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Thursday, March 15, 2012

Peak Oil is Real - Middle Eastern Conflict Remix

Another guest post by Friend o' the Frog Rex Weyler!


Oil company cheerleaders proclaiming huge supplies of oil are dead wrong. Peak oil is as real as rain, and it is here now. Not 2050. Not 2020. Now.

Oil production has been flat since 2005. This is not by choice. The producers cannot increase production because new fields cannot keep pace with declining production from old fields. The plateau is the top of the global depletion curve.

(The oil plateau: The calm before the decline. Reference: The Oil Drum.)

Furthermore, this end of energy growth only accounts for volume. Energy quality and net-energy are falling like stones as environmental devastation increases.

Every producing oil field on Earth is in decline (unless it is brand new), and peak discoveries are well behind us.

(Peak discoveries occurred 50 years ago. Reference: Exxon Mobile, from The Oil Drum.)

Meanwhile, the aggregate decline rate appears to be about 5% per year. To maintain world production, we would need to bring a new Saudi Arabia (3-billion barrels annually) into full production every three years. There exists on Earth not one single promising field that remotely approaches those requirements.

When you read or hear about “10 billion barrels” of oil discovered somewhere, here is how to think about that: A third of that is probably not recoverable or entirely illusory. The recoverable portion will require a billion barrels of oil equivalent energy to produce (in the tar sands it would take 3 billion barrels). What is left, about 5 or 6 billion barrels, equates to about a 2-month supply for humanity. Two months.

Quantity and quality

We won’t “run out of oil” because, simply, we’ll never get it all. What petroleum geologists point out is that all oil fields have a production curve, a peak, and a decline. Therefore, Earth’s total supply has a peak and decline.

But that’s not all: The volume decline includes a decline in quality and net energy. As oil fields reach old age, energy returned on energy invested plummets and production costs soar for a lower quality product. Over the last century, oil producers high-graded Earth’s energy storehouse, and the best net-energy reserves disappeared seventy years ago.

Oil in its heyday – 1930 and 40s – produced 100:1 net-energy, a hundred barrels out for one barrel of energy invested. Today oil fields range from 20:1 to 10:1. The US average is 11:1. We are now digging into the 3:1 net-energy tar sands.

Charles Hall at the State Univ. of NY has calculated that it is not possible to run our complex civilization on a net-energy below about 6:1, because the society needs that reserve energy to run its transportation, agriculture, health systems, and so forth. The tar sands 3:1 net energy is simply pathetic. A salmon does better chasing herring. An Amish farmer gets 10:1 net energy with hand tools!

Blood and Oil

Energy expert Howard Odum warned of the net energy curve in the 1970s and geologist M. King Hubbert graphed oil peak and decline in the 1950s. US oil production peaked in 1970, exactly as Hubbert predicted. In this era, the US spent millions to topple governments in oil nations and install US-friendly dictators such as Shah Pahlavi in Iran. Lately, the US has spent billions to fight its own creations – Saddam, Taliban – to gain access to the oil fields. They now contemplate opening a front in Syria to go after Iranian oil, of which they lost control when the Iranians toppled their puppet Shah.

In 2010, the US Military Joint Forces Command predicted the end of “surplus oil production capacity” -- their way of saying “peak oil” -- and warned: “the shortfall in output could reach nearly 10-million barrels per day.” They also predicted that this oil decline “would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and have serious economic impact on China and India.” This is the US military talking. When politicians tell you the next war is “not about the oil,” rest assured, it’s about the oil.

In 1912, as the British navy switched from coal to oil, Winston Churchill said flatly: “You have got to find the oil ... purchased regularly and cheaply in peace, and with absolute certainty in war.” In the end, World War II was about oil, and won by oil. During the war, the US produced 880 million tons of oil, Russia 100 million tons, Japan 5, and Germany 30, and most of this by expensive coal-to-liquid technology. Germany entered North Africa to secure oil, and entered Russia to reach the Caspian Baku oil fields. German Minister for War Production, Albert Speer, conceded in his post war interrogation: “the need for oil certainly was a prime motive.” They failed, and the German war machine literally ran out of gas, as Rommel abandoned empty, fuel-gobbling tanks in the Libyan desert.

Prior to the 1990 Gulf War I, bush henchman Dick Cheney revealed, “We're there because the fact of the matter is that part of the world controls the world supply of oil, and whoever controls the supply of oil … would have a stranglehold on … the world economy.” So there you have it. All this bloodshed is over dwindling oil reserves and the pipelines to deliver the black goop to refineries and markets.

Burning the storehouse

I suspect most of the industry cheerleaders talking about “giant discoveries” and “energy gluts” know this. Still, they spin every new oil discovery as an arrival in the Promised Land, pump stock plays, and promote their industry. In our world, that’s legal, but it isn’t really honest. In April 2011, Fatih Birol, chief economist of the International Energy Agency, revealed what the industry knows: “We think that the crude oil production has already peaked, in 2006.”

And since the population is growing, peak oil per capita occurred in 1979. We have now reached the absolute peak. Without increasing energy sources, we cannot increase economic activity. We can print money and consume Earth’s assets and make it look like growth – for a while – but the piper will be paid. Nature shall not be mocked.

In 2008, when the economy appeared to be roaring and swindlers at Goldman Sachs pitched mortgage-backed securities on unsuspecting clients, energy production had ceased growing. As a result, the oil price almost tripled from $50/barrel to $147. This equated to a $3-trillion increase to the world’s annual energy bill, which sucked discretionary income from every other market and helped crash the global economy.

When the economy collapsed, oil prices fell, but as economies recover, even slightly, the price will rise again since supply is restrained. Blaming US President Obama for rising energy prices is another con job. Blame nature. She just can’t make more of the stuff fast enough.

During the last century human society burned the best half of recoverable hydrocarbons that represented 500-million years of captured sunlight, a one-time storehouse of high quality, concentrated energy. We squandered it on drag races, traffic jams, private jets, and overheated office buildings. We burned this valuable asset and called it “income.” If you did that in your home, you’d go bankrupt.

Peak oil is real. The consequences – at best – will be a slowly scaled-down industrial civilization. If we continue to ignore these facts, the consequences will be far worse. Nature just isn’t sentimental.


References and sources:

Charts: See The Oil Drum

Howard T. Odum: Pioneer of energy analysis and thermodynamics in ecology and economics, predicted the net-energy predicament in the 1970s.
Environment, Power, and Society (Wiley Interscience, 1971)
Essay: Energy, Ecology & Economics, May 1974:

Nicholas Georgescu-Roegen, The Entropy Law and the Economic Process, (1971)
Georgescu-Roegen integrated energy laws into modern economics.

M. King Hubbert: In 1956, he correctly predicted US peak oil in the 1970s. Hubbert’s curve applies, to every oil field ever known, and to Earth as a whole.

“US military warns oil output may dip causing massive shortages by 2015,” Terry Macalister, The Guardian, April 11, 2010.

Charles Hall: Biophysical Economics, State University of New York, Syracuse; developer of “Net Energy Analysis.”
Charles Hall, Stephen Balogh, David Murphy, Energies Journal, 2009
What is the Minimum EROI that a Sustainable Society Must Have
Dr. Charles Hall, Dr. Cutler Cleveland, 1986
Energy and Resource Quality: The Ecology of the Economic Process,
Oil Drum: “Why EROI Matters”, Charles Hall
Oil Drum, David Murphy on Net Energy

Cutler Cleveland, Boston University, Center for Energy and Environmental Studies; Senior Fellow, National Council for Science and the Environment, Washington D.C.; Editor-in-Chief, Encyclopedia of Earth. History of Energy, Cutler Cleveland (Academic Press, 2009)

Gail Tverberg, Oil Drum, on Energy, peak oil, nuclear option

Vaclav Smil: The time scale and challenges of energy transformation.
Energy Transitions: History, Requirements, Prospects, University of Manitoba

David Hughes: The Energy Sustainability Dilemma