We are "Wrong" on peek oil..

[photon555]

Re: We are "Wrong" on peek oil..

I agree that gas is still cheap. My rational for this is the way that most people drive, and not just the type of vehicle. If gas were perceived to really be expensive, most people would be driving to conserve energy, not demonstrate their ego.

[BadJuju]

Re: We are "Wrong" on peek oil..

I agree that gas is still cheap. My rational for this is the way that most people drive, and not just the type of vehicle. If gas were perceived to really be expensive, most people would be driving to conserve energy, not demonstrate their ego.

Definitely! Despite all of the moaning about gas prices, people still largely drive much the same way they did before. The other day, my mom and dad were talking about buying a new truck. My mom said my dad needed one to haul stuff despite the fact he never needs to haul things. Even so, to him and her, they -need- that truck. My mom then went on to say that trucks are manly. So not only are they driven to buy a gas hogging behemoth for completely uneconomical reasons, they are also driven to buy one for inane social reasons. They associate status and manhood with owning a big truck. I love my parents, but damn, they are dumb. And people in the US are like that. They equate their vehicles to social status. And the bigger it is, the more conspicuous it is, the greater the status associated with it. I wish we had rational leaders that would bitch slap these people with $8 gas prices and tell them to stop living so idiotically. And even worse, my mom is poor. Despite making poverty live wages, she spends money like a fiend. Until she is really impacted economically, she isn't going to change.

It doesn't help that I live in the south where you see damn fools with these mammoth trucks that belch forth more black smoke than Mount Doom in Mordor.

[GRG55]

Re: We are "Wrong" on peek oil..

It makes no difference how much crude oil is left in the earth's crust. There could be 10,000 times the amount we've already removed and it still makes no difference.
The only thing that matters is how many btus does it require to extract a btu of crude oil that remains in the earth's crust.

Why?

Let's suppose we use a wind turbine to generate the electricity needed to run the submersible pump on an oil well. Does it matter how many BTUs are consumed?

Isn't it really more about costs vs value of the product? If the costs of the wind turbine generated electricity are greater than the value of the crude being pulled out of the ground then the well will be suspended from production in rather short order. Of course one might discover that electricity generated from coal is cheaper than a wind turbine, and perhaps that will allow the oil well to be put back on production. But then again, perhaps the coal fired plant is then subjected to a carbon tax which raises the cost of that electricity, which once again makes the oil well uneconomic to produce (this is starting to sound suspiciously like the USA's actual energy policy).

Like most things, it all comes down to "money" (and politics). :-)

Let's look at another hydrocarbon comparison. Today in the USA one million BTUs of natural gas is priced at about $2.80. One million BTUs in the form of crude oil is worth about $14.80. Why anybody wastes their time on EROEI is beyond me...

[Raz]

Re: We are "Wrong" on peek oil..

Why?

Let's suppose we use a wind turbine to generate the electricity needed to run the submersible pump on an oil well. Does it matter how many BTUs are consumed?

Isn't it really more about costs vs value of the product? If the costs of the wind turbine generated electricity are greater than the value of the crude being pulled out of the ground then the well will be suspended from production in rather short order. Of course one might discover that electricity generated from coal is cheaper than a wind turbine, and perhaps that will allow the oil well to be put back on production. But then again, perhaps the coal fired plant is then subjected to a carbon tax which raises the cost of that electricity, which once again makes the oil well uneconomic to produce (this is starting to sound suspiciously like the USA's actual energy policy).

Like most things, it all comes down to "money" (and politics). :-)

Let's look at another hydrocarbon comparison. Today in the USA one million BTUs of natural gas is priced at about $2.80. One million BTUs in the form of crude oil is worth about $14.80. Why anybody wastes their time on EROEI is beyond me...

I stand corrected.

IF you can produce the energy to operate the drilling equipment, platforms, pipelines, etc. cheaply enough, then it doesn't matter how difficult it is to access and extract the crude. And yes, c1ue, $8.00 petrol hasn't ruined Europe's economy. BUT, at some point doesn't the cost of gasoline from crude oil become so expensive that it precludes its use as THE primary transportation fuel?

[Raz]

Re: We are "Wrong" on peek oil..

That's not strictly true. If the BTUs used to extract crude oil were derived from flare off natural gas, EROEI goes down but the price doesn't necessarily go up.

Secondly the reality is that at $100/barrel, oil is still cheaper than milk and is close to bottled water. Because it is so damn cheap, oil is almost certainly used for all sorts of low ROI purposes.

As its price goes up, a lot of those low ROI purposes go away.

Ultimately so long as any kind of economic benefit can be obtained, we'll still find ways to get and supply oil so long as the price - a function of ROI - can justify it.

Europe has already demonstrated that $8/gallon is supportable - that's at least $200/barrel.

Well yes, "free" energy from NatGas could empower a lot of productive activity that might otherwise be unprofitable.

I didn't think through my off-the-cuff remarks, or in the alternative, I'm an ignoramus.

[BadJuju]

Re: We are "Wrong" on peek oil..

I stand corrected. IF you can produce the energy to operate the drilling equipment, platforms, pipelines, etc. cheaply enough, then it doesn't matter how difficult it is to access and extract the crude. And yes, c1ue, $8.00 petrol hasn't ruined Europe's economy. BUT, at some point doesn't the cost of gasoline from crude oil become so expensive that it precludes its use as THE primary transportation fuel?

Certainly a possibility that it use will be curtailed and gradually replaced with less expensive alternatives as its price rises; however, I think that will it still be the primary source even with prices of $8 or more. The main difference incurred will be in conservation. People will greatly change their driving habits to focus on utility. More and more people will switch to more fuel efficient vehicles, like smaller cars or motorcycles. Streets will look more and more like China or Thailand where scooters and bikes zip around. There has been a major increase in scooter and motorcycle sales where I live in the last few years. In fact, I had a motorcycle that I rode 365 days a year, rain or shine, up until recently. Entry level motorcycles and scooters are cheap to buy, easy to maintain, and much cheaper to insure. My insurance was $130 a year, although I didn't have collision insurance since I saw no point in paying $500 a year for a bike that cost $2000. I got 85 mpg, which is around 3-4x as much as your typical vehicle. I was able to perform most of the maintenance myself, which meant I incurred very few costs. And riding in bad weather with the exception of ice was a walk in the park. I still rode when it was icy on occasion. You just have to have some balls!

[Thailandnotes]

Re: We are "Wrong" on peek oil..

I love cities and abhor the blight we have forced upon the world around us in our desire to spread out as much as possible.

http://www.npr.org/2012/07/03/155916...es-budget-woes

The city of Oakland, Calif. has long been associated with crime, poverty, urban decay and, more recently, violent protests tied to the Occupy movement.

So it may have been a surprise to New York Times readers when the newspaper listed Oakland as No. 5 among its top "places to go" in 2012.

But Oakland has seen a revitalization of its downtown in the past decade, thanks in large part to the city's now-defunct redevelopment agency and past support from Oakland's onetime Mayor Jerry Brown.

Now, as governor of California, Brown is closing the redevelopment agencies that helped transform Oakland's blighted places. The goal is to solve California's ongoing budget crisis, but left in the lurch are urban building projects all over the state, including in Oakland.

Uptown Oakland's Hole In The Wall

On a Friday evening in Oakland's Uptown neighborhood, there's a lot of life near the corner of 17th Street and Telegraph Avenue. Local bars and restaurants are filling up, including Cafe Van Kleef, one of Uptown's signature spots.

Cafe Van Kleef is a dark hole in the wall where you'll meet everyone from lawyers to longshoremen. Tom Hammitt, a private investigator in his late 50s, sits at the bar. An Oakland native, he's seen the slow rebirth of this neighborhood in the past decade. He credits tavern owner Peter Van Kleef with leading Uptown's transformation.

'Pounding The Chest Of Oakland'

When Van Kleef opened his bar 10 years ago, everyone said he was crazy. At the time, he says, "hookers, muggers, thieves and homeless were rampant" in the area.

"At 5 o'clock, the streets were absolutely empty. Everybody vacated Oakland. There was nobody here," Van Kleef explains. "You could park anywhere you wanted. You could park a fleet of taxis if you wanted to!"

But Van Kleef, an artist and former rock impresario, had a different vision for Uptown Oakland, which he saw as "the last geographical possibility" for an arts and entertainment district in the city. So Van Kleef opened his bar just a block from City Hall…

[GRG55]

Re: We are "Wrong" on peek oil..

I stand corrected.

IF you can produce the energy to operate the drilling equipment, platforms, pipelines, etc. cheaply enough, then it doesn't matter how difficult it is to access and extract the crude. And yes, c1ue, $8.00 petrol hasn't ruined Europe's economy. BUT, at some point doesn't the cost of gasoline from crude oil become so expensive that it precludes its use as THE primary transportation fuel?

I don't think that will happen.

Transportation is one of the most valuable uses for liquid hydrocarbon fuels.

It is comparatively easy to substitute fuels in stationary applications. Natural gas displaces coal fired power plants. Solar or wind farms displace non-renewables. And so forth.

Much more difficult to do so for transportation. Look at the effort it is taking to find an adequate substitute for gasoline or diesel powered light vehicles. Every single alternative that is touted has compromises. Serious compromises given the climate and distances in the USA and Canada. Even with its density of population and short distances compared to North America, Europe still has a lot of diesel powered trains (like the fast Eurostar service between London, Paris & Brussels). And so far nobody has figured out a realistic alternative for fueling aeroplanes and helicopters.

As conservation takes out the demand for liquid hydrocarbons in the low value end of the chain, and substitution takes out the demand where a feasible economic alternative exists, more and more of the remaining supply will be directed to transportation (which will itself be subject to conservation, substitution and greater efficiency effects like the Boeing 787). In addition, more of the crude supply is going to be converted to transportation fuels, instead of other refined products, through the application of technology in the refining process - that is after all what brought us fluid catalytic cracking, hydrocracking, naptha-isomerization, and a variety of other methods that today significantly boost the production of high value transport fuels from each barrel of crude. And that doesn't touch on the potential of gas-to-liquids (GTL) technologies, that are at present too expensive and in themselves too energy consuming to be competitive...yet.

Unless governments start to raise taxes on transport fuels a great deal, I don't see the "massive spike" being predicted by some. Prices are going to continue to rise, but that suddenly some day price will drive transport fuel demand to zero is not in the cards.

[gnk]

Re: We are "Wrong" on peek oil..

GRG55,

I don't think EROEI holds little merit. It's a big picture, long range concept like Peak Oil that deals with the fact that the vast majority of energy use today is nonrenewable. Pricing, which is frequently distorted, is a short term concept. Thus, the Alberta tar sands that are heavily reliant on nat gas use for extraction and refinement can not be compared to the Ghawar oil field in its heyday when its oil, requiring little refinement, spewed out of the ground by itself.

You are right about transportation fuels. The liquid characteristic of nonrenewables such as nat gas and oil is difficult to replace. I think people underestimate the value of the gas tank concept and just how energy dense oil and gas are.

Here's a good article that puts things in perspective - the cubic mile illustration shows just how far we still have to go with renewables:

http://www.theoildrum.com/node/2320

As for your US nat gas price quote in the post above, I believe it is heavily distorted, and Arthur Berman will eventually be proven right.

One more thing about price, but in a long term perspective: Price is not static. Just like a thirty - forty year downward trend in interest rates boosts an economy, a multi decade upward trend in energy prices is dangerous to an economy. What I am saying is it's not the current price of energy, but the trend that matters. Same with interest rates. A country with high interests rates that are gradually falling long term is in a better economic position than a country with low interest rates that are gradually rising.

[c1ue]

Re: We are "Wrong" on peek oil..

Some might argue that it would be impossible for the US to operate as Europe does because of its infrastructure; however, with an increase in prices, American lifestyles would adjust. More and more people would forego moving away. There would be more urban migration. Downsizing vehicle use and transitioning towards lighter, more efficient transportation. While it might not duplicate Europe, it could come much closer than it is now. There really is tremendous room for cutting out a lot of things.

Yes and no. American lifestyles would adjust, but the actual savings is less clear.

The oil shock of the '70s only resulted in a 10% drop in overall gasoline consumption for 10 years.

The pain and time scale of adjustment is also an issue. Europe after the oil shock embarked on its present high tax course; the Europeans, Japanese, and so forth have been adjusting to high gasoline prices for 40 years now. All of their construction, infrastructure, and so forth since the 1970s have been to a significant extent influenced by this 40+ year program.

To think that the US could do the same, but in less time and equal or less pain, that is fantasy.

IF you can produce the energy to operate the drilling equipment, platforms, pipelines, etc. cheaply enough, then it doesn't matter how difficult it is to access and extract the crude. And yes, c1ue, $8.00 petrol hasn't ruined Europe's economy. BUT, at some point doesn't the cost of gasoline from crude oil become so expensive that it precludes its use as THE primary transportation fuel?

I don't think $8/gallon gasoline in the US will preclude its use as the primary transportation fuel. In Europe, gasoline is still the primary transportation fuel for individuals, for example. As we've also seen elsewhere on iTulip, there are fundamental energy density reasons why gasoline is going to remain the primary transportation fuel for the foreseeable future.

The main difference between Europe and the US in terms of gasoline consumption seems to be stylistic: smaller cars overall, less one-person driving, etc. Of course much of this is due to far superior public transportation, higher density, and so forth, thus I would absolutely agree that $8 gasoline would be a severe shock to the US economy and consumer.

I'd also note that the use of electric vehicles in Europe is astonishingly low - but that is because electricity in Europe is also much more expensive.

[coolhand]

Re: We are "Wrong" on peek oil..

why is that the important metric? It seems to me that the important thing to watch is how many Dollars it takes to extract a Dollars worth of gasoline. For instance what if it required the equivalent of 100 barrels of oil to extract 1 marginal barrel of oil, but that barrel sold for enough money justify removing 102 barrels of oil from the ground? This situation may already be the case in Saudi Arabia where it is alleged that the Saudis are using superheated steam to extract oil that uses more BTUs than is contained in the oil that they are extracting.

The other important thing to watch is not "reserves" but "flows". Who cares about reserves if you can't get those reserves, in aggregate, to flow beyond 85m b/d?

[BadJuju]

Re: We are "Wrong" on peek oil..

To think that the US could do the same, but in less time and equal or less pain, that is fantasy.

Oh, there will definitely be a lot of pain. People that have hedged themselves based upon cheap oil in the form of suburban/rural housing and fuel-intensive lifestyles are going to be bled dry until they make some major fundamental changes to their lifestyles. And it is going to be a bitch for them when their properties fall in value even further and their vehicles become untenable as transportation options. They are going to lose big because their money went towards an unsustainable lifestyle. They have had years to make changes in the face of a changing world. It is their problem and they will just have to reap what they have sown. I've already made the transition.

[coolhand]

Re: We are "Wrong" on peek oil..

Oh, there will definitely be a lot of pain. People that have hedged themselves based upon cheap oil in the form of suburban/rural housing and fuel-intensive lifestyles are going to be bled dry until they make some major fundamental changes to their lifestyles. And it is going to be a bitch for them when their properties fall in value even further and their vehicles become untenable as transportation options. They are going to lose big because their money went towards an unsustainable lifestyle. They have had years to make changes in the face of a changing world. It is their problem and they will just have to reap what they have sown. I've already made the transition.

Sure, things won't be good for the US b/c of the way we've structured things, but a few key factors makes me think it may be worse most other places:

1. The US is ~40% of the global grain export market, by far the biggest in the world (Argentina is #2 at ~20%).

2. I have read there are ~10 calories of oil in every 10 calories of food we eat.

3. Food represents a very small % of the average Americans' budget.

Let's get crazy. Let's say peak oil is worse than expected & oil goes to $250/bbl. The US declares a state of emergency & says "we are going to use the 40% of grains we export to make biofuels for our citizens." My truck could run on E85 if it wanted to...why do you think GM made that?

Suddenly, the world is 40% short grains...a few follow up questions:

1. What do you think happens to the global price of grains?

2. Given the answer to #1 above, what happens to the US trade balance with most of the world?

3. Given a staggering % of the world's population subsists on very little $ every day, what happens to human population/geopolitics globally if the world is 40% short grains?

Think that isn't how the US would react? It's how Argentina has with corn & oil (YPF); it's how Russia did with wheat a couple summers ago...it's human nature - we will take care of our own 1st...

The above facts are a key reason why i think the "China will take over the world" theme is overplayed...any country that can't feed itself & is short water seems like a bad bet to take over the world in the long run...

To the contrary, if anything resembling the above scenario plays out, one would be better served to invest the "foreign" portion of their portfolios in Argentina & Brazil, under a peak oil scenario.

[BadJuju]

Re: We are "Wrong" on peek oil..

The above facts are a key reason why i think the "China will take over the world" theme is overplayed...any country that can't feed itself & is short water seems like a bad bet to take over the world in the long run...

I agree entirely with you on this. That's how I have always imagined things going. Places without the resources to support their populations will see more and more of its people fleeing to other countries, like the US, to escape the extreme poverty of their homes. Unfortunately for them, the anti-immigration sentiment is only going to grow, especially in the face of these simple facts. What will happen is that countries like Dubai and UAE will scoop up these desperate immigrants en masse and continue to use them as they already have to drive their growth.

[coolhand]

Re: We are "Wrong" on peek oil..

I agree entirely with you on this. That's how I have always imagined things going. Places without the resources to support their populations will see more and more of its people fleeing to other countries, like the US, to escape the extreme poverty of their homes. Unfortunately for them, the anti-immigration sentiment is only going to grow, especially in the face of these simple facts. What will happen is that countries like Dubai and UAE will scoop up these desperate immigrants en masse and continue to use them as they already have to drive their growth.

It makes me sad to think things could develop this way, & I hope I am wrong about it...but having been an Eagle Scout, I have found that when a big storm appears to be coming, hope alone is a shitty survival strategy.

So I'll "Be Prepared', hope for the best & help anyone I can as I progress along the path we're all walking through this life