Thunder horse
(Swedish below)
In today’s edition of Svenska Dagbladet Industry [the business section of one of Sweden’s major broadsheet newspapers] Björn Lindahl has published an article on activities and investment on the world’s seas. (I cannot find it on the internet.) He states that 59,000 freight ships ply the world’s oceans and that the world’s shipping turns over $183 billion per year. He also asserts that only half of the fish that we eat are caught wild at sea, the rest being cultured in large cages or on land in dams/ponds. We know that Norway is a large producer of fish. Naturally, he also writes about the offshore oil industry and asserts that a third of all oil production, 24 million barrels per day, is produced offshore (NGL is excluded). At a price of $100 per barrel that is oil worth $860 billion, nearly five times as much as all sea traffic. 17,000 fixed or floating oil production platforms have been built and 400 new platforms are built every year if one includes those installations built directly on the sea floor. With this in mind it is amazing that there are not further accidents at sea. It is estimated that investments in offshore oil production increased by $213 billion in the last year, i.e. approximately 25% of the income during the year (or $25 per barrel) was reinvested in new installations. The greatest investments involved production at depths of over 1000 metres. If one considers these production costs then one can see that the era of cheap oil is a thing of the past. I would just like to remind the reader that ten years ago the world’s collective economic expertise considered that the price of oil in 2020 would be under $30 per barrel. The quest for oil at sea is now moving into areas of contested sovereignty, the most serious conflict of which is the dispute between China and Japan. In connection with this I would just like to mention that the volume of oil currently produced by fracking is 1 million barrels per year (1 Mb/d) and the most optimistic estimates put this volume at 2-4 Mb/d by 2020. So you certainly can understand how the “fracking bubble” of oil optimism that is currently being inflated by the oil industry will soon “fracture”.
(Swedish)
Björn Lindahl har i dagens SvD Näringsliv en intressant artikel om investeringar till havs (kan inte hitta den på nätet). Han konstaterar att det på världshaven seglar 59,000 fraktfartyg och att linjetrafiken omsätter 183 miljarder dollar om året. Han konstaterar också att det bara är hälften av all fisk som vi äter som fångas i haven, resten odlas i dammar eller i stora kassar till havs. Vi vet att Norge är en stor producent. Naturligtvis kommer han sedan till olja och konstaterar att en tredjedel, 24 miljoner fat om dagen, produceras till havs. Med ett pris på $100 per fat blir det 860 miljardet dollar, dvs nästan 5 gånger större än all sjöfart. Det har byggts 17,000 fasta eller flytande plattformar och det byggs cirka 400 nya varje år om man räknar in de installationer som byggs direkt på havsbotten. Med tanke på detta är det förvånande att det inte finns fler haverier till havs. Man beräknar att investeringarna till havs under 2012 ökade till 213 miljarder dollar, dvs ungefär 25% av inkomsterna under året investerades i nya anläggningar, dvs $25 per fat. De största investeringarna gäller utvinningar på mer än 1000 meters djup. Tar man sedan hänsyn till produktionskostnader så inser man att den billiga oljans tid är förbi. Vill bara påminna om att världens samlade ekonomiska expertis ansåg för 10 år sedan att oljepriset 2020 skulle vara under $30 per fat. Till havs rör man sig nu mot områden där det finns konflikter om rätten till oljan varav konflikten mellan Japan och Kina är den allvarligaste. I detta sammanhang vill jag nämna att volymen olja från fracking är ungefär 1 miljon fat om året och fram till 2020 visar de mest optimistiska beräkningarna en produktion på mellan 2 och 4 miljoner fat om dagen. Ni förstår säkert att denna ”fracking bubble” som man nu bygger upp mycket snart kommer att ”fracking”.
Aleklett's Energy Mix 
jeppen
January 8, 2013
USA har ökat sin produktion från BO (bottom oil) på 5 Mb/d år 2008 till 7 Mb/d idag. Är bara 1 Mb/d av detta från fracking? Vad är resten av ökningen isåfall?
aleklett
January 8, 2013
Jag föreslår att du går till referensen här nedan och slide 7. Där visar man att råoljeproduktionen är ungefär konstant 6.3 Mb/d och det verkar som om den var 5.0 – 5.2 som lägst.
Click to access Berman-ASPO-USA-2012-Conference-Oil-Presentation-29-Nov-2012.pdf
jeppen
January 8, 2013
När kurvan ser ut som en hockeyklubba gäller det att vara på tå. Det är inte meningsfullt att hänvisa till urgamla data. Titta på färska, officiella data för “crude oil” istället. Senaste siffrorna är 7 Mb/d!
aleklett
January 8, 2013
Det är uppenbart att det har ökat till 7 Mb/d. Ökningen kan också vara att man startat någon av de nya produktionsplattformarna i GM. Skall gå in och titta stat för start i de detaljerade produktionsdata.
jeppen
December 29, 2013
Och nu är det 8 Mb/d, ett knappt år senare. Ökningen på cirka 1 Mb/d under året är den största ökningen någonsin i USAs historia. Se:
aleklett
January 8, 2013
Jag har nu tittat på detaljer och det är inte offshore. Ni hittar detaljer här:
http://www.eia.gov/dnav/pet/PET_CRD_CRPDN_ADC_MBBL_M.htm
Med tanke på att man flyttat största delen av borriggarna till skifferolja är det inte förvånande att man får en ökning just nu.
aleklett
January 9, 2013
Björn Lindahls artikel finns nu på nätet:
http://www.svd.se/naringsliv/branscher/energi-och-ravaror/kraftig-tillvaxt-for-investeringar-till-havs_7804000.svd
Tom S
January 10, 2013
Kjell, you said:
“I would just like to remind the reader that ten years ago the world’s collective economic expertise considered that the price of oil in 2020 would be under $30 per barrel.”
The collective economic expertise certainly was nothing like that. In fact, the collective economic expertise expressed absolutely no opinion on the topic whatsoever. I can find only two prominent economists who have ever expressed any opinion on peak oil. One, Paul Krugman, wrote in 2010 that:
“Conventional oil production has been flat for four years; in that sense, at least, peak oil has arrived [note: this was incorrect]. True, alternative sources, like oil from Canada’s tar sands, have continued to grow. But these alternative sources come at relatively high cost…”
…after which he explains that oil prices are probably not coming back down.
Also MA Adelman claimed that nobody knows what future oil production would be, and everyone should stop pretending, however he didn’t think oil was peaking right then (2007).
I typed in “economics peak oil” into google and got an article from economics.about.com entitled “we will never run out of oil”, which says:
“we will have a series of price increases and a series of reductions in the total amount of gasoline consumed. Eventually the price will reach a point where gasoline will become a niche good purchased by very few consumers, while other consumers will have found alternatives to gas.”
I found a paper on econbrowser:
“The IMF model predicts that growth in demand will put continual upward pressure on price, with the inflation-adjusted price of oil headed for $180/barrel by the end of the decade [by 2020].”
I do not find any other statements about peak oil by economists. Also, there are no consensus statements from economic organizations or bodies. It appears that the topic is mostly ignored. This is because peak oil, and the amount of oil remaining in the ground, are questions of geology, not economics.
The reason economists at the IEA, EIA, oil companies, etc disagree with you, is because they are working as general managers and gather information from geologists, engineers, etc who do not agree with you either. I have read documents from the USGS about future oil supplies. Their opinion is quite different from yours. Furthermore, when Tony Hayward bet against you, it was probably because he gathers estimates from respective experts of how much unconventional oil is available, whether they could extract it, how their deepwater plays are likely to pan out, and so on. It was not taken from an economics textbook. By the way, I think it was unwise of you to bet against him.
Thus far, the predictions of official agencies like the IEA etc have been wrong. Furthermore, the predictions of peak oilers have usually been much worse.
-Tom S
Tom S
January 10, 2013
Kjell,
I definitely grant that peak oilers have gotten some things right. Peak oilers successfully predicted that there would be a peak in onshore, regular conventional crude in the mid 2000s. They got this right, within a 5 year error margin or so. On the other hand, the IEA, the EIA, and so on, got it wrong, and did not anticipate either the slowing of supply, or the consequent increase in prices.
On the other hand, the peak oilers were just totally wrong about what would happen after the peak in regular conventional crude. They did not correctly anticipate the development of alternatives. They did not foresee the developments in tight oil. They did not anticipate the degree of deepwater offshore increases. They did not foresee the long plateau followed by further increases in oil production.
Notably, ASPO’s predictions made in 2008, in response to the WEO, about what would happen after the peak of regular conventional crude, were far worse than the predictions of the IEA. In this case, the IEA’s predictions were fairly accurate and ASPO’s were way off.
Also, peak oilers did not correctly anticipate what would happen after conventional gas peaked in North America. None of them foresaw fraccing to anywhere near its current degree.
In my opinion, techniques of Hubbert LInearization etc have been reasonably accurate in predicting when a peak will occur, for a given type of oil, price level, and level of technological development. However, such techniques have been completely inaccurate in predicting what would happen afterwards.
In Colin Campbell’s 1998 paper in Scientific American, he said: “Last, economists like to point out that the world contains enormous caches of unconventional oil that can substitute for crude oil as soon as the price rises high enough to make them profitable… Theoretically, these unconventional oil reserves could quench the world’s thirst for liquid fuels as conventional oil passes its prime. But the industry will be hard-pressed for the time and money needed to ramp up production of unconventional oil quickly enough”
So far, the economists cited by Campbell have been right about this, and Campbell has been wrong.
-Tom S
Michael Lardelli
January 11, 2013
Kjell can defend himself as he sees fit but I find Tom S’s comments amusing. First, 2010 and 2007 are not 10 years ago – those comments are coming after the rise in oil production stalled. An example of the attitude of economists 10 years ago comes from The Economist:
“The current overproduction suggests that, whatever the short-term war-influenced gyrations may be, the trend of the oil price may be downwards over the medium term.”
(See http://www.economist.com/node/1301105)
And one can always refer to the economists at the IEA in 2002 for a naively optimisitic picture of the future. Have a look at the World Energy Outlook for 2002.
Second, Tom S would obviously benefit from reading Kjell’s book where he could see laid out quite clearly the comparisons of the predictions of the IEA, USGS and others versus what his own group’s research predicted. It is clear that even Kjell’s group was too optimistic when it came to production from conventional fields (due to the invasion of Iraq that they had not foreseen) but he was, nevertheless, far closer to the truth than the oil optimists.
Thirdly, Tom does not appear to apprecicate the relative scale of the ongoing declines in production from current conventional oilfields versus what agencies like the EIA say can be expected for increases from unconventional oil. It was always expected that unconventional oil would be exploited when conventional supplies became restricted. The point is what RATE can they be exploited at and that is much lower than for conventional oil. One must always remember that peak oil is about RATES, not RESERVES. This shows that Colin Campbell was right, not wrong!
Tom S
January 11, 2013
Michael,
You simply are not addressing the points I raised in my posts. I turned your attention to your clearly failed predictions in 2008. Your response was simply ignore that and change the topic.
You will find an article from the Guardian from 2009 here:
http://www.guardian.co.uk/business/2009/nov/12/oil-shortage-uppsala-aleklett
At the bottom, it has graphs comparing your predictions against those of the IEA at that time, for the next 20 years. The article was from 2009. As you can plainly see, your predictions turned out to be just totally wrong, already, to say nothing of 20 years in the future.
“And one can always refer to the economists at the IEA in 2002 for a naively optimisitic picture of the future. Have a look at the World Energy Outlook for 2002.”
That is changing the topic. I granted that the IEA and so on, failed to anticipate the slowing of production growth and increase in prices in the late 2000s. I was not disputing that. You are just not addressing what I said.
As I said, peak oilers have badly mispredicted what would happen AFTER the peak of regular, conventional crude. Not a single one predicted further increases in oil production after 2010. Every single prediction showed oil peaking and then DECLINING, often fairly rapidly. They were ALL wrong. Except possibly the prediction made in 2002, which still has a few years to go before we can tell if it’s wrong, but it’s not looking good so far.
Of course, if the prediction from 2002 fails also, then it will be forgotten and never discussed again within peak oil circles. If I mention it, the topic will be changed. That is standard procedure by now. Also, if Kjell loses the bet against Tony Hayward, which is looking increasingly likely, then it will be forgotten, just as Matt Simmons’ bet was forgotten the day after he lost.
“Second, Tom S would obviously benefit from reading Kjell’s book where he could see laid out quite clearly the comparisons of the predictions of the IEA, USGS and others versus what his own group’s research predicted.”
I have read Kjell’s book. Please turn your attention to figure 11.6 of that book, which shows the “Uppsala world oil outlook 2008” predictions. The Uppsala prediction clearly shows oil peaking in late 2007 or so and then declining to ~75 mb/d all liquids today, which was quite wrong. Even the most optimistic Uppsala prediction was wrong, and much worse than the IEA prediction of that time.
“One must always remember that peak oil is about RATES, not RESERVES. This shows that Colin Campbell was right, not wrong!”
Colin Campbell was clearly wrong about both rates and reserves. He predicted that the RATE of oil production would start declining in 1989, then in the late 1990s, then in the early 2000s. These were all wrong. His prediction from 1991 was ~40 mb/d by now, which was a RATE, and was just drastically wrong. I don’t see how you can claim he was right.
-Tom S
Tom S
January 11, 2013
Michael, you said:
“First, 2010 and 2007 are not 10 years ago – those comments are coming after the rise in oil production stalled.”
Read my comment carefully. I was not saying those statements were from 10 years ago. I was saying they were the ONLY statements about peak oil I could find from any prominent economists, either 10 years ago or any time. There appears to be very little by economists about peak oil from 10 years ago.
“An example of the attitude of economists 10 years ago comes from The Economist:”
I read that article from the economist. It does not mention peak oil even once, anywhere in the article. It was claiming that the war in Iraq wouldn’t affect oil supply very much over the next few years. It had nothing to do with peak oil, and expressed no opinion about it.
Of course, even if the article was relevant, it still wouldn’t demonstrate a consensus of economists. It’s a cherry-picked quotation from a news magazine (despite its name) and was probably written by a journalist. For example, the current edition has a long article about the rock musician David Bowie.
As I said, there was not a consensus of economists that oil would peak (or not peak) at any time. It is not an economic question.
-Tom S
jeppen
January 11, 2013
I agree with most of what you say, Tom, but I disagree this isn’t an economic question. It very much is, and that’s at the heart of why Aleklett’s team fail to predict peak oil. They fail to appreciate the power of a heightened oil price on the economical reserves of oil. Also, they, and other peakers, talk about PO being about the “rate” not reserves, but again, they fail to understand that the feasible rate is all about economics. If extraction is profitable, then it is scalable!
They claim low EROEI, for instance 5, makes it not scalable, but that is simply wrong. Current shale trends demonstrate this.
Michael Lardelli
January 11, 2013
Tom, I think a lot of your confusion comes from comparing apples with pears. The definitions of oil vary between information sources and the oil industry plays with these definitions in its attempts to paint a rosy picture of current production (a little like the US government keeps changing the definition of inflation so that it can continue to quote low inflation figures and raise nominal growth rates). Sure there is currently an increase in unconventional oil production from “shale” that is a little greater than foreseen and this will change the year that oil goes into decline by a year or two depending upon which definition of oil that you are using. But that increase is marginal compared to the gathering decline in conventional crude oil. The real point of Chapter 11 in Kjell’s book is the massive rate of decline in existing conventional oilfields (that not even the IEA could avoid admitting eventually) and the fact that the new conventional oil that the IEA predicted would come on line in coming decades was an impossible dream. Little has changed with that analysis and if you actually read the paper in Energy Policy upon which that chapter of Kjell’s book is based you would understand how Kjell’s group’s predictions are actually based on very optimistic assumptions about how quickly fields can be found and brought online (optimistic assumptions that are, nevertheless, way below the pure fantasies promoted by the IEA). While you are looking at Kjell’s book you should check out Chapter 9 and, in particular, Figure 9.7 that shows how UGES’s most pessimistic predictions of giant oil field production were actually the closest to reality.
As for there being no mention of peak oil by economists (or The Economist) back in 2002, that is hardly surprising because the term was only invented in that year. What the economists were predicting early in that decade was rising production and low oil prices for decades to come – i.e. what we would now call an absence of “peak oil”.
I stand by what I said about Colin Campbell – I think you have misinterpreted his statement. The truth is that economists at the IMF have now realised that, if they include oil availability concerns in their economic analyses, then their predictions come far closer to the current reality. See:
http://oilprice.com/Energy/Crude-Oil/IMF-Do-we-Have-a-Peak-Oil-Problem.html
Tom S
January 12, 2013
Michael, you said:
“Tom, I think a lot of your confusion comes from comparing apples with pears.”
Michael, I think a lot of your confusion comes from shutting your eyes very, very tightly. I have never seen anyone shut his eyes as tightly as you. If you keep doing that, you will never learn anything.
“The definitions of oil vary between information sources and the oil industry plays with these definitions in its attempts to paint a rosy picture of current production”
Michael, your paper in 2008 predicted that all oil would decline from ~83 mb/d in 2008 to ~75 mb/d now. That was wrong according to the definition of oil that you guys set out in your own paper. You defined oil as C+C, natural gas liquids, deep offshore, unconventional including shale and oil sands, and so on. Using your own definition, your prediction was unambiguously and drastically wrong.
The other predictions about peak oil using Hubbert Linearization etc, have also been entirely wrong, using their own definition of oil, or any reasonable definition of oil. Campbell’s prediction of peaking in the early 2000s and then severe decline, was just totally wrong even if we restrict our attention to regular, conventional oil.
“Sure there is currently an increase in unconventional oil production from “shale” that is a little greater than foreseen and this will change the year that oil goes into decline by a year or two depending upon which definition of oil that you are using.”
There has already been a long string of drastic failures of prediction, stretching back over decades. Now you say that shale will change the decline by “a year or two”? You are already off by far more than a year or two.
“I stand by what I said about Colin Campbell – I think you have misinterpreted his statement.”
His predictions were unambiguous. There is little room for interpretation. His predictions were just clearly wrong.
“Little has changed with [our] analysis… ”
That is exactly the problem.
-Tom S
Tom S
January 12, 2013
Jeppen, you said:
“I agree with most of what you say, Tom, but I disagree this isn’t an economic question. It very much is, and that’s at the heart of why Aleklett’s team fail to predict peak oil.”
Jeppen, perhaps I should clarify my position on that issue. What I meant, is that economics does not predict how much oil is in the ground (URR), how quickly it can be extracted without damaging fields, what kinds of alternatives there are (shale, sands, etc), how much there are, how deep the tar sands are, and so on. Those are questions of geology.
Thus, it is not possible to predict the date of peak oil using economics alone. It requires making assumptions based upon geology.
The reason economists from the IEA etc disagreed with peak oilers on this issue, is because economists from the IEA are basing their analyses upon the picture of oil availability which the USGS and other geologists have given to them.
-Tom S
Michael Lardelli
January 11, 2013
I see also that Jeppen has a real problem with EROEI and thermodynamics. The fact is that the energy laws are the most fundamental principles in all of science. They constrain the behaviour of everything from subatomic particles to interactions between living species to the motion of galaxies. So how he can believe that they are irrelevant to human economic systems is beyond me. There is nothing more certain in this world than that EROEI will constrain the future behaviour of the human economy.
jeppen
January 11, 2013
Peakers always say this: “Oh, thermodynamics is on my side, so all the others are clueless.” Of course, this is nonsense. You could just as well invoke quantum theory or whatever. It’s completely wrong level of abstraction. Yes, sure quantum theory is a “limit”, and “a fundamental principle”, but you cannot say anything meaningful about extraction rates from this.
What matters are economics for different kinds of reserves, and those reserves’ respective sizes. EROEI is irrelevant. If you have to sacrifice half of the resource to extract it, but the extraction is cheap and the resource huge, it doesn’t matter that EROEI is 2. (Yes, eventually it matters since the reserve will run out twice as fast – but we might all be long dead then!)
Tom S
January 12, 2013
Michael,
Nothing in peak oil analysis is taken from thermodynamics. Furthermore, thermodynamics does not imply anything in peak oil theory. Thermodynamics is compatible with 1 tb URR, or with ten times that amount. It is compatible with fast extraction, or with deliberately curtailed extraction.
Peak oil analysis is not thermodynamics. Instead, it has been mostly a kind of curve fitting and extrapolation. It is far more doubtful than anything in thermodynamics.
-Tom S