When will the world reach peak fossil fuel production?

[Office_Shredder]

No, that is not an example of a zero tax bill because of net losses. http://www.forbes.com/2010/04/01/ge-exxon-walmart-business-washington-corporate-taxes_slide_3.html" , they just paid it elsewhere and not in the US. There may be plenty of good reasons to object to the tax laws that allow this, but these have nothing to do with this topic - tax liabilities or avoidance that may / may not apply only to renewable energy.

I think you missed my main point. talk said that the fact that income tax is only levied on net profit somehow counts as a subsidy for solar power. I was pointing out that the same income tax rules apply to everyone.

 

[mheslep]

I think you missed my main point. [...]. I was pointing out that the same income tax rules apply to everyone.

I got your larger point and agree; I also chose not to let the flawed example stand.

 

[apeiron]

http://img.timeinc.net/time/daily/2010/1007/time_cover_0809.jpg" , and off topic.

If the topic has become about the responses to peak fossil fuels, then US military action in oil-rich areas is of course on topic. Would you want your nation to pursue simply technological solutions and ignore the geopolitical ones?

Pretty girls with their noses cut-off make good propaganda to stir a populace that is tiring of the US's longest war and wondering how the extreme cost can be justified while health and education in the homeland has to suffer. But that is an emotional argument and so not a valid one here.

Peak oil modelling has to factor in all the likely responses to arriving at a production turning point. Even oil companies like Shell are coming out with useful scramble vs blueprint analyses.

http://www-static.shell.com/static/public/downloads/brochures/corporate_pkg/scenarios/shell_energy_scenarios_2050.pdf

You only have to research the current US programme of air base building in the Middle East to get clear evidence of scramble.

We can all play the emotive picture game.
http://www.google.co.nz/imgres?imgu...casualties+us+fire&um=1&hl=en&sa=G&tbs=isch:1

But my interest lies in what is really happening in the world.

 

[mheslep]

If the topic has become about the responses to peak fossil fuels, then US military action in oil-rich areas is of course on topic. Would you want your nation to pursue simply technological solutions and ignore the geopolitical ones?...

As you well know, Afghanistan is not an oil-rich area, so please don't detour the conversation there.

 

[heusdens]

http://img.timeinc.net/time/daily/2010/1007/time_cover_0809.jpg" , and off topic.

Well you must be fundamentalistic believer in the true goodness of imperialism for bringing democracy and human rights to countries (like Afghanistan and Iraq), but for sure they come with a lot of bombs. As experienced previously Vietnam and Korea...

I stay a skeptic of such claims, since there are of course strategic raw materials that are far more important then human rights (and undeniably, the US does not have a very good record on supporting "democratic" regimes, given their support for Pinochet/Chili, Suharto/Indonesia, and many other right-wing or out-right fascist regimes).

We know we have been lied about Iraq. There was no Al Qaida connection. There were no WMD's. There were only massive deceptions.

I think this issue is "on topic" afaic.

 

[heusdens]

As you well know, Afghanistan is not an oil-rich area, so please don't detour the conversation there.

Which does not mean that:
1) They do have large deposits of valuable raw materials (like for instance Lithium).
2) You don't seem to remember the Unilocal (or whatever the oil companie's name was, Kazar was working at that firm; the Chinese wanted to buy this oil company but it was blocked by the US) issue, in which Afghanistan is a strategic region, as it is the only way to get oil out of the Kaspian/Central asian region without having to pass through Iran or Russia.

 

[heusdens]

http://img.timeinc.net/time/daily/2010/1007/time_cover_0809.jpg" , and off topic.

btw. was that damage done by the Taliban (put in power by who again? If I am correct, the US placed them in power after the Soviets retreated) or a civilian casualty of the warfare (a misdropped bomb or something)?

Them fundamentalists and righ-wing Islamist where in the Soviet epoche called "freedom fighters", since they were good for fighting the "evil" commists. Now they are the enemy.
Like Saddam was before a friend of the USA, he could kill his own people and go into war with Iran, but then all of a sudden Saddam was the main enemy.

Afghan women were basically free in Afghanistan, during the Soviet occupation, and this could have lasted if not the US were supporting the right-wing fundamentalistic Islamic groups there.

So what side is the US on anyway?
So

 

[mheslep]

I think this issue is "on topic" afaic.

Which is "Peak fossil fuels by 2017"

 

[Office_Shredder]

If this wasn't off topic before, certainly a bad attempt at criticism of US international policy over the past half century is off topic.

 

[heusdens]

If this wasn't off topic before, certainly a bad attempt at criticism of US international policy over the past half century is off topic.

I will reserve that critique for another topic. Anyway, the peak oil issue is closely related to how one handles upcoming oil scarcities, and this includes the military actions also. But if you want to treat that as a "different topic" even though it is connected to that same issue, I'll be glad to do that.

 

[apeiron]

As you well know, Afghanistan is not an oil-rich area, so please don't detour the conversation there.

It is strategic to the domination of an oil rich area. And there is also of course the direct interest in controlling future routes for natural gas pipelines.

One of the points of Mohr's study is just how important gas will be. So from a nationalistic US viewpoint, people might think it foolish if the US did not have the foresight to secure access to gas for itself and its friends.

But you are right that the topic was about the evidence for a fast approaching peak in fossil fuel - even coal, which would be the surprise for many.

Responses to that peak would be both technological and geopolitical. And we could even use the US case as a guide to which response might dominate.

US oil production did peak. It did not build nuclear reactors or wind turbines to keep the game going. It did find ways to manage saudi arabia and the other largest overseas oil reservoirs.

In a market forces analysis, one pathway appears to have been favoured over the other.

OK, I have set that argument up in a clearly tenditious way. But if people want to debate the likely response to peak fossil fuels, then the relative costs of warfare and new technology ought to be compared.

Scramble vs blueprints as the Shell document alludes.

 

[talk2glenn]

First, Walmart is often exempt from public property tax (how is a yearly payment a startup cost anyway?) along with many other big chains. Towns supporting businesses through eminent domain, tax breaks etc. in order to boost their economy is something that happens all the time, and to single out solar power for getting this benefit occasionally also is disingenuous.

I do not deny that this is common industry practice beyond solar power, nor do I think this is a "bad thing" in and of itself. In a subsidy-free environment, temporary tax exemptions help level the playing field for business startups relative to entrenched competitors. It is a policy discretion - the local government has decided that the subsidy is a good political policy, for its own reasons. But it is a policy with economic consequences, and those economic consequences are typically, but not always or necesarrily, negative for broader economic efficiency (does Wal Mart choose to open a new store in the most economically or politically desirable location?).

The trouble is when these subsidies (which the temporary tax credits are, by definition) are in addition to an already large federal largesse. Usually local communities justify the temporary local exemption as an offset against other negative subsidy items (federal taxes, environmental regulations, licensing fees, etc). In the case of renewable energy companies, this argument fails on its face.

Also, the income tax exemption because of lack of profit is just nonsense. Oil companies have the same opportunity (for example, Exxon-Mobil paid no income tax to the US in 2009)

You have cherry picked your data. The effective tax rate for Exxon-Mobil was a staggering 47 percent of taxable revenues. Further, as has already been pointed out, there are many additional taxes on oil companies (land use taxes, royalty taxes, licenseing fees, etc) that are deducted from taxable revenue but still paid to the national government.

The oil and gas industries are probably the largest non-personal revenue sources for the worlds governments, on average.

But you do know the difference between actually finding new reserves and simply reclassifying known unconventional reserves, right?

And you understand the difference between classified proved and unproved reserves, right? Proved reserves are a regulated, fiscal classification for corporate reporting purposes, and are defined as "economically practical reserves given current price and technology levels".

Clearly, before a reserve is "proved" it starts it life as "unproved". The burden is on the reporting company to establish that it can profitably remove some sum of oil from some point in the ground given the resources it has, if it attracts some fixed investment pool from private investors. So yes, all proved oil reserves by definition started their lives in the arbitrary, nonstandard, and very loosely understood unproved pool. What does this prove?

talk said that the fact that income tax is only levied on net profit somehow counts as a subsidy for solar power. I was pointing out that the same income tax rules apply to everyone.

I never said otherwise. In fact, I specifically said the income tax exemption for lack of taxable income was an unintended subsidy of the solar industry (given that the solar industry is able to channel its operating revenues into non-taxable initiatives). That it is unintended changes not the fact that it is a de facto subsidy.

For comparison, First Solar paid $23 million dollars in tax on $195 million in income, for an effective rate of less than 12%, well below rates paid by Exxon and other oil/gas companies.

 

[brainstorm]

There is no "disaster". This is a political myth promoted by interested parties who regard petroleum and other carbon fuels as "bad", and so-called alternatves as "good". If there were any impending threat of a collapse in global oil supplies, the price of oil (which reflects both current supply/demand and anticipated future supply/demand, through the futures markets) would be significantly higher than it is currently. Even with recent inflation, which is a product of market distortion through public policy (war, energy subsidy, etcetera) and not fundamental changes in supply/demand (the increased demand from China is more than offset by increased production), refined oil remains extremely cheap, relatively speaking. This is because it is extremely plentiful.

It is so funny to me that I go from the overpopulation thread, where everyone is quite sure that global population growth is leading to inevitable disaster, to this thread where oil is only "theoretically" scarce and the idea of disaster is a fiction promoted by political proponents of alternative fuels. I don't doubt that oil reserves are still significant, although new predictions seem to emerge all the time, probably each with its own market interest attached to it. What I do doubt is that economic growth based on oil-dependency is sustainable insofar as the bigger the economy grows, the more oil-intensive it becomes. It's like trying to keep a furnace running where the house keeps getting bigger and requiring increasing amounts of fuel to maintain the desired temperature.

If conservation practices were resulting in a steady decrease in per-capita oil usage globally, I would say that no abrupt crisis is likely at any point in the future. As long as per-capita oil usage is remaining the same or going up, though, there has to come some point in the future where scarcity will become immanent and conservation driven by necessity is never as pleasant as voluntary measures. Of course, alternative fuel sources and transit may evolve to the point where energy demand can remain high but transition smoothly from oil to others as it becomes necessary to do so. However, that will only be smooth transition if those industries are established, tried and true when they're needed. Otherwise it will be like trying to change a flat tire when you're already late, except you have to invent the spare tire before you can change the flat.

To exercise this point, consider the recent cash for clunkers program. The program subsidized the purchase of cars in the short term, but everyone acknowledge that this would mean a later-term decline in car sales, once the subsidies were eliminated (in effect, people who would have otherwise purchased their vehicle in a month purchased it today; net sales were unaffected, just the rate of sales). Subsidy advocates argue that, due to unforeseen market conditions, it is worth moving future demand to present demand, for political reasons.

I think it would have been more conducive to alternative-transit cultural growth and development if cash4clunkers and the auto industry bailout had not occurred. Getting a bunch of new cars on the road has a trickle-down effect of causing people to see hope of getting a new car, or a relatively new used one sooner than later. As long as people are having to maintain their clunkers, there is a certain realism about the amount of economic energy (labor and parts) that goes into maintaining these big, heavy vehicles. Compared to a clunker, walking/biking or buses are less of a pain. Compared to a new car with perfect climate control, sound-proofing, and a state-of-the-art sound system and all the creature comforts, buses/walking/biking seem like a pain. So cash4clunkers was more than an economic move, it was a cultural stimulus package.

 

[apeiron]

And you understand the difference between classified proved and unproved reserves, right? Proved reserves are a regulated, fiscal classification for corporate reporting purposes, and are defined as "economically practical reserves given current price and technology levels".

You are evading the point - which was about conventional vs unconventional. And about discovery vs reclassified.

What you said was that new discoveries outstripped consumption, not reclassified unconventional outstripped consumption.

So yes, now you may want to correct yourself.

But you have done such an awful job providing citations to back up your claims that I would discount anything you might say on the subject.

 

[talk2glenn]

As long as per-capita oil usage is remaining the same or going up, though, there has to come some point in the future where scarcity will become immanent

I think the problem is in the presumption that this point is a "black day", and the notion that there will be some dramatic change in oil consumption/production patterns overnight, with catastrophic social consequences.

Markets do not work this way. Investors are very cognizant of changing demand trends, and this weighs heavily in their invesmtnet decisions (you don't buy a 10 year bond in a company without considering its ability to repay that debt 10 years from now, regardless of present financial circumstances).

As oil usage goes up, all other things being equal, this puts inflationary pressures on oil prices. This in turn encourages consumers and producers to do two very different things, both of which put negative price pressure on the commodity:

1) Consumers are incentivized to use less oil, either by purchasing cheaper alternatives or reducing overall energy demand.

2) Producers are incentivized to produce more oil, either by exploring for new fields or more efficiently exploiting existing operations.

If at some theoretical point in time, producers are no longer able to keep up with demand price pressures, consumers will pick up the slack, so to speak. In this manner, an long term equilibrium is maintained that practically insures no valuable, marketable commodity is "used up", and that changes in consumption patterns are gradual and relatively non-consequential (there was no social upheaval as economies transitioned from dependency on water-power to electric-power for industrial output, for example).

Humans have been cutting down trees since the beginning of time, yet there is no concern of "peak wood" or an imminent drying up of global wood supply. Granted, there are some very clear differences in the wood market relative to the petroleum products market (particularly in the time scales needed to replace lost supply), but the principal is the same. Market forces naturally insure that wood will not be exhausted, even if such an exhaustion is theoretically possible given a fixed supply of trees at any fixed point in time.

What you said was that new discoveries outstripped consumption, not reclassified unconventional outstripped consumption.

Re-read what I wrote and what was quoted. I said new economically exploitable discoveries outstripped consumption. Nobody knows how much oil is in unproven fields, beyond educated guesses, because the surveying process is very expensive and time consuming. There is no incentive for oil companies to bother figuring out how much oil is in actually in Utah shale, because they don't anticipate it being economically reachable today.

Since talk of "discoveries" that does not specifically exclude the unproved and intentionally include only changes in reported, proved reserves is arbitrary, subjective and theoretical, I do not engage in it.

 

[brainstorm]

1) Consumers are incentivized to use less oil, either by purchasing cheaper alternatives or reducing overall energy demand.

If at some theoretical point in time, producers are no longer able to keep up with demand price pressures, consumers will pick up the slack, so to speak. In this manner, an long term equilibrium is maintained that practically insures no valuable, marketable commodity is "used up", and that changes in consumption patterns are gradual and relatively non-consequential (there was no social upheaval as economies transitioned from dependency on water-power to electric-power for industrial output, for example).

I love it. This is what I was telling people when gas was $4/gallon. The problem is that the economy responded to the challenge of $4/gallon gas rather poorly. If people hadn't pushed for increasing supply-side competition to drive the price down, I don't know what would have happened. Plus, the economy is still dragging along with $3/gallon gas. What economic restructuring and innovations have been implemented to increase oil-demand elasticity? To my knowledge, reasonably little except consumers have become wiser, more cautious, and more innovative when it comes to restricting their fuel-consumption.

Have businesses and residences altered their locations or employment/labor practices in ways that have reduced auto-commuting? Have large numbers of people shifted to relying on public transit? Have local retail outlets shifted to catering to pedestrian and bicycle traffic to the point where people can live sustainably without driving if necessary? No. Why? Because even $4/gallon didn't bring it to that point. But what happens when gas gets up to $6/gallon next time?

 

[apeiron]

Since talk of "discoveries" that does not specifically exclude the unproved and intentionally include only changes in reported, proved reserves is arbitrary, subjective and theoretical, I do not engage in it.

It's good that you share your private definition of terms like discovery (and new?) with us.

But now can you supply a recent study that makes more sense. Give us some actual figures.

 

[talk2glenn]

It's good that you share your private definition of terms like discovery (and new?) with us.

But now can you supply a recent study that makes more sense. Give us some actual figures.

I did no such thing! Proved reserves is a precise term defined uniformly by the SEC, DOE, DOI, and various international bodies. That's why we use it when we talk of discoveries; it was developed specifically to standardize and objectify discussion of oil field reserves, including new and existing finds.

 

[Evo]

You are evading the point - which was about conventional vs unconventional. And about discovery vs reclassified.

What you said was that new discoveries outstripped consumption, not reclassified unconventional outstripped consumption.

So yes, now you may want to correct yourself.

But you have done such an awful job providing citations to back up your claims that I would discount anything you might say on the subject.

Apieron, you need to cite your sources too.

 

[Evo]

I will unlock this thread, but I need sources from everyone that has made any statement of fact.

No posts are to be made unless they are valid sources to back up what has already been posted.

If you have not made any claims, then you may continue to post your opinions.

If you have made no claims but are only requesting proof, please point that out to me. The burden of proof is on the one making the claim. However, if you also made claims, then you need to back them up.

I just need to bring some semblance of order to this thread and stop the bickering.

 

[apeiron]

Apieron, you need to cite your sources too.

Where have I not done so when asked?

 

[Evo]

Where have I not done so when asked?

Can you list the post numbers with the sources? Too many posts today for me to keep up. I figure this is a better approach than me shutting down the thread in order to have time to read back though it and validate all sources before re-opening.

Thanks.

 

[apeiron]

Can you list the post numbers with the sources?

I haven't made any unsourced claims that have been challenged.

Glenn made a couple of claims that were contradictory to the study which is the subject of the OP:

with the effect being that oil is practically an inexhaustible resource

Global proved oil reserves have grown every year since they began collecting the data using current methodology at the turn of the century. This means that we are finding new, economically exploitable oil (at current price and technology levels) faster than we are drilling it up.

His reference to back up these claims turned out to be a peak oiler study from the previous century which concluded quite the reverse of what he purported.

He has yet to supply credible current figures.

He has not justified his use of the words "finding new" - although I accept it was probably just an over-eager way of saying reclassifying existing known probable (and largely unconventional) reverves to proven ones.

This reclassification issue is widely known, widely discussed. It is not hard to find public souces.

Making sensible estimates of actual useable oil is central to the OP study. If Glenn can raise a solid objection based on some source I have missed, then I would be interested.

 

[RonL]

This might put a little more information into the discussion of new production coming on line.
It has been known for some time, but technology has progressed enough to make the wells more likely to be successful. At least two things are going to be big factors in how quickly this play can be produced, (1.) having enough rigs to put wells in place, (2.) Having access to the very large volumes of water needed in the fracing process of long horizontal bores.

http://oilshalegas.com/eaglefordshale.html

BP just gave a good example of what resides below the Gulf of Mexico.

 

[talk2glenn]

He has yet to supply credible current figures.

http://tonto.eia.doe.gov/cfapps/ipd...=57&aid=6&cid=ww,&syid=1980&eyid=2009&unit=BB

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

World 641.934 649.130 667.400 665.632 666.488 697.813 698.607 697.929 887.534 906.018 1,000.513 998.745 989.443 996.105 998.336 999.261 1,007.368 1,018.515 1,020.075 1,032.753 1,016.772 1,028.132 1,031.954 1,213.112 1,265.026 1,277.228 1,292.936 1,316.662 1,332.043 1,342.207

I aplogize for the lack of formatting in the copy/paste job, but if you follow the link directly you will find it more neatly organized.

Clearly, this data is in line with my claims. I did not know I was making any claim which was so controversial as to require sourcing; it is relatively common knowledge that world reserves today are larger than they were in the past.

The DOE data only goes through 1980, but I can assure you that the trend is the same however far back one goes.

although I accept it was probably just an over-eager way of saying reclassifying existing known probable (and largely unconventional) reverves to proven ones.

This is not accurate. Existing known probable reserves do not exist, as an international standard or otherwise. The only standard is the prescisely defined proved reserves, which are subject to regulation and verification. Proved reserves are not simply "reclassifications" of "known probably" reserves. When we talk of "probable" oil supplies we are engaging in idle speculation, nothing more. There is probably oil in my backyard; that does not mean anyone should try to factor that into measured global reserves.

 

[talk2glenn]

But what happens when gas gets up to $6/gallon next time?

I imagine you've answered your own question. As observed, there were consumer and producer reactions following the roughly 100% appreciation in gas prices which resulted in a 25% price depreciation to a new equilibrium level 50% above the baseline.

If gas prices were to appreciate further, I imagine the reaction would be the same: consumers would continue to move towards more fuel efficient vehicles, and/or change their driving habits, while suppliers would take steps to increase the amount of gas available to the market.

Remember also that there are policy barriers that prevent consumers and producers from changing their behavior quickly and efficiently, as is expected in ideal market conditions and modeled in economic theory. These regulatory and bureacratic hurdles are less efficient in their response to changing market circumstances, and serve to exacerbate the effects of rapid short-term price variance. In the medium and long runs, however, we can generally assume that governments will yield to market forces through policy changes and ultimately a market equilibrium will be established that preserves maximal market efficiency (at the most extreme, this might take several decades - see the Soviet Union).

And then there is the problem of immediate policy action intended by governments to mitigate the effects of price variations but which are counter-market mechanisms and ultimately serve only to exacerbate the corrective effects. For example, it was proposed by Sen. McCain during the gas crsis that the federal gasoline tax be temporarily suspended, and by others that the SPR be tapped. These two policy ideas would have had the effect of lowering gas prices in the short-term, but also discouraging the kinds of fundamental market changes that were necesarry to stabilize prices in the long-term.

These kinds of political circumstances can have dramatic, and typically dramatically negative, social consequences, but one must attribute fault correctly: they are government failures, not market failures. Indeed, we observe government-induced dramatic social events periodically throughout human history, in war, civil unrest, etc.

Western governments were, typically, relatively well insulated against these kinds of problems due to both the responsiveness of their bureacracies (as derided for inefficiency as they are, they are models of efficiency relatively speaking, and at least make an effort to make use of sound data in their policy decisions) and the market-oriented nature of their economies.

 

[apeiron]

Clearly, this data is in line with my claims. I did not know I was making any claim which was so controversial as to require sourcing; it is relatively common knowledge that world reserves today are larger than they were in the past.

It would be good if you could provide a source that backs up what you claim - that the rate of reserve increase has outstripped the rate of consumption.

But anyway, doing a quick calculation based on on...
http://tonto.eia.doe.gov/cfapps/ipd...4&aid=2&cid=ww,&syid=2005&eyid=2009&unit=TBPD

and your...
http://tonto.eia.doe.gov/cfapps/ipd...=57&aid=6&cid=ww,&syid=1980&eyid=2009&unit=BB

You might want to check my maths but the story for 2009 appears to be an annual consumption of 30 billion barrels and an annual reserve increase of 10 billion barrels. Which if right, would rather undermine your position?

 

[apeiron]

Helping Glenn out with his research, the 2008 World Energy Outlook, the full text of which is now online, seems the best freely available official source.

http://www.worldenergyoutlook.org/docs/weo2008/WEO2008.pdf

Analysis starts p202. Here are some snippets.

According to BP, which compiles published official figures, proven reserves worldwide have almost doubled since 1980 (Figure 9.3). Most of the changes result from increases in official figures from OPEC countries, mainly in the Middle East, as a result of large upward revisions in 1986-1987. They were driven by negotiations at that time over production quotas and have little to do with the discovery of new reserves or physical appraisal work on discovered fields. The official reserves of OPEC countries have hardly changed since then, despite ongoing production.

Globally, remaining proven reserves have increased modestly but steadily since 1990, despite continuing consumption growth. According to O&GJ, reserves increased by 14.2 billion barrels, or 1.2%, in 2007, mainly thanks to upgrades in Venezuela, Brazil, Saudi Arabia, Kuwait, Iran and Angola. OPEC countries’ reserves, at 930 billion barrels based on official data, represent 77% of the world total (using the O&GJ estimate). The global reserves-to-production ratio (R/P), based on current levels of production, is in the range of 40 to 45 years, depending on the source and whether non-conventional resources are included. This level has changed little in the last few years.

A growing share of the additions to reserves has been coming from revisions to estimates of the reserves in fields already in production or undergoing appraisal(reserves growth) rather than from new discoveries (see the next section for a
discussion of the role of reserves growth). The volume of oil in new discoveries
has fallen well below the volume of oil produced in recent years (Figure 9.4).
Discoveries dropped from an average of 56 billion barrels per year in the 1960s to 13 billion barrels per year in the 1990s. The number of discoveries peaked in the 1980s, but it fell sharply in the 1990s.

The fall in both the number of discoveries and the volume of oil discovered has been most acute in the Middle East and the former Soviet Union. By contrast, discoveries rose in Africa, Latin America and Asia. The drop in discoveries worldwide was largely the result of a fall in exploration activity in the regions with the largest reserves (where access by international companies is most difficult) and a fall in the average size of the fields that have been found.

These factors more than offset the effect of an improved exploration drilling success
rate, which has increased by a factor of two in the last 50 years, from one out of six
wildcat wells to one out of three today (Harper, 2005). The downward trend in the
volume of oil found has reversed slightly in the current decade, thanks to increased
exploration activity (with higher oil prices), with an average 16.4 billion barrels per
year discovered since 2000. The excess of production over cumulative discoveries over the same period is 400 billion barrels.

 

[brainstorm]

Remember also that there are policy barriers that prevent consumers and producers from changing their behavior quickly and efficiently, as is expected in ideal market conditions and modeled in economic theory. These regulatory and bureacratic hurdles are less efficient in their response to changing market circumstances, and serve to exacerbate the effects of rapid short-term price variance. In the medium and long runs, however, we can generally assume that governments will yield to market forces through policy changes and ultimately a market equilibrium will be established that preserves maximal market efficiency (at the most extreme, this might take several decades - see the Soviet Union).

I hate to play the stratification card, but in my perception middle-class people were largely insulated against having to radically alter their lifestyle practices as a result of high gas prices. Yes, their budgets were affected by higher cost per tank, and they became more conscious of their driving choices and made choices to eliminate less essential trips. But this did not alter their fundamental approach to life, which was/is to drive around to most every activity and continue the urban-development practice of separating areas of work from residential areas and consumption. I suspect that if middle-class people had radically modified there consumption behavior to favor local businesses within walking/biking distance by actually walking/biking, investors would have noticed the trend and started thinking about expanding more local consumption, leisure, and work/job opportunities within gas-free distances from residences.

Ironically, the people who were hardest hit by the high gas prices, i.e. people with lower-income, do not stimulate (much) business investment because they don't spend as much money compared with middle-class consumers. So while more bicycle/walking/public-transit developments took place among lower-income consumers, business-investors didn't respond. In fact, they responded negatively by divesting in risky mortgage programs in order to re-establish investor confidence in middle-class lending.

Certainly there has been a very pro-active segment of middle-class people who have radically adjusted their lifestyle activities to pedestrian/bicycle transit, but business investment simply hasn't responded by generating more consumption and leisure opportunities that make these people as happy to live-local as they are to get in the car and go have an adventure, or at least go someplace else with something interesting to do. More importantly, workplaces have not moved or found other ways to make themselves 100% gas-free accessible to employees. Once this occurs, the economy will be oil-independent except for industrial applications and shipping.

 

[talk2glenn]

You might want to check my maths but the story for 2009 appears to be an annual consumption of 30 billion barrels and an annual reserve increase of 10 billion barrels. Which if right, would rather undermine your position?

You are quoting a net figure. That is, discoveries - production = net +10 bbl, for example.

A growing share of the additions to reserves has been coming from revisions to estimates of the reserves in fields already in production or undergoing appraisal(reserves growth) rather than from new discoveries...

This is hair-splitting. How does one differentiate between "new discoveries" and "estimate revisions"? Whether newly "discovered" oil is in existing or new fields is irrelevant to the point (which is, is that oil economically exploitable today).

There really is no distinction. It is a semantic argument, and serves no practical purpose except to reveal subjective biases in the authors. All other "conclusions" in the quoted paragraphs follow from this bad reasoning.

Imagine if I have a bag of peanuts. I cannot say how many peanuts are in that bag, but based on a survey of its contents, I reasonably estimate that it contains 1,000 peanuts. Some time later, after eating 900 peanuts, again I gauge the contents of the bag, and find that it still seems to contain at least 1,000 peanuts. I report my peanut reserves at 1,000 initially, and 1,000 later. Both estimates are "accurate", in that they represent my best guess given the data and methodology available to me at the time. You can argue until you are blue in the face whether I actually "discovered" more peanuts, however, or had at least 1,900 peanuts the entire time, but this makes no practical difference; it is a philosophical argument, at best.

I hate to play the stratification card, but in my perception middle-class people were largely insulated against having to radically alter their lifestyle practices as a result of high gas prices.

Sure; I would agree. The share of an American middle class households income which goes towards fuel costs is pretty small. It would take a dramatic change in fuel prices, and no corresponding change in consumption patterns, before fuel prices would begin to have the kinds of dramatic effects you seem to want.

This will never happen. As transportation becomes more efficient, the share of household income devoted to fuel consumption should decline further, not increase. It would take a catastrophic reversal of this technical trend for this to change (as with food).

but business investment simply hasn't responded by generating more consumption and leisure opportunities that make these people as happy to live-local as they are to get in the car and go have an adventure, or at least go someplace else with something interesting to do

This is a reverse-causal argument. Business do not define the environments that make people happy; they respond to consumer demand for "happiness" to the extent that it is a marketable commodity by supplying luxury goods.

Consumers define what makes them happy. People prefer to drive than walk. This has always been the case, and will always be the case. All things being equal, driving or any other form of privatized transit (private planes, yachts, etc) is considered a more "luxurious" form of transportation than a public alternative. People are willing to pay for their privacy, and their exclusivity. You seem to imagine that this is the case because car dealers sold people cars. That is wrong; it is the case because consumers bought the cars. The supply always follows the demand, for obvious reasons.

If people would rather walk to the movies than drive to them, business would be happy to respond by building more theatres within walking distance. However, this would have a number of unintended effects which consumers would not like (and which I don't think you are considering). There would be fewer showings per theatre, and individual ticket prices would go up. Centralized megaplexes are more efficient than local boutiques. Movies being a normal good, consumers would rather have more of them than less; therefore we prefer a megaplex within driving distance to a boutique operation within walking distance. This would only change if the transportation costs became so expensive and/or unpleasant (ie, less luxurious via car and more painful via public bus) that it just wasn't worth the hassle of traveling to the megaplex uptown, and we settled for the neighborhood boutique. But clearly you can see how such a society is "less luxurious" (in that consumers are settling for less utility from their same, fixed normal consumption) than the one we have currently?

Again, businesses do not drive the environments we live in; consumers do. Businesses just respond by giving people the products they want. To the extent that governments force non-market models on consumers due to motivations which are political, rather than economic, the consequence tends to be a lower standard of living, as in the crude "trip to the movies" example above.

 

[brainstorm]

Sure; I would agree. The share of an American middle class households income which goes towards fuel costs is pretty small. It would take a dramatic change in fuel prices, and no corresponding change in consumption patterns, before fuel prices would begin to have the kinds of dramatic effects you seem to want.

You got me. There are multiple reasons beyond oil-dependency that I would like to see automotive transit become less dominant. However, this doesn't change the fact that doing so would also achieve better oil-independence, which would help insulate against future scarcity and price-spikes.

This is a reverse-causal argument. Business do not define the environments that make people happy; they respond to consumer demand for "happiness" to the extent that it is a marketable commodity by supplying luxury goods.

You're thinking abstract instead of concrete. I actually get around by bike and walking so I think about how much happier it would make me if there was more to do close by. The correlate of this is that the lack of things to do close by impedes the choice to bike/walk for my neighbors.

Consumers define what makes them happy. People prefer to drive than walk.

They do when gas is cheap, cars are readily available, traffic is good, and they don't have to be concerned about oil-wars, oil-spills, obesity, or other health problems related to over-reliance on driving.

This has always been the case, and will always be the case. All things being equal, driving or any other form of privatized transit (private planes, yachts, etc) is considered a more "luxurious" form of transportation than a public alternative. People are willing to pay for their privacy, and their exclusivity. You seem to imagine that this is the case because car dealers sold people cars. That is wrong; it is the case because consumers bought the cars. The supply always follows the demand, for obvious reasons.

I think you're assuming a lot on the basis of all the self-reinforcing aspects of automotive culture. Plus it's just not economically sustainable if prices go up again. Look how badly the economy did at just $4/gallon.

If people would rather walk to the movies than drive to them, business would be happy to respond by building more theatres within walking distance. However, this would have a number of unintended effects which consumers would not like (and which I don't think you are considering). There would be fewer showings per theatre, and individual ticket prices would go up. Centralized megaplexes are more efficient than local boutiques. Movies being a normal good, consumers would rather have more of them than less; therefore we prefer a megaplex within driving distance to a boutique operation within walking distance.

So you're basically saying that cinema attendance preferences will ensure sufficient demand and economic means of maintaining an automotive culture that allows people to drive a ways to a megaplex?

This would only change if the transportation costs became so expensive and/or unpleasant (ie, less luxurious via car and more painful via public bus) that it just wasn't worth the hassle of traveling to the megaplex uptown, and we settled for the neighborhood boutique. But clearly you can see how such a society is "less luxurious" (in that consumers are settling for less utility from their same, fixed normal consumption) than the one we have currently?

I think luxurious is relative and that if people's cultural experiences shifted in a way that they were satisfied with more local excursions, they would be happy not to have the hassles and expense of driving and use that time, money, effort, and headache for other things. Plus, they would be able to weather high gas prices without (much) deprivation.

Again, businesses do not drive the environments we live in; consumers do. Businesses just respond by giving people the products they want. To the extent that governments force non-market models on consumers due to motivations which are political, rather than economic, the consequence tends to be a lower standard of living, as in the crude "trip to the movies" example above.

That's what I was trying to explain in my previous post. Middle-class consumers could have driven business investment if they had sufficiently changed their behavior, which they didn't because they were relatively insulated by their high incomes relative to lower-income people. Lower income people DID change their behavior more, but their low-income prevents them from driving business investments to cater to them. This is why I called it a class-stratification problem.

 

[apeiron]

You are quoting a net figure. That is, discoveries - production = net +10 bbl, for example.

OK, but the point is still that this is not "discoveries".

Firstly, proved reserves are created by oil industry action. It is a book-keeping exercise in which you keep ahead of your production by qualifying a sensible amount of your probable reserves by actually getting out into the field and doing the necessary testing.

Secondly, the "discoveries" as you keep putting it include a mix of things. There are new estimates of recovery levels, the validation of long-discovered probable resources, new views of market prices that make long-discovered probable resources worth adding to the imminent exploitation list. And then some element of actual new discoveries.

Now what I was asking for - to back up your original phrasing of the situation - is that there is indeed no need to worry, peak oil is a myth, the supply is for all purposes unlimited, because we are still finding way more oil than we are using.

Now everything I read is about how official reserve figures are untrustworthy and the true picture, as far as it can be made out, is that there is very little new cheap oil discovery and most of any hope is being pinned on unconventional oil - precisely the stuff that is expensive and dirty.

So even if the peak can theoretically be delayed, the geopolitical consequences of moving into a new petroleum exploitation regime could be huge.

Which is why it is essential that you come up with your own credible sources that support your view.

Anyway, here are some futher sources to support my view.

Even tight US definitions of reserves are shonky...(your friend, Laherrere)...

Present probability of US proved reserves is about 50%, far from the SPE/WPC
definition of proved = 90%, and the maximum value is 75% once.
It means that Reasonable varies from less than 50% to 75 %!
http://www.hubbertpeak.com/Laherrere/ASPO2006-JL-long.pdf

And here Laherrere says it explicitly (check his graphs)...politically-inspired revisions vs the actual discovery story...

Political data is always rising from 1950 to now, when from the technical sources, oil
remaining reserves has peaked in 1980! It is well recognized by almost every IOC that,
since 1980, oil discovery is less than oil production

The same data annually shows very well the artefacts of political reporting, compared to the truth, which is that finding new reserves is a nightmare for oil companies (Scaroni 2006) and that since 1980 the world oil production is much higher than oil discovery.

It is interesting to find that major companies or official agencies which claims that peak oil is decades away, quote always old works by others, never their own. Exxon-Mobil 2006 quotes USGS 2000 (10 years old as being at end of 1995), Shell in 2002 quoted EneRG (1999), IEA in 2005 quoted Shell 2002! IFP quotes Wood Mac! Is it to say, if found wrong, that it is not their works?

Medias and politicians claimed that there is oil for the next 40 years and gas for 60
years, but it is using proved reserves from political or financial sources. The ratio is
different when using technical data (backdated mean). As mean annual discovery can be
modelled with several cycles, and production mimics discovery with a certain lag, the
R/P is trending towards an asymptote depending upon the width of the last cycle.

R/P from US proved reserves is about 10 years since the last 80 years, showing that
this ratio is useless for forecasting...The last US barrel will be produced with still 9 barrels reserves in the ground, barrels that will then go back to resource status.

Many examples lead to conclude that the US reserve growth is mainly bad reporting and that the USGS claim of 730 Gb of world reserve growth obtained by applying this poor
and obsolete US proved growth to proved + probable reserves is scientifically wrong.
All forecasts using USGS 2000 results (at end 1995) are highly unreliable. A new world
assessment is a must.

This separate powerpoint has a bunch of the standard graphs from p14 on. They illustrate the basic claim that consumption > discovery. All the talk otherwise is based on political fiddling of the books.

http://www.sust.sbg.ac.at/download/sschool02/w_zittel_oil.ppt#269,14,Slide 14

 

[talk2glenn]

You're thinking abstract instead of concrete. I actually get around by bike and walking so I think about how much happier it would make me if there was more to do close by. The correlate of this is that the lack of things to do close by impedes the choice to bike/walk for my neighbors.

Your preferences and aggregate preferences do not necesarilly align, but surely you would be unhappy if you had to walk/bike everywhere (not just when the mood suited you), regardless of where you were going, why, or in what conditions? If you're going to the ball and it is raining, would you prefer to walk or drive? And if we agree that you would rather drive, again all things being equal, would you rather take the bus or ride in your own car?

They do when gas is cheap, cars are readily available, traffic is good, and they don't have to be concerned about oil-wars, oil-spills, obesity, or other health problems related to over-reliance on driving.

This is all ancillary. All things being equal, consumers would rather drive than walk (you can basically assume the ceterus perebus condition whenever anybody makes a simple statement, which is why we don't routinely include it in argument). The variables you describe determine the proportion to which consumers in a given market divide their travel time between driving and walking. Just because you would prefer to do something, doesn't mean that you can or will. Remember opportunity costs.

I think you're assuming a lot on the basis of all the self-reinforcing aspects of automotive culture. Plus it's just not economically sustainable if prices go up again. Look how badly the economy did at just $4/gallon.

Again, this is ancillary. I may not able to drive everywhere if gas prices rose to $10/gal, but I would still rather do so. I cannot afford to fly first class every time I go home for the holidays, and I in fact do not. However, if I could, I would.

So you're basically saying that cinema attendance preferences will ensure sufficient demand and economic means of maintaining an automotive culture that allows people to drive a ways to a megaplex?

As a simple explanation of urban development, yes. Because large, centralized distribution hubs are inherently more efficient (less is more, in business terms, given that the capital costs of opening a new store can be considered basically fixed, while the per-operation revenue potential is negatively sloped), it follows that the ability to travel over large distances cheaply and quickly contributes to greater aggregate economic performance. Cars effectively enable a single supermarket to serve a larger community with groceries; a single office building to serve a larger community with jobs; etc.

I think luxurious is relative and that if people's cultural experiences shifted in a way that they were satisfied with more local excursions, they would be happy not to have the hassles and expense of driving and use that time, money, effort, and headache for other things. Plus, they would be able to weather high gas prices without (much) deprivation.

Sure, what is luxury is relative, but luxury itself is not. It can be uniformly defined as "more utility is preferential to less". Therefore, any market outcome that increases utility/dollar is necesarilly more luxurious for consumers than the alternative, whether that means you have lowered the cost of slasher movies or roller coaster rides (we are assuming for a moment that the amount of dollars available to purchase goods is fixed). Not everyone will agree that things are better, but the consumers in aggregate will have reached a higher level of utility.

That's what I was trying to explain in my previous post. Middle-class consumers could have driven business investment if they had sufficiently changed their behavior, which they didn't because they were relatively insulated by their high incomes relative to lower-income people. Lower income people DID change their behavior more, but their low-income prevents them from driving business investments to cater to them. This is why I called it a class-stratification problem.

Thems the shakes. Lower income individuals consume less than their wealthier counterparts, therefore it is reasonable to expect that there will be fewer goods and services available to them.

 

[talk2glenn]

Now everything I read is about how official reserve figures are untrustworthy and the true picture, as far as it can be made out, is that there is very little new cheap oil discovery and most of any hope is being pinned on unconventional oil - precisely the stuff that is expensive and dirty.

I am sorry, but we have effectively reached the end of the argument. Your criticisms here are not technical; you have basically said you reject my conclusions because the data is, in your opinion, untrustworthy. Anybody can say "I don't trust the data, because it does not conform to my expected world view".

Given that this data is provided by the strongest sources in the field (large corporations, government agencies, etc), subject to peer review (to the extent anything as proprietary as oil reserves can be) and according to standardized definitions and methodologies, it is as good as we are going to get.

In the absence of competing data on world oil reserves that we can agree is "stronger" and which demonstrates apparently different circumstances, I think we have to pretty much say, game over man.

 

[apeiron]

I am sorry, but we have effectively reached the end of the argument. Your criticisms here are not technical; you have basically said you reject my conclusions because the data is, in your opinion, untrustworthy. Anybody can say "I don't trust the data, because it does not conform to my expected world view".

Given that this data is provided by the strongest sources in the field (large corporations, government agencies, etc), subject to peer review (to the extent anything as proprietary as oil reserves can be) and according to standardized definitions and methodologies, it is as good as we are going to get.

In the absence of competing data on world oil reserves that we can agree is "stronger" and which demonstrates apparently different circumstances, I think we have to pretty much say, game over man.

It's been game over ever since your first failure to present some actual source for your original claim. Your first cite in fact contradicted you flatly. Your second was just a trend line for proven reserves, not rate of discover vs rate of consumption.

I can't reject data that you can't provide :zzz:.

But I've had no trouble citing industry experts who have quite clearly said consumption has outstripped discovery for a long time, that proven reserves are not such a great benchmark for discussing this issue, that we are talking about pinning our optimism on expensive/dirty unconventional oil, etc.