Peak Oil Production - Happening Now

PointBreak,

The conspiracy you talk about is not a conscious one but a fault in flat earth economics, and in particular the way the oil industry is encouraged to operate as a result of companies floating on the stcok markets.

If you look at technical sheets and reports for oil fields and discoveries, the 1960's was the decade in which most discoveries were found. Most oil companies will acknowledge this. Some years you find a lot of oil, some years you find less. Since 1964 we have been finding less and less every year.

See http://www.peakoil.net/uhdsg/Default.htm

But for oil companies to look good to investors on the stock markets, it is in their interests to under report a discovery and then gradually upgrade your estimates for the field year on year.

If you look at economic reports from oil companies, we now have more proved reserves than ever before.

If you look at geological reports, we had the most known reserves in the late 1970's when consumption of crude oil overtook discoveries.

Today we use over 4 barrels of oil for every 1 we find.





So instead of oil getting more expensive since the 1960's, when the peak in discoveries was, and since when it has been a dwindling resource, we have a faulty economic model that encouraged us to not look at that for the interests of Wall Street.

When you look back it is obvious how the model failed us, but at the time it made good economic sense.

No conspiracy, just lack of forward thinking, in favour of imediate profit.

 

Number one, if the price is being "kept down artificially", then by what or by who?

Number two, falling total global reserves doesn't mean the price of oil has to rise. Oil prices are driven by demand and supply, and that is based on current production and consumption, not geological estimates of how much oil exists. How much people pay for oil companies and oil reserves is an entirely different matter, and looking at the spot and even short term futures markets doesn't tell you that.

Number three, oil companies are not the only sources of reserve estimates. Govenments and independent researchers also produce estimates.

Number four, regardless of what companies tell us about their reserves, investors make their own minds up as to how much oil reserves really exist.

Delaying reserve recognition would not benefit the stock price. The idea is to make the stock price go up NOW, not eventually. Oil companies which underreported reserves would be at risk of hostile takeovers from companies which report reserves accurately, and which would thus have a higher market capitalisation.

 

You ask how it's being kept down artificially, and then go on to answer the question by stating that the price is determined by supply and demand. That's keeping the price down artificially in my books, because the accounting that goes into determining the price of oil fails to take into consideration the "true cost" of depleting a limited resource.

 

Point break,

Number one, the price is being kept down by a lack of economic understanding of a limited resource, hence why when production peaks and demand outstrips supply there will be a violent correction.

Number two. Falling total reserves would affect the price. If you ask a Trader on the floor in NYMEX, they would tell you reserves are higher now than they have ever been. Similarly if you look at the history of anual reserve reports from BP, Shell, Exon Mobil, Texaco, etc. etc. If you ask a petroleum geologist, they would tell you consupmtion over took discovery around 1980 and reserves have been falling at an accelerating rate since then.

In effect the oil shocks of the late 1970's should have told us something but we failed to listen as we saw just the political implications of the time, rather than the bigger picture.

Number Three. OK, so reserve estimates come from sources such as IEA and the USGS. These are the government sponsored sources for reserve estimates.

The USGS for unknown reasons changed its stance and started to include non-conventional oil in its estimates around 2000 so that it vastly upgraded its reserves. It used this to go on to show that production could grow for the next 30 years or so. (around 1 trillion barrels conventional oil left, 2.6 trillion non-conventional) The USGS suddenly decided there were 3.6 trillion barrels instead of 1 trillion left to be produced. the fact that non-conventioal oil cannot be extracted at anywhere near the rate of conventional reserves, and therefor cannot even hope to ofset the depletion in conventional production seemed to stop mattering to the USGS so that it could give much rosier forcasts.

The IEA gives forcasts based on demand. If it calculates demand will be 92 millin barrels per day in 2015, then it forcasts production will be that amount at that time. It works on the principle that if prices rise, exploration will expand, more reserves will be discovered, and therefor production will meet demand. It fails to consider that there may not be more reserves to find.

As for independent researchers, they tend to be the ones with the most pessimistic outlook. They tend to be retired petroleum geologists and accademics. And they are the people most screaming about the very worrying issues peak oil production raises.

Number Four. Delaying reserve reporting is common practice in the Oil industry. As we saw with Shell earlier this year, when you have to downgrade reserve estimates it is far more damaging that holding back reserve upgrades.
Oil companies have also found that releasing small reserve upgrades regularly is better for their stock value than to anounce a find all in one go and then go quite for 5 or 6 years.

I don't know the specifics of the economics of that but you could definately look it up if you want to find out more.


If economists considered oil as a finite resource then its price would have started rising when it became clear that discoveries had peaked and increased with more pace as production overtook discovery.

Instead we see it as an unlimited resource. Where economists think that if the price increases then so will exploration and that will then act to raise production and bring the prices back down. Whatever way you look at oil, that trend cannot continue. The world only has a finite number of basins to drill in.

 

ive ready every single bit of this thread all the way to the end before replying wth what i want to say,


and what i was wantng to say was:

welp im ready to use horses and bicycles and what have you, ive always wanted to be around and ride horses, never had an opportunity to do such, so lets get it on

its pretty apparent we are in for some bg changes at this rate, i expect life to change alot in this world in the coming years if we are really using 3 or 4 times the amount of oil that the world is pumping

its inevitable unless something miraculous happens, and ASAP


we run out of fuel and then there will be troubles transporting food, and all kinds,

everything uses fuel, planes trains autos, ships,

food and everything not just oil will be so costly not anyone wll be able to afford, even more so than right now, as if it werent already getting bad enough!


and fuel to keep warm with, well it will be time for wood burning, etc. for heat,
but how long will trees last then huh ?

so.. theres not really much to look forward to at this rate,


be prepared!

somehow!

cuz some crazy sheep's gonna be happening, alot to change, i cant see how its gonna get any better and not worse and worse until.........

alot of ppl wont agree im sure, but i have to say that mankind has been and is and will continue to be its own worst enemy.

hurting the planet, hurting ourselves, hurting other species also, everything, have been for well a damned long time,

how can it just keep going on ? something will give, evnetually, things have been giving, more and more, and more,






good luck

 

Kandahar, please read some of this thread and think about how technology could fix the problem in time.

If you can then I will be in awe because too many of the worlds renowned scientists and economists don't see a way out of this one.

 

The USGS World Petroleum Assessment is the first of its kind to provide a rigorous geologic foundation for estimating undiscovered energy resources for the world. The results have implications for energy prices, policy, security, and global resource balance.

The latest assessment shows a 20% increase in undiscovered oil and slight decrease in undiscovered natural gas. More resources were identified in the Middle East, offshore Africa, and South America, while less resources were found in Canada, Mexico and the Former Soviet Union.

http://energy.cr.usgs.gov/oilgas/wep/wepindex.htm



Oil Reserves - The Pessimists

The "pessimists" advocate the position that the world is finite and so are its recoverable oil resources. To make their argument, they rely on descriptive statistics and base their conclusions on the statistical study of past discoveries, considering all oil and gas fields to be static objects (with no evolution in the size of initially recoverable reserves). The pessimists believe that all of the oil-bearing regions worth exploring have already been explored and that the big fields have already been discovered, ergo future discoveries will be small. They claim that the official figures for proven reserves have been overestimated for some regions and that world oil production is currently at its optimum - or can be expected to reach its optimum in the medium term - and will decrease steadily thereafter.

The Optimists

The "optimists" hold a dynamic concept of reserves and believe that a method based solely on applying descriptive statistics to past discoveries will only yield a partial image of actual potential. The volumes of exploitable oil and gas are closely correlated to technological advances, technical costs and the price of the barrel of crude or the cubic metre of gas. For example, it is estimated that today only 35% to 40% of the oil present in discovered fields is recovered. According to an optimist, any improvement in this recovery rate - even if by only one point - allows the industry to tap substantial additional reserves. Similarly, the boundary between conventional and non-conventional hydrocarbons is not fixed, but has continued to shift regularly over time. For instance, optimists note that it is now both feasible and profitable to exploit fields at water depths exceeding 1 000 metres, which was still thought to be impossible 15 years ago.

Where are the world's oil reserves? You might be surprised. Take a look at the map.

http://www.mapsofworld.com/world-top-ten/world-top-ten-oil-reserves-countries-map.html

Nuclear Fusion - The future

And what about Nuclear Fusion? Perhaps this is the future energy resource. It is known to work and Europe is about to take it from its development stage in Cambridge, UK to a working and sustainable reality.

Read more about it here;

http://news.bbc.co.uk/1/hi/sci/tech/4044895.stm

 

The Stuff on Fusion does look very promising but its still not soon enough. If we were building a fleet of fusion reactors around the world now then maybe but we still haven't built the first full scale prototype. Still, I'll cross my fingers.


As for the USGS, it is increasingly politicised rather than acurately giving the facts. Politicians don't want to scare us incase we stop shopping.

Dick Cheney knows the truth!
http://www.peakoil.net//Publications/Cheney_PeakOil_FCD.pdf

The Saudis also think the US agencies etc. are overcooking the figures.
http://channel4.com/news/2004/10/week_5/26_oil.html


No politician wants to be the ones to have to tell the public to consume less, so they will just wait for production to fall and the economic recession to make people consume less.

 

The Future

I understand what everyone is saying and we have reason to be concerned but economy has and will continue to be the driving factor behind our next power sources. The reason we rely on crude oil is due to its availability and cost. Relatively speaking it is cheap.

It's surprising that during the wars countries managed to power their machinery on fuel from coal which incidentally is still being done in South Africa. The factors against coal based petrol or benzin is cost. However, with increasing oil prices the cost of production becomes more attractive.

This is unlikely to benefit the world economy but countries rich in coal would certainly benefit and coal and gas based fuels may well be the answer for an interim period whilst we wait for the increase in capacity for other energy sources which primarily are likely to be; nuclear based, fusion, wind power, solar power and solid fuels.


Brazil has the capacity to produce large volumes of renewable, alternative fuel: ethanol made from sugar beets, potatoes, corn or sugarcane. Brazil's sugarcane crop potential is enormous, giving it the ability to not only grow its own fuels, but to also export them to other countries... If you find this article interesting, be sure to also read 'Plasma fuel devices aren't new, but they are promising.'

http://www.newstarget.com/001494.html


About two hours' drive across the highveld from Johannesburg lies the town of Secunda. [size=-1]This town is situated in the middle of nowhere, supported primarily by the massive Sasol Synthetic Fuels factory, chemical plants and coal-mines. [/size]
[size=-1]The Sasol underground coal-mines form the biggest underground coal mining complex in the world and they annually produce 34 million tons of coal to the Synfuel plants. This is the only place in the world where coal is converted into fuels and chemicals. [/size]

http://www.zetron.com/pages/english/realw/real119.html


I think it is wrong to be very pessimistic about the future and also wrong to be too optimistic. I remember the cries of alarm in the late 1970's with the petrol queues and prices rocketing to new heights. Oil would only be around for another 30 years they said. Oil reserves were about to be depleted.

Here we are in 2004 and we estimate that possibly there is half the world's oil left?

 

The reason we use it so much is because it makes everything !!! Its the perfect material for an industrialised society to have.

In the late 1970's that crisis was casued by a 5% drop in production during the Iranian revolution, but it was only political and production was easily raised again to calm things down.

This time, the worlds largest single largest traded commodity is going to go into decline. A 2% drop in production will be bad, but when it is followed by another 3% drop the year after, and another 5% the year after that, it will really start to hurt.


Ghawar is Dying.
http://www.newcolonist.com/ghawar.html

 

I suggest that those interested in grasping the very real dangers we face should obtain a copy of the deocumentary "The End of Suburbia" by Barry Silverthorn.

I also recommend that people bookmark this site as a handy resource for ongoing analysis of the subject...

http://www.peakoil.net/

 

Meanwhile oil prices have fallen 22% off their October peak in dollar terms (despite a falling dollar).

Prepare for a bear market in oil crisis panic theories.

 

The nature of the market close to peak will mean it fluctuates severely as people are less and less sure of what i actually happing and what will happen in the future.

Once it is apparent production is actually definately falling, prepare for a massive paradigm shift in all sectors of the stock market.

 

That why the oil panic theories are so robust - when the oil price falls, that only makes it more true!

 

no. I can see what you are saying but I'm not trying to claim that.

When the price drops then it means that we are not past the peak in production yet but it doesn't mean we are not at it.

This year there was a mass panic that supply could not meet demand because demand rose so fast.

The reason supply could not rise fast enough however is because of the peak oil situation. There is no more spare capacity.

We have had a relatively mild northern hemisphere winter so far and US crude stocks and heating stocks have been able to recover.

The SWHTF again next summer as the US driving season drives demand up while China will be even more thirsty than it has been this year.






This years price rise and fall again are just the market panicing but they haven't seen the full picture yet.

 

You are confusing short term demand and supply, particularly in terms of refining capacity, with "peak oil". What does a predictable, seasonal event like driving season have to do with peak oil?

Global refiners don't want too much spare capacity, it is wasted capital expenditure. They try to forecast demand, and this last year they got it spectacularly wrong. Refining capacity is not peak oil.

The amount of oil produced and refined is not a fixed amount or a fixed percentage of the oil in proven reserves. It varies based on decisions based all along the supply chain.

 

while it is perfectly true that every time the oil industry squizes a little more blood out of everybody it has made dependent on itself, end of the petrolium erra predictions and measures abound. this is not neccessarily a bad thing.

because it is equaly true however that the petrolium era inevetably and eventualy WILL end, if not immediatly tomarrow or the day after as costs of extraction can only increase as inexpense to extract deposits get consumed leavin only more expensive to extract from ones available.

this is a proccess that happens in any nonrenewable resource industry. hell there's still tons of gold waaaaaay underneath the granite rock of my sierra nevada mountains, but you don't see a massive gold extraction industry. and why? because even for gold you can only get so much, however much that might be, and if it costs more to get it out then what you can get for it, it's pretty much gonna stay there.

oil reserves may not be at that point. i have no idea when they actualy will. but as sure as i'm alive and breathing they will eventualy.

and we DON'T absolutely need them.

sure the most capitol gratifying way to generate energy right now might be by burning combustable fuels, but we could, with a combination of alternative and traditional NON-combustion based tecnologies be producing all the energy we need without burning anything.

the day WILL come when we HAVE to. and a happier and better day that will be, for everything other then currently dominant economic theories, for which, should i live to see the day, i do not expect to shed a very great many nostelgic tears.

=^^=
.../\...

 

Refining capacity is a problem in the US. However this doesn't really affect the wholesale price of crude on the stock markets.

World demand doesn't climb evenly over the course of a year, the huge consumer that the US is(some 26% of all oil production consumed by US) means that at times like the summer driving season and the winter heating season are two periods when world demand for oil jumps up in steps.

Demand outstripping a supply that can no longer grow, and will soon start to decline is "peak oil"

The US has a very tight refining capacity because all the US refiners know there is no point in building new refineries that cost billions of dollars when they will be useless again before they are built. They know that the world is struggling to maintain 82.5 million barrels per day. It will probably never reach 85m bpd and so the US refiners will never have to deal with any more than about 22m bpd max before it starts declining.

The same goes for why your electricity grid is so fragile at the moment. no-one is going to build anymore gas fired power plants (the currently thought most cost efective plants) when they know there will be no more gas to power them with.

Shale oil and Tar sands are almost the oil equivalent of that gold you talk about. It costs two barrels of oil equivalent energy to get 3 barrels of energy out of shale and tar sands which is why they will never be the power source of the future, even though many people look to them and say "we have loads of oil left".

Tar sands and oil shale are our future plastic sources and fertilizer and pesticide sources but they are never going to be any good as an energy source. But it will be expensive to use even for these uses as the energy needed to get at them will cost so much more.

We can get all the energy we "NEED" from other sources but we cannot get enough to continue living the extravagent lifestyle we live now.

 

You are ignoring my points. I don't need you to explain to me that oil demand varies throughout the year. What you need to explain is why oil prices have fallen 25% during the high demand winter season, yet you are expecting a "SWHTF" scenario for summer driving season. Two predictable seasonal fluctuations, with one demand surge happening as prices fall, yet the other somehow supposed to make the SHTF. As I pointed out before, it seems like no matter what happens, it proves your theory somehow.

Peak oil? Doesn't look like it.

 

I'm not ignoring your points.

At the moment we are experiencing a milder than expected northern hemisphere winter, allowing stocks of heating oil to build again and taking the fear out of the market.

Yes at the moment the world is slighly overproducing as now the gulf of mexico is back on strong and disruptions in other areas seem to have gone away for a while.

OPEC may cut production but if they do expect the oil price to rise again quickly. What they will then do is bring back that production next spring and try and say "see, we told you we could increase production".

I guess we are both argueing theories that we will have to wait and see about to see what happens.

I really doubt the world will ever be able to produce much over 85m bpd and at the current rate of demand increase we will be there next year.

I would love the peak oil problem to be false but the evidence and maths behind it all begin to add up. The fact that so many oil producing regions around the world have already peaked and fit into the scenario.

I suppose it may come across as though everything proves the peak oil theory. I suppose the way you view the news is in the eye of the beholder. Most of the statements OPEC and etc. make seem from my point of view to make a lot of sense with peak oil in mind.

To me it is just a matter of, if you expect the worst, you can only be pleasantly supprised.