Does Cheap Oil Disprove Peak Oil? Absolutely Not!

Blogger Arun Gupta recently wrote a piece on smirkingchimp in which he claims that Peak Oil is all overblown nonsense. According to Gupta:

"Fervent peak oilers are neo-Malthusians, believing the relentless growth of population and society on their own will outstrip natural resources. While Malthus’s ideas were discredited on scientific, historical, and economic grounds in the 19th century, they live on in peak oil, peak water, peak minerals, peak soil, peak food and peak everything."

But in fact, this is emphatically true, despite Gupta lacking the education to see it. Please refer to:

http://brane-space.blogspot.com/2014/05/yes-population-growth-spurs-higher.html

And:

 http://brane-space.blogspot.com/2013/09/44-trillion-in-deficits-by-2024-minus.html

The gist of the above content is that YES- usable energy and resources are decreasing and at a clip most people don't grasp (including Gupta). But the evidence is all around including: slow economic growth, lack of new investments which help many people instead of the few, and ever increasing difficulty in obtaining oil supplies.

One of Gupta's biggest howlers in his piece is when he claims:

"The inherent flaw of peak oil is that it naturalizes capitalism. Energy reserves are determined by price, investment and technology. The current oil boom, driven by innovations in fracking and drilling, tar-sands production, low-cost investment capital and persistently high oil prices, have smashed Hubbert’s theory to bits like brittle shale."

First some background into Hubbert's theory, as Gupta accurately notes:

" Shell Oil geologist Marion King Hubbert developed peak oil theory in the 1950s, predicting domestic U.S. oil production would peak by 1970 and decline steadily thereafter. In exploiting an individual oil field, Hubbert contended, production ramps up quickly and hits a peak at about which time about half the recoverable oil has been extracted. As the oil becomes increasingly difficult and costly to pump out, the field goes into decline. Think of the production as abell-shaped curve. The top point means half is gone and half is left. But because population and the economy continue to grow, so do energy needs. Hubbert held that his theory about an individual field was applicable to the continental U.S. oil production and even the entire world, which he predicted would peak around 2000."

But hold on! In fact the evidence shows that global Peak Oil occurred around 2005-06. But what about the so-called "oil boom" due to fracking etc. It's all bogus!  It arises by conflating all oil sources as having the same efficiency to deliver energy.

At the heart of Gupta's - and many others' misunderstanding - is the failure to distinguish between different classes of oil.  Here is my effort to sum it all up, from an energy perspective, so readers can consider it the 'Cliff Notes' version of the whole story:

The planet was endowed with ~ 3,000 billion barrels of oil  – of which we’ve consumed one third and another one sixth of relatively cheap oil remains, after there will reside another third of “break-even” oil (costs as much to access as it delivers), after which one -sixth of very expensive oil remains (costs much more to reach it than it deliver in energy).  At the heart of these considerations is the net energy eqn. (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.

 

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. Thus its Q(PR) will be small in relation to the bracketed quantity.

In a similar vein, Richard Heinberg uses the quantity EROEI or ‘Energy returned on energy invested’ which for oil reached a high of 30 (ratio) in the 70s and is still the highest of all energy sources at around 22.   Thus, the problem in a nutshell is not “running out of oil’ per se but running out of CHEAP oil.

 Bottom line, we need not run out of the stuff before the world economy runs into problems of untold, unspeakable proportions! We already have ample economic indicators showing the signs.

“Peak Oil’ is a somewhat misleading a term, since it suggests a specific date of peak production- a common error Gupta also makes, i.e.

 

"Then there is the concept of a peak. Even though Hubbert was off by only one year—domestic production peaked in 1971—production looks nothing like his bell curve over time. It rose after each seventies shock, went into a twenty-year funk after the mid-eighties crash, and in the last five years it has soared to near its 1971 peak."

 

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 2005  was the actual year of peak oil production then the worldwide oil production in 2025 will be the SAME as in 1985, demanding that Q(net) > 0.   Also, it means that 2045 will be the same as 1965, and 2065 will be the same as 1945, and 2085 will be the same as 1925! 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 population constantly rises with the same demands.

Hubbert predicted U.S. oil production would peak around 1970,  which it did (at 2.2 liters per person per day). He also predicted world production would peak around 1995, which it would have – had the severe OPEC-induced oil crises not created an artificial supply problem in 1973, thereby pushing this critical peak back 10 years (to 2005).

 

 Some wildly optimistic prognosticators forecast predictions that 2020-2035 will the “true” date, but as Matt Savinar points out (‘Life After the Oil Crash’ p. 7), these are all based on government agencies “that admit cooking their books" - like they do with inflation and unemployment numbers. SO how can you believe them? You can't!

 

Now, let's return to the claims made for fracking. Alas, fracking oil - drilling into shale rock to get kerogen, or alternatively, natural gas, is in fact evidence of grabbing BREAK EVEN oil NOT high EROEI oil!  It is a sign of defeat and desperation.  not success - just like deep sea drilling for oil.

As Richard Heinberg explains (p. 110) it in his book, 'Snake Oil: How Fracking's False Promise Imperils Our Future':

 

"No evidence suggests that the technology of fracking has actually raised the EROEI for natural gas production. It temporarily lowered prices but only by glutting the market."

 

Also (ibid.) :

 

"A  study of the EROEI for electrical heating of methane hydrate deposits between 1000 and 1500 meters deep yielded ratios from 2:1 up to 5:1, depending on the source of the electricity"

 

Regarding the promises for kerogen or oil shale, he writes:

 

"Kerogen is not oil. It is better thought of as an oil precursor that was insufficiently cooked by geologic processes. If we want to turn it into oil, we have to finish the process nature started: that involves heating the kerogen to a high temperature for a long time. And that in turn takes energy- lots of it, whether supplied by hydroelectricity, nuclear power plants, natural gas, or the kerogen itself. 

 

Therefore the EROEI in processing oil shale is bound to be pitifully low. According to the best study to date, by Cutler Cleveland and Peter O'Connor, the EROEI for oil shale production would be about 2:1. That tells us that oil from kerogen will be far more expensive than regular crude oil."

 

In other words, conflating oil shale (kerogen) with actual light crude oil of high EROEI is like mixing up cow turds with cow's (calves') liver.  One can be eaten, the other can't - and for the oil - one requires additional energy inputs to put to use, the other only refining.

 

Heinberg's numbers and projections are reinforced by sound sources such as the London-based brokerage firm Tullet Prebon, whose Strategic Insight report declares:

 

 

"Our calculated EROEIs both for 1990 (40:1) and for 2010 (17:1) are reasonably close to the numbers cited for those years by Andrew Lees. For 2020, our projected EROEI of 11.5 to 1 is not as catastrophic as 5: 1 but would nevertheless mean that the share of GDP absorbed by energy costs would have escalated to 9.6% from about 6.7% today. Our projections further suggest energy costs would absorb as much as 15% of GDP (at an EROEI of 7.7 to 1)  by 2030."

 

The Report goes on to note that the "diminishing dismal energy returns" (and again one needs to separate Q(PR)   from Q(net))  means that "the economy we have known for two centuries will cease to become viable at some point." In other words, far from being "capitalistic" - the Peak Oil model and meme is fiercely the opposite because it discloses there are serious limits to our use of resources. BY implication - and direct observation as here in Colo. with its 50,000 frack wells - it also means we have already passed the break even oil extraction point.

 

Obama, in addition, now evidently wants to permit deep sea drilling off the Atlantic coast, which is further evidence the break even point has been passed and we are I desperation oil extraction mode.

 

Stop and think - and read - before you buy into the bullshit that cheap oil prices mean Peak Oil is or was a myth. And should you disbelieve it, then take note of this forecast from yours truly: as high quality, efficient oil becomes ever scarcer, look for returns on investments to sink ever lower and the world economy to 'bottom out' with growth barely 1 percent per year. Look also for common goods including food to become ever more expensive since oil is the fuel needed to produce it, as well as transport it. Not to mention the water resources consumed as well.

 

Oh, and look for your energy bill - relatively low now - to go through the freaking ceiling!

Did Dem Neoliberalism Contribute To The Rout?

"For the Democratic Party is not a collection of diverse interests brought together only to win elections. We are united instead by a common history and heritage--by a respect for the deeds of the past and a recognition of the needs of the future."   -- John F. Kennedy

This header embodies  the central question put forward in a provocative blog post by Arun Gupta on www.smirkingchimp.com, actually written a day before the mid-term election. It is something we may all need to consider - those left of center - especially since 63% of voters in exit polls asserted the "system is rigged in favor of the richest" (which begs the question of why so many voted in the party of the rich and business class). This is also why we must not avoid the painful history Gupta recalls. It is also something I have discussed a number of time on this blog: how the insidious poison of Neoliberalism is poisoning both parties.

See, for example, my April 14 blog post wherein I observed:

The problem with the Neoliberal, pro -free market idiom is that it denies the most basic security for the majority of citizens. In this way it feeds economic inequality while it rewards the speculator and banker class. It also helps to corrupt the political class via unregulated campaign contributions.

I then cited a segment of a 1997 piece on Neoliberalism by Jay Bookman aptly entitled 'The New World Disorder Evident Here, Abroad', in The Baltimore Sun, December 15, 1997):

"The global economy has been constructed on the premise that government guarantees of security and protection must be avoided at all costs, because they discourage personal initiative. In times of crisis, however, that premise cannot be sustained politically. In times of trouble it is human nature to seek security and protection and to be drawn toward those who promise to provide it. That is how men such as Adolf Hitler, and Vladimir Ilyich Lenin came to power, with disastrous consequences."

In other posts I referenced the invasion of many Democratic policies by Neoliberal ideology, priorities and memes , for example as referenced by SC blogger Richard Eskow, e.g.:

http://www.smirkingchimp.com/thread/richard-eskow/54446/yes-the-left-killed-the-chained-cpi

Excerpt:

“As for the president and his supporters, it is clear that the chained CPI is well-liked by both the White House's key economic players -- and by many of the commentators who support them. That's unfortunate, because it is inaccurate, unjust, and economically unwise. But like it, they do.

It appears that both the Republicans and the White House like it, but neither wants such a politically unpopular measure hung around their neck -- especially in an election year.”

Does that mean they might cooperate on resurrecting this abomination as a sign of "mutual cooperation" like they did after the 2010 Dem drubbing? Possibly!  Further perspective is provided by Robert McChesney in his excellent book, The Problem of the Media, Monthly Review Press, 2004, p. 49:

"With the election of Ronald Reagan, the neoliberal movement had commenced. Neoliberal ideology became hegemonic not only among Republicans but also in the Democratic Party of Bill Clinton, Al Gore, and Joseph Liebermann. Differences remained on timing and specifics, but on core issues both parties agreed that business was the rightful ruler over society"

If all this is true, and all the authors present plenty of facts to support it, then it would seem the Democrats are their own worst enemies - seeking to advance a misbegotten, pro-business agenda even at the expense of losing many of their base - or at least turning them off to come out in mid-term elections (though I still believe political immaturity is at least a partial factor). 

What about Gupta's claims? He writes:

"Now, neoliberalism is often thought of as synonymous with privatization, deregulation, and trade and capital liberalization, but the state will discard these policies for corporate handouts the instant elites get into a self-inflicted mess, as with the Wall Street crash.

This has left the Democratic Party in a bind. It relies on votes from social groups like women, union members, Blacks, Latinos, and environmentalists who favor redistributive policies like gender equity in income, a higher minimum wage, lower healthcare costs, more environmental protection, and stronger immigrant rights. 

At the same time, Democrats need billions of dollars to run elections and their party machinery. They go hat in hand to corporations and promise more tax breaks and corporate welfare in return. But Democrats can never be as committed to the free-market ideology as Republicans. Democrats need to satisfy some needs of their social base while Republicans can move the goalposts further right and wait for the Democrats to play catch up."

This is born out by the corporate funding disparity relative to each party, and the fact the Rs always grab slightly more, because - well-  they aren't as dependent on the social groups that rely on redistributive policies. So the Ds can't be as committed to free market nonsense else they'd be the same as the Repubs. 

Gupta goes on:

"Obama and likely 2016 presidential nominee Hillary Clinton say we will manage trickle-down economics more efficiently. This will increase taxes for modest market-based redistribution in the form of healthcare, housing and higher education subsidies, and tax breaks for the working poor. It’s the same role many traditional left parties play in other countries. Democrats offer a bit more funding, miniscule compared to military spending and corporate welfare, for food stamps, homelessness, and energy assistance. But the commitment to neoliberalism leaves the programs vulnerable. Obama readily cut tens of billions of dollars in social welfare to appease Republicans complaining about a $17.9 tillion national debt. Obamacare is part of this framework. While it did extend coverage to uninsured millions, the goal was to reduce costs through intensified neoliberal restructuring, which is reducing overall quality of healthcare."

Which also makes sense and is all verifiable. I have written before about the cuts - including to food stamp programs - back in December, 2013. Again, Democratic Neoliberalism emerges as a malignant cancer eating away at the parties innards. 

Gupta cites the historical background of the Clinton years in embracing Neoliberal policies:

"Lacking a progressive vision, Democrats follow the GOP on economic policy, pushing the center rightward. Most media outlets have little interest in unpacking historical conditions that shape politics, preferring gossip about the personality, values, tastes and lineages of candidates. Yet it’s the historical contradiction Democrats are trapped in that explains how and why Bill Clinton and Obama pursued a neoliberal agenda that dashed the hopes of their supporters, resulting in the biggest midterm losses in Congress of any president in the modern era. It also explains why the Democrats will likely lose the U.S. Senate in November 2014.

Bill Clinton campaigned as a “New Democrat”: tough on crime, fiscally responsible, and stern with welfare recipients. Clinton effectively fulfilled the Reagan Revolution by gutting welfare, passing NAFTA, deregulating telecommunications and the finance sector, and ramping up government spying, policing, and immigrant detention. Clinton could grant the right-wing’s wish list because the Democratic base was conditioned to supporting any deal no matter how bad because the Republicans would supposedly be worse. Yet Clinton needed Republicans to pass NAFTA because the Democrats controlled Congress. He threw millions of poor women and children off welfare to shore up his right flank in advance of the 1996 election. But that cynical calculation was unnecessary Clinton trounced the feeble Republican nominee, Bob Dole in a race that was never in doubt. And deregulation happened in Clinton’s second term when he was freed from election concerns."

The last paragraph, especially, speaks to the perils of 'lesser of two evils'  thinking- thus the base accepting Clinton's travesties because the Repukes under Dole would be worse. (In fact, the odds of Dole getting elected were slim and none but most of the base didn't know that at the time).

So there we are. The Demos have moved progressively rightward economically under the lash of the Neoliberal global imperative. Voters either keep putting them in because  there is no compelling third party alternative, or they reactively toss them out  in droves (including by apathy)  - as the case Tuesday night - to vent their frustrations.

At root, the reason for this perversion is the influx of money into our political system - to buy politicians and parties. The abominable meme of "money as speech", validated by the atrocity of 'Citizens United',  has only reinforced the corrupted landscape - so no wonder so many voters see the system as rigged. Of course it is, for those with the money to buy Senators and whole parties! 

Justice Stephen Brier pointed out that along with the Citizens United decision, the more recent one (last year)  "eviscerates our nation's campaign finance laws leaving a remnant incapable of dealing with the grave problems of democratic legitimacy that those laws were intended to resolve."

Sen. Bernie Sanders has it exactly correct when he said, in response to the ruling:

“Freedom of speech, in my view, does not mean the freedom to buy the United States government,” 

Alas, that is what has happened and why citizens, many voters, are willing now to say more often than not, "A pox on both their houses!"

In effect, Neoliberalism and its attendant cancer of campaign cash  has engendered an inherent instability in our political system - also fed by polarization-  which is unlikely to abate soon. Perhaps the Dems, as they puzzle over these recent losses, need to take a long, hard look at JFK's quoted words at the top of this post.