Re-Laird Redux; matters arising
Roger Baker
rcbaker@eden.infohwy.com
Fri, 2 Nov 2001 14:48:47 -0800
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Content-Transfer-Encoding: quoted-printable
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Need it be said that I want to hear as many opinions expressed
as possible and have NO threats of sanctions standing in their way.
-- Like those institutional brick walls standing in the way of free
thought you see more and more everywhere else in life.
Grassroots social pressure is the best and proper remedy for
even Bush-supporters others posting dumb shit, right? I sure
don't want the information filter factor to be some mean list-marm
with a bunch of explicit rules based on political correctness
and ghetto pedigree.
I often favor, and hold in high regard, unpopular opinions as the most
promising paths to truth, given the tribal ape mentality of humans.
In somewhat the same context, let me offer the following that I just
posted on another list -- in response to what Tim Jones posted to
me.
Same old story; humans are unable to think clearly enough to
fear the genuine threats like an oil peak warning from scientists
as much as emotional bandwagon media-cultivated threats like
anthrax.
-- Roger
Since oil powers a huge portion of the world energy economy (about 60% =
as
I recall), and is geologically limited in supply, the issue of when it=20=
will production
will peak and decline is enormously important.
Since supply and demand are both relatively inflexible factors, the=20
failure of
supply to match a growing demand will cause a sharp increase in price=20
that will
rock the world economy. That is the context of the debate below between=20=
the
supply optimists and supply pessimists, as reported in the Economist=20
below.
The Economist begins by getting it wrong in the first sentence; "The=20
world is
about to run out of oil. Or perhaps not. It depends whom you believe". =20=
The real
issue is actually the price until we do finally run out, and not running=20=
out of oil
at all; it will taper to a trickle over many decades but the real issue=20=
is how much
the price will go up in the meantime.
The oil optimists treat this event like global warming; as a crisis that=20=
is far enough
in the future that it can be safely discounted as the basis for a call=20=
to action,
especially if we meanwhile invest a mere trillion or so; about $200 for=20=
every human
on earth over the next decade on producing outside the OPEC areas.
The troubling thing about the optimistic side presented below is that=20
the guys
sounding the alarm are, like Hubbert (who got it right in 1970),=20
prestigious geologists,
who have had the hands-on experience finding and producing oil.
The oil optimist rely largely on presumptions of future innovation in=20
finding and
producing oil. They come from the ranks of economists, government=20
bureaucracies,
and Exxon -- those who got their forecasts wrong in the 1970's by=20
predicting oil would
stay at $100+; in other words these guys have been wrong before, as=20
indicated below.
The Economist mostly sides with the optimists in predicting the oil=20
industry
will pull a rabbit out of the hat to replace the declining reserves of=20=
the Persian Gulf.
as the following passage indicates:
"...Given the industry's astonishing track record of innovation, it may=20=
be foolish to bet
against it. That is the result of adversity: the nationalisations of the=20=
1970s forced
Big Oil to develop reserves in expensive, inaccessible places such as=20
the North Sea
and Alaska, undermining Dr Hubbert's assumption that cheap reserves are
developed first..."
But this example in support of oil optimism makes little sense. The=20
North Sea and
Alaska were developed precisely because the Arab embargo raised prices,
after the cheap reserves had already long been developed in Texas and =
the
Persian Gulf. And now these are depleting with no big replacements in=20=
sight.
Now that the geology is thoroughly understood, there are few unexplored
places on earth left for any similar big new reserves to hide no matter=20=
what the
price. No big new reserves able to quench our huge 70 million barrel a=20=
day
dependency and fill in for the Persian Gulf have been found recently.
To argue that technology will find a way to increase the yield of=20
existing reserves
is also unsupportable. We have spent a century of scientific effort=20
seeking to
discover ways to drain reserves more completely, and the best we have=20
been
able to do is mostly to drain existing reserves a bit faster using=20
secondary
recovery.
It may be true that some reserves are being developed at $6/per barrel,=20=
but the
quantities of new oil being developed at this price are small -- the=20
little
puddles the geologists missed the first time.
In other words, the reporter the Economist sent to cover the debate=20
doesn't
have a very good understanding of geology, and thus tends to side with
the institutional resource bureaucrats and economists, who have a=20
built-in
disposition toward favoring the status quo and solving resource =
depletion
problems with money.
Read Ken Deffeyes' book "Hubbert's Peak", and see if you still agree =
with
the oil optimists. He reviews all the facts in detail , and his case is=20=
solid
so far as I am concerned.
-- Roger
*********************************************
Sunset for the oil business?
Nov 1st 2001
=46rom The Economist
http://envirolink.netforchange.com/frame.html?page=3Dsearch.html%3F
The world is about to run out of oil. Or perhaps not. It depends whom=20
you believe
IF YOU think OPEC ministers are a conspiratorial cabal, you ought to=20
meet the Oil
Depletion Analysis Centre (ODAC). This colourful group is convinced that=20=
the world is
perilously close to an oil shock induced by scarcity, not politics.=20
Several dozen of its
members got together recently in an auditorium at Imperial College,=20
London, for a
peculiar planning session.
Leading lights of this movement, including Colin Campbell, a geologist=20=
and author
of "The Coming Oil Crisis", presented technical data that supported=20
their grim
prognosis. Various experts ridiculed rival analyses, done by America's=20=
Geological
Survey and the International Energy Agency (IEA), that contradicted=20
their views. Dr
Campbell even decried the "amazing display of ignorance, deliberate=20
ignorance,
denial and obfuscation" by governments, industry and academics on this=20=
topic.
So is the oil really running out? The answer is easy: Yes. Nobody=20
seriously disputes
the notion that oil is, for all practical purposes, a non-renewable=20
resource that will
run out some day, be that years or decades away. The harder question is
determining when precisely oil will begin to get scarce. And answering=20=
that question
involves scaling Hubbert's peak.
M. King Hubbert, a Shell geologist of legendary status among depletion=20=
experts,
forecast in 1956 that oil production in the United States would peak in=20=
the early
1970s and then slowly decline, in something resembling a bell-shaped=20
curve. At the
time, his forecast was controversial, and many rubbished it. After 1970,=20=
however,
empirical evidence proved him correct: oil production in America did=20
indeed peak
and has been in decline ever since.
Dr Hubbert's analysis drew on the observation that oil production in a=20=
new area
typically rises quickly at first, as the easiest and cheapest reserves=20=
are tapped. Over
time, reservoirs age and go into decline, and so lifting oil becomes=20
more expensive.
Oil from that area then becomes less competitive in relation to other=20
fuels, or to oil
from other areas. As a result, production slows down and usually tapers=20=
off and
declines. That, he argued, made for a bell-shaped curve.
His successful prediction has emboldened a new generation of geologists=20=
to apply
his methodology on a global scale. Chief among them are the experts at=20=
ODAC,
who worry that the global peak in production will come in the next=20
decade. Dr
Campbell used to argue that the peak should have come already; he now=20
thinks it
is just round the corner. A heavyweight has now joined this gloomy=20
chorus. Kenneth
Deffeyes of Princeton University argues in a lively new book ("The View=20=
from
Hubbert's Peak") that global oil production could peak as soon as 2004.
A slippery slope
That sharply contradicts mainstream thinking. America's Geological=20
Survey prepared
an exhaustive study of oil depletion last year (in part to rebut Dr=20
Campbell's
arguments) that put the peak of production some decades off. The IEA has=20=
just
weighed in with its new "World Energy Outlook", which foresees enough=20
oil to
comfortably meet demand to 2020 from remaining reserves. Ren=E9 Dahan, =
one=20
of
ExxonMobil's top managers, goes further: with an assurance=20
characteristic of the
world's largest energy company, he insists that the world will be awash=20=
in oil for
another 70 years.
Who is right? In making sense of these wildly opposing views, it is=20
useful to look
back at the pitiful history of oil forecasting. Doomsters have been=20
predicting dry
wells since the 1970s, but so far the oil is still gushing. Nearly all=20=
the predictions for
2000 made after the 1970s oil shocks were far too pessimistic. America's
Department of Energy thought that oil would reach $150 a barrel (at 2000=20=
prices);
even Exxon predicted a price of $100.
Michael Lynch of DRI-WEFA, an economic consultancy, is one of the few =
oil
forecasters who has got things generally right. In a new paper, Dr Lynch=20=
analyses
those historical forecasts. He finds evidence of both bias and recurring=20=
errors, which
suggests that methodological mistakes (rather than just poor data) were=20=
the
problem. In particular, he faults forecasters who used Hubbert-style=20
analysis for
relying on fixed estimates of how much "ultimately recoverable" oil=20
there really is
below ground, in the industry's jargon: that figure, he insists, is=20
actually a dynamic
one, as improvements in infrastructure, knowledge and technology raise=20=
the amount
of oil which is recoverable.
That points to what will probably determine whether the pessimists or=20
the optimists
are right: technological innovation. The first camp tends to be=20
dismissive of claims
of forthcoming technological revolutions in such areas as deep-water=20
drilling and
enhanced recovery. Dr Deffeyes captures this end-of-technology mindset=20=
well. He
argues that because the industry has already spent billions on =
technology
development, it makes it difficult to ask today for new technology, as=20=
most of the
wheels have already been invented.
Yet techno-optimists argue that the technological revolution in oil has=20=
only just
begun. Average recovery rates (how much of the known oil in a reservoir=20=
can actually
be brought to the surface) are still only around 30-35%. Industry=20
optimists believe
that new techniques on the drawing board today could lift that figure to=20=
50-60%
within a decade.
Given the industry's astonishing track record of innovation, it may be=20=
foolish to bet
against it. That is the result of adversity: the nationalisations of the=20=
1970s forced
Big Oil to develop reserves in expensive, inaccessible places such as=20
the North Sea
and Alaska, undermining Dr Hubbert's assumption that cheap reserves are
developed first. The resulting upstream investments have driven down the=20=
cost of
finding and developing wells over the last two decades from over $20 a=20=
barrel to
around $6 a barrel. The cost of producing oil has fallen by half, to=20
under $4 a barrel.
Such miracles will not come cheap, however, since much of the world's=20
oil is now
produced in ageing fields that are rapidly declining. The IEA concludes=20=
that global oil
production need not peak in the next two decades if the necessary=20
investments are
made. So how much is necessary? If oil companies are to replace the=20
output lost at
those ageing fields and meet the world's ever-rising demand for oil, the=20=
agency
reckons they must invest $1 trillion in non-OPEC countries over the next=20=
decade
alone. Ouch.
--Apple-Mail-1-664324758
Content-Transfer-Encoding: quoted-printable
Content-Type: text/enriched;
charset=ISO-8859-1
Need it be said that I want to hear as many opinions expressed=20
as possible and have NO threats of sanctions standing in their way.=20
-- Like those institutional brick walls standing in the way of free=20
thought you see more and more everywhere else in life.=20
Grassroots social pressure is the best and proper remedy for=20
even Bush-supporters others posting dumb shit, right? I sure=20
don't want the information filter factor to be some mean list-marm=20
with a bunch of explicit rules based on political correctness=20
and ghetto pedigree.=20
I often favor, and hold in high regard, unpopular opinions as the most=20=
promising paths to truth, given the tribal ape mentality of humans.=20
In somewhat the same context, let me offer the following that I just=20
posted on another list -- in response to what Tim Jones posted to=20
me. =20
Same old story; humans are unable to think clearly enough to=20
fear the genuine threats like an oil peak warning from scientists=20
as much as emotional bandwagon media-cultivated threats like=20
anthrax. =20
-- Roger
Since oil powers a huge portion of the world energy economy (about 60%
as
I recall), and is geologically limited in supply, the issue of when it
will production
will peak and decline is enormously important.
Since supply and demand are both relatively inflexible factors, the
failure of
supply to match a growing demand will cause a sharp increase in price
that will
rock the world economy. That is the context of the debate below
between the
supply optimists and supply pessimists, as reported in the Economist
below.
The Economist begins by getting it wrong in the first sentence; "The
world is
about to run out of oil. Or perhaps not. It depends whom you believe".=20=
The real
issue is actually the price until we do finally run out, and not
running out of oil
at all; it will taper to a trickle over many decades but the real
issue is how much
the price will go up in the meantime.
The oil optimists treat this event like global warming; as a crisis
that is far enough
in the future that it can be safely discounted as the basis for a call
to action,
especially if we meanwhile invest a mere trillion or so; about $200
for every human
on earth over the next decade on producing outside the OPEC areas.
The troubling thing about the optimistic side presented below is that
the guys
sounding the alarm are, like Hubbert (who got it right in 1970),
prestigious geologists,
who have had the hands-on experience finding and producing oil.
The oil optimist rely largely on presumptions of future innovation in
finding and
producing oil. They come from the ranks of economists, government
bureaucracies,
and Exxon -- those who got their forecasts wrong in the 1970's by
predicting oil would
stay at $100+; in other words these guys have been wrong before, as
indicated below.
The Economist mostly sides with the optimists in predicting the oil
industry
will pull a rabbit out of the hat to replace the declining reserves of
the Persian Gulf.
as the following passage indicates:
"...Given the industry's astonishing track record of innovation, it
may be foolish to bet
against it. That is the result of adversity: the nationalisations of
the 1970s forced
Big Oil to develop reserves in expensive, inaccessible places such as
the North Sea
and Alaska, undermining Dr Hubbert's assumption that cheap reserves are
developed first..."
But this example in support of oil optimism makes little sense. The
North Sea and
Alaska were developed precisely because the Arab embargo raised prices,
after the cheap reserves had already long been developed in Texas and
the
Persian Gulf. And now these are depleting with no big replacements in
sight.
Now that the geology is thoroughly understood, there are few unexplored
places on earth left for any similar big new reserves to hide no
matter what the
price. No big new reserves able to quench our huge 70 million barrel
a day
dependency and fill in for the Persian Gulf have been found recently.
To argue that technology will find a way to increase the yield of
existing reserves
is also unsupportable. We have spent a century of scientific effort
seeking to
discover ways to drain reserves more completely, and the best we have
been
able to do is mostly to drain existing reserves a bit faster using
secondary
recovery.
It may be true that some reserves are being developed at $6/per
barrel, but the
quantities of new oil being developed at this price are small -- the
little
puddles the geologists missed the first time.
In other words, the reporter the Economist sent to cover the debate
doesn't
have a very good understanding of geology, and thus tends to side with
the institutional resource bureaucrats and economists, who have a
built-in
disposition toward favoring the status quo and solving resource
depletion
problems with money.
Read Ken Deffeyes' book "Hubbert's Peak", and see if you still agree
with
the oil optimists. He reviews all the facts in detail , and his case
is solid
so far as I am concerned.
-- Roger
*********************************************
Sunset for the oil business?
Nov 1st 2001
=46rom The Economist
=
<underline><color><param>1A1A,1A1A,FFFF</param>http://envirolink.netforcha=
nge.com/frame.html?page=3Dsearch.html%3F</color></underline>
The world is about to run out of oil. Or perhaps not. It depends whom
you believe
IF YOU think OPEC ministers are a conspiratorial cabal, you ought to
meet the Oil
Depletion Analysis Centre (ODAC). This colourful group is convinced
that the world is
perilously close to an oil shock induced by scarcity, not politics.
Several dozen of its
members got together recently in an auditorium at Imperial College,
London, for a
peculiar planning session.
Leading lights of this movement, including Colin Campbell, a geologist
and author
of "The Coming Oil Crisis", presented technical data that supported
their grim
prognosis. Various experts ridiculed rival analyses, done by America's
Geological
Survey and the International Energy Agency (IEA), that contradicted
their views. Dr
Campbell even decried the "amazing display of ignorance, deliberate
ignorance,
denial and obfuscation" by governments, industry and academics on this
topic.
So is the oil really running out? The answer is easy: Yes. Nobody
seriously disputes
the notion that oil is, for all practical purposes, a non-renewable
resource that will
run out some day, be that years or decades away. The harder question is
determining when precisely oil will begin to get scarce. And answering
that question
involves scaling Hubbert's peak.
M. King Hubbert, a Shell geologist of legendary status among depletion
experts,
forecast in 1956 that oil production in the United States would peak
in the early
1970s and then slowly decline, in something resembling a bell-shaped
curve. At the
time, his forecast was controversial, and many rubbished it. After
1970, however,
empirical evidence proved him correct: oil production in America did
indeed peak
and has been in decline ever since.
Dr Hubbert's analysis drew on the observation that oil production in a
new area
typically rises quickly at first, as the easiest and cheapest reserves
are tapped. Over
time, reservoirs age and go into decline, and so lifting oil becomes
more expensive.
Oil from that area then becomes less competitive in relation to other
fuels, or to oil
from other areas. As a result, production slows down and usually
tapers off and
declines. That, he argued, made for a bell-shaped curve.
His successful prediction has emboldened a new generation of
geologists to apply
his methodology on a global scale. Chief among them are the experts at
ODAC,
who worry that the global peak in production will come in the next
decade. Dr
Campbell used to argue that the peak should have come already; he now
thinks it
is just round the corner. A heavyweight has now joined this gloomy
chorus. Kenneth
Deffeyes of Princeton University argues in a lively new book ("The
View from
Hubbert's Peak") that global oil production could peak as soon as 2004.
A slippery slope
That sharply contradicts mainstream thinking. America's Geological
Survey prepared
an exhaustive study of oil depletion last year (in part to rebut Dr
Campbell's
arguments) that put the peak of production some decades off. The IEA
has just
weighed in with its new "World Energy Outlook", which foresees enough
oil to
comfortably meet demand to 2020 from remaining reserves. Ren=E9 Dahan,
one of
ExxonMobil's top managers, goes further: with an assurance
characteristic of the
world's largest energy company, he insists that the world will be
awash in oil for
another 70 years.
Who is right? In making sense of these wildly opposing views, it is
useful to look
back at the pitiful history of oil forecasting. Doomsters have been
predicting dry
wells since the 1970s, but so far the oil is still gushing. Nearly all
the predictions for
2000 made after the 1970s oil shocks were far too pessimistic.
America's
Department of Energy thought that oil would reach $150 a barrel (at
2000 prices);
even Exxon predicted a price of $100.
Michael Lynch of DRI-WEFA, an economic consultancy, is one of the few
oil
forecasters who has got things generally right. In a new paper, Dr
Lynch analyses
those historical forecasts. He finds evidence of both bias and
recurring errors, which
suggests that methodological mistakes (rather than just poor data)
were the
problem. In particular, he faults forecasters who used Hubbert-style
analysis for
relying on fixed estimates of how much "ultimately recoverable" oil
there really is
below ground, in the industry's jargon: that figure, he insists, is
actually a dynamic
one, as improvements in infrastructure, knowledge and technology raise
the amount
of oil which is recoverable.
That points to what will probably determine whether the pessimists or
the optimists
are right: technological innovation. The first camp tends to be
dismissive of claims
of forthcoming technological revolutions in such areas as deep-water
drilling and
enhanced recovery. Dr Deffeyes captures this end-of-technology mindset
well. He
argues that because the industry has already spent billions on
technology
development, it makes it difficult to ask today for new technology, as
most of the
wheels have already been invented.
Yet techno-optimists argue that the technological revolution in oil
has only just
begun. Average recovery rates (how much of the known oil in a
reservoir can actually
be brought to the surface) are still only around 30-35%. Industry
optimists believe
that new techniques on the drawing board today could lift that figure
to 50-60%
within a decade.
Given the industry's astonishing track record of innovation, it may be
foolish to bet
against it. That is the result of adversity: the nationalisations of
the 1970s forced
Big Oil to develop reserves in expensive, inaccessible places such as
the North Sea
and Alaska, undermining Dr Hubbert's assumption that cheap reserves are
developed first. The resulting upstream investments have driven down
the cost of
finding and developing wells over the last two decades from over $20 a
barrel to
around $6 a barrel. The cost of producing oil has fallen by half, to
under $4 a barrel.
Such miracles will not come cheap, however, since much of the world's
oil is now
produced in ageing fields that are rapidly declining. The IEA
concludes that global oil
production need not peak in the next two decades if the necessary
investments are
made. So how much is necessary? If oil companies are to replace the
output lost at
those ageing fields and meet the world's ever-rising demand for oil,
the agency
reckons they must invest $1 trillion in non-OPEC countries over the
next decade
alone. Ouch.
--Apple-Mail-1-664324758--