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Finance and Economics => The Money Board => Economic News, the Global Economy and all Things Monetary => Topic started by: David in MN on January 10, 2017, 09:22:07 AM

Title: Is 'Peak Oil' Over?
Post by: David in MN on January 10, 2017, 09:22:07 AM
I put this in economics, not energy because it is (in my opinion) an economic assessment but could be moved if necessary.

I don't take this question lightly and I'm very open to some pushback. I know I'm tackling a sacred cow and peak oil has been a preparedness topic for a long time. I'm not suggesting we all dump our stored fuel down a storm drain or cancel plans for off-grid solar/wind setups. I'm also not focusing on the morality and ethics of drilling procedures or slave labor conditions in the Mideast. My only focus is whether the concern of peak oil is over.

Oil is normalizing to trade in a band. What do I mean by that? Oil as a commodity only makes money for a producer when sold at a certain pricepoint. For different producers a different pricepoint is required. Saudi Arabia requires less per barrel to be profitable than does North Dakota. SUffice to say it costs the Saudis $25 to produce a barrel while it costs the Canadian Oil Sands $70. These represent both the high and low end of known oil reserve production.

With the price of oil (today 1/10/17) at about $53 a barrel reserves in Brazil, Mexico, US shale, and Canadian sands are priced out. In faact, new deep sea discoveries are being priced out. Take a moment to let this sink in: We are discovering and proving oil reserves that are not currently economically feasible. In other words, the drillers are establishing a price ceiling where increased production from currently untapped reserves come online and provide enough supply to stabilize price.

So oil has pressure from both sides. You know it really can't slide below $25 and over (about) $65 the flood gates open. ANd with proven reserves exanding while remaining untapped, total supply globally is growing with no end in sight. And the markets and futures contracts are so narrow and predictable right now that the traders are in the doldrums for the foreseeable future.

http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude.html

The days of predicting skyrocketing and ever increasing oil prices are gone. At least in my book. Of course there are very smart people who disagree. Fortunately for me they don't run my trading portfolios. Unfortunately for millions of people they run the economies of Venezuela and Brazil.

Full disclosure both myself and my daughter own shares of Exxon Mobil (XOM) and I routinely trade in South American drillers.
Title: Re: Is 'Peak Oil' Over?
Post by: Chemsoldier on January 10, 2017, 12:14:58 PM
I am not sure I am convinced but well argued. What are the consequences of the energy becoming increasingly expensive (in terms of energy and capital) to extract? Is there a point where it is too expensive to extract to provide all the roles in the economy it does? What are the impacts?
Title: Re: Is 'Peak Oil' Over?
Post by: mountainmoma on January 10, 2017, 03:43:02 PM
But, this is what the peak oil sites talk about, exactly as you say. We wont run out, the price gets too high for the economy to handle.

What they think we will see is oscillating prices. So, for the tight oil, or whtever they are calling it, the expensive to get oil we have brought online, we brought it online when prices were high per barrel, and when prices are too high per barrel people and businesses start using less, so then less demand. Less demand means that  "fight" over existing consumers of it happens, which the low prices fields ( Saudi arabia, etc...) can make that low price and make a profit, and others have to too to get business, because they already have sunk costs. The big expense was the drilling, and they already did that, so they make enough pumping it out at the low price to pay for the labor and pumping. But, they do not make new expensive fields at this low price, so then the supply will constrict and the price will spike again.

You know what I mean. In any case, what they project is the price oscillating, specifically Peak Prosperity says that the price needed to make getting the oil pay is higher than the price the economy, as we now have it running, can take.
Title: Re: Is 'Peak Oil' Over?
Post by: David in MN on January 10, 2017, 05:40:04 PM
Historically economies run better with expensive oil (or any commodity for that matter). It turns out that having gasoline cheap enough that we drag race Hummers isn't necessarily good.

As far as the oscillation being a problem, I can only assume this is being formulated by people with no commodity experience. Things like the Chicago Board of Trade (CBOT) exist historically so farmers can buy or short futures in the crops they grow. In corporate life we call this arbitrage.

As an example, I worked for a spell in cocoa (a commodity) in Big Food. Our contracts were north of $40,000,000 (I won't be specific) and we leveraged contracts of one supplier against another while buying and selling said contracts on the open market for a better deal. I personally worked to accept a lot of cocoa that was outside spec because the contract was bought at a significant discount. I helped find where it could fit and saved the company a few million. I can only assume oil companies have a futures buy and option strategy to stabilize and reduce pricing. This isn't simple economics like vertical integration. It's very complex.

The only thing volatile oil prices are guaranteed to do is to make oil traders and people like me a lot of money. We love volatility.
Title: Re: Is 'Peak Oil' Over?
Post by: mountainmoma on January 10, 2017, 05:56:04 PM
We have more substitutes for cocoa bean ( well, maybe not, I mean chocolate....)

Not my area to make arguments at all, but, when oil is 100/barrel this makes everything consumers buy more expensive. Yes, it makes traders money too, I am sure. But, fod is grown with oil, everything is transposrted with oi, people have to heat their houses and get to work.

so, if prices are high, the economy is not functioning the way we presently have it set up ( we seem t be set up assuming constant growth)

In other words, what Chemsoldier said, "...too expensive to extract to provide all the roles in the economy..."

I am not capable of arguing this , but I have read many, many persuasive ones
Title: Re: Is 'Peak Oil' Over?
Post by: FreeLancer on January 10, 2017, 07:48:36 PM
Is there any consensus about what's driven oil prices lower, supply or demand? 
Title: Re: Is 'Peak Oil' Over?
Post by: David in MN on January 10, 2017, 08:23:08 PM
Is there any consensus about what's driven oil prices lower, supply or demand?

It's a futures market. Supply and demand don't actually matter. What matters is the marginal cost to produce more. As the marginal cost approaches zero (as barrel cost rises) price normalizes.

This is a classic Chicago School example of supply side economics. All the math occurs at the margin, not deep in steady state. Sorry to overuse 'margin' but it is very important. The $30/barrel oil and $77/barrel oil are already in the system. What matters is the momentary (spot) price and the price going forward.

When we talk aggregate supply and demand I worry we slip into Keynsian steady state which I feel doesn't exist.
Title: Re: Is 'Peak Oil' Over?
Post by: mountainmoma on January 10, 2017, 08:42:43 PM
 "....energy was boring (to me) this year, but I keep investing in it. Of course, lower energy prices were hailed as great tax breaks for the consumer, ignoring those who say the economy drives commodity prices not vice versa. Like every other market, however, has been totally financialized. The supply/demand market got replaced with a casino-based futures market, and we know that casinos are trouble. Then there’s that whole petrodollar thingie wherein our alliances in the Middle East keep the dollar at reserve currency status and allow us to sell debt. It also seems to be the proximate cause for bombing vast numbers of Arab countries, but I’m ahead of myself....."

a quote from the paper, 2016 Year in Review
A Clockwork Orange
David B. Collum
Betty R. Miller Professor of Chemistry and Chemical Biology
Cornell University

https://s3.amazonaws.com/cm-us-standard/documents/2016-Year-In-Review-PeakProsperity.pdf

a long review that goes all over, but he seems to agree that the pricing is being done by a "casino based futures market"

so, even if you both are correct that that is setting current price. The thing is, if current price is too low, we do not develop new expensive fields, because no matter what the speculative market decides, someone has to make money drilling, pumping and refining the oil. If the price is low, then no incentive to drill and develop.

While speculation may set todays price, ultimately I would call it demand pricing, as people do in fact stop buying the descretionary portion of fuels that they can do without, and often that is do without and hardship resulting from it, when it gets too expensive. And, so then the price has to fall to get them to buy more.

SO, David, doesnt the speculative market take into account how much they think the market will bear in terms of price ?

Title: Re: Is 'Peak Oil' Over?
Post by: FreeLancer on January 10, 2017, 10:22:14 PM
It's a futures market. Supply and demand don't actually matter. What matters is the marginal cost to produce more.

I don't get it.  Supply and demand don't matter, ever?  Or are you just talking short term? 
Title: Re: Is 'Peak Oil' Over?
Post by: surfivor on January 11, 2017, 12:59:18 AM
 I am not sure how much oil there really is ? Most of the geologists work for either indirectly or otherwise for industry or govt. How much oil there is and the price are all geo political and thus complex and I have alot of doubts that the average person is intended or expected to be allowed to know the truth. As long as there is a perceived shortage, various wars or high prices are justified .. and if the price goes up and down the instability makes it difficult for other sources of energy or independent smaller operations  ..

 Not a single news or alt news source I have ever listened to has been able to convince me definitively that I could be sure of what is the overall world supply of oil or when it might run out. I have seen alot of evidence of price manipulation and market manipulation over the years.

 I have also heard that there is alot of oil here or there, in Australia or other places but this too I have no good sense on. There are various forces that it would seem would rather have oil be more of a scarce commodity only to be found in politically unstable parts of the world.

Also, the left would rather see oil as a scarce commodity so as to inspire alternative energy otherwise there is no incentive so is the thinking .. but there are political motivations to believing this or that about oil supply
Title: Re: Is 'Peak Oil' Over?
Post by: Carl on January 11, 2017, 05:22:08 AM
  Man has no idea of how much oil exists or even how much man has extracted from the earth.

What if oil is not finite,but a naturally occurring by product of the earth,and not dependent on dead plants or dinosaurs?

  http://www.viewzone.com/abioticoilx.html
Title: Re: Is 'Peak Oil' Over?
Post by: David in MN on January 11, 2017, 07:48:23 AM
I don't get it.  Supply and demand don't matter, ever?  Or are you just talking short term?

No, actually it is a long term phenomenon. The truth is that we don't really know what the S/D curve will look like in the future and the longer we set our horizon the murkier it gets. There will come a time where humans stop using oil for energy. We just don't know when. Likewise, there are spikes in demand due to industrialization but we don't know where or how big they will occur.

What the futures markets tell you is not the supply and demand but the marginal cost and utility. In fact it offers virtually no information at all about demand. To even pretend that we could aggregate all the data necessary to formulate a supply and demand curve in oil would be a lie. If it helps to think of it, a farmer has no idea what the supply and demand of his crop will be when he plants his seed. He can only look to a futures market to see what the market would price the next unit of said crop put on the market (this is the marginal aspect completely lost in traditional 9th grade economics). I'm a bit in the weeds with some economic principles here and I hope I'm not losing people. The big takeaway is that S/D is supposed to offer a "market clearing" price that's 100% efficient while futures markets tell you what price the next unit will go for. It's static vs. dynamic.

  Man has no idea of how much oil exists or even how much man has extracted from the earth.

What if oil is not finite,but a naturally occurring by product of the earth,and not dependent on dead plants or dinosaurs?

  http://www.viewzone.com/abioticoilx.html (http://www.viewzone.com/abioticoilx.html)

While not totally germane to the topic, I have been studying this for a while and the mathematics (mostly done by Russian physicists) is a fascinating topic. If you'd like to start a thread on the fact that fossil fuels may have nothing at all to do with fossils, I'll chime in.
Title: Re: Is 'Peak Oil' Over?
Post by: Chemsoldier on January 11, 2017, 10:34:42 AM
  Man has no idea of how much oil exists or even how much man has extracted from the earth.

What if oil is not finite,but a naturally occurring by product of the earth,and not dependent on dead plants or dinosaurs?

  http://www.viewzone.com/abioticoilx.html
Isnt this moot if we are in fact extracting fast enough to make it increasingly scarce in easy to extract form?  OK great, its not fossil...it still seems to be getting more difficult to extract.

Will the curve to increase extraction capability continue to improve the way that it has or will the technology mature to the point that it reaches a plateau similar to how say...handgun technology has plateaued?  Then, increasingly hard to extract petroleum turns into just plain inaccessible.

Yes, I know the economic theories...it becomes valuable enough that someone figures it the **** out.  I hope so, but I don't think it is a valid assumption that that will always be the case.  Back to the handgun analogy.  Handgun technology is basically mature. The last 30 years is just nibbling around the edges, training, red dot optics, etc.  The amount of "improvement" is not marked and seems unlikely to become so.  Improvements are marginal and massively more expensive.  We tried gyrogets, flechette packets, explosive rounds, caseless ammo, directed energy...nada.
Title: Re: Is 'Peak Oil' Over?
Post by: surfivor on January 11, 2017, 11:37:37 AM
Quote
Isnt this moot if we are in fact extracting fast enough to make it increasingly scarce in easy to extract form?  OK great, its not fossil...it still seems to be getting more difficult to extract.

 That always seems to be the argument that is hard to dispute however, it's still observing the activity of drillers and drawing conclusions from that which could be explained in other ways even though to many people it's a compelling argument 

 How deep into the ground is the oil in Saudi Arabia ?

Apparently Russia produces more oil than Saudi Arabia, that seems to be one reason the price went down to try to hurt the Russian economy ..
 
 Where does US oil production come from ? How deep in the ground is the oil ? How do you measure how hard it is to get ?


(http://reportgraphics.euromonitor.com/reportgraphics%5CArticles%5C5d42a69e-0690-41f8-8228-0aa086b2018c.gif)

 



Title: Re: Is 'Peak Oil' Over?
Post by: endurance on January 11, 2017, 11:57:03 AM
The "more is always being discovered" dream has a reality component on the other side. We drilled for the easiest, most accessible, most commercially viable stuff first. In 1920 it took one unit of energy going in to recover hundreds of units of energy coming out. In the 1970s that ratio was down to 30:1. Now some of the oil being recovered by fracking and extracted from oil sands is 5:1. The financing for fracking in North Dakota is a house of cards. Many of these wells are costing $4-5 million to drill, but on the other side, the initial production drops by 40% the first year.

There's still fields in Texas that have been producing 40 years that haven't lost that kind of production. What rock the oil is in matters. It matters a lot. If it's porous, the oil flows well and you need few wells to produce a lot of oil. If it's not, you have to drill more wells, do more fracking and get less return on investment.

The problem with the term Peak Oil is that it's incomplete. Are we talking about Peak Conventional Oil?  Peak Shale Oil?  Peak Oil Sands oil?  Because all you have to do is look at the production graphs for a given well or field and see that wells don't produce the same amount forever. The production drops off with time. What should matter is the rate of new discoveries. Which have fallen. And where those discoveries are is expensive places to extract it. Places like deep in the Gulf of Mexico, places in tightly pored shale rock, and countries we shouldn't be supporting economically like lands of our enemies.

We will never run out of oil, but that doesn't mean we will be continuing our happy motoring for the next century either. Sooner or later it will not be economically viable to use oil for transportation. Sooner or later the amount of money a family spends on energy will mean they can't drive to that job or they have to move or they can't afford that home anymore. That's the truth about peak oil.
Title: Re: Is 'Peak Oil' Over?
Post by: bigbear on January 11, 2017, 12:05:56 PM
Are you questioning the invisible hand?!   ;)

In a static world, the terms marginal cost/profit and utility can be swapped out for supply and demand, respectively.  Aren't there direct correlations between those measures?  If profits of a product are made in the margins, then that determines the supply.  If the work of a product is a measurement of its utility, then that determines the demand.

Maybe there's layers of expectations, future events, trades, time, etc... that can't be measured without a Magic 8 Ball.  But there's a parallel economic theory at work. 

Is "Peak Oil" over?  Well, the rate of consumption is greater than the rate of geologic production.  And everyone seems to believe that gap is growing.  So unless/until that changes (however near/far), we will run out of earth created oil.  So I think we're in a pause period.  The only differences as I see it between 10 years ago and today is an increased knowledge of what was unknown quantities and our knowledge/expectation of how to get it. 
Title: Re: Is 'Peak Oil' Over?
Post by: surfivor on January 11, 2017, 12:08:19 PM
 I don't exactly understand oil exploration .. If there is oil someplace, if that someplace is off the coast or in another country, perhaps only large companies can get involved and I don't know what their motivations may be .. If oil is in Texas maybe it's easier for smaller companies ..

 I suppose oil would or could run out some day but it's hard to get any sense of how far away that is ? Previous predictions where that we would run out in something like 2014. Why was that prediction so far off or who makes these types of predictions ?

 If Russia has oil, but things are not friendly then that has a possible effect etc ..

Seems like alot of unknowns to me and whatever large corporations know, they would likely consider it their private business

Title: Re: Is 'Peak Oil' Over?
Post by: David in MN on January 11, 2017, 12:15:07 PM
We could have claimed that drilling at all made oil too difficult to get. There was a time when it was considered a nuisance and pooled on the surface.

My central claim is that it isn't getting more difficult to get oil. It's become such a mature market that pricing is getting very tight and producers can better predict costs and margins. That costs have raised and margins narrowed isn't necessarily a bad thing.

As far as getting our act together and solving energy problems, we did that. We developed technology to reach previously unreachable oil. We also found alternatives (my car gets synthetic). The pessimism that these remarkable leaps in innovation don't have an effect and don't signify a radical change from an industry beholden to a few petrol rich countries to a diversified commodity market seems wrong to me.

If you took the time machine back to the late 70s and made the correct prediction, people would laugh at you. I feel like Matt Ridley's proverbial "Rational Optimist" but how many times do we need to repeat the Simon/Ehrlich bet before we give our own innovation the respect it deserves? It wasn't CAFE standards, speed limits, ethanol mandates, weather dependent mixtures, or any of that nonsense. It was capitalist innovation once again.
Title: Re: Is 'Peak Oil' Over?
Post by: surfivor on January 11, 2017, 12:16:54 PM
Here's another chart, certain companies are major players and the majority are connected directly to governments.

(http://www.eia.gov/energy_in_brief/images/charts/top_100_oil_companies.png)

http://www.eia.gov/energy_in_brief/article/world_oil_market.cfm

There are three types of companies that supply crude oil to the global market. Each type of company has different operational strategies and production-related goals:

    International oil companies (IOCs): These companies, which include ExxonMobil, BP, and Royal Dutch Shell, are entirely investor owned and primarily seek to increase their shareholder value. As a result, IOCs tend to make investment decisions based on economic factors. These companies typically move quickly to develop and produce the oil resources available to them and sell their output in the global market. Although these producers are affected by the laws of the countries in which they produce oil, all decisions are ultimately made in the interest of the company and its shareholders, not in the interest of a government.

    National oil companies (NOCs): These companies operate as an extension of a government or a government agency, and they include Saudi Aramco (Saudi Arabia), Pemex (Mexico), the China National Petroleum Corporation (CNPC), and Petróleos de Venezuela S.A. (PdVSA). These companies support government programs financially and sometimes strategically. These companies often provide fuels to domestic consumers at a lower price than the fuels they provide to the international market. These companies do not always have the incentive, means, or intention to develop their reserves at the same pace as investor owned international oil companies. Because of the diverse objectives of their supporting governments, these NOCs pursue goals that are not necessarily market oriented. The goals of these companies often include employing citizens, furthering a government's domestic or foreign policies, generating long-term revenue to pay for government programs, and supplying inexpensive domestic energy. All NOCs belonging to members of the Organization of the Petroleum Exporting Countries (OPEC) fall into this category.

    NOCs with strategic and operational autonomy: The NOCs in this category function as corporate entities and do not operate as an extension of the government of their country. This category includes Petrobras (Brazil) and Statoil (Norway). These companies often balance profit-oriented concerns and the objectives of their country with the development of their corporate strategy. Although these companies are driven by commercial concerns, they may also take into account their nation's goals when making investment or other strategic decisions.

In 2014, 100 companies produced 82% of the world's oil. NOCs accounted for 58% of global oil production.
Title: Re: Is 'Peak Oil' Over?
Post by: fred.greek on January 12, 2017, 11:59:14 AM
My understanding is that “peak oil” referred to the time period where humanity had reached the point of maximum capability of pumping oil out in any given time period.

If during that time period demand did not exceed peak pumping potential, rationally we would not see any jump in price, indeed during this limited period of maximum pumping capacity, we might see a drop in price. 

The price spike would be expected as maximum pumping capacity slid down the curve, while demand failed to fall at the same rate as pumping capacity.
Title: Re: Is 'Peak Oil' Over?
Post by: mountainmoma on January 12, 2017, 01:10:28 PM
My understanding is that “peak oil” referred to the time period where humanity had reached the point of maximum capability of pumping oil out in any given time period.

If during that time period demand did not exceed peak pumping potential, rationally we would not see any jump in price, indeed during this limited period of maximum pumping capacity, we might see a drop in price. 

The price spike would be expected as maximum pumping capacity slid down the curve, while demand failed to fall at the same rate as pumping capacity.

exactly ! 
Title: Re: Is 'Peak Oil' Over?
Post by: surfivor on January 12, 2017, 01:50:40 PM
My understanding is that “peak oil” referred to the time period where humanity had reached the point of maximum capability of pumping oil out in any given time period.

If during that time period demand did not exceed peak pumping potential, rationally we would not see any jump in price, indeed during this limited period of maximum pumping capacity, we might see a drop in price. 

The price spike would be expected as maximum pumping capacity slid down the curve, while demand failed to fall at the same rate as pumping capacity.

 Not sure what you are saying but "peak oil" implies we have peaked out and it's all downhill from here .. sort of like a football or basketball star who can't be expected to perform much better and is in decline .. This sort of happens to say a boxing champ who reaches middle age.

 It implies the supply is ever dwindling and the price is ever rising .. If that changes for a significant length of time and goes on the upswing then one has to wonder if other factors are involved ..

 peak oil has a bit of an apocalyptic aspect

https://en.wikipedia.org/wiki/Peak_oil

Peak oil, an event based on M. King Hubbert's theory, is the point in time when the maximum rate of extraction of petroleum is reached, after which it is expected to enter terminal decline
Title: Re: Is 'Peak Oil' Over?
Post by: mountainmoma on January 12, 2017, 02:00:51 PM
A short article on shale oil producers view of price/risk

http://thesovereigninvestor.com/oil/the-rise-of-black-gold/
Title: Re: Is 'Peak Oil' Over?
Post by: David in MN on January 12, 2017, 02:16:50 PM
Help me to understand what I clearly don't.

https://en.wikipedia.org/wiki/Peak_oil (https://en.wikipedia.org/wiki/Peak_oil)

I can read the theory. But my takeaway is that once oil production has 'peaked' (which seems to be a somewhat unclear term) production will diminish and be outpaced by consumption.

Ignoring that the creator of the theory (Hubbert) predicted oil to "peak" in 1970 which is flat wrong, wouldn't access to new oil sources further confound the prediction if not negating it? Wouldn't a stabilization of futures prices and option contracts imply that producers know they can meet demand? If the concern is the moment that peak extraction is reached, these factors would seem to indicate that is at the very least far off.

Assuming this to be a serious theory and not a can that we keep kicking down the road as our gravest concerns never seem to materialize, don't these facts at least give us pause? If not, what would? Dead serious, what would disprove this theory if not increasing supply and low price variability?

Clearly I'm missing something that the believers see. I'd like to be informed because from my POV (which is biased by my background in economics and trading) it's not exactly holding water.
Title: Re: Is 'Peak Oil' Over?
Post by: surfivor on January 12, 2017, 02:32:42 PM
peak oil is also peculiar because it seem to imply mankind can never power anything that doesn't run on gas because science and technology can't move fast enough to provide viable and affordable alternatives. It seems like there may be forces at work to slow down the technology developments or to make sure new technology is not going to be very cheap ..

 Peak oil is also economic because when you hear about peak oil, you often hear stuff like "it will be a crisis", "it will lead to economic decline" .. etc .. but the way it is often portrayed is that we are completely helpless to stop it even though people always think science is going to solve everything so I really have to say where are these scientists who are supposed to save us anyway ?

https://en.wikipedia.org/wiki/Peak_oil#Economic_growth

"As the industrial effort to extract new unconventional oil sources increases, this has a compounding negative effect on all sectors of the economy, leading to economic stagnation or even eventual contraction."


=================

Here it is, the typical explanation .. our demise is not due to government as libertarians would claim but when the oil runs out we'll all be as good as dead. Either that or living in primitive dwellings and cutting trees for our only source of fuel


https://ourfiniteworld.com/

We first used fossil fuels to allow the population to expand, starting about 1800. Things went fairly well until the 1970s, when oil prices started to spike. Several workarounds (globalization, lower interest rates, and more use of debt) allowed the economy to continue to grow. The period since 1970 might be considered a period of “stagflation.” Now the world economy is growing especially slowly. At the same time, we find ourselves with “overhead” that continues to grow (for example, payments to retirees, and repayment of debt with interest). The pattern of past civilizations suggests that our civilization could also collapse.

Historically, economies have taken many years to collapse; I show a range of 20 to 50 years in Figure 1. We really don’t know if collapse would take that long now. Today, we are dependent on an international financial system, an international trade system, electricity, and the availability of oil to make our vehicles operate. It would seem as if this time collapse could come much more quickly.

With the world economy this close to collapse, some individual countries are even closer to collapse. This is why we can expect to see sharp downturns in the fortunes of some countries. If contagion is not too much of a problem, other countries may continue to do fairly well, even as individual small countries fail.
Title: Re: Is 'Peak Oil' Over?
Post by: mountainmoma on January 12, 2017, 02:33:55 PM
As you have stated, price is not just a function of amount of oil. So, price does not define Peak Oil. Just being at the Peak does. As someone else stated, there is ALOT of oil at the peak, then it declines.

Maybe I will try to find correct data, but we DID hit and pass Peak Oil production in the US ( regular oil, not tight oil) when the prices got high enough, we have gone to developing non-standard sources. Since we can also alter how quickly we pump out, we may use it quicker or slower, but those fields we have going in the world, how much is available is at or near the peak. Obviously, it is a finite resource. The regular, easy to get oil did peak as predicted, or very close to it.

It makes a very big difference to the overall economy if it costs EROI 10:1 vs 3:1 (for example, I do not have ratios in front of me) Oil will not go away, it will get very expensive before that.

So, yes, we can get oil, we can predict it, but the easy stuff peaked and the stuff we can get will continue to have worse and worse EROI.

If something was going to be an even bell curve, it would follow that at peak you have used half, not all, not 80%, but half. Things are not even, it is hard to predict how steep or not the downward curve is how fast we use up the other half.

One of the things peak oil emphasies is how disruptive to common people the economies of oil decline is and will  be. ANd, here there gets speculation of course, how soon will the decline (in the ground) translate to decline of available to use (as these are 2 very different things) ? How much and how soon will common people be disrupted by the economy that results from high prices of oil and job losses from changing economic picture ?

We know that we already have a very high real unemployment ( aged 18-64 non-disabled adults not in work force)

Ironically, the other peak prosperity linked article from this morning said they are moving to more automation in drilling and oil production, which of course keeps the price lower, so they can develope a bit more of the hard to get stuff in teh US at a price that they can potentially sell it at -- but then, more unemployment !
Title: Re: Is 'Peak Oil' Over?
Post by: mountainmoma on January 12, 2017, 02:56:32 PM
Got a decent link for you, John Michael Greer on Peak Oil and the the peak oil doomsayers ( these are 2 different things, there is peak oil, what that means and will mean is speculative)

http://thearchdruidreport.blogspot.com/2016/02/whatever-happened-to-peak-oil.html

: .....To understand what happened instead, it’s necessary to keep two things in mind that were usually forgotten back when the peak oil scene was at white heat, and still generally get forgotten today. The first is that while the supply of petroleum is ultimately controlled by geology, the demand for it is very powerfully influenced by market forces.....factor in lag times on its effects on both production and consumption, and you get a surge in new supply landing right about the time that demand starts dropping like a rock. That’s what happened in 2009, when the price of oil plunged from around $140 a barrel to around $30 a barrel in a matter of months. That’s also what happened in 2015, when prices lurched down by comparable figures for the same reason: surging supply and plunging demand hitting the oil market at the same time....Could the bloggers and researchers in the pre-2009 peak oil scene have predicted all this in advance? Why, yes, and as a matter of fact a few of us did.  The problem was that we were very much in the minority. True believers in an imminent peak oil apocalypse denounced the analysis just outlined .....Your average barrel of oil from a conventional US oilfield today has a net energy around 30 to 1.....credible estimates put the net energy of tar sands and hydrofractured shales well down into single digits. ...The decline in net energy won’t be visible in the places you’d expect, either. As long as the hard facts of geology make it physically possible to do so, large volumes of “petroleum,” in some sense of that increasingly flexible word, will continue to be produced and consumed. With each year that passes, though, a larger fraction of that output will have to cycle right back into the extraction and refining process, leaving less and less available for all other uses. Thus declining net energy promises to play out over time in the form of creeping dysfunction throughout the economic sphere, in the form of neglected and abandoned infrastructure, failing institutions, a rising tide of permanent joblessness and homelessness, all papered over with an increasingly brittle layer of propaganda spewed out with equal enthusiam from the partisans of every officially acceptable point of view....."
Title: Re: Is 'Peak Oil' Over?
Post by: endurance on January 13, 2017, 06:47:03 AM
Hubbard's 1970 prediction for US Peak Oil production was accurate if you look strictly at conventional oil in the US. We have not produced more conventional oil in the US since the early 1970s. Since that time we have depended on imports, even after the discovery and development of the Alaskan oil fields. US oil production had been in continuous decline since the early 1980s (there was a second rise in the early 1980s with the completion of the Alaskan pipeline, but not as high as the 1970s peak) until the flurry of recent shale oil drilling.

Shale production in both eagle ford and the Bakkan appear to have already peaked even though some drilling continues. The wells are not as economically viable as originally hoped.

Why folks think this pattern won't continue baffles me. As I mentioned earlier, we will never run out of oil. That is not what peak oil is about. It is about the real limits of a finite resource and the fact that it will be come more and more expensive to get the more and more difficult to extract oil out of the ground. Companies are losing their asses in the Bakkan fields and future investors will be timid to return to shale because the returns haven't panned out. When oil prices get over $100 a barrel, some will return, but an economy will struggle with $100 a barrel oil and when the economy collapses again, prices will fall again and the investors will be hosed again. yes, there is money to be made in volatility; go for it. But for endless new supplies that are economically viable?  That's coolaid I'm not drinking. The geological theories that have supported our findings to date also support that oil won't be found any deeper and the center of the earth isn't filled with oil. (At some depth, oil gets too hot and transforms into gases, generally natural gas, so that's why almost all the world's oil is found in a very limited range between about 5,000'-13,000')
Title: Re: Is 'Peak Oil' Over?
Post by: osubuckeye4 on January 13, 2017, 07:23:46 AM

We will never run out of oil, but that doesn't mean we will be continuing our happy motoring for the next century either. Sooner or later it will not be economically viable to use oil for transportation. Sooner or later the amount of money a family spends on energy will mean they can't drive to that job or they have to move or they can't afford that home anymore. That's the truth about peak oil.

This has always been the more legitimate outlook on peak oil.

It's not that the Earth will actually "run out" of oil and there will not be a single drop left that we're able to access. I've never been bullish on that and every time someone's tried to sell me on it I just chuckle.

It's that our demand for oil will be unable to be met in a cost effective manner, and it will have an impact on everyday quality of life around the globe. 


That said...

I have always felt that when the markets hand is forced, technological advances/breakthroughs always seem to provide a workaround.

The big concern 10'ish years ago was that India and other emerging economies were putting millions of cars on the road, and oil/gas was needed for those cars.

Now, we're already seeing the market provide an alternative in the form of electric cars. Not just in the form of $80,000+ Teslas either... Nissan Leaf goes for $30,000 or so.


---

As far as what David is saying in regards to oil futures/pricing. I agree. "Peak oilers" are going to be sorely disappointed because the market seems to have flattened out quite a bit.
Title: Re: Is 'Peak Oil' Over?
Post by: David in MN on January 13, 2017, 08:05:57 AM
Claiming we're post-peak because US oil production has diminished seems like a fallacy. It could likewise be argued that oil peaked in Texas, iron peaked in Minnesota, or Legos peaked in Denmark. There were more efficient ways of meeting demand.

It's also necessary not to believe we're in a vacuum. North American production has slowed primarily because of price drops in the past 2 years. They could still pump oil and not turn a profit. But the global market priced them out. It's not that no one can get more oil, it's that existing production meets demand at a lower cost.

I still have a problem with the claim that production has/is peaking, costs are rising, reserves are dwindling, and price is dropping. In fact, oil compared to any other commodity seems like it hasn't really changed price in forever. You can still get a gallon of gas with a 1948 quarter... It just doesn't feel like we're competing over a scarce resource.

I fully agree that oil, like steam engines and whale oil, will be replaced. I don't know how but we seem to be good at that historically. To argue that humanity will evolve past oil seems so obvious it would be a forgone conclusion. But I also don't think oil will be so scarce we put jars of it on the shelf as decoration.

As far as what David is saying in regards to oil futures/pricing. I agree. "Peak oilers" are going to be sorely disappointed because the market seems to have flattened out quite a bit.

Oh, an olive branch. Nice to have someone else reading the futures markets. Proximity to the CBOT perhaps?  ;)
Title: Re: Is 'Peak Oil' Over?
Post by: osubuckeye4 on January 13, 2017, 10:16:04 AM

Oh, an olive branch. Nice to have someone else reading the futures markets. Proximity to the CBOT perhaps?  ;)

I wouldn't go far as to say I sit down and really read them in great detail.... more like glance from time to time just to make sure a freight train isn't about to run me and my family over.  8)

I'm noticing the same general things you are.


I fully agree that oil, like steam engines and whale oil, will be replaced. I don't know how but we seem to be good at that historically. To argue that humanity will evolve past oil seems so obvious it would be a forgone conclusion. But I also don't think oil will be so scarce we put jars of it on the shelf as decoration.

I'm not necessarily convinced oil will be "replaced"... so much as, if we do ever manage to hit "peak oil" (if there is such a thing), then the market will adjust to meet the need, and non-oil alternatives will present themselves along with the oil-based products offered. You'll see prices shift to accommodate the resources available. That seems to always be what happens historically, I don't see why oil would be different.


Put it this way... if we hit peak oil, we'll see the automotive industry shift to producing more electric cars. thus driving down the price considerably. Gas guzzling Suburban's are going to cost $220,000... whereas Tesla's will cost $35,000 just because there are going to be millions of people lined up to buy Teslas and very few people in the market for Suburban's and their unsustainable gas prices.


We're kind of already seeing the market take care of this.
Title: Re: Is 'Peak Oil' Over?
Post by: mountainmoma on January 13, 2017, 10:35:42 AM
Again, how much we are pumping out is not a definitiion of peak oil -- peak oil is when you have heit the peak of how much you have avialable to pump out.

It is also wrong to assume that we will come up with a substitute., just because you want us to. There is no data or indication of anything that will replace the roll of oil with a similar historical ROI, and that is key, the ROI.

When we went from burning wood and whale oil to using petroleum, the oil especially at the beginning, had a crazy high ROI. What we are bringing online now, solar, wind, etc... has a way lower ROI, and is a dispersed energy, not concentrated and portable. And, we need oil to mine the stuff needed for trucks, solar panels, wind turbines, etc... so these will get more expensive, we never had to have whale oil lamps to drill for oil. And, people could have cut back or replaced whale oil, and we not stumbled on how to drill fro oil ( not had lamps, for example ) Whale oil was a short, brutal extraction period and the world would not have changed much had it just stopped with no replacement. SO, if your hope doesnt pan out and we do not have a high ROI, portable energy source to replace oil, then you can see that the change will be hard on us. Yes, we will go on, but there will be disruptions, to say the least

Electric cars, which are a drop in the market share, are for replacing personal cars, when most of our transport economically is ships and planes and semi-trucks.

Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on January 13, 2017, 11:08:33 PM
Again, how much we are pumping out is not a definitiion of peak oil -- peak oil is when you have heit the peak of how much you have avialable to pump out.

There are two different concepts in play.  Peak oil is defined as the point of maximum production.   But the peak oil movement, popularized by M. King Hubbert adds some assumptions to this:


One can accept peak oil without accepting the other assumptions the peak oil movement tacks on.

My central claim is that it isn't getting more difficult to get oil. It's become such a mature market that pricing is getting very tight and producers can better predict costs and margins. That costs have raised and margins narrowed isn't necessarily a bad thing.

Peak theory is used regularly in business.  In fact I just completed an analysis two weeks ago based on peak theory.   Basically peak theory addresses the question of when does a particular category (or technology) reach its highest point.  This is important as profitability is directly related to the size of the category.  Specifically:

Profit = Category Size X Share of Market X Margin - Fixed Costs

Category Size is the number of units sold across all competitors (which typically equals production since markets clear).
Share of market is the percent of units sold by the company.
Margin is the amount made per unit sold taking into account all variable costs (e.g. production costs)
Fixed costs are basically overhead that doesn't change much with units sold.

Net the number of units being produced is a major driver of profitability.  When a peak occurs in a category it signals an immediate need to diversify offerings.  It sucks to be a PDA producer in a smart phone world.  As an example, the PC manufacturers are facing huge issues because Peak PC has occurred.

<a href="https://www.statista.com/chart/5241/global-pc-shipments-since-2008/" title="Infographic: Five Years Past Peak PC | Statista">(https://infographic.statista.com/normal/chartoftheday_5241_global_pc_shipments_since_2008_n.jpg)[/url]
You will find more statistics at Statista (https://www.statista.com/)

Right now there is no sign of reaching peak oil.  Every time the peak oil movement tries to fit a bell curve the actual trend just flies through it.  For example the last really big 'peak push' was 2010 and that prediction failed in months.

(https://people.hofstra.edu/geotrans/eng/ch5en/appl5en/img/worldoil19002100.png)

But even if a peak does occur, it most likely won't be from production issues.  Current accessible reserves are through the roof.  And even if there were production issues it wouldn't be apocalyptic in the US.  Most people don't realize it but we have diversified our electric grid away from oil.  Right now oil makes up less than 1% of our electricity production and dropping (solar alone will probably eclipse it this year). 

(http://www.eia.gov/energyexplained/images/charts/outlet-graph-large.jpg)

And our consumption of oil for other purposes (heating and fuel) is dropping substantially.  Natural gas and other sources are just sapping the need.  Right now petroleum is down to about one third of total.
Title: Re: Is 'Peak Oil' Over?
Post by: CharlesH on January 14, 2017, 08:03:36 AM
Impressive post iam4liberty.  I appreciate all the detail.
Title: Re: Is 'Peak Oil' Over?
Post by: mountainmoma on January 14, 2017, 12:43:17 PM
The thing is, oil is a problem for transportation, and the manufacture of plastics and fertilizers,  not electricity generation.

And, most of our transportation needs is not personal cas used to commute

And, the reason for peak charts that do not "bell curve" is that when it has started to go down, we add things that we are charting, so different products are on that graph as it goes along. Yes, tight oil gives oil ( at a real low EROI ), but the originally charted, conventional fields are what peaked. the others will peak soon. Tight oil has to constantly have new drilling, ech spot lasts just a couple years(that time frame is from memory -- but, it is very short )
Title: Re: Is 'Peak Oil' Over?
Post by: surfivor on January 14, 2017, 03:34:05 PM

 Apparently electric cars depend on lithium batteries which are made from rare earth minerals so it's not clear how easy it is to manufacture infinite amounts of batteries.

Title: Re: Is 'Peak Oil' Over?
Post by: Carl on January 14, 2017, 03:44:57 PM
 Also batteries only STORE ENERGY and so they require fuel,of some kind,to charge them...often the over-loaded grid so NUKE,Natural gas,coal...all are used for grid service.
Title: Re: Is 'Peak Oil' Over?
Post by: surfivor on January 14, 2017, 07:20:55 PM
Yes, it seems questionable that because of climate change nuclear power starts to look better but may have severe problems and Hazards of its own
Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on January 14, 2017, 07:58:30 PM
Also batteries only STORE ENERGY and so they require fuel,of some kind,to charge them...often the over-loaded grid so NUKE,Natural gas,coal...all are used for grid service.

Electric cars actually help the grid.  One of the biggest issues utilities face is unbalanced load throughout the day and night.  Electric vehicles are primarily charged at night during off peak times.  So until millions are on the road it will be beneficial.  Many utilities are even offering lower rates for electric vehicle charging.
Title: Re: Is 'Peak Oil' Over?
Post by: mountainmoma on January 14, 2017, 08:22:49 PM
Electric cars actually help the grid.  One of the biggest issues utilities face is unbalanced load throughout the day and night.  Electric vehicles are primarily charged at night during off peak times.  So until millions are on the road it will be beneficial.  Many utilities are even offering lower rates for electric vehicle charging.

for the moment, but they are also paying hefty rebates, at least in CA, for businesses to install storage for "peak shaving" ie., the are heavily subsidizing the battery banks, to be charged at night, to be put in use during "peak" usage time (late afternnon thru early evening. Time of Use metering also does this, I have time of use metering, so we are encouraged by this pricing to do, for example, laundry, baking, garden watering (pumps), run the dishwasher, at non-peak hours ( at night, early morning). Time of Use has been too popular, actually, so they are changing the rate structure, they no longer need to encentivize it as much.

So, yes, all these things are good and useful.

But, the major disruptive effects predicted to result from higher priced oil are not about electricity production ! It is about the Industrial/Business level, - plastic/synthetic products, pesticides, other chemical industrial uses of oil; Commercial transportation, ie., trucks, air transport, shipping of all types; powering the Mining, Refining, Smelting and Construction (of buildings, of roads, of wind turbines, etc....) Again, it is not about our driving, a little it is, but not alot, (the getting the metal and the plastics to build the cars, it is ) not so much the personal transport portion of the worlds fuel budget-- because, while that is part of it, and will be affected, it is a small part compared to other uses of oil.
Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on January 14, 2017, 11:21:56 PM
But, the major disruptive effects predicted to result from higher priced oil are not about electricity production ! It is about the Industrial/Business level, - plastic/synthetic products, pesticides, other chemical industrial uses of oil; Commercial transportation, ie., trucks, air transport, shipping of all types; powering the Mining, Refining, Smelting and Construction (of buildings, of roads, of wind turbines, etc....) Again, it is not about our driving, a little it is, but not alot, (the getting the metal and the plastics to build the cars, it is ) not so much the personal transport portion of the worlds fuel budget-- because, while that is part of it, and will be affected, it is a small part compared to other uses of oil.

Hmmm.... I dont think i am communicating very well today.   My point is that the US has been aggresively moving away from oil. It only makes up a small portion (less than 1%) of our grid.  It is the grid which primarily fuels industry.  Another item you mentioned was plastics.  We primarily (over 80%) use natural gas to create plastics.  We stopped using oil about a decade ago.  The number one use of oil in US is for fuel at about 67%.  But  we have drastically improved fuel economy.  Here is the break down from 2015:

Product                                     Annual consumption (million barrels per day)
Finished motor gasoline.                                       9.178
Distillate fuel oil (diesel fuel and heating oil)       3.995
Hydrocarbon gas liquids (HGL)                            2.549
Kerosene-type jet fuel                                       1.548
Still gas.                                                             0.683
Petroleum coke                                                    0.349
Asphalt and road oil                                            0.343
Petrochemical feedstocks                                    0.331
Residual fuel oil                                                    0.259
Lubricants                                                            0.138
Miscellaneous products and others.                     0.089
Special napthas                                                    0.052
Finished aviation gasoline                                    0.011
Kerosene                                                            0.006
Waxes                                                                    0.006

The net effect has been a big drop in oil use in the US at the same time we have had a big rise in domestic production.

(http://fuelfix.com/files/2013/08/ET_081513Fig1.jpg)

This drop has been devastating to oil producing countries.  Saudi Arabia is going into massive debt.  Venezuela has collapsed.  Russia is freaked.  So if there is a danger from oil it is more that a lack of demand is destabilizing countries not that we are going to run out.

Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on January 15, 2017, 07:21:04 AM
I also just checked fertilizer as that is one item often cited by the peak oil movement as being a disrupter.  95% is now made from natural gas as well. 

http://petrowiki.org/Gas_as_fertilizer_feedstock (http://petrowiki.org/Gas_as_fertilizer_feedstock)

Ammonia can be produced from different hydrocarbon feedstocks such as natural gas, coal, and oil. Natural gas accounts for more than 95% of ammonia tonnage. Natural gas is the preferred feedstock primarily because:

    It is intrinsically the most hydrogen rich and, therefore, contributes more hydrogen compared with other feedstocks on a unit weight basis.
    The heavier feedstocks, like coal and oil, are more complex to process; therefore, the capital costs are higher compared to natural gas.


There was even a, shall we say, more colorful response about this in Forbes: http://www.forbes.com/sites/timworstall/2012/04/07/were-not-going-to-run-out-of-oil-based-fertilizer/#553b642115ae (http://www.forbes.com/sites/timworstall/2012/04/07/were-not-going-to-run-out-of-oil-based-fertilizer/#553b642115ae)
Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on January 15, 2017, 08:48:50 AM
Claiming we're post-peak because US oil production has diminished seems like a fallacy. It could likewise be argued that oil peaked in Texas, iron peaked in Minnesota, or Legos peaked in Denmark. There were more efficient ways of meeting demand.

Also the first statement is false.  As Endurance pointed out, to make any type of claim of a peak you have to limit the discusdion by extraction technology used.  US production didnt peak in the 1970s.  We are back on the upswing and whether it peaks or not purely depends on how much overseas oil costs.  If it is a good deal we will throttle back production and hold this in reserves.  If it is a bad deal we will continue to set production records.

(http://www.postcarbon.org/wp-content/uploads/2017/01/image005.png)
Title: Re: Is 'Peak Oil' Over?
Post by: David in MN on January 15, 2017, 02:22:54 PM
Fair point. Maybe I was a bit hasty and unclear. I agree there is some nuance to the source. But my bias would assume that's just "baked in" to the cost. I wouldn't decouple those and assume they go hand in hand.

In truth this thread hasleft me more confused about "peak oil" than when I started. It seems that the term can apply to any point where production reaches a momentary maximum, which seems unimportant if demand is met. It can refer to the economic turmoil of demand outpacing diminishing supply (what I thought it was at the jump). And it can refer to increased production costs which somehow don't translate into higher commodity costs.

I'll admit that while I'm trying to understand the nuances here I'm not quite ready to abandon my original thesis. In fact given some new definitions of "peak oil" I'm not even sure I have a workable problem definition to tackle. I can envision a situation where oil supply peaks and due to increased efficiency and good futures pricing nobody even notices.
Title: Re: Is 'Peak Oil' Over?
Post by: NWPilgrim on January 15, 2017, 10:23:08 PM
I thought "Peak" in this situation refers to a peak in total in-the-ground accessible reserves whether developed or not.  That is, the total known reserves.  Production will always fluctuate depending on demand, ROI, etc.  If so, the big question is not when PRODUCTION peaked, but are total reserves fixed and past the point of maximum potential extraction/production; or, are there much more reserves yet to be created or discovered?

I don't think the COMEX is a reliable indicator of peak or not.  It really just reflects what is expected in the next year or so.  Unpredictable influences such as politics, new tech, etc can also disrup or expedite production along with variable demands.
Title: Re: Is 'Peak Oil' Over?
Post by: mountainmoma on January 15, 2017, 11:51:33 PM
I thought "Peak" in this situation refers to a peak in total in-the-ground accessible reserves whether developed or not.  That is, the total known reserves.  Production will always fluctuate depending on demand, ROI, etc.  If so, the big question is not when PRODUCTION peaked, but are total reserves fixed and past the point of maximum potential extraction/production; or, are there much more reserves yet to be created or discovered?

I don't think the COMEX is a reliable indicator of peak or not.  It really just reflects what is expected in the next year or so.  Unpredictable influences such as politics, new tech, etc can also disrup or expedite production along with variable demands.

Yes, Dave, the term applies, like he says to amount in the ground, peak of available oil --- not how much we are producing  (pumping out)

But, I thought of something, we often think of the Peak Oil Movement when we think of the term Peak Oil -- and, if you can stand another JMG essay, he agrees with you that this movement is dead, and why he thinks that is. He also thinks it pretty much has contaminated the term "peak oil " and that we are going to have to use a new term to describe it. So, likely you like everyone else think of the overblown claims from some areas of the movement, and so rightly see it as "dead "  "....I’m sorry to say that the phrase “peak oil,” familiar and convenient as it is, probably has to go.  The failures of the movement that coalesced around that phrase were serious and visible enough that some new moniker will be needed for the time being, to avoid being tarred with a well-used brush. The crucial concept of net energy—the energy a given resource provides once you subtract the energy needed to extract, process, and use it—would have to be central ....."

http://thearchdruidreport.blogspot.com/2016/12/why-peak-oil-movement-failed.html
Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on January 16, 2017, 12:05:34 AM
I thought "Peak" in this situation refers to a peak in total in-the-ground accessible reserves whether developed or not.  That is, the total known reserves.

From wikipedia:

https://en.m.wikipedia.org/wiki/Peak_oil (https://en.m.wikipedia.org/wiki/Peak_oil)

Peak oil, an event based on M. King Hubbert's theory, is the point in time when the maximum rate of extraction of petroleum is reached, after which it is expected to enter terminal decline.[1] Peak oil theory is based on the observed rise, peak, fall, and depletion of aggregate production rate in oil fields over time. It is often confused with oil depletion; however, peak oil is the point of maximum production, while depletion refers to a period of falling reserves and supply.

In truth this thread hasleft me more confused about "peak oil" than when I started. It seems that the term can apply to any point where production reaches a momentary maximum, which seems unimportant if demand is met. It can refer to the economic turmoil of demand outpacing diminishing supply (what I thought it was at the jump). And it can refer to increased production costs which somehow don't translate into higher commodity costs.

You are not confused at all.  This is exactly right.  It can be either the "optimistic: or" pessimistic scenario.  Again from wikipedia:

Some observers, such as petroleum industry experts Kenneth S. Deffeyes and Matthew Simmons, predict negative global economy implications following a post-peak production decline and subsequent oil price increase because of the high dependence of most modern industrial transport, agricultural, and industrial systems on the low cost and high availability of oil.[2][3] Predictions vary greatly as to what exactly these negative effects would be.

Oil production forecasts on which predictions of peak oil are based are often made within a range which includes optimistic (higher production) and pessimistic (lower production) scenarios. Optimistic[4] estimations of peak production forecast the global decline will begin after 2020, and assume major investments in alternatives will occur before a crisis, without requiring major changes in the lifestyle of heavily oil-consuming nations. Pessimistic predictions of future oil production made after 2007 stated either that the peak had already occurred,[5][6][7][8] that oil production was on the cusp of the peak, or that it would occur shortly.[9][10]


So, say we get fusion up and running producing electricity at 1/1000th of current costs allowing us to replace gasoline with hydrogen from electralysis, we will hit peak oil as there will be no market for it.  That would be a very happy peak oil scenario.  If on the other hand outer space aliens come and suck all the oil out with a giant straw, we will hit peak oil as there will be none left to get.  That would be a very sad peak oil scenario. 
Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on March 09, 2017, 06:47:53 AM
We are now getting clarity on production/inventories since opec scale back.  OIL production steady and still outpacing demand.

http://finance.yahoo.com/news/market-alert-us-oil-price-200557480.html (http://finance.yahoo.com/news/market-alert-us-oil-price-200557480.html)

Market alert: US oil price plunges toward $50 as a perfect storm brews

Oil is on track to break through the key psychological level of $50 a barrel after a ninth straight rise in U.S. crude stockpiles came at exactly the wrong moment, analysts said Wednesday.

The amount of crude oil in U.S. storage rose to another record high on Wednesday, jumping 8.2 million barrels from the previous week, the Energy Information Administration reported. The increase was more than four times what analysts expected.

Weekly figures also showed U.S. oil production continuing to tick up toward 9.1 million barrels a day, the highest level in more than a year. That provided further evidence that rising American output is confounding efforts by the Organization of the Petroleum Exporting Countries , Russia and 10 other exporters to reduce global oil inventories by curbing their own output.
Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on May 26, 2017, 09:31:02 AM
Detailed article in WSJ a few days ago on oil companies preparing for peak demand; ie the point where demand for oil starts to plummit. "Calling it accurately is high stakes for an oil industry sitting on trillions of dollars of crude-oil reserves.  Whenever it finally does happen, the tipping point from oil-demand growth to decline will reverberate through the energy world,  knocking down oil prices and some companies shareholders."  Base prediction seems to be the year 2040.  Some oil companies have already started scaling back investment in production.

https://www.wsj.com/articles/get-ready-for-peak-oil-demand-1495419061 (https://www.wsj.com/articles/get-ready-for-peak-oil-demand-1495419061)
Title: Re: Is 'Peak Oil' Over?
Post by: Carl on May 26, 2017, 07:05:14 PM
  I think oil demand has already cut back or the price would be higher. It may be a bit harder to get,but we have MORE oil available now than in the early days as we have better technology to harvest economically now.
Title: Re: Is 'Peak Oil' Over?
Post by: Chemsoldier on May 26, 2017, 11:09:53 PM
  I think oil demand has already cut back or the price would be higher. It may be a bit harder to get,but we have MORE oil available now than in the early days as we have better technology to harvest economically now.
I am not sure that last Clause computes. We have more oil available now, but the methods to access much of it is more expensive now (even in inflation  adjusted dollars).
Title: Re: Is 'Peak Oil' Over?
Post by: alexlindsay on June 03, 2017, 01:42:17 PM
As I currently sit in a shack at an oil rig drilling an oil well I can assure you production has not and will not peak for quite a while. technology has made so many resources become reserves that production can drastically increase if price increases or moderately expand if prices remain stable. the oil company I'm drilling for makes money right now and are expanding their drilling program quite a bit.

as the various recovery technologies progress the breakeven costs drop, it's much like buying tvs which have dropped in price because they are commodity technology instead of being proprietary or revolutionary. the same has and continues to happen in oil.
Title: Re: Is 'Peak Oil' Over?
Post by: Carl on June 03, 2017, 05:10:43 PM
As I currently sit in a shack at an oil rig drilling an oil well I can assure you production has not and will not peak for quite a while. technology has made so many resources become reserves that production can drastically increase if price increases or moderately expand if prices remain stable. the oil company I'm drilling for makes money right now and are expanding their drilling program quite a bit.

as the various recovery technologies progress the breakeven costs drop, it's much like buying tvs which have dropped in price because they are commodity technology instead of being proprietary or revolutionary. the same has and continues to happen in oil.

Thanks for the incite.
Title: Re: Is 'Peak Oil' Over?
Post by: Chemsoldier on June 03, 2017, 10:58:32 PM
Thanks for the incite.
And with the puns again...

Seriously though, thank you for that Alex.
Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on June 04, 2017, 08:17:05 AM
As I currently sit in a shack at an oil rig drilling an oil well I can assure you production has not and will not peak for quite a while. technology has made so many resources become reserves that production can drastically increase if price increases or moderately expand if prices remain stable. the oil company I'm drilling for makes money right now and are expanding their drilling program quite a bit.

Quick question, Alex. What rough percent of the equipment cost is already paid for by US producers like yours?  Was it a large upfront cost which was paid for and now it is mostly ongoing maintenance?  From the chart earler in the thread the big rise in US production began about 10 years ago.  So my guess is that if it  is like construction where equipment is finaced for 5 to 8 years, a lot of those costs are now going away lowering the break-even point for existing locales.
Title: Re: Is 'Peak Oil' Over?
Post by: alexlindsay on June 04, 2017, 10:46:16 AM
I am actually Canadian and working for a Canadian producer, but the situations are similar.

when you say equipment cost I'm assuming you mean it like the PP&E line on their balance sheet? the sunk costs of a well are usually paid off in 18 months to 3 years depending on oil prices and the particular wells economics.

the ongoing maintenance of a well is variable with the type of well it is. some wells don't require expensive maintenance such as refracks but tight oil wells do if they are to maintain production. much of the additional production from the last 10 years is tight oil and has different economic dynamics for an oil company. companies that are exclusively tight oil producers operated like ponzi schemes really. they borrowed to still, drilled to prove up reserves, borrowed against those reserves to drill more to further the cycle, all the while hoping to get bought out to pay out the insiders stock. sometimes they made shareholders rich but when the downturn came the model failed because they didnt have the counted upon revenue to setvice the debt that was used to pay for the well and many went tits up because they relied on perpetual expansion to exist. they were not asset management companies which is really how an oil company ideally should be run. to understand oil markets you have to understand oil companies and to understand most oil companies you have to understand oil executives. junior oil company executives want to get rich off founders shares when the company gets sold, that's why oil companies are started, for no other reason.

equipment such as rigs have longer payoff periods for drilling companies because they tend to last a lot longer.
what has really changed things is the commoditization of aa bunch of formerly expensive oil services such as directional drilling and fracking. 20 years ago if you wanted those services there were very few providers, who therefore could set their prices as they wished. now, I could start a directional drilling company tomorrow if I had guaranteed work, all would take would be 200000$ for an mwd tool kit and paper to write the contract on. this commoditization of formerly niche services is what has driven down drilling costs. they were held high by demand when oil was 100$ a barrel but once it wasn't services went into a race to the bottom.

so basically it is service costs that mostly determine the cost of oil extraction.

I'm not sure if that entirely answers your question, so if you want more clarification or information just let me know.
Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on June 04, 2017, 12:15:36 PM

I'm not sure if that entirely answers your question, so if you want more clarification or information just let me know.

Exactly what i wanted to know.  I think most of us probably have an overly simplistic view of how industries like this work because of the caricutures painted in the media.  This makes it hard to judge statements and especially predictions made.  It is good to get  an inside view into how these businesses operate.  +1 for the insightful posts.
Title: Re: Is 'Peak Oil' Over?
Post by: alexlindsay on June 04, 2017, 02:13:22 PM
thank you very much.

I, personally, take predictions about commodities markets with a grain of salt. no one really knows what is going to happen. to make a prediction you have to make assumptions about things that are going to happen that will effect the market and because no one can accurately know the future you can't make these assumptions.

I try to stick to what is known which in reality is very little. most predictions sound conveniently plausible but are nothing but talk.

I'm happy to answer technical questions about oil and gas as well if anyone has any.

Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on December 07, 2018, 05:30:24 PM
Update.

New estimates are that US oil will continue to flow down to $35  a barrel as most is sunk cost which has to be covered.  Since Saudi Arabia and Russia needs $50 to $60 a barrel to keep economy from collapsing, not much chance it will drop far below that price. At this point we have proven reserves higher than at any other point in history.  Net effect of this and lower consumption is US has become net exporter of fuels again.

https://www.wsj.com/articles/u-s-becomes-net-exporter-of-oil-fuels-for-first-time-in-decades-1544128404 (https://www.wsj.com/articles/u-s-becomes-net-exporter-of-oil-fuels-for-first-time-in-decades-1544128404)

U.S. Becomes Net Exporter of Oil, Fuels for First Time in Decades

The U.S. became a net exporter of oil and refined fuels last week for the first time in decades, a symbolic milestone that would have seemed unthinkable just 10 years ago.

The shift to net exporter from importer, detailed in weekly data from the U.S. Energy Information Administration, may be short lived. Still, it demonstrates that America is moving closer to achieving “energy independence” as the shale revolution makes the country one of the world’s top oil producers and reshapes global markets.
...
America is now the world’s top producer of oil and natural gas.
Title: Re: Is 'Peak Oil' Over?
Post by: scoop on December 25, 2018, 08:30:48 PM
The U.S. Department of the Interior announced the Wolfcamp Shale and overlying Bone Spring Formation in the Delaware Basin portion of Texas and New Mexico’s Permian Basin province contain an estimated mean of 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids, according to an assessment by the U.S. Geological Survey (USGS). This estimate is for continuous (unconventional) oil, and consists of undiscovered, technically recoverable resources.

"Christmas came a few weeks early this year," said U.S. Secretary of the Interior Ryan Zinke. "American strength flows from American energy, and as it turns out, we have a lot of American energy.

https://www.doi.gov/pressreleases/usgs-identifies-largest-continuous-oil-and-gas-resource-potential-ever-assessed
Title: Re: Is 'Peak Oil' Over?
Post by: Alan Georges on December 26, 2018, 06:28:18 AM
That is a lot of oil.  For comparison, the current proven reserves in the U.S. are about 36 billion barrels (wikipedia (https://en.wikipedia.org/wiki/List_of_countries_by_proven_oil_reserves)).  Now, "technically recoverable" and "proven" and "economically recoverable" are all entirely different things when it comes to tight oil, but still, if 10% of this works out it's enough to significantly influence our energy policy for the next decade.
Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on December 26, 2018, 09:10:01 AM
That is a lot of oil.  For comparison, the current proven reserves in the U.S. are about 36 billion barrels (wikipedia (https://en.wikipedia.org/wiki/List_of_countries_by_proven_oil_reserves)).  Now, "technically recoverable" and "proven" and "economically recoverable" are all entirely different things when it comes to tight oil, but still, if 10% of this works out it's enough to significantly influence our energy policy for the next decade.

Yes.  And new tech coal-to-diesel plants are in the works which will potentially double domestic diesel production.  The looming peak oil theory is dead.
Title: Re: Is 'Peak Oil' Over?
Post by: Alan Georges on January 23, 2019, 06:40:43 PM
Maybe.  Or maybe not so fast.  In a recent podcast with Chris Martenson (link (https://www.peakprosperity.com/podcast/114710/art-berman-exposing-false-promise-shale-oil)) while discussing the Wolf Camp formation, Art Berman opines:
Quote
Chris Martenson: What?

Art Berman: Yeah, and using the average EUR, the mean, I guess, you know, they give you ranges, using the mean, which I can’t remember what it was, but it was something like 170,000 barrels of oil equivalent, well, run that through an economics program and the break-even price on that great new discovery that isn’t a discovery was $135.00 a barrel.

Chris Martenson: As a break-even, no return.

Art Berman: As a break even.
Emphasis on that price added.  Hm, I'm not sure what to make of this.  Berman always seems like a straight shooter, but I have no way to judge.  Opinions?
Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on January 23, 2019, 07:04:22 PM
Maybe.  Or maybe not so fast.  In a recent podcast with Chris Martenson (link (https://www.peakprosperity.com/podcast/114710/art-berman-exposing-false-promise-shale-oil)) while discussing the Wolf Camp formation, Art Berman opines:Emphasis on that price added.  Hm, I'm not sure what to make of this.  Berman always seems like a straight shooter, but I have no way to judge.  Opinions?

Um, no.  Not sure where they are getting their data.  The maximum extraction cost was estimated at $45. 
Title: Re: Is 'Peak Oil' Over?
Post by: David in MN on January 23, 2019, 07:09:46 PM
Maybe.  Or maybe not so fast.  In a recent podcast with Chris Martenson (link (https://www.peakprosperity.com/podcast/114710/art-berman-exposing-false-promise-shale-oil)) while discussing the Wolf Camp formation, Art Berman opines:Emphasis on that price added.  Hm, I'm not sure what to make of this.  Berman always seems like a straight shooter, but I have no way to judge.  Opinions?

It's a big fat maybe. The problem with oil is the extraction cost and the transport cost. It's a horribly hard calculation to determine the value of oil drilled here to be used there. I spent a few years as an oil trader and what you end up betting on is supply chain. The company with a pipe from Russia to France has the advantage. Conoco Phillips did this in the early 2000s.

A lot of oil trading has more to do with legal BS and commodity pricing. I'm not claiming to have a solution. I claim the problem is much more difficult than most imagine.

You're on the hunt for this issue. I might look at commodity pricing and see a floor and a ceiling. But there are massive supply chain costs that break into oil. You're hitting on a business where it 'makes sense' to tow a floating derrick from Danemark to the Caribbean. I mean millions just to move a drill on the hope it pays. Weird industry.

It's why I wanted this thread. It's such a mess we might not even have a correct costing. Such is life in discovering commodities.
Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on January 23, 2019, 07:23:00 PM
But they are already extracting there in the $30s.  So they can estimate pretty good off that given other assumptions on deeper fields.

https://www.mrt.com/business/oil/article/EIA-economist-Permian-production-is-11107506.php (https://www.mrt.com/business/oil/article/EIA-economist-Permian-production-is-11107506.php)
EIA economist: Permian production is ‘remarkable’
Basin’s daily output expected to hit 2.4 million barrels in May


Even as conventional projects were declining, U.S. shale investments and production rose as production costs have fallen 50 percent since 2014. Of the 85 million barrels per day of global oil output, conventional oil production is 69 million barrels, accompanied by 6.5 million barrels per day from U.S. shale plays and the remainder from other natural gas liquids and unconventional sources such as oil sands and heavy oil.
...
The agency puts the average break-even price in the Permian at $40 to $45 per barrel, with production from U.S. shale plays expected to rise by 2.3 million barrels a day by 2022 at current oil prices. It could be a larger increase if prices are higher.


Title: Re: Is 'Peak Oil' Over?
Post by: Alan Georges on January 23, 2019, 08:13:05 PM
It's why I wanted this thread. It's such a mess we might not even have a correct costing. Such is life in discovering commodities.
Yes, with industry experts "agreeing" within a factor of 3, it's hard for an outsider to make a call.  As always, my bets are hedged.  This is a surprisingly touchy subject.  Thanks for the link, i4l.  It's a new avenue to research.
Title: Re: Is 'Peak Oil' Over?
Post by: David in MN on January 24, 2019, 06:05:56 AM
Actually as I slept on this it occurred one could claim 'peak oil' has taken victims. Just not as predicted. Perhaps the first to suffer were the Venezuelans. You could make the case that they hit peak production or peak profits and then disaster befell them. It's also hurt Russia and parts of the Middle East.

Commodities are goofy.

I called it Danemark. That's what happens when the only Dane you speak to uses German.
Title: Re: Is 'Peak Oil' Over?
Post by: alexlindsay on February 02, 2019, 04:37:35 AM
I have a least a decent understanding of what berman is talking about there. EUR means estimated ultimate recovery or the total amount of oil you're going to get out of a well over its lifetime. it is the calculation they use to determine breakeven price. Lets say you drill a well and it produces a million barrels, 1 million was your ultimate recovery. Now lets say that well cost you 10 million to drill, automatically your bare minimum break even price is 10$ plus whatever your time value of money is. Then you add on your lift costs, often 10-20$ per barrel. Then you add in finance costs, then you add in transportation costs, then you add in general and administrative costs, hedging costs, mineral right leasing or buying costs. divide all that crap by your number of barrels you will produce and you get a break even price, or at least you should. Many companies have been giving numbers using two falsehoods. one, they call breakeven price whatever price they need to cover their non capital costs (lifting, transport, G&A, but excluding drilling and leasing). the other trick which i see more and more is to increase the EUR. so if you spend 10 million capital on a well and mineral rights you can dramatically lower your breakeven price if you say "this well will make a million barrels and not half a million". if you look at the EUR's in many shale plays they have dramatically increased while evidence has not shown why. They have used bigger and bigger fracks but the wells seem to peter out just as fast.

The other thing to look at is a pure shale oil company that can drill out of cashflow. Basically that doesn't need to borrow to drill more, I will wait here while you find one. If your company is making all kinds of money you shouldn't need to borrow to fund the most basic element of your growth or even just maintenance. most shale oil are barely or not at all cashflow positive and are heavily indebted, if interest rates went way up they would be pooched. Shale oil is a function of cheap money plain and simple. Way way more oil is technically available than we can use, I'm a consultant in the oil industry in canada and the facility i am currently working in is just realizing the true ultimate recovery it's capable of and all i can say is what Canada can actually produce economically make Saudi Arabia look small. give us enough pipelines and enough demand and we could crank out 20 million barrels a day for 100 years at a price that would make money even today. estimates based on the industry data (literally created in the facility in which i work) i have seen says we could economically extract 672 billion barrels out of north east alberta at todays prices.

Don't worry about oil running out, there are too many people like me who have fun and make a bunch of money getting it out. Worry about government making life unaffordable with carbon taxes and crap like that.   
Title: Re: Is 'Peak Oil' Over?
Post by: iam4liberty on February 02, 2019, 07:36:42 AM
Don't worry about oil running out, there are too many people like me who have fun and make a bunch of money getting it out. Worry about government making life unaffordable with carbon taxes and crap like that.

Thanks for the insiders look!

Would love to hear your thoughts on transportation.  It is shocking to me that we are back to transporting  oil by truck because they wont let pipe capacity keep up with production. How much does that add to costs?  It's been great for Indiana as we are trucking capital of US.  But gosh it seems backwards to truck haul oil huge distancces.

https://www.wsj.com/articles/hot-commodity-in-the-shale-boom-truckers-1528459200 (https://www.wsj.com/articles/hot-commodity-in-the-shale-boom-truckers-1528459200)
Hot Commodity in the Shale Boom: Truckers
Pipelines filled to the brim drive up demand for Permian Basin drivers; signing bonuses and six-figure salaries
Title: Re: Is 'Peak Oil' Over?
Post by: Alan Georges on February 02, 2019, 07:51:51 AM
Thanks for a knowledgable take on this thread, Alex.
Title: Re: Is 'Peak Oil' Over?
Post by: alexlindsay on February 03, 2019, 02:17:27 AM
Trucking oil away from wellheads is a reality in many places for a variety of reasons. One is the absence of local and regional pipeline capacity, which can be a short or long term problem and a local or regional problem. In the short term it takes a while to prepare a project and build a pipeline into a given region and their needs to be enough oil production for a period of time to justify building a pipeline. Locally it may not be economical to build flowlines (tiny pipelines) to individual wells or pads because the realistic production cycle of the well or pad is too short, which may be the case with many tight oil wells. in that case all the trucking may only be for 5 - 10 miles or less and possibly it is cheaper to pay a trucker 100 grand a year than to pay a legion of pipeline welders 300k a year to build all that infrastructure. Pipeline bottlenecks are a thing that has happened as long as there has been oil booms, if it purely a lag time problem it won't last forever. this is what it appears to be in many tight oil basins in the US. Then there are long term pipeline bottlenecks like you see in Alberta right now that are caused by regulations and government obstruction. Those a much different and bigger problem. If you are wondering about that look at the local cost of a barrel of oil in west texas when oil was originally discovered there (went from several dollars to 40 cents)  or even in alberta in the last 6 months. A barrel of the bitumen we produce was selling for under 11$ when WTI was over 60$ because the cost to get it out of this landlocked area was so high and producers need cash to cover costs and we as a country elected a green brained retard to kill our economy.

Trucking and transportation adds a lot to the cost of oil, trucking oil 50 miles to a tank battery likely costs as much as a 500-1000 mile ride on a pipeline. With that said it doesn't really impact the end user cost because oil is sold by companies at terminals. So all the costs to get oil from the ground to a terminal are born by the production company and it comes off the top of what they get paid for a barrel. This could potentially have a long term impact on the amount of wells they drill and if they are economical or not but doesn't add to the broader cost of the commodity except in the long term sense mentioned. At a certain point the oil company just won't drill development wells if it is going to be too expensive to get the oil to market.

 Remember that crude oil is a commodity that physically is traded by very few entities. The only people who actually buy/sell crude are marketing firms who sell oil for smaller companies, large oil companies who have their own trading desks, mid stream companies that act as middle men to refineries and refining companies themselves. That's it. Many people trade oil and make money on it that don't have anything to do with actual oil and couldn't even identify it if they saw it. Everyone else is buying derivatives of oil price movement or some paper surrounding it. More paper oil is sold in new york in a day than actual oil is used in a year. The people that actually buy and sell oil have pretty good info on it and the market is pretty transparent. If there is a substantial market distortion in the physical market it's there for a reason and won't last forever, the oil market actually functions pretty efficiently albeit with a lag time for various things. Things only get weird when you start to deal with paper oil which is a broader world commodity that is traded almost entirely based on market sentiment by people who've never seen an oil well. The reports from major oil agencies are also total bullshit, the IEA or API or whatever have no fucking clue. They base huge numbers on voluntary reporting from a fraction of the companies that produce oil with zero accuracy checking or ability to enforce anything if they did find malfeasance. If you google "missing barrels" you'll find that there is about 1% uncertainty in oil numbers reported, which amounts to about a million barrels a day. yet they then sit around and say things like "the oil markets will be oversupplied by 300k barrels a day" yet they don't add "plus or minus a million barrels a day because how can you possibly accurately count this crap". I do trade some oil ETF's and oil stocks based on my own knowledge but really that is just fancy gambling. Oil markets are only predictable in very long terms. It appears right now that we are at the beginning of a long term secular bull market for oil much like occurred from 2002 - 2014. If you'd like more info read the Q4 Goehring report. With that said governments can ruin it for a given country or region and short/medium term change things. Long term we haven't invested much of anything in finding more affordable or economical oil in a bunch of years and eventually people will stop giving money to shale companies once they clearly realize they aren't going to get it back. I hope the 100k a year truckers save some money or invest it in something outside of consumer goods because long term it won't likely be there.