There'll Be NO Oil!

Human hubris and over-optimism is a study in itself. Why humans are brain-wired to do almost everything in their power to avoid reality and white wash it to their liking, usually followed by using rose-colored glasses as an added flourish. The objective, as always, is to try to sugar coat foreboding predictions and ....well, how to say this? Put lipstick on a pig! Such is the case with the extensive piece ('There WILL Be Oil') in the Weekend Wall Street Journal (Sept- 17-18, p. C1) by Daniel Yergin. It seems clear, on reading his arguments, that he's targeting the Peak Oil meme, and also trying to show its dire predictions won't be coming to pass anytime soon. As I scanned through his data (see, e.g. the graphics shown) it quickly became evident to me that he's fudging his stats to put a shiny face on them, much like the Bureau of Labor Statistics does when they drop the unemployed after 6 months and re-classify them as "discouraged" - in order to keep the unemployment statistic artificially low. 

Well, as they say, you can fool some of the people some of the time.... Let's look at some of Yergin's claims, as I will also reference a previous blog I did last year ('Has Peak Oil Arrived?'). Before doing so there are a few preliminaries, mainly preliminary definitions and concepts, I need to elaborate so we're clear on what's being debated and discussed. First, the concept of "EROEI" or energy returned on energy invested. This measure or index of energy efficiency was perhaps first popularized by Richard Heinberg in his excellent book 'The Party's Over' - which I strongly endorse for anyone interested in the subject of Peak Oil, followed by the more technical book, A Thousand Barrels a Second. Oil used to have an EROEI as high as 30 (before Hubbert's Peak occurred in the U.S.) It only took one barrel of oil to extract 30 barrels of oil. 

This was such a fantastic ratio that oil was practically free energy. Some oil wells had EROEI ratios close to 100. By 2004 it had fallen to around 20 and is now just above 10, disclosing the more degraded oil that we have on hand- a sure sign we are fast approaching peak. (See also the info at: http://www.dieoff.org/) This is the most critical measure that one must factor into any statements made about oil currently available. Thus, much like comparing dollars undergoing inflation, the value must be compared to what went before. This means that just as today's dollar is worth about one half of the dollar from 1980, so also the barrel of oil of today is worth less (in energy terms) than one from 1969. This cheapening of the grade of oil is part of what is driving oil prices higher, as speculators in the commodities markets bet on what oil futures look like, say one year, or five years from now. (This also means that Yergin's claim that "world oil output has increased by 30% since 1978" must be taken with a grain of salt. Not when adjustments are made to the EROEIs of the oil extracted more recently! Doing that, and figuring in the net costs, it's more like 1%) Second, and maybe just as critical, is the per person usage of oil and how it has changed and is expected to change. Albert A. Bartlett - in an article in Physics Today November, 2004, p. 18- noted that in the 1970s consumption averaged about 2.2 liters per person per day of oil. Today it is close to 4 liters per person per day. So, just as the energy punch of oil has cheapened or degraded, the usage per person has nearly doubled...and it is logical to expect the two factors may be related. Hence, if the EROEI of oil has depleted in the past forty years - say by a factor of 2 - it makes sense its usage has enhanced by the same factor. Now, Yergin in his WSJ piece writes: "Just in the years 2007-2009, for every barrel of oil produced in the world, 1.6 barrels of new reserves were added. " 

 Now, having worked for an oil company (Pan American Oil Corp., New Orleans) for two years (1967-69), as a break from college and to earn money for continuing, I can tell readers that "reserves" are NOT the same as actually extracted oil! Reserves only mean what the term implies, the anticipated volume in barrels expected in a particular region. Also, the extracted oil is not the same as "barrels produced" which is to say, refined. (And true, right now the U.S. has a dearth of refineries). Most often, where I worked, we discovered it under salt domes, and used a line of geophones and explosive charges to make estimates, say in Plaqueminnes Parish, La. The record of depths and hollows would show up in geo-strata records that the geologists would then interpret. (I was responsible for preparing the records with appropriate fiducial marks.) What we most often found, and again this was in the heyday of oil before Hubbert's Peak in the USA, was that the extracted volume was only 3/4 of the estimated reserves - and that was in ideal conditions. 

Applying the same rubric to Yergin's stats, one would actually expect maybe 1.2 usable barrels of reserves for every barrel actually produced. Even this is misleading since Yergin himself doesn't differentiate between the highest efficiency grades, like light sweet crude, and coarser, heavier grades with less power to the dollar...or lower EROEI. Worse, in his lower graphs, for example, he throws in "other hydrocarbon liquids" (presumable from shale oil deposits) and "biofuels" - like ethanol - which actually require more energy put in to extact the energy in them! Thus, about 1 gal. of oil is needed to extract 0.94 gals. of ethanol, not to mention that ethanol is also coming at the cost of a potential food source - corn! Thus, when one adjusts his graphs for these deficiencies the graphs are actually seen to plateau. I

In my previous blog post on Peak Oil, I quoted T. Boone Pickens (from The Financial Times, May 21, 2009, (‘Oil Futures Near $140 Amid fears of Shortage’) page 1A, who asserted we’re now at the point where demand for oil is 87 million barrels a day, while only 85 million can be produced. This was acknowledging Peak Oil by any other name. Meanwhile, in The Wall Street Journal of May 22, there appeared the article ‘Energy Watchdog Warns of Oil-Production Crunch’ (p. A1) . The piece noted that the world’s “premier energy monitor” was "preparing a sharp downward revision of its oil supply forecasts". The article also noted (p. A12): “A growing number of people in the industry are endorsing a version of the ‘peak oil’ theory: that oil production will plateau in coming years, as suppliers fail to replace depleted fields with enough fresh ones to boost overall output.” The skinny then was that the IEA (International Energy Agency) was expected to forecast as much as a 12.5 billion barrel a day shortfall by 2015. This would certainly have the effect of spiking oil prices to probably well over $600 a barrel and at least $8 per gallon (or what Europeans are now paying) at the pump. Most Peak Oil signifiers pitch its entry at $7 a gallon. “Peak Oil’ is a somewhat misleading a term, since it suggests a specific date of peak production. In the real world, the top part of the oil production curve is nearly flat (cf. A. Bartlett, Physics Today, op. cit. p. 54) In more practical terms, what it means is that if 2008 was the year of peak oil production then the worldwide oil production in 2028 will be the SAME as in 1988, demanding that Q(net) > 0. Recall, Q(net) defines the net useful energy from a quantity of fuel. (cf. Weisz, in Physics Today, July, 2004, p. 51) Q (net) = Q (PR) – [Q (op) + E/T] In effect, for break-even oil one would find Q(net) = 0. 

 Thus, there is no net gain in energy given the quantity that must be used to obtain it. (Yergin's "1.4 trillion barrels" figure falls into this bracket) Then, for the last 700 billion barrels, Q(net) = negative quantity = -Q since the rate of energy production (Q (PR)) must be debited by the energy consumed for its operation Q(op), and the energy E invested during its “lifetime” T. (Yergin estimates a total of about 5 trillion barrels remaining, but this is wildly optimistic, since over three fourths of this will be at ocean depths - e.g. well over 2 miles- so will be technologically impossible to retrieve or extract. Let's also not forget the 2010 Deep Water Horizon disaster! ) Getting back to Peak Oil - based on a putative 2008 Peak date, it means that production in 2048 will be the same as 1968, 2068 will be the same as 1948, and 2088 will be the same as 1928! All this while the population is expected to reach 9 billion or more in the same period! (cf. Bartlett, ibid.) In other words, as time goes on the available accessible oil constantly diminishes even as its energy grade does likewise, while the population constantly rises (about 1.3 %/yr) with the same demands (4 L /day). Yergin also writes: "Other developments..from more efficient cars and advances in batteries, to shale gas and wind power- have provided reasons for greater confidence in our energy resiliency. Yet the fear of peak oil retains its powerful grip.." As well it should given this info! First, the planet currently has nearly a half billion automobiles and even as I write this, more are being added by the second - especially in newly rich China - upping the per person consumption. There is also no evidence the Chinese are building costly "more efficient" green cars like the U.S. 

That means the bulk of autos, maybe 400 m, will still be inefficient oil guzzlers. (Even in the U.S. the low aggregate and consumer demand environment means that few people other than the richest will be able to afford any of the hotshot electric, or hybrid autos!) Batteries are also minor players in terms of the big bang energy measure known as Exajoules. A useful indicator, according to 'The Physicist's Desk Reference' (Energy Supplies, Table C, p. 187) is which energy sources measure up to the exajoule (EJ) mark in delivery capability. (One EJ = 10 to the 18 power joules, or 10 to the fifteenth power BTUs - British thermal units). According to the Table, the only double-digit EJ energy source (general use) contributors currently are: oil (47), coal (77), natural gas (24) and nuclear (31). Oil shale is at 3, solar is at 2 and ethanol-wind-geothermal doesn't even make the 'cut' other than as a toss in for the category 'others.' 

 So much for Yergin's mishmash of "energy resiliency" and reasons for confidence. When he alerts us that wind power together with oil shale have at least hit the double digit EJ mark maybe we can take note. In the meantime, my advice to all and sundry is to prepare for Peak Oil, with the initial adverse effects likely starting by 2015-16. You will see a spike in commodities, oil futures prices, probably to well over $200/ bl. Then the gas pump will be the next place for it to show, with prices near or about $6/gal. Maybe now's the time to purchase that shiny new bicycle in preparation!