War and Cisco, Yahoo! and Amazon were tiny companies.
Sergey Brin and Larry Page were still teenagers and Fed Chairman Alan Greenspan was just getting warmed up.
No, the title of today's post is not in reference to aerospace engineers, but rather, petroleum engineers and the theory of peak oil (yes, that was a long row to hoe, but this is going to be movie-themed week here - well, at least today and Thursday).
[Begin awkward segue.]
While Michael Douglas could be easily mistaken for an oil industry engineer who had trouble keeping himself upright, Dave Cohen and the good folks at The Oil Drum are quick with a rebuttal to a recent (and very expensive) report from CERA (Cambridge Energy Research Associates) with a similar sounding name:
This sixteen page report is available for only $1,000 - nice margins!
The critique of the CERA report at The Oil Drum is available for $1,000 less:
It begins:With the release of Why the "Peak Oil" Theory Falls Down — Myths, Legends and the Future of Oil Resources by Peter M. Jackson, Cambridge Energy Research Associates (CERA) attempts to cast doubt on the credibility of those with imminent, empirically-based concerns about our future oil supply.
They actually have quite a bit to say about the report in this post from last Thursday, starting out with a detailed description of what peak oil is and what it is not, then going on to rebut many of the assertions made in the CERA report, including the emphasis on reserves rather than production and many technical nits that are far too detailed and well constructed to be dismissed.
CERA's "Decision Brief" requires a response because since 1870, the health of the world's economies have hinged on a secure, dependable and growing flow of "conventional" oil. Their forecast, shown in Figure 1, predicts that the oil supply will continue to grow and sustain economic growth.
We shall have much more to say about CERA's forecast later. For now, it is sufficient to note that CERA's analysis is lacking. The world's oil supply will not continue to grow to meet ever-rising global demand, and worse, the consequences could irrevocably damage global economies. Such an outcome would have harmful effects on people's lives. So, this debate is not "academic" — much depends on a correct analysis of the future oil supply.
In fact the level of detail in Dave Cohen's rebuttal is quite impressive - anyone who thinks that the idea of peak oil is just more crazy talk from conspiracy theorists should have a look.
The Oil Drum retort takes exception to, among many other things, the tone of the CERA report:Peak Oil Modeling Theory & Data
The piece is well worth reading in its entirety along with many of the comments (over 300 as of today). At around number 70 or so, a commenter brings up the subject of CERA funding, posting some helpful links:
CERA berates those concerned about peak oil, labeled peakists in their document, for using questionable data and analysis methods. This passage is worth quoting in full.
"We are also struck by three characteristics of the current debate:
* The peakist argument is not grounded in a credible systematic evaluation of available data.
* The peakist arguments cluster around the questionable model described by the late American geologist M. King Hubbert. This is a technique that fails to recognize both that recoverable reserves estimates evolve with time and are subject to constant and often significant change. It also underplays the far-reaching impact of technological advances.
* Some of the peakists are, interestingly, shifting their emphasis away from running out, in terms of physical resources, to issues that we believe are significant--infrastructure and aboveground risks."
Here we must take exception to CERA's characterization of peak oil research, especially here at The Oil Drum. Not only have we tracked CERA's bottom-up project- by-project analysis in the past —a complete list of stories is too long to enumerate here— but we also avail ourselves of whatever data we can find, such as the Megaprojects Database compiled by Chris Skrebowski, editor of the Petroleum Review.
Space limitations preclude going into much detail here, but suffice it to say that it is a bit disingenuous for an organization such as CERA, a wholly-owned subsidiary of IHS Energy, to charge money for it's reports for paying clients and then turn around and tell us that we are unfamiliar with the current & future oil production data. This points up a larger issue which Matt Simmons has brought to the forefront of public attention: data transparency in the world's oil industry. Just as we can not see some of CERA's field-by-field production projections, we also can not see an historical production profile or this year's monthly production data for Ghawar in Saudi Arabia, the world's biggest oil field. For an issue so crucial to the health of world economies, the lack of readily accessible data is scandalous. A pro bono approach would make data available to independent organizations that have an interest in analyzing it.Bartlett & Udall respond to latest CERA report
As Matt Simmons (Twilight in the Desert) has commented on many occasions, the opinions at CERA are paid for by an industry that has certain interests that are not necessary in line with the greater good.
Slashdot readers ask who pays CERA?
Google search: Who pays CERA?
As always, follow the money.
12 comments:
The Isrealis have patented a process for extracting petroleum products for the equivalent of $17/bbl from oil shale. Please add 200-300 to the peak.
Wanting to believe in "peak oil" and trusting the doublespeak at the oildrum are not substitutes for historical fact that has proven, proven every, every peak oil claim wrong for 150 years.
As a rather loud member of theoildrum.com at times and one of the avid economist with a real understanding of natural resource depletetion, I find this article to be a refreshingly unbiased piece pushing the reader to look at the broader picture. Peak oil isn't a "theory", it's a simple fact of life no different than dying.
There was only so much oil put into the ground and once we consume the first half(most likely around now), then the corresponding last half will be harder to produce (gee offshore drilling anyone?) and MORE EXPENSIVE. Google Texas East Field depletion and you'll find out that we are currently pumping just as much oil as we did in the 60's.
How is it that we are importing almost 2/3 of our oil demand when technology has ADVANCED? Why are we only producing as much oil as 40 years ago? Because peak oil is no "theory", it is a scientific fact derived from nature which is not going to magically change. Technology isn't going to SAVE us and we must be prudent and pragmatic in preperation for less oil at signigicantly higher prices!
As an economist price signals are suppose to inform consumers. However the elasticity of gas is so inelastic that consumers do not think of any other way except gas guzzling cars. We need a crash program across the country for MASSIVE investment in mass transit like electric urban rail.
Keep in mind no matter what WE do, India and China or roughly 2.5 Billion people want to live an energy intense & wasteful life just like us. We can add zero additinal demand in this country but throught shear size of the population, CHINDIA will increase the price of oil as they consumer it at ever growing rates.
Remove your emotions are begin to understand the facts. The conclsuion to this blog post says it best.....always.....follow the money.
Robert Cote...perhaps you should read more about the scientific process of extracting oil from oil shale. It's a fact that it's easier to get oil from asphalt pavement than it is from oil shale laying all over the southwest basin.
Keep dreaming.....
As a matter of fact I'll send you to another econ website and say no more....
http://www.econbrowser.com/archives/2005/09/oil_shale_retor.html
If oil companies really did expect declining output and higher prices in the near future, why would they ever want to alarm anyone about it? If everyone else got all worked up about it, then they'd go off and fund alternative energy like they did the Manhatten Project, and the oil business as it currently exists would slowly decline.
If oil companies continue to say that everything's gonna be OK, then as long as there are not too many painful energy episodes, prices and profits can steadily rise.Then when the long slow squeeze turns into a full-blown crisis that has to be solved immediately, the government will come in and pay them to fix the problem.
Regardless of their real beliefs, what motivation is there for oil companies to paint a picture of anything other than an endless supply of energy? They are in business to make money, not to look out for what is referred to above as "the greater good".
The Isrealis have patented a process for extracting petroleum products for the equivalent of $17/bbl from oil shale. Please add 200-300 to the peak.
Like Jack II, too little too late.
Wanting to believe in "peak oil" and trusting the doublespeak at the oildrum are not substitutes for historical fact that has proven, proven every, every peak oil claim wrong for 150 years.
The only relevant historical prediction was Hubbert's, wherein he nailed the U.S. peak.
Meanwhile, global oil production growth has apparently stalled at a level slightly below 85mbb/day for the past year, despite higher prices.
Just keep your head buried in the (tar) sand, Robert.
Is the $17/bl based on shale in the ground or shale that is in a railcar? If it is still in the ground, then take the price of coal(a softer mineral) and divide that by the fraction of oil that is in the shale. Then add $17!
Excellent comments regarding this Israeli oil shale claim. Here are a few more (since I posted on this elsewhere over the weekend):
1) Israel has a major water problem, which is a key component of any peace talks and future agreements.
"Currently, Israel's water resources yield 449 billion gallons each year, but population growth and a general increase in the standard of living have boosted annual consumption to 580 billion gallons. With an annual deficit of 131 billion gallons of water, Israel is over-consuming its water resources by 25 percent."
Israel Water Facts
"But it is access to water, a more fundamental resource, that is at the root of much of the bitter conflict between the Israelis and the Palestinians. Case in point: The Palestinians say they rejected a recent peace proposal from Israel because, among other things, it didn't give them control of water resources within their territory."
(Blood and Water
2) The process claims to use lower temperatures and produce less waste.
From a government of Israel site (www.export.gov.il) that directly addresses Hom Tov and its claims:
"The term "oil shale" is actually a misnomer, the World Energy Council says. The organic material that would act like petroleum is called kerogen. When processed, kerogen becomes a petroleum-like substance, but in order to be able to use it for energy, it must also be heated to around 932 degrees Fahrenheit."
"There are two ways to process the shale: One way is to fracture the shale in its location and then heat it to get gases and liquids by wells. In the second process, the shale is mined, transported and then heated to about 842 degrees Fahrenheit. Hydrogen is then added to the resulting product and waste is then disposed and stabilized."
"The total energy and water requirements together with environmental and monetary costs (of producing) shale oil in significant quantities have so far made production uneconomic," a World Energy Council paper said."
(Israel Export Institute
So, unless this company has somehow found out a way to ignore some basic laws of physics, the process is still very energy intensive, awfully wasteful/toxic and, most importantly, a money loser.
It may be an improvement on current processes, but this really isn't saying much. A relative improvement of possibly the most harmful technique of producing oil is not a real improvement at all.
Cheney on peak oil in 1999:
http://energybulletin.net/559.html
BTW, by 'peak oil' what is meant is peak cheap oil. In the end, there is no comparable substitute, only best alternatives.
Not much more to say over the oil drum and other commenters, but I'll add these points:
1) despite the fact that above-ground oil price has fluctuated historically quite wildly in both directions due to a variety of variables, one trend has been largely consistent over the history of fossil fuels conspution: EROI keeps getting lower (this is the amount of energy required to extract more energy). This is a matter of physics, not simply market economics, and takes into account the gradual improvement of technology. The upshot is that the floor on the market price of fossil fuel resources keeps going up. If you don't believe this has yet been a factor (despite the fact that it took greater than $50/bbl to get oil sands projects going), I would like to know when you think it will.
2) I have seen few people express peak oil in the correct terms. The peak will come not at when oil is "running out", nor when supply is half depleted, nor necessarily when production peaks: it is when productive output ceases to increase faster than demand growth. To focus on any of the aforementioned incorrect renderings of the peak oil problem is simply to construct an easily-dissembleable straw man. I have yet to see any "cornucopian" rebuttal of peak oil that didn't employ one of these distractions.
Robert's comment illustrates a common misconception about alternatives such as shale oil and tar sand. (I don't care about the clains made by the Israeli company, I've been around long enough to know that fantastic claims like that should be filed in the same pile as letters from Nigeria)
They think that if it costs X dollars to make a Y barrels of alternatives, then 1000X will yield 1000Y barrels, or that the relationship between X and Y is a linear function.
In reality the cost will increase dramatically as you run up against resource limits such as vater and gas and have to pay more for everything from steel to machinery and labout. (Try to google [Athabasca cost overrun] to see what I mean)
After the Jack2 results, OPEC cuts to stabilize prices (cuts that never happened) , and now the CERA report, it looks like the coast is clear. WHEW! Does anyone else think that we're about eight months away from oil companies appearing before Congress again to explain how they're making so much money after oil prices slowly climbed back up? Rinse, lather, repeat.
the problem isn't so much how much is there, but how FAST can you extract it.
even if we had a perfected shale process today, substantial production isn't going to happen tomorrow.
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