Entering the Tough Oil Era

[RedEarth]

Entering the Tough Oil Era
The New Energy Pessimism
By Michael T. Klare

When "peak oil" theory was first widely publicized in such path breaking books as Kenneth Deffeyes' Hubbert's Peak (2001), Richard Heinberg's The Party's Over (2002), David Goodstein's Out of Gas (2004), and Paul Robert's The End of Oil (2004), energy industry officials and their government associates largely ridiculed the notion. An imminent peak -- and subsequent decline -- in global petroleum output was derided as crackpot science with little geological foundation. "Based on analysis," the U.S. Department of Energy confidently asserted in 2004, " would expect conventional oil to peak closer to the middle than to the beginning of the 21st century."

Recently, however, a spate of high-level government and industry reports have begun to suggest that the original peak-oil theorists were far closer to the grim reality of global-oil availability than industry analysts were willing to admit. Industry optimism regarding long-term energy-supply prospects, these official reports indicate, has now given way to a deep-seated pessimism, even in the biggest of Big Oil corporate headquarters.

The change in outlook is perhaps best suggested by a July 27 article in the Wall Street Journal headlined, "Oil Profits Show Sign of Aging." Although reporting staggering second-quarter profits for oil giants Exxon Mobil and Royal Dutch Shell -- $10.3 billion for the former, $8.7 billion for the latter -- the Journal sadly noted that investors are bracing for disappointing results in future quarters as the cost of new production rises and output at older fields declines. "All the oil companies are struggling to grow production," explained Peter Hitchens, an analyst at the Teather and Greenwood brokerage house. " it's becoming more and more difficult to bring projects in on time and on budget."

To appreciate the nature of Big Oil's dilemma, peak-oil theory must be briefly revisited. As originally formulated by petroleum geologist M. King Hubbert in the 1950s, the concept holds that worldwide oil production will rise until approximately half of the world's original petroleum inheritance has been exhausted; once this point is reached, daily output will hit a peak and begin an irreversible decline. Hubbert's successors, including professor emeritus Kenneth Deffeyes of Princeton, contend that we have now consumed just about half the original supply and so are at, or very near, the peak-production moment predicted by Hubbert

http://www.tomdispatch.com/post/print/174829/Tomgram%253A%2520%2520Michael%2520Klare%252C%2520Tough%2520Oil%2520on%2520Tap

[Recursion]

1. Cost per barrel is still the wrong way to look at it

I find it curious that most peak-oil writers still put it as, "$X per barrel extracted makes it unprofitable." In my opinion the market will bear most financial costs of oil extraction (and, like most industries, oil will become low-margin).

The much more crucial issue, given that there are no market forces in thermodynamics, is energy. At some point (possibly soon) it will require more than one oil barrel's worth of energy to extract a barrel of oil. At that point, game over. Oil will no longer be an energy source, but will instead be a way of storing energy with some less-than-100% level of efficiency (it will also be a source of plastic still).

[youngdem]

2. That is the more accurate way to view it

In fact, MUCH of the Arctic National Wildlife Refuge oil field's barrels are thermodynamically delta negative. Just shows how purely political that whole ANWR fiasco really was. It was so political and stupid, even the oil companies didn't want to explore the field. Much of it wouldn't make any positive delta and would be expensive to produce the positive wells.

Much of the remaining oil in the ground is yield negative to produce. The fields are small and the access is extremely energy intensive and expensive. Soon, you will see nuclear power in large oilfields creating co-generated power to energize the exploration equipment, I predict. Then finally, there will be some large percentage left in the ground, simply thermodynamically impossible to retrieve.

[Recursion]

3. Not "impossible"

Oil will, I think, for centuries yet be an efficient way of transporting energy. And it will always be valuable for plastics.

But, yeah, the only thing universally more certain than death and taxes is the 2nd law of thermodynamics.

[youngdem]

4. The only thing I said was impossible

was for some oil to be energy efficient to recover from the ground. The last oil left will be deep, difficult to frag or pressure out, will be heavily sour, will be very remote or inaccessible, or will be in such slow sands or deposits it will take more oil to remove it than it will produce, thereby being 'impossible' to recover.

That's all I meant. No doubt will oil continue to be an efficient way to move goods and people - if you can get it. The trouble is getting it out of the ground, piped, cracked, transported, refined and retailed in a delta positive manner. That is becoming VERY difficult on fields the industry is considering production on. New technology will need to step up.