"Death Knell" For Peak Oil? Not So Fast!

It is easy to understand why some folks, including the nattering nabobs of the mainstream media, might somehow mistake the current glut of oil for evidence that Peak Oil is fiction or never existed at all. This would be a tragic error but as we see in today's Denver Post editorial ('The Death Knell for Peak Oil', p. 19A) it is definitely being made.

The Post's editor gushes that the "world is now awash in oil"- with Iran set to add its millions of barrels next, and in effect:

"It's as if the whole world were conspiring to bury the tattered remains of the 'peak oil' thesis so popular a few years ago."

Nowhere in his misplaced screed, not in one single paragraph, does this genius tie the consistently low economic growth rates in the advanced nations to the reduction of oil's efficiency. This is a result of having used up all the best quality oil and now going for the 'leftovers'.  As I pointed out to wifey this a.m.: "The moron doesn't even realize the shale oil we're pulling out of the ground is the next thing to garbage, which in fact proves the peak oil primary contention."

Yet the Post editor, blinded by BS, actually praises the fracked crap - devastating Colorado's landscape, air and water, btw -  as he merrily goes on:

"Little did the peak oil theorists - who insisted the planet was running out of oil- realize the shale oil revolution in the U.S. - already under way-was about to push domestic production to unforeseen heights"

First, peak oil "theorists" - like Richard Heinberg ('The Party's Over') never said the world was "running out of oil".  What they said is that the planet is running out of the highly efficient, high grade cheap oil (light sweet crude in particular) that is capable of driving the intense energy demands of industrial societies - from glass factories to military hardware and jet planes. Obviously, this point is too subtle for the editor at the Post to seemingly grasp. But let's try again to break it down for him - and others.

The planet was originally endowed with ~ 3,000 billion barrels of oil  – of which we’ve consumed one third and another one sixth of relatively cheap oil remains. Afterwards (say by 2030) 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 delivers 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

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.

Right now, to fix ideas, we are very nearly at this Q(net) = 0 level with shale oil - which is why once its price falls to much lower than $50 /bl. it makes little economic sense to take it out of the ground. Compared to light sweet crude it is effectively garbage fuel. 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.

Alas, fracking shale 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."

Get that? Adding it to the total world pool of higher quality oil merely "glutted the market". This is also what's dragging your 401k down right now, though yeah, you will catch kind of a break at the pump. Let's also grasp that this crap oil isn't even used here in the U.S. it's shipped off to places like China - where it fouls their skies and creates health havoc along with the CO2 and SO2 from factories and autos.

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.

These are crucial points to process, but the Post editor never does as he goes on to cavil about "peak oil handwringing".   The guy would be better served having studied the issue in more depth before putting out an editorial. In particular, that 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."

We are already seeing the initial signs in the entrenched low growth (barely 2 percent)  confounding the nation's politicos and economists who - up to now - haven't tied this to the degraded oil slopping around the world..  

Stop and think - and read - before you buy into the bullshit that cheap oil prices (or an "oil glut") 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 when shale is exposed for the snake oil it is..

Robert Samuelson: "Peak Oil in Retreat" - Don't Believe It!

As I've shown in numerous earlier blog posts, WaPo Neoliberal hack Robert Samuelson generally gets more things wrong than he does correct. For example, on the issue of deficits under JFK, see:

http://brane-space.blogspot.com/2012/07/thats-right-now-blame-60s-jfk-for.html

We also know Samuelson has frequently played fast and loose with economic facts, e.g.

http://brane-space.blogspot.com/2011/08/more-ridiculous-lies-from-robert.html


So, it should be no surprise to those of us who've followed his career of PR hijinks that he'd also dissemble and spin about one of the most important energy milestones in recent human history: Peak Oil.   For reference and perspective, let's recall  peak oil theory was developed in the 1950s by oil geologist Marion King Hubbert, who predicted 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.

More importantly, Hubbert maintained that his theory was applicable to the continental U.S. oil production and even the entire world, which he predicted would peak around 2000.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.

This is exactly the error made by Samuelson in his article, as when he writes ('The Retreat of Peak Oil', Denver Post, June 15, p. 17A):

"Supply and demand have unexpectedly expanded the global surplus, reducing prices. The increase in U.S. shale oil unexpectedly boosted supply....the world now used 93 million barrels daily but can produce 95 mbd or a bit more"

The problem is that cheap shale oil is a mirage, which doesn't detract from the validity of Peak Oil. Let's examine this at length. The shale oil, from drilling into shale rock to get kerogen, is in fact evidence of grabbing near BREAK EVEN oil NOT high EROEI oil!  It is a sign of defeat and desperation.  not success - just like deep sea drilling for oil.

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.

 

Contrary to Samuelson's descriptor, shale oil at an EROEI currently of 4-5 EROEI is not "cheap oil"  The reason is that its low EROEI relative to earlier more accessible light sweet crude (at 22-30 EROEI) makes it necessary to consume more of it to get the same jobs done. That ALSO includes exploration, drilling for new, degraded oil sources. So one is effectively squandering higher EROEI oil to extract lower EROEI shale oil- resulting in a radical lowering of efficiency which ultimately affects energy consumption across the board, and the GDP. See e.g.

 

http://brane-space.blogspot.com/2015/05/cheap-oil-turns-out-not-to-be-economic.html

 

And while shale oil is currently "cheap" in the monetary sense, this doesn't mean that the condition will be sustained. It can't be since we are adding more people every day who use more energy and a low EROEI source is not tailored to incessant demand on account of population growth.

 

This error leads to an inevitable compounding of confusion as when Samuelson asserts (ibid.):

 

"Peak oil would occur when new oil discoveries no longer offset annual consumption and provide for future growth. This seems unavoidable. Oil is a finite natural resource  There's only so much of it- when it's gone it's gone. The trouble is that this compelling logic has yet to play out in the real world"

 

But in fact, it IS playing out in the real world!  As noted in the previous link, the London -based brokerage firm Tullett Prebon (whose customers are mostly investment banks). already warned in a Strategy Insight report that: energy costs would absorb as much as 15% of GDP (at an EROEI of 7.7 to 1)  by 2030."

In other words, the low EROEI is adversely impacting economic growth into the future! This is exactly meeting Samuelson's criteria but he can't see it on account of mistaking the shale boom for a true energy boom that contributes to economic growth.

 

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:

 

"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"

As I noted, energy costs absorbing as much as 15% of GDP by 2030 means our present energy-intensive civilization with its HDTVs, Nooks, Ipads, Smart phones, F35 bombers, Dreamliner jets,  drones and SUVs is literally on life support.  Other costs from degraded oil production are hidden, such as the clean up costs and devastated environment arising from exploding shale oil trains, oil leaks from pipelines, as well as escape of oil effluent such as benzene, xylene etc. into the air and water.  These costs, exacted over time in cleanups and health costs - also limit GDP.

Now, let's affix our heads on straight. In the real world, the top part of the oil production curve for the high EROEI we've been conditioned to use  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!

In fact, the situation is likely much worse than this given we are desperately trying to substitute degraded oil to do the earlier work of high EROEI oil!   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).

So when someone like Samuelson offers this micro-byte of misinformation:

"Oil is not inexorably fading from the world stage. Peak oil remains distant"

Stop and think - and read - about the declining EROEI aspect before you buy into the bullshit that cheap oil prices mean Peak Oil is in retreat or 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.