Peak Oil Redux Series

$130 Oil Justified? No Way
Oil Price Redux
OIL: Demand, Production and Speculation
Peak Oil - The Myth, The Legend, The Fraud
Spreading "Peak Oil" Crack
"Peking" Oil, the Saudis and China
Peak Oil? Not!
Peak Oil? Not! Part Deux
Peak Oil? Not! - Update
Peak Oil Redux Part I
Peak Oil Redux - Part II
Peak Oil Redux Part III
Peak Oil Redux Part IV
Peak Oil Redux Part V
Peak Oil Redux Part VI
Peak Oil Redux Part VII
Peak Oil Redux Part VIII
The Blame for $135 a Barrel Oil
Blame it on Markman's Myopia or The Day They Burned Ol' Dixie Down - A "Peak Oil" Commentary

 Another Peak Oil Cufuffle Series 

Comments

Kirk said…
If I may, I'd like to selectively disagree with some of your points on this subject.

First, let me split the consolidation you've made. Oil production is going to be split into three types: Sweet/Light; Sour/Heavy; and Pseudos. And cost is going to be disassociated from dollars and made into a more relevant constant: joules. (You can pick another energy currency if you want - btu's, calories, whatever. But this is an important thing to keep in mind as I go along.)

Sweet/Light (S/L) oil is preferred because it costs little compared to the other types to produce and convert to useful products. There's a huge difference between energy cost to produce and refine vs energy available from the product. Ballpark is that for every unit of energy spent extracting/refining to produce motive fuels (gasoline, diesel, etc), the product (that gasoline, diesel, etc) carries 30 units of energy.

Heavy/Sour oil costs a lot more. While this label is for all oil with more than 1% sulphur and/or an API Gravity of over 33 degrees, we can use a nominal median of production. (Note that API gravity has an inverse relationship to specific gravity - the lighter the SG, the higher the APIG.) For that nominal median, the energy received is about 10 or 15:1. To restate, it takes two to three barrels of H/S to produce as much gas/diesel/etc as one barrel of S/L.

Finally, there are the 'alternates' - oil sands, coal conversion, etc. The energy return runs from 1.5:1 for oil sands to somewhere near or below 1:1 for biofuels. (I'll note that the last figure is debatable. According to the USDA, corn ethanol as fuel is about 1.25:1.)

Finally, my functional definition of Peak Oil isn't that it runs out. It's that the cost of extraction becomes prohibitive relative to the amount obtained. In this specific case I mean both cost in dollars and cost in energy, though the latter is the reason for the former.

Thanks for bearing with that background, now for the interpretations.

You argue that there is no 'peak oil' because even if S/L should run out we've plenty of alternatives. We do, indeed, have alternatives. All the alternatives are more expensive in energy cost to obtain. Which means that if S/L runs out - or even becomes more difficult to obtain - the raw cost goes up. That's simple business math: If I have to use more raw to produce the same amount of finished goods, then unless that raw COSTS (dollars) less than the original I have to charge more. Counterstatement: if there's enough of the less efficient raw it may cost less by virtue of quantity. Counter-counterstatement: Oil's not in that category, not at this time. The thicker the oil, the harder it is to pump out of the rocks. Thicker is the essence of heavy crude.

You also argue that peak oil doesn't exist because of found but unproven and/or untapped deposits. I will counter by pointing out that the numbers for these have been declining. I will further point out that one reason they're untapped is the expense of getting to, extracting, refining, and delivering the product. Again I note my 'peak oil' definition. It's not gone, it's that what's available is too expensive to get. I see your counter that we'll pay more dollars to make it happen - though this counters your own argument that oil prices should stay low - but there are no shortcuts for energy costs at this time.

Notice that I do not disagree that we will go to alternatives - not just alternate petroleums, but alternate fuel systems - if/when oil "costs too much" or "runs out". But we - people - are lousy at moving in anticipation of disaster. Which means that if oil is peaking we WILL have a period when there's not enough motive fuel around. And scarcity causes inflated prices.

To summarize - peak oil won't be the end of the world. I'm quite confident that when pushed into it we'll develop alternatives - some more effective than oil, some less, but alternatives nonetheless. However, to dismiss it as completely mistaken is erroneous.

Oh, one last tidbit. It appears - though definitive proof remains to be found - that S/L production has declined since 2000. From then to about 2004 the decline was as a proportion of total crude produced. Since 2004 it appears it's actual barrels produced. Again, this is interpretive not definitive. It is, however, worth pondering.

Thank you for an insightful blog, and for letting me present my counterpoints.
Wed Jun 28, 05:06:00 PM EDT
Mr. Naybob said…
Kirk,

Thank you for the comment.

I agree with the economic practicality theory you subscribe to.

I will be posting my comments in the next few days.

The Nattering One
Thu Jun 29, 01:45:00 AM EDT
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