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Penny Outskirts

Peak Oil

Just had this link sent to me

http://www.theoildrum.com/node/2325

Don't know what to think really, but I'd be interested in other's comments...
AnneandMike

It's been predicted for over 50 years.

For more info, try

'Energy beyond oil' by Paul Mobbs

'The end of oil' by Paul Roberts

'The long emergency' by James Kunstler

Cheap hydrocarbons are gone forever. Thank god, considering the state of the climate. Time to buy a pushbike.
oldish chris

My stress counseller advised me to stop worrying about things that i cannot alter! We are not about to run out of oil. Sometime in the near future demand will exceed supply and supply will not increase. There will be problems of energy costs and inflation. I would have thought that most downsizers were better positioned than typical consumerists to cope with the impact. I reckon that we will not know that we've peaked until two years after the event ('cos on the graphs of supply or cost the noise is bigger than the signal)

But just in case, i'm buying the energy intensive gear now whilst its still cheap.
AnneandMike

[quote="oldish chris"] We are not about to run out of oil. Sometime in the near future demand will exceed supply and supply will not increase. quote]

True. The sometime in the future is about now. We may already have passed it but, as you said, Chris, you can only tell some years ahead due to market fluctuations. The critcal thing for everyone to understand is hydrocarbons are not going to get cheap again - ever, and with increased demand from newly industrialising countries, shortages will lead either to more price rises or actual shortages - I would forcast petrol rationing in this country within 10 years. Not a good time to buy a 4.2 litre Range Rover (moronic vehicle anyway which will be worthless in a few years.)
Treacodactyl

We may have reached or even passed peak oil a few years back but I think there will be a few more years before the costs become prohibitive. If you take the cost of the various taxes off petrol it's still very cheap now and airport expansion, which will cater for air travel in 10+ years time, is being greatly increased. Just last year people were saying gas was becoming too expensive but the price has fallen a fair bit recently.
James

What’s important is when the financial markets realise that supply outstrips demand. Its like the emperors new clothes- its all OK until someone says something.
Capitalism requires growth. Growth requires energy. If the energy isn’t there, growth stops, capitalism breaks down.

The supply outstripping demand could happen three ways.
At best, it could happen slowly and in a reasonably controlled way, with a steady reduction in supply from the available resources, and a steady increase in the worlds requirements. This would probably result in lots of small recessions, with minor up-turns in between. A sort of stepped effect.
Or one of the major OPEC countries could loose a big well tomorrow. Most of Saudi Arabia’s well fields are very old, and have probably been irrevocably damaged by forced pumping. They could fail quite soon.
Or, one Americas non-allies like Venezuela, Iran, Libya or Russia, could close the taps, or just sell more to China.


When the stock market realises there Adam Smith model of economic growth is all to shit, then they’ll start recovering debt faster than I could change my socks

The sort of debt you and I have is small in comparison to large companies, or even nations. If these become insecure, then the world economy suddenly looks a lot more fragile.

A word on why prices of gas shot up last year & are now reducing- Europe used up its supply of north sea gas faster than was expected. The wells stopped producing large volumes of gas much sooner than the oil co's had led us to believe. And the massive pipes coming across from Russia hadnt been built when this happend. Now they have (or will be complete this summer), and the party can continue for another six or maybe seven years.
thos

James wrote:

Capitalism requires growth.
...
When the stock market realises there Adam Smith model of economic growth is all to shit, then they’ll start recovering debt faster than I could change my socks

I agree with most of your post. However capitalism and Adam Smith's philosophy is about the allocation of scarce resources. Economic growth is not required, but is a probable consequence.
Blue Peter

Quote:
What’s important is when the financial markets realise that supply outstrips demand. Its like the emperors new clothes- its all OK until someone says something.
Capitalism requires growth. Growth requires energy. If the energy isn’t there, growth stops, capitalism breaks down.


With regard to Thoth’s comment that perhaps capitalism doesn’t require growth, I’m not too sure, and it might depend upon your definition of capitalism. What is usually meant here is that most new money is produced via debt. The bank creates X pounds out of thin air, and so creates new money. When you pay the money back, you destroy this new money. However, the bank charge you interest, which means that you have to find some new money from somewhere, and since you’re not a bank, you can’t just magic it up, you have to earn it by doing some work (the economy grows). There’s a strong correlation between the size of an economy and energy, so, within some degree of tolerance, if energy decreases, so will the economy. If the economy decreases, people can’t pay off their loans and the whole system looks very vulnerable.

Quote:

The supply outstripping demand could happen three ways.
At best, it could happen slowly and in a reasonably controlled way, with a steady reduction in supply from the available resources, and a steady increase in the worlds requirements. This would probably result in lots of small recessions, with minor up-turns in between. A sort of stepped effect.
Or one of the major OPEC countries could loose a big well tomorrow. Most of Saudi Arabia’s well fields are very old, and have probably been irrevocably damaged by forced pumping. They could fail quite soon.
Or, one Americas non-allies like Venezuela, Iran, Libya or Russia, could close the taps, or just sell more to China.


When the stock market realises there Adam Smith model of economic growth is all to shit, then they’ll start recovering debt faster than I could change my socks

The sort of debt you and I have is small in comparison to large companies, or even nations. If these become insecure, then the world economy suddenly looks a lot more fragile.

A word on why prices of gas shot up last year & are now reducing- Europe used up its supply of north sea gas faster than was expected. The wells stopped producing large volumes of gas much sooner than the oil co's had led us to believe. And the massive pipes coming across from Russia hadnt been built when this happend. Now they have (or will be complete this summer), and the party can continue for another six or maybe seven years.


I think you are more or less right on UK gas prices. UK gas production is now steadily falling, meaning we have to import more (and more). We now (this year) have more connections with the continent and extra liquefied natural gas (LNG) capacity. This winter has also been incredibly mild. However, I’m not so sure about 6 or 7 more years. As well as UK gas decreasing in amount, European gas as a whole will begin to decrease from now on, which makes the whole continent increasingly dependent upon Russian gas and (non-Russian) LNG. Quite how this will play out, I am not sure, but a few interesting facts:

1. North American (especially US) natural gas is similarly on a downward slope. To a great extent, gas markets are regional, so this won’t affect us directly, apart from LNG where perhaps the spot market will become more active;
2. The UK runs a hefty balance of payments deficit (I believe -116 billion Euro for 2006). This is at a time where we are still substantial producers of oil (though I think we became net importers in 2005) and natural gas. Both of these are in decline, and like the traditional “six-pointer” as they decline, they subtract from exports and add to imports, so the balance of payments deficit is going to go up a lot;
3. Our fleet of nuclear reactors is aging, and it will take a number of years (2015? At the earliest) to build new ones. In the interim, do we build more gas power stations, or do we go for coal?
4. As noted, Europe as a whole will be experiencing decreasing indigenous natural gas. There will be a lot of competition for what is available. And I suppose that the bit about energy and growth might be relevant here too.
thos

Blue Peter wrote:

With regard to Thoth’s comment that perhaps capitalism doesn’t require growth, I’m not too sure, and it might depend upon your definition of capitalism. What is usually meant here is that most new money is produced via debt. The bank creates X pounds out of thin air, and so creates new money. When you pay the money back, you destroy this new money. However, the bank charge you interest, which means that you have to find some new money from somewhere, and since you’re not a bank, you can’t just magic it up, you have to earn it by doing some work (the economy grows). There’s a strong correlation between the size of an economy and energy, so, within some degree of tolerance, if energy decreases, so will the economy. If the economy decreases, people can’t pay off their loans and the whole system looks very vulnerable.


That's the Multiplier. I could never follow the argument when I was at University.

Under Capitalism there are three inputs: Capital, Land and Labour, all of which are scarce resources. Capital does not mean just money, but plant and equipment and raw materials. The owners of capital (as the owners of land and the owners of labour) provide it and expect a return on their investment. The purpose of business is to add value so that all three provider groups can profit.

Capitalism did not start in the eighteenth century with industialisation. Like the bourgois gentilhomme people were doing it for years before they knew what it was called.

It is true that power (particularly coal-fired steam) increased the value of the outputs against the inputs, but capitalism is still appropriate in an energy-restricted future. It does mean that the gross domestic product cannot continue to increase, and will certainly fall while we work harder to add value.
timbo

Interestingly, The Stern Review which is now the basis for much of the government thinking and legislation about climate change, dismisses Peak Oil with the statement: " There is enough fossil fuel in the ground to meet world consumption demand at reasonable cost until at least 2050" (page 212).

Put another way, Peak oil isn't going to help us tackle climate change. Nor is it going to cause a collapse in civilistation any time soon.

Timbo.
AnneandMike

timbo wrote:
Interestingly, The Stern Review which is now the basis for much of the government thinking and legislation about climate change, dismisses Peak Oil with the statement: " There is enough fossil fuel in the ground to meet world consumption demand at reasonable cost until at least 2050" (page 212).

Put another way, Peak oil isn't going to help us tackle climate change. Nor is it going to cause a collapse in civilistation any time soon.

Timbo.


Of course there is enough fossil fuel in the ground. It is called coal, oil shale, etc. Using it may be economic. However, peak oil will only increase environmental damage if we move to coal big time as is suggested in Australia and US of A.

Also, the issue of peak oil is not about the amount of oil in the ground but about the rate at which it can be extracted. As oil wells age, the flow rate inevitably decreases. Wells globally are reaching this postion (although all at different times) so that it will be impossible to pump the oil as quickly and demand will exceed supply, a situation that can then only get worse. The drop in production is predicted at about 3% per year continuously, against a backdrop of constantly rising demand. I don't need a degree in economics to see a problem with that.
timbo

Hi Anne and Mike,

I only posted this to ensure that no one feels, in the slightest, that peak oil (even if it is true) will help us avoid climate catastrophe.

There are a gazillion discussions on the web about Peak Oil, I think it is a distraction.

The basic tenet of Peak Oilers argument is that:

"As oil wells age, the flow rate inevitably decreases, so that it will be impossible to pump the oil as quickly and demand will exceed supply"

Ultimately of course this is true, but it does NOT follow that the shape of the production curve at the end will follow the same shape as oil sources that experienced their peak production when there was still plenty of other conventional oil sources competing to supply the market (e.g. those of the USA and UK).

Economics will justify extra effort to get the remaining oil out of the ground without dropping the production rate (or even increasing it), this is not "impossible", just more expensive.

This is why Stern and other professionals dismiss it and why it wont help us avoid climate change.

The whole debate about Peak Oil is an unnecessary distraction, we must stay absolutely focussed on reducing CO2e emissions to save ourselves.

It's a pity really, I wish the World would have run out of oil already, still the stuff is too cheap.

Timbo.
thos

timbo wrote:

It's a pity really, I wish the World would have run out of oil already, still the stuff is too cheap.
Timbo.


We should really be saving the oil for the next Ice Age. We'll need it then, if we don't want to all stand on Zanzibar.
Blue Peter

timbo wrote:

The basic tenet of Peak Oilers argument is that:

"As oil wells age, the flow rate inevitably decreases, so that it will be impossible to pump the oil as quickly and demand will exceed supply"

Ultimately of course this is true, but it does NOT follow that the shape of the production curve at the end will follow the same shape as oil sources that experienced their peak production when there was still plenty of other conventional oil sources competing to supply the market (e.g. those of the USA and UK).

Economics will justify extra effort to get the remaining oil out of the ground without dropping the production rate (or even increasing it), this is not "impossible", just more expensive.



I believe that peak oil is defined as the peak flow of oil, so, by definition, the rate can't be increased after peak.

What you may be saying is that peak tends to occur at roughly 50% depletion. However, peak may occur after this, if a real effort is made to increase production. This is true (to a certain extent). Incidently, I believe that overproducing a field does tend to damage it, so that you may get less oil out than you would otherwise have.


I agree that the roughly symmetrical extraction profile has so far only been seen in cases where the oil market is still expanding. It is therefore a theoretical prediction that this will still occur post-peak. I think that it would also be reasonable to take what I think is the opposite of your point of view, in which, post peak, rather less oil is produced than might otherwise be expected because it is being extracted in a declining economy. That is one in which undertaking difficult engineering projects becomes harder and harder,


Peter.
Shane

Blue Peter wrote:
Incidently, I believe that overproducing a field does tend to damage it, so that you may get less oil out than you would otherwise have.

Yep - if you produce a well too hard you can cause it to collapse, which results in lots of sand coming up with your oil and your separators getting clogged up, meaning you have to abandon the well earlier than planned. Fortunately, there are lots of clever reservoir engineers out there nowadays that can work out how much you can turn up a well and get away with it. Of course, the money men don't always listen to them!

Blue Peter wrote:
I think that it would also be reasonable to take what I think is the opposite of your point of view, in which, post peak, rather less oil is produced than might otherwise be expected because it is being extracted in a declining economy. That is one in which undertaking difficult engineering projects becomes harder and harder

Hard to tell, really. Recovery technology is moving on in leaps and bounds. It won't be long before old, abandoned reservoirs become viable again due to the new methods of enhanced recovery. The new generation of reusable FPSOs (oil rigs built on supertankers that sail around to different reservoirs) should also make things interesting as they'll significantly reduce capital expenditure.
My personal view is that should we not be extinct before we've used up all the planet's oil reserves we'll have moved on to extracting methane from the sea bed and converting coal to oil in a big way. With a bit of luck, somebody will have made the right decision regarding nuclear power and we'll have a new generation of stations to reduce our CO2 output and reliance on fossil fuels. All of that will give us time to develop whatever the next, big, feasible (and hopefully sustainable!) method(s) of power generation will turn out to be. If we haven't made the planet uninhabitable for humans, of course...
mark

I think peak oil when it comes maybe good for the planet but may not be so good for downsizers!!

i don't think we can safely huddle up round our woodburning stoves and gloat

Think about all those millions of people who have depended on oil - looking for alternative fuel sources.

we already see the rape of the rainforest to facilitate the non sutainable production of Biofuels in Brazil

think of the pressure on land again to produce energy - sustainable in small amounts - but not enough to replace the burning of fossil fuels.

worst case scenario is compulsary purchase on a wide scale pushing out smallholding as energy crops replace food crops!

its attitudes that need to change - not just how much oil is left
Treacodactyl

mark wrote:
I think peak oil when it comes maybe good for the planet but may not be so good for downsizers!!

i don't think we can safely huddle up round our woodburning stoves and gloat


I'm not sure I'd leave everyone to it and gloat if other people showed the slightest appreciation for help and willingness to change.

Forgive me for being optimistic, it'll not last for long, but perhaps people who have learnt to manage their land well to be productive will actually be regarded highly rather than freaks?
mark

Treacodactyl wrote:
mark wrote:
I think peak oil when it comes maybe good for the planet but may not be so good for downsizers!!

i don't think we can safely huddle up round our woodburning stoves and gloat


I'm not sure I'd leave everyone to it and gloat if other people showed the slightest appreciation for help and willingness to change.

Forgive me for being optimistic, it'll not last for long, but perhaps people who have learnt to manage their land well to be productive will actually be regarded highly rather than freaks?


i think that might happen in gradually changing non crisis situation

but nah - in a big crisis - probably just have it confiscated or compulsary purchase if the powers that be want it!

same plot as people who provide for their pension or whatever..

if you aint in with a big flock its hard to get your rights defended!

If you make the same mistakes as everyone else usually theres political pressure for some compensative agreement
AnneandMike

timbo wrote:



The whole debate about Peak Oil is an unnecessary distraction, we must stay absolutely focussed on reducing CO2e emissions to save ourselves.

It's a pity really, I wish the World would have run out of oil already, still the stuff is too cheap.

Timbo.


Can't disagree with that, Timbo.
Blue Peter

AnneandMike wrote:
timbo wrote:



The whole debate about Peak Oil is an unnecessary distraction, we must stay absolutely focussed on reducing CO2e emissions to save ourselves.

It's a pity really, I wish the World would have run out of oil already, still the stuff is too cheap.

Timbo.


Can't disagree with that, Timbo.



Of course, it could be that peak oil will do the reducing of CO2 emissions for you (though coal might be a different story),


Peter.
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