Reporting gross oil production to hide the collapse of net oil production

[Shakespear]

Re: Reporting gross oil production to hide the collapse of net oil production

It is the economics that matter here, not the energy balance.

Which? The one that has managed to get the US into a Trillion dollar size deficit? The one practiced by the World Bank and IMF? I'm starting to realize that the bees are closer to practicing true economics than we in the US are

[bpwoods]

Re: Reporting gross oil production to hide the collapse of net oil production

Global, your welcome to your somewhat inadequate opinion but our energy quandry is real and no amount of politics or economics can correct the imbalance between supply and demand. If you assume that a barrell of liquid hydrocarbon fuel (octane or iso-octane) = 100 units of energy, then how many units of energy are in the molar mass equivalent of methane (nat gas)? More? Same? Less? It matters a great deal which.

The energy obtained from hydrocarbons (gaseous, liquid or solid) is due to the 'oxidation' of the carbons (to carbon dioxide) and hydrogens (to oxygen dihydride). The more carbons and hydrogens in the original molecule, the greater the potential energy output. Which is the reason the oxidation of carbohydrates (wood) provides less energy. The hydrocarbons we use as fuel (for whatever reason) are a gift of nature, a 'one-off', though it is chemically possible to inter-convert between them - provided you have enough energy to initiate and maintain the process. There are absolutely no free lunches in the energy sector. None. There are no chemical substitutes on this planet for fossil hydrocarbon fuels. None. All other sources of energy are complements of fossil hydrocarbon fuels. There's your quandry.

[bpwoods]

Re: Reporting gross oil production to hide the collapse of net oil production

"While EROEI is a nonsense concept, profit is not."

EJ, I missed this comment. Profit is what? Oh! Its money returned on money invested. Which is, of course, a nonsense concept! You have not debated Peak Oil with me. I'm no Peaker, just a scientist who understands (to some extent) the energetics of energy and the absolute dependence of our economic activity on large inputs of raw fossil fuels. Again I must stress, that you cannot have a meaningful intellectual engagement with the quandry of our finite energy supply unless you accept that energy units cannot pe priced (realistically) in dollars or any other monetary entity. You have to price them in terms of themselves - using energy units. That's what ERoRI really is. It has nothing to do with money. That is reserved for the final consumer product: the money surplus over and above the money invested to extract, refine and transport the finished liquid product. Simple really.

[EJ]

Re: Reporting gross oil production to hide the collapse of net oil production

"While EROEI is a nonsense concept, profit is not."

EJ, I missed this comment. Profit is what? Oh! Its money returned on money invested. Which is, of course, a nonsense concept! You have not debated Peak Oil with me. I'm no Peaker, just a scientist who understands (to some extent) the energetics of energy and the absolute dependence of our economic activity on large inputs of raw fossil fuels. Again I must stress, that you cannot have a meaningful intellectual engagement with the quandry of our finite energy supply unless you accept that energy units cannot pe priced (realistically) in dollars or any other monetary entity. You have to price them in terms of themselves - using energy units. That's what ERoRI really is. It has nothing to do with money. That is reserved for the final consumer product: the money surplus over and above the money invested to extract, refine and transport the finished liquid product. Simple really.

A few simple rules of thumb:

1. The liquid fossil fuels endowment is finite. The cheaply located and produced oil has been exploited first because it is the most profitable to produce. As the supply of cheaply located and produced oil falls, E&P costs rise. These are passed on in the form of higher prices to consumers. If there is not sufficient demand for the more expensively produced oil at the prices that will yield a profit to producers, that oil will not be produced.

2. Rising prices will ration demand. What will be the demand for diesel at $50 per gallon in 20 years? Zero for passenger cars used for commuting, some for rail and ocean freight, some for fueling equipment used for mining shale rock, and so on. Altogether a fraction of demand today.

3. Rising prices will make currently uneconomical (unprofitable) oil E&P profitable, such as using nuclear energy to refine shale rock or disill water out of the oil that exists in highly depleted oil fields. As prices rise a wider range of alternative fuels production will become profitable. These will therefore be financed. However, these additions to supply will not increase the liquid fuels supply in excess of demand and lower price because the supply of cheaply located and produced oil will continue to fall and E&P costs will keep rising.

I think it's this last point that most people have trouble getting their heads around. All our lives the oil E&P cycle has been rising demand, rising price, increased E&P investment, increased supply, falling price, rising demand, and so on. But as we saw in the wake of the 2008 and 2009 recession, prices did not collapse to $20 as they did during the much smaller recession of 2001 and quickly increased to $100 even though most of the world remains in or close to recession and demand is lower than after the end of the previous recession. Partly that was due to dollar depreciation, partly due to oil supply characteristics.

In other words, PCO means we are on the wrong side of the supply/demand curve for liquid fuels from now til kingdom come, starting in 1998 by my estimate, six years before the actual plateau in global production.

[cbr]

Re: Reporting gross oil production to hide the collapse of net oil production

every oil producer has an economic metric, and shale plays are profitable even at $2 gas.... and that is using simple traditional diesel trucks, generators, etc., because it is still much cheaper than alternatives. obviously, you could go with electric pumps and vehicles, whether by solar/wind/nuclear/etc., and your hydrocarbon EROEI ratio would skyrocket. my clients know what they are spending down to the penny, and what they are selling. there is no mystery there. and you're right, you'll know we are getting closer to some sea change when people stop drilling for economic reasons. today, the only threat to that is our own ABSURD government. i would say but for government interference over the last 10 years, we would be EXPORTING massive amounts of hydrocarbons to the rest of the world, at a price that would render their own development unnecessary. and i think we have enough to have done so without valid long term strategic worries.

[davidstvz]

Re: Reporting gross oil production to hide the collapse of net oil production

I think EROIE is a useful concept to some degree though failure to account for differing types of energy invested and returned is a weakness. That said, rising cost is a proxy for worsening EROIE and price data is immediately available so focusing on price seems most useful.

[magicvent]

Re: Reporting gross oil production to hide the collapse of net oil production

http://www.telegraph.co.uk/finance/n...ec-admits.html

[*T*]

Re: Reporting gross oil production to hide the collapse of net oil production

After years of debating EROEI with peak oil doomers, I've given up. I'm not sure what their agenda is but it isn't to develop an understanding of the political and economic impact of diminishing availability of cheaply produceable oil.

Quite true, it isn't. EROEI is, instead, a measure that is useful as a quick guide to whether extraction is thermodynamically sustainable.

The turbine example given earlier is actually helpful here. The EROEI is poor for the converting of heat->steam->motion->electricity. It is economically viable to do it, because electricity is useful. However the EREOI indicates it is useless as a primary source of energy.

EROEI falling for oil indicates not so much the economics of oil extraction, but its declining availability as a primary source of energy. This is a hard thermodynamic limit which favourable economics cannot
overcome. Hence my long-standing sig.

You will find that the EROEI advocates here tend to be physicists or engineers with some thermodynamics education. We are not, in general, "peak oil doomers".

[flintlock]

Re: Reporting gross oil production to hide the collapse of net oil production

Well said.

What has happened over time is that man thinks he has escaped the ecosystem called Earth and its Laws. Mankind (Western civilization) is operating under the assumption that it set the rules until that is Sandy visits.

Mankind's version of this model needs adjustment with addition of thieves, robbers and psychopaths. I would venture to say that the North American Indians were closer to the Bee Model than the developing Western Civilization.

NA Indians spent a lot of their time stealing from and fighting with each other long before the palefaces arrived. Basic human nature doesn't vary that much . Even Bees steal from each other when the need arises.

[Shakespear]

Re: Reporting gross oil production to hide the collapse of net oil production

NA Indians spent a lot of their time stealing from and fighting with each other long before the palefaces arrived. Basic human nature doesn't vary that much

Quite right

Even Bees steal from each other when the need arises.

Stealing doesn't need to "taste bitter"

[flintlock]

Re: Reporting gross oil production to hide the collapse of net oil production

Yes EROEI is indeed a thermodynamic issue. We can think of it in much the same way as we think about the heat death of the universe. A largely theoretical issue of no immediate urgency.

Let's try another thought experiment I use a giant magnifying glass to boil water that I then use to extract crude oil from rock. My energy balance is insane. I am using 10 times the energy that I extract. How can I hope to make a profit here? Simple. My crude oil use is zero. I am spending exactly zero to boil water. It is the economics that mater here, not the energy balance. There is a good reason you put barrels in quotes up above. It is because they are not barrels of crude oil.

Well said. Thermodynamics may ultimately run the show, but economic concerns are what run our day to day lives and money is the best way to value energy's worth to us. Even a normally valuable energy source can have more or less value depending on who has it and where its located. A bunker full of crude oil is worthless to me but worth x amount a bbl to a refiner. The devil is in the details. Its the value of the energy at the point of consumption that ultimately matters. Using the Nat gas that would otherwise be vented off to produce oil is cheaper than the gas delivered to my home. But the oil it produces may not be cheaper than the oil that came by boat.

[flintlock]

Re: Reporting gross oil production to hide the collapse of net oil production

Global, your welcome to your somewhat inadequate opinion but our energy quandry is real and no amount of politics or economics can correct the imbalance between supply and demand. If you assume that a barrell of liquid hydrocarbon fuel (octane or iso-octane) = 100 units of energy, then how many units of energy are in the molar mass equivalent of methane (nat gas)? More? Same? Less? It matters a great deal which.

The energy obtained from hydrocarbons (gaseous, liquid or solid) is due to the 'oxidation' of the carbons (to carbon dioxide) and hydrogens (to oxygen dihydride). The more carbons and hydrogens in the original molecule, the greater the potential energy output. Which is the reason the oxidation of carbohydrates (wood) provides less energy. The hydrocarbons we use as fuel (for whatever reason) are a gift of nature, a 'one-off', though it is chemically possible to inter-convert between them - provided you have enough energy to initiate and maintain the process. There are absolutely no free lunches in the energy sector. None. There are no chemical substitutes on this planet for fossil hydrocarbon fuels. None. All other sources of energy are complements of fossil hydrocarbon fuels. There's your quandry.

In the end you are correct of course. But man tends to think of his problems in the context of his own lifespan. Our energy policy is like a game of musical chairs. Nobody wants to think about when the music stops until they have to. Our unflinching faith in technology coming through is what keeps the game going. Oil would be even more expensive today if we actually thought past our own lives. I think we all know its going up in price. its just how much and when.

[bpwoods]

Re: Reporting gross oil production to hide the collapse of net oil production

Thanks for your considered reply. Nothing in it I have any difficulty with. Its a quandry alright!

[bpwoods]

Re: Reporting gross oil production to hide the collapse of net oil production

Yep, Easter Island is a good example. Funny how folk 'forget' unpleasant things. Its not the price of fossil fuel that I realy bother about (I do bother!), but what a significant decrease in availability iin liquid fossil fuel is likely to mean for our economies, and by extension to our societies. Its not good! Thanks for the reply.

[BadJuju]

Re: Reporting gross oil production to hide the collapse of net oil production

Yep, Easter Island is a good example. Funny how folk 'forget' unpleasant things. Its not the price of fossil fuel that I realy bother about (I do bother!), but what a significant decrease in availability iin liquid fossil fuel is likely to mean for our economies, and by extension to our societies. Its not good! Thanks for the reply.

As someone that has went without using oil for transportation or using very little in proportion to the miles traveled, I am not particularly concerned. I think people underestimate the amount of conservation possible. People will just have to adapt. Look at Cuba after the collapse of support from the Soviet Union. It wasn't good, but it wasn't apocalyptic either. People made do with what they had.

I think we are likely to see tiers of oil usage. Big industries, like agriculture, will be first serve and with subsidies to offset price rises. Regular consumers, on the other hand, will be gouged heavily and that will drive down consumption dramatically. Like EJ said, it will undulate from reaching a peak and crashing, then rising up again to a higher level before crashing at a higher level; however, each time it occurs the economy will become more and more inured to its effects as adaptations occur.

I just wish it would happen sooner than later while supplies are greater to force people to make meaningful changes now.