The International Energy Agency (IEA) provides unrealistically high oil forecasts in its new 2012 World Energy Outlook (WEO). It claims, among other things, that the United States will become the world’s largest oil producer by around 2020, and North America will become a net oil exporter by 2030.
Figure 1 shows that this increase comes solely from the expected rise in tight oil production and natural gas liquids. The idea that we will become an exporter in later years occurs despite falling production, because “demand” will drop so much.
The oil price forecasts underlying these and other forecasts in the report are approximately as follows:
One reason the WEO 2012 estimates are unreasonable is because the oil prices shown are unrealistically low relative to the production amounts forecast in the report. This seems to occur because the IEA misses the problem of diminishing returns. As the easy-to-produce oil becomes more depleted, and we need to move to more difficult reservoirs, the cost of extraction increases.
In fact, there is evidence that the “tight” oil referenced in Exhibit 1 is already starting to reach production limits, at current prices. The only way these production limits might be reasonably overcome is with higher oil prices–much higher than the IEA is assuming in any of its forecasts.
Higher oil prices cause a huge problem because of their impact on the world economy. The IEA in fact mentions that current high oil prices are already acting as a brake on the global economy in its first slide for the press. Higher oil prices also mean that investment costs required to reach target production levels will be even higher than forecast by the IEA, adding another impediment to reaching its forecast production levels.
If higher prices put the economies of oil importing nations into recession, then oil prices will drop lower, reducing the incentive to invest in new oil production infrastructure. In fact, we could find ourselves reaching “peak oil” because of an economic dilemma: while there seems to be plenty of oil available, the cost of extracting it may be reaching a point where it is more expensive than consumers can afford. As a result, some oil that we know about, and have been counting as reserves, will have to be left in the ground.
The IMF has recently done modeling that is relevant to this issue in a working paper called “Oil and the World Economy: Some Possible Futures.” This analysis may provide some insight as to what the real situation will be.
The Problem of Diminishing Returns
One issue that the IEA has not properly modeled is the issue of declining resource quality, leading to diminishing returns and a rising “real” (inflation adjusted) cost of production. This situation is often described as reflecting declining Energy Return on Energy Invested (EROEI).
The reason diminishing returns are a problem is because when a producer decides to extract oil, or gas or coal, the producer looks for the cheapest, easiest to extract, resource first. It is only when this resource is mostly depleted that the producer will seek locations where more expensive, harder to extract resource is available. Thus, over time, the inflation adjusted cost of extracting a resource tends to increase.
In terms of the triangle shown, producers tend to start at the top, with the “best” of the resource, and work their way toward the bottom. One result of this approach is that the cost per unit of production tends to rise, even as there are technology advances and efficiency gains, because the quality of the resource is declining.
Reserves tend to increase over time with this approach, because as producers work their way down the triangle in the diagram, they always see an increasing quantity of lower quality resources. The new reserves are increasingly expensive to extract, in inflation adjusted terms. There is no flashing light that says, “Above this price, customers won’t be able to afford to purchase this resource any more,” though. As a result, the increasingly low quality reserves get added to reported amounts, even though in some cases, the cost of products made with these reserves (say gasoline or diesel) will send economies into recession.
It should be noted that the issue of diminishing returns exists for almost any kind of resource. It exists for uranium extraction, since there is always more available, just harder to reach, or in lower concentration. Diminishing returns exists for gold, copper, and for nearly any other kind of metal. This means we often need more oil for metal extraction and processing, as we dig deeper or find ore that is mixed with a higher proportion of waste product.
The problem of diminishing returns also seems to hold for renewables. The first biofuel developed was ethanol from corn, since the process of making alcohol from corn has been known for ages. Newer approaches, such as ethanol from biomass and biofuel from algae, tend to be much more expensive. As a result, when we add new biofuel production, it is likely to be more expensive, and thus harder for the customer to afford. If we want it, we will need increasingly high subsidies.
Wind energy is also subject to diminishing returns. Onshore wind was developed first, and it is far less expensive than offshore wind, which was developed later. Early units of wind added to an electric grid do not disturb the electric grid to too great an extent. Later units of wind energy add increasingly large costs: long distance transmission lines, electrical storage, and other balancing–something that is generally overlooked in making early cost analyses.
Diminishing returns seem even to happen for energy efficiency. We have been working on energy efficiency a very long time. We have a tendency to pick the low-hanging fruit first. Later expenditure for efficiency may be less cost-effective.
Why Light Tight Oil Won’t Increase as in Figure 1
Tight oil, also referred to as “shale oil,” is supposed to be the United States’ oil savior, if we believe the IEA. The Bakken and Eagle Ford plays are the best known examples.
Rune Likvern of The Oil Drum has shown that drilling wells in the Bakken already seems to be reaching diminishing returns. The choicest locations appear to have been drilled first, and the locations being drilled now give poorer yields. He has also shown that the average well in the Bakken now requires a price of $80 to $90 barrel, which is close to the recent selling price. If increased production is desired, the price of oil will need to start increasing (and keep increasing) to provide the incentive needed to drill wells in less-choice location.
There are other issues as well. If there is a need to drill an increasing number of wells just to stay even, or an even larger number, to increase the amount of oil produced, we start to reach limits on many kinds: number of rigs available, number of workers available, miles driven for water to be used for fracking. Perhaps the issue that will limit production first, though, is limits on debt available to producers. Rune Likvern has also shown that cash flows from tight oil extraction tend to run “in the red,” so an increasing amount of debt financing is needed as operations ramp up. At some point, companies hit their credit limit and have to stop adding new wells until cash flow catches up.
Evidence Regarding Rate of Growth of Oil Extraction Costs
Bernstein Research recently published information showing that the marginal cost of oil production was $92 barrel in 2011 for non-OPEC, non Former Soviet Union oil producers at the 90th percentile of production. This cost is increasing at 14% per year (or about 12% a year in inflation adjusted terms). Even at the median marginal cost level, costs appear to be increasing at a compound annual growth rate of 9% (or about 7% in inflation adjusted terms). See also this FTAlphaville post.
If we take the $92 barrel cost in 2011 at the 90th percentile of production and increase it by 7% a year (arguably we should be using 12% per year), the real cost will be $169 barrel in 2020, and $467 a barrel in 2035. These are far in excess of the IEA oil price estimates shown on Figure 2. There is no reason to believe that Bakken and other tight oil production costs would be substantially cheaper.
Other Issues That Appear Not to be Handled Well by IEA WEO 2012
There are three other issues that the IEA has not handled well, in my opinion.
1. Rising Real Need for Fuels of Some Sort
WEO 2012 shows falling “demand” for fuel. Demand, as economists define demand, has to do with how much customers can afford. It is quite possible that demand will fall because people can’t afford the fuel.
It seems to me would be better to start by analyzing how the real need for fuels is changing. Once this is determined, adjustments can be made to reflect other ways the same benefits can be provided, assuming this is possible.
Regarding the real need for fuel, if we look at species that are in some ways similar to humans, such as chimpanzees and gorillas, we find that these animals have no need for fuels, because they live in the way that they are biologically adapted: There are only a relatively small number of them (less than 1,000,000 per species) living in territory which is restricted to their biological adaptation. They do not need their food cooked, or spears or other tools to keep away predators, or shelter from the elements.
Humans don’t live in the way that we are biologically adapted. Because there are so many of us, we need to grow our own food, and gather water from natural sources. Because we do not have big heavy jaws because there is little easy-to-chew food available, we need to cook much of our food. Because we live in diverse areas of the world, we need shelter and adaptive clothing. As humans move to cities, we have even greater needs. We need antibiotics and immunizations to prevent epidemics. We need fuel for commuting, unless we sleep on the floor of the factory where we work. We need fossil fuel for cooking, because traditional fuels such as dung or twigs are not available in sufficient quantities in urban areas.
Another need for fuel, besides directly responding to human needs, is to offset the continued degradation (entropy) of built infrastructure. As the number of humans expands, so do the miles of roads, the number of bridges, the miles of pipelines, the number of homes and schools, and many other kinds infrastructure. All of this infrastructure wears out. Roads need to be repaired almost every year, especially in cold climates. Electrical transmission lines need to be put back in place after every major storm.
Population is also, of course, rising. When we put these issues together (rising fuel need with urbanization, rising population, and increasing entropy), it is clear that the services humans need from fuels will continue to rise, whether or not “demand” as economists measure it appears to rise.
Most of these fuel services will need to come from fossil fuels, rather than renewables, for two reasons: (1) This is the way our infrastructure now is built, and it is expensive and time-consuming to change it. (2) Biological sources are quite limited compared to the needs of 7 billion humans. According to Chew in The Recurring Dark Ages, deforestation started to occur in multiple locations 6,000 years ago, when the world population was about 20 million people.
2. Substitution for Oil
The IEA seems to err in the direction of assuming that substitution can be made more quickly than it really can be. In general, whenever substitution is done, new devices need to be created that use the new fuel, or new plants need to be developed that transform one type of fuel to another type of fuel. Doing either of these things will temporarily add to demand for fossil fuels. There is also a cost involved.
Only the heavier portion of natural gas liquids can be added directly to gasoline supply. Most natural gas liquids are used for other purposes, such as making plastics, or propane for home heating, or making liquid petroleum gas (LPG). LPG is used for cooking in some parts of the world and for operating vehicles that have been designed to use it.
The IEA seems to assume that efficiency gain can have a big impact on the need for oil. The issue it seems to lose sight of is that efficiency gains are a two-edged sword. When a device is made more efficient, the usual effect is that it can be operated more cheaply. This means that more people can afford it, and demand may increase. In the early days, electricity was very expensive. As its cost came down with efficiency gains, its use went up dramatically.
Putting All of These Issues Together
It is very clear to me that the IEA oil estimates way too high, unless prices are much higher. Of course, prices can’t really be much higher, or the economy will go into recession. As a result, production both for the US and the rest of the world is likely to be much lower than forecast by the IEA.
It would be useful to have a better estimate of exactly where the world is headed. One way this might be done is by adapting the indications of a new IMF working paper called Oil and the World Economy: Some Possible Futures. The working paper considers some unknown time, between now and 2020, when the rate of increase in oil supply is assumed to decrease by 1%. While it is not stated in the report, it appears to me that this is similar to what actually happened about 2005, when the rate of oil production increase dropped from 1.3%” annual increase to 0.1%, a 1.2% decrease. (Figure 4, below).
I have a few observations regarding such an adaption:
(a) The model could be adjusted to consider the fact that a drop in the trend rate of about 1.2% actually took place in 2005, rather than simply assuming that a 1% decrease will happen at some unspecified point in the future. It appears to me that shift in the oil extraction trend line underlies many of the world’s problems in the last several years.
(b) The treatment in the model of diminishing returns should be adjusted. It is my understanding that this is currently handled assuming a 2% annual increase in real costs of production. The model could be adjusted to reflect a more realistic (higher) annual cost in oil production, and indirectly, required selling price.
(c) The authors of the IMF report suggest building a more resource-based model, and I would agree that this would be helpful. There are many interlinkages that the current model cannot adequately capture. A more resource-driven model, especially one that considers balance sheets of world governments, would appear to be better.
My View of What is Happening Now
As noted above, world crude oil production seems to have hit a plateau, starting about 2005. This is working its way through the economy with varying effects over time. The major effect at this point of time seems to be on the finances of governments that import oil, although it started earlier, with different aspects more apparent.
In general, what happens as we reach a situation of diminishing returns, and thus rising real oil prices, seems to be as follows:
As the price of oil rises, the price of food and commuting tend to rise. Both of these are considered essential by most consumers, so consumers cut back in discretionary spending, to have sufficient funds for the essentials. This leads to layoffs in discretionary industries, such as vacation travel and restaurant eating. The rise in laid off workers leads to an increase in debt defaults, and problems for banks. Housing and commercial real estate prices tend to fall, because of reduced demand, further adding to debt default problems.
Governments of oil importers get drawn into this in many ways: (1) Their revenues are reduced, because they receive less tax revenue from people who are laid off from work and from businesses with fewer sales. (2) They are asked to prop up failing banks, and to stimulate the economy. (3) They are also asked to pay workers who have been laid off from work. The net of all of this is that the governments of many oil importers find themselves with huge budget deficits, and declining ability to fix these deficits. This pattern is precisely what we are seeing today in many of Eurozone countries, the United States, Japan.
The statements about rising oil production in the US are just a distraction. Diminishing returns mean that US oil production will never increase very much. Oil costs will remain high, and this will be the real issue disturbing economies around the world.
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Efficiency of tight oil extraction improving.
I believe Gails anti-Bakken analysis are often based on rig counts, which are misleading as they are extracting a lot more fuel per rig.
Your link merely indicates that yes, we are running even faster than we thought to maintain this production. It says nothing about the productivity of each of the new wells drilled.
Furthermore, the costs probably are not reduced in proportion to the number of wells drilled per rig: completion costs have always been much higher than drilling costs for these wells.
The ultimate limitation on Bakken production growth is lack of space for more wells to be drilled. An article in the Oil & Gas Journal (http://www.ogj.com/articles/print/vol-110/issue-4/exploration-development/bakken-s-maximum.html) discusses the limits of production. In order to reach 2 million barrels per day of Bakken oil, a peak total of 3000 wells per year will need to be drilled. At $10 million per well, that’s $30 billion dollars just in drilling and completion costs, and it would all end before 2035.
It seems that the current drilling rate is on track to reach this rate of drilling even earlier than the O&GJ article suggests. This means that the peak could be larger than 2 million barrels per day. But it also means that the decline will set in earlier than 2034.
The mature area of the Bakken has only space for under 40,000 wells. Each of these wells will only produce 0.5-1.0 million barrels, most of it spread over thirty years of active production. If we are optimistic, we could say that 40,000 wells with a million barrels each means 40 billion barrels of oil. But spreading this over thirty years means 1.3 billion barrels per year, or 3.6 million barrels per day.
This is a lot of oil. But it is less than half of the current level of crude oil imports. And the Bakken is widely touted as the best hope for energy independence.
there is a simple arithmetic when dealing with oilwells and production rates:
Saudi Arabia produces 10mbd from about 1600 wells
The USA produces about 7mbd from 535000 wells
We built our economy and infrastructure on cheap oil (eroei of 100:1) a good well now delivers only about 20:1. So prime oilwells use up 5 times as much energy to get the oil as they used to.
As to the Bakken, a ”good” well there might give 6:1 for a short lifespan, the tarsands around 3:1, and the scramble to get that is ongoing, drilling well after well to keep up production rates at all costs. If there was easy oil to be had, the Bakken oil would be left where it is. Instead the oil companies are desperate to get hold of anything.
This is why the USA won’t outproduce Saudi, or be self sufficient. There comes a point when the energy needed to get hold of oil is the same as the energy got from the oil. That’s known as the energy cliff, and we’re right on the edge now. We might even be like the roadrunner cartoon who always ran off the cliff with his legs whirling in space before dropping into the ravine.
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Oh sure (Ianbrettcooper) we used to farm without fossil fuel. At one tenth of the current population and a life expectancy of about 45.
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Some thoughts supporting Gail’s statement that it is an excellent time to be a financial peak oiler (or words to that effect). Inspired by Steven Vogel’s book The Life of a Leaf. Vogel is a Professor Emeritus of Biology at Duke.
On pages 269 and following, after an extensive exploration of green leaves, Vogel begins to make some generalizations. I won’t give you a blow by blow, but will instead put them into my own distillation with an eye toward economic, energy, ecological, and human problems.
Natural selection should prune mechanisms to select only the most efficacious. In the world of automobiles, the market selected out batteries and steam engines in favor of internal combustion engines. So that today we wonder if it is even possible to power an automobile any other way. Yet there exists in a tropical forest a staggering variety of solutions to the basic problems of living, even amont groups such as tall growing trees. How do we explain the rapid convergence on internal combustion, but the seeming non-convergence in the natural world?
My thesis is that financialization has emerged as the dominant organizing principle in the modern world and that this principle has severely subordinated all other concerns. For example, many commentators in the recent US Presidential election found little difference between the candidates in terms of the ‘important issues’–the financial issues. Such assertions might be questioned by partisans of each candidate–but few questioned that financial issues were ‘important’ while everything else was ‘unimportant’.
The instruments which discover and implement the policies and practices which will further the goals of financialization are the global corporations, aided by governments.
As the global corporations increase their dominance of daily life, the wide variety of adaptive practices humans might practice are pruned into very few choices–just as internal combustion engines were selected. Humans in the industrial world now eat just a handful of plants and have just a handful of governmental modes. Debt has become a dominant feature of our life, along with great disparities in wealth. Dependence on fossil fuels is another prominent feature. One can add many more aspects of life which have been determined by financialization and its instruments, the global corporations.
But humans remain a stubbornly biological entity. We may very well function better in a tropical forest environment than in the monocrop world of the financialization and the global corporation. We can list some important items which financialization completely ignores: healthy diet; physical activity; low stress; purposeful work; energy conservation; self reliance (vs. dependence); family and clan (vs. economic man).
I think that what we are seeing now is the failure of the financialization model for two reasons. First, the notion of an infinite planet with inexhaustible natural resources to be exploited is failing. Second, the notion that humans can be reduced to economic men is failing as the bribes from ever increasing wealth from financialization are failing to materialize.
Therefore, I believe I agree with Gail that the immediate problem is the failure of the financialization model. Putting the focus entirely of oil depletion is a mistake. Oil depletion is just one important factor.
The reason why many investors rather go to the financial casino since the 1990’s, instead of setting up real world businesses, is because the risks of long term investment are too high, compared to easy profits by short term trading. Add some insider knowledge, and it’s just perfect. Along the lines of this blog, the difficulty of making money in the real world, is the end of cheap energy. It’s not that nobody wants to invest – there’s even a huge quest going on, everyone trying to guess what the next megatrend will be: japanese stocks, dotcom, bio-tech, housing, agriculture, gold… The Chinese at least do have a vision: just ramp everything up as fast as you can, spend paper money on real things. They have to, in order to feed their 1 billion. Meanwhile in the West, each financial bubble represents a number of investors thinking they got the next megatrend right, only to realize once again that they don’t.
That’s why I like places like this blog, kind of telling the real story.
Returning to the financial system, DEBT seems to be the one and only megatrend in sight. Debt means denying the limits of growth. On the one hand, paradoxically, it is today in the proximity of debt (i.e. Wall Street) that the really big profits are made. On the other hand, debt will bring evereything down when it finally drops the mask and shows it’s ugly face.
Now if I were the government, at the helm of a country deeply in debt, but protecting my power, I would try to offset all the deflationary forces with huge money printing. And then just the moment when inflation really kicks in, revalue the currency overnight in some emergency scenario, take some global warming, a little war will also do. After that you just have to deal with the poverty left behind (= police state).
Driving to the Home Depot Friday night I saw the new shrunken Chevy Suburban. It is about 4/5 of its’ former self. I think the same thing will happen with cars. Today cars are still FAR larger and heavier than they have to be for most trips to get you from point A to point B. As the years pass and gasoline gets more and more expensive, I can see people driving tiny little cars. I wouldn’t be shocked if a lot of the vehicles of the future are made from plastic and aluminum, which can be recycled. They could last for decades. Tiny electric cars would be far preferable to walking or riding a bicycle. It wouldn’t take huge, expensive batteries to power one with a range of 20 miles or so.
When I lived in New Orleans my round trip to and from work was about 18 miles a day. A small electric car would have worked fine. For long commutes, battery packs that could be quickly switched for charged ones, could be developed. They could be standardized across the auto industry. Or people could travel long distances on electric trains, like they did before the jet age lowered the cost of air travel.
I think adaptation to peak oil can delay the collapse of civilization for longer than many people now believe. Life won’t be as easy, safe, or convenient, but it will still be possible.
Yes. Life will be possible, just ‘not as we know it, Jim’.
The major problem is that all governments right now are committed to ‘business as usual, with renewables’.
Until an area of the globe collapses completely, the public at large wont notice that it isn’t working.
Google Twizy or Honda Micro Commuter Prototype, your vision is here today. I’m guessing a lot of doomers are going to be surprised by the future reduction in demand. Auto mileage was doubled once in the past by regulation and is happening again as we write. Now if we could only get the right to understand birth control.
On peak oil….
Alice never could quite make out, in thinking it over afterwards, how it was that they began: all she remembers is, that they were running hand in hand, and the Queen went so fast that it was all she could do to keep up with her: and still the Queen kept crying ‘Faster! Faster!’ but Alice felt she could not go faster, thought she had not breath left to say so.
The most curious part of the thing was, that the trees and the other things round them never changed their places at all: however fast they went, they never seemed to pass anything. ‘I wonder if all the things move along with us?’ thought poor puzzled Alice. And the Queen seemed to guess her thoughts, for she cried, ‘Faster! Don’t try to talk!’
Not that Alice had any idea of doing that. She felt as if she would never be able to talk again, she was getting so much out of breath: and still the Queen cried ‘Faster! Faster!’ and dragged her along. ‘Are we nearly there?’ Alice managed to pant out at last.
‘Nearly there!’ the Queen repeated. ‘Why, we passed it ten minutes ago! Faster! And they ran on for a time in silence, with the wind whistling in Alice’s ears, and almost blowing her hair off her head, she fancied.
‘Now! Now!’ cried the Queen. ‘Faster! Faster!’ And they went so fast that at last they seemed to skim through the air, hardly touching the ground with their feet, till suddenly, just as Alice was getting quite exhausted, they stopped, and she found herself sitting on the ground, breathless and giddy.
The Queen propped her up against a tree, and said kindly, ‘You may rest a little now.’
Alice looked round her in great surprise. ‘Why, I do believe we’ve been under this tree the whole time! Everything’s just as it was!’
‘Of course it is,’ said the Queen, ‘what would you have it?’
‘Well, in our country,’ said Alice, still panting a little, ‘you’d generally get to somewhere else — if you ran very fast for a long time, as we’ve been doing.’
‘A slow sort of country!’ said the Queen. ‘Now, here, you see, it takes all the running you can do, to keep in the same place.
If you want to get somewhere else, you must run at least twice as fast as that!’
‘I’d rather not try, please!’ said Alice. ‘I’m quite content to stay here — only I am so hot and thirsty!’
On reflection, I might sound too dogmatic above. There is a signficant chance Gail could turn out to be substantially right and myself substantially wrong. Then I will have to eat humble pie. There will be little enough of any other food to eat by then.
What tilts the possibilities towards Gail’s view is the possibility of compounding disasters. If the various problems we face seriously compound each other and our own response is poor with conflict, wars, bad ideology and bad economics then collapse is very probable.
The second point I take issue with is the construction put on the financial and debt crisis. It may indeed have an effect as bad as Gail predicts but if it does so then the reasons will be political and ideological and not inherent to the operations of modern monetary and financial systems IF they are managed properly.
There is no inherent reason why money should inhibit real solutions. In the end, only the lack of real resources should inhibit or prevent real solutions. Energy and materials are real. Money is only nominal. Money is not real! At least, money is not real in the sense that energy and materials are real. This also means that debt is not real.
Debt can be “spirited away” at the stroke of a pen at any time (though not without consquences). When individuals fail to pay debt they go bankrupt. The debt is never repaid. The creditor loses the money and it is a form monetary destruction. When governments cannot repay debt they can default or they can print extra money. None of these operations are without knock-on effects. Someone somewhere loses “wealth” in the form of lost money (or inflated prices). That is they lose access to “chits” which they could have exchanged for real good or services. However, when a default occurs no real goods are destroyed. The economic world is not one atom worse off in terms of existent real goods after any default.
Knock-on effects of default and inflation can make the world worse off in real goods and services in the future. However, most of this negative effect will only occur if the government remains hands-off and allows market failure and market and employment collapse to occur without remedial government action. Unfortantely, the current ideology of neoconservatism and neoclassical economics attempts to prohibit or prevent efficacious government action. This occurs because neoclassical economics is unempirical and built on a series of myths about the real economy. This post would become too long if I went into this topic.
Suffice it to say that money is not necessary for real actions with real materials and real energy. In real emergencies (personal or national) the need for a money transcation to effect an energy and materials transation can be waived or deferred.Various expedients can be used to balance the books later.
To suggest that we have no options (if Gail suggests this), to suggest that money must determine everything that can happen and to suggest that alternative energy and materials can do nothing above a 1700s level is to over-call the situation dire as it is. In fact, it feeds defeatism. That is what I take issue with. Hard nosed realism is one thing but total defeatism will make disaster more likely and most be eschewed to make the most of possibilities no matter how slim.
I’m sorry, I don’t agree with you. We have to have systems to make transfers of goods and services work, and of promises to pay at a future time work. If we don’t have money, we need another similar system.
Think about making a computer, using goods from all over the world. There has to be some kind of money system to make the transfers work, and to allow for payment after the goods arrive. It is also necessary for businesses to be able to pay their workers, other than with some of the goods made by the company (in this case, computers). There also has to be a way for customers to buy the computers.
If the financial system fails, what I see is that financial systems within individual countries will continue to work. (Or if a country falls into pieces, like the Former Soviet Union, the new smaller governmental units will quickly set up their own currency.) The problem I see with international interconnections–it will take a long time to get people to trust each other, especially if that trust is not warranted. Suppose Greece, after it drops out of the Euro, says that it wants to buy a large quantity of oil. If it still looks like it has very little tourist travel, and thus very low revenue in the future as well, governments may not want to accept IOU’s from it. There is the possibility of making the transactions more barter based (I will sell you oil if you will provide wheat in return.), but this is cumbersome, and will lead to much reduced trade.
There could also be a problem with just the difficulty of dealing with multiple currencies. Suppose each US state (North Carolina, South Carolina, etc) has its own currency. In addition, many local cities and villages have decided to issue their own “currency,” good only within their own community. How does one trade and travel within this system?
Basically what you are saying Gail is that IOU’s isn’t a good monetary system. I believe a lot of us believe in that, and from what I read between Ikonoclast lines is that the value lies in real assets in the form of resources (including your present ability to work with your hands). Bartering systems are very good for a energy conserving future, it means that you only get stuff for what you got in trade. Its a change of mindset from “all I can get” to “what I need to get by”. Money is only a token that is spun out of an idea of selling your future ability of generating the ability to do the barter over time. Its really a fault of the whole system and the major reason why we are consuming at an ever growing rate. Basically we are consuming to cover future debt payments as well as the stuff we need right now.
Some say however that debt based systems help people out of poverty by giving them means to sell their soul to the devil (banks) in order to gain some feeling of wealth in the present time. But essentially you are really just a rich slave instead of a poor free man.
I agree with you that at one point you need some token to simplify bartering when you need to assemble several resources in order to e.g. make a computer. And that is basically some sort of “money”, but I cant help but feeling that if this was based on real physical resources (like gold) we could have a good system still around. A common global currency would also be nice (gold?).
Another thing I agree with Ikonoclast is that if you absolutely need a raw material (e.g. oil) to drive your car, money isnt an issue, we will pump it up if we need it. I think its better to think in terms of ERoEI – if something gives you more energy out for each part invested – it doesnt matter if the stuff costs $1000 a barrel or $100. To compare this with a real world example. If it takes 1 unit of energy to plant a potato that gives you 10 units of energy in return when eaten, a high “price” on potatoes, will just make more people value their 1 energy unit better spent in planting their own potatoes instead of buying them on the market. The only problem we have with this today is that someone “owns” the area to plant those potatoes, forcing people to buy expensive potatoes on the market. In my view its the classical fight between the classes and the masses. When it gets too bad, the classes get overthrown for the masses, and the potato fields are open for people again.
Ofc, I realize that i sound overly idealistic in my reply there, and in that sense Gail is naturally planted more in the real world problems and with the rules of the game we are playing right now. In that sense I guess collapse is unavoidable.
But I guess it helps still to ask these questions, much like John Greer (with a long beard) and Chris Martenson (without the long beard). If/when we experience the collapse, at least we have some think tanks who have evaluated the options at hand when all we got is our hands and ERoEI to think about again. Somehow I cant help but feel Ikonoclast might be on to something about the fact that we have to learn to conserve energy in such a future anyway. And if done right, it might even work out – unless the planet has turned to complete anarchy. 🙂
If you read Debt: The First 5,000 Years by David Graeber, you will discover that barter doesn’t really work to run an economy. The usual approaches are either (1) A gift economy, where people gain stature by the amount they give away, rather than what they keep. There are parts of the world that are still on a gift economy. (2) Some system that allows a person to “run a tab” and pay back with the goods they produce. I don’t have Graeber’s book with me here, but as I recall, the earliest systems were that the government leaders were paired with religious leaders that ran huge temples. The temples allowed significant exchange of services. People brought food, some to trade, and some for offering. There were services available too. People ran tabs, and paid when they could. The tabs were an early form of debt.
What has happened now is that we have raised debt (and other equivalent promises) to new levels, far out of proportion to the underlying resources. If the world is not as well off in the future, it will be nearly impossible to make good on these promises.
Keeping supply chains operating will become increasingly difficult if oil is constrained. I think this will be a major obstacle to keeping oil flowing. Even if we “absolutely need something” it may be out of reach, if we cannot make all of the necessary intermediate steps happen.
Yes I agree with you that e.g. getting to the oil that is left in the ground now requires some serious costly infrastructure involving many different fields of expertise and energy for all of these. And you are probably right that in a bartering system it would be simply impossible to get together the systems to get it out of the ground. I guess a monetary system allows for a way more complex system of collaboration between humans.
This is why I also worry about a collapse turning into scavenging hunt where we take any resource that is easy to get hold of. Chopping down every tree in sight and all that which we did in previous civilisations. As I have said earlier we can be somewhat happy that the steam engines were powered by coal (and later oil) and not trees. I can imagine the earth’s flora and wildlife taking a serious toll with 7 billion of us around fending for themselves. Even the coal we have left in the ground (which is considerable amount) is probably not easily accessible without serious collaboration and technology.
It seems to me too that the fossil fuels that are left in the ground pretty much will need our current complex systems for extraction.
I think the one exception may be some coal that is close enough to the surface that we can get it out of the ground with simple tools. But even with this coal, I expect we will mostly be able to use where near where it is extracted, because good long-distance transport possibilities will be lacking. As I recall, lack of good transport was a limiting factor on coal transport in the past. Even now, there are huge amounts of coal that are distant from population areas (for example, in Alaska, Canada, and Montana) which we have not tried very hard to extract, simply because other options which were closer to markets, and thus cheaper to transport, existed. It is possible we might be able to extract some of this, and use it locally.
I agree with you on the issue of too many people for the amount of trees and wildlife. It seems unfortunate to me that we are working hard to find ways to use our biomass for purposes such as making “second generation biofuels” and for making wood pellets to export to Europe. It seems to me that these purposes are not really sustainable for the long term, and will deplete supplies that could be better be used by people trying to live simpler lives, if we are living in a period of severe recession or collapse.
I do take issue with two aspects of Gail’s forecasts. This might mean I am one of those “individuals dominating comment threads only looking for weak points in main articles to give huge controversial replies”.
Or it might mean that I think if some points are debateable then they should be debated. However, I will try to keep my comments brief.
Clearly I agree with the central thesis of this site. In my own words I agree that;
1. The earth is finite.
2. Growth cannot continue indefinitely in a finite system.
However, I am not entirely convinced that the end of fossil fuels is the end of everything to the extent that Gail depicts it. Although, it might be if we burn ALL fossils as very severe climate change will follow.
I might be wrong but I feel that Gail dismisses renewable energy for debateable reasons and makes assumptions unbacked by a fully quantified analysis. Gail’s position seems to be that ALL renewables can NEVER in any way supply any significant quantity of energy to keep ANY kind of civilization going above about a 1700s level civilization. I take issue with this.
Wind is now demonstrating 20:1 EROEI (energy returns on energy invested) and solar is now demonstrating returns of 10:1. This is over the operational life span. The assumption that natural oil, natural gas or coal need to be involved in the cycle as fuel, lubcricant and chemical feedstocks may be flawed. We have to move our thoughts from the IC (Internal Combustion) oil powered economy to the pure electrical economy. Our economy and our plant and infrastructure will have to be transitioned over about a generation.
Much of our current energy use is lavish and wasteful. We could live substantially as well on half or even one third of our current energy consumption. This is particularly true of the USA. Private cars with IC engine vehicles will become a thing of the past. Some people, perhaps the rich, will own private electrical vehicles. Government, military, emergency, essential services and some farm vehicles will remain powered by gasoline / diesel for some time to come. Eventually they will switch too but necessary products like avgas and jet fuel could be synthesised from solar and elictrically created methane. Air based tourism well end. It will be unaffordable. Sea travel including large modern sailing ships with wing sails may well become the norm. People will have to walk, cycle and use public transport.
City design will have to change. Eventually walls, roofs and even windows will be generating solar power. Passive design will be utilised to heat, cool and ventilate buildings. I live out of town on an acre and a half in sub-tropical Brisbane, Australia. In winter, I need no heating. I just put on a jumper. In summer, I need no cooling or air-conditioning provided I am willing to put up with a little discomfort. If I stay slim and fit the heat is no bother. Slim people lose heat more easily.
In summer and winter, my solar panels system (5.5 kW nominal capacity) provides all power in the sunny daytime and feeds much extra into the grid. My solar hot water system does most (about 85%) of my water heating over the full year. The already existent electrical grid is my “battery”. I draw on it at night and when there is no sun. About 15% of the houses in my larger area have similar solar systems. The grid can handle that although it might be near its limit. They will not allow many more houses to connect solar to the grid. Our grid locally is still totally stable.
The assumption that the grid cannot be re-engineered to allow more solar and wind feed-in is false. The assumption that heat cannot be stored for later conversion into electical power is false. See solar salt storage. The assumption that large windfarms and solar power stations cannot be made and integrated into the grid with solar salt storage is false. The assumption that solar cannot make power at night is even false! Solar convection chimneys produce power 24/7. In fact they can make more power at night as the temperature differential between ground level and tower top is even greater at night. The assumption that these facilities cannot be made industrial size is false.
I could go on but that is enough.
I have to agree with Ikonoclast here, though I’m not convinced that Gail is guilty to the extent that he describes. The thing is, there’s a big problem in that people of all persuasions – cornucopians and peakists too – tend to assume that we MUST generate the same level of energy in order to keep society running, and as I see it, that just isn’t the case. If I actually bother to conserve energy (which I don’t), I can easily cut back to 25% or even 10% of the energy I use now. I don’t need my computer on all day – if I conserved and managed my computer time, I could deal with it being on for just a couple of hours. Same with TV, heating, cooling, etc. – all I need do is break out the wool pullovers and blankets and install a couple of fans rather than relying on air conditioning. The thing is, we in the US are so used to embarrassingly vast excess that we don’t even have a clue how much energy we’re wasting to keep stuff running that we aren’t even using and don’t really need. Today, I know I spent 75% of my home’s energy doing stuff that I wasn’t even around for. For example, I left my computer on in my 2nd floor office while I watched TV for 4 hours in the basement. Why? Because energy is so fricken cheap – I don’t need to conserve, so I don’t think about the need to switch stuff off.
We will be able to live quite comfortably at 25%, even 10% of the energy use we have now. The only problem is, we’re so hugely spoiled by a century of essentially free energy that 90% of the time, we don’t even realize how wasteful we’re being.
And although I could save money by getting my house’s energy audited and installing insulation, I don’t, because a year’s heating and cooling cost about the same as the audit and the insulation installation. We are not conserving because energy is so stupidly cheap that we can’t afford not to just waste energy.
At least I ride a bike everywhere, so at least I’m not a complete hypocrite. But this is the issue – we all assume that today’s consumption of energy has to be equalled by any future energy system, but it just doesn’t. We don’t have to get renewables to the point at which they can substitute for the amount of oil we use now. If we simply get serious about conservation, we can easily live on the energy that renewables can already provide. We just need to get really serious about changing our habits so that we can find ways of living well on less energy.
This view on energy and consumption may be correct for an individual. Of course the individual may save. But to see the big picture, we have to think on a higher level. The younger generations and the people on low-paid jobs may not be able to have a house with 2 floors to begin with, so there comes your reduction in overall GDP, and once that starts in a country for good, the choice is between default and money printing, i.e. financial collapse.
The issue is that you use your salary to buy things. Pretty much all of the things you buy use energy in their production and transport. If you save money by not buying one type of goods or service that uses energy, there is a good chance you will buy something less.
I will grant you that if we cut back salaries of everyone to 10% or 25% of what they earn today, the people with the lower salaries will indeed cut back energy expenditures by a great deal, but probably not by as much as their salaries are cut, because essentials (like food and commuting) require energy. Also, people who are making minimum wage now would have a real problem with this arrangement, because they would not be able to cut back enough, and get food and other necessities.
Also, what we are dealing with is a situation in which electric companies have fixed costs they have to cover, such as repair of transmission lines and repayment of debt. Oil companies need to operate refineries and pipelines, no matter how few customers they have. Even if it is possible for customers to cut back to 10% of what they have been using, the economic model doesn’t work for the companies producing the electricity or delivering the oil. If customers cut back by huge amounts, they may soon discover themselves without a company providing the service they were expecting. So they inadvertently end up cutting back by 100%, because the companies providing the service go out of business with such low sales amounts.
Goods and services don’t have to rely on energy used for transport. I live in an area that has farmland aplenty within a few miles, and extra land if we need it. We can grow crops and raise animals here – we don’t have to import meat from New Zealand and vegetables from Mexico. We just don’t. We can quite easily move back to a more agrarian economy. Sure, we need a few years for transition, but there’s no peak oil scenario that doesn’t give us a good few years. Oil is not just going to suddenly disappear. The decline will affect luxuries first and essentials last, otherwise, popular riots will ensure that essentials get subsidized (whether the political right likes it or not). Heck, in terms of crude oil, we’re in a post-peak world right now, yet people who could telecommute haven’t even given up road commuting yet and people who commute an hour to work are not even feeling a serious pinch. As far as I can see, this is just not happening fast enough to pose a truly serious problem.
On the issue of the poor, they’re probably not in the energy market at anywhere near the level I’m at. Many poor people don’t have cars or air conditioning. It’s folks like me and those richer than me who are doing an enormous amount of energy wasting and we will be the ones to make the big difference in terms of conservation when the stuff really does hit the fan. The poor will be hit very hard and they will provide the impetus for the big changes when the food riots start. But that will be dealt with by subsidies and a movement towards localization and socialization.
As for electric companies going out of business, we can probably handle that. I grew up in a house with no central heating or air conditioning. My grandparents grew up in houses with no electricity. The loss of electrical, gas and oil service is not an extinction event except in places like Alaska and Las Vegas.
In terms of transportation, very few people commute more than 8 miles. They can start cycling and/or move closer to work. Those who have a longer commute will be out of luck. They will be forced to move or find work closer to home.
Sure, these things aren’t optimal, but the fact is, we have the ability to transition very quickly to a more local economy in which we don’t need all the luxuries of the past.
You live in an area of farmland. The way we farm today is with tractors and soil amendments (sometimes including fossil fuel fertilizer), and irrigation, and pesticides and herbicides. We have metal (even electric) fences to keep the animals we are trying to raise in, and the kind of animals that would eat what we are raising out.
Without fossil fuels, it is very hard to have metals in any quantity. This puts a real limit on what we can do. We might be able to reprocess some existing metal, but even this takes heat. There are severe limits on what can be made from the reprocessed metal–it will not be pure enough to make parts for a computer for example, and will likely not yield a good knife edge, but it might make a satisfactory wheelbarrow.
The productivity of farms back before fossil fuels was very low. It is hard to see that your farm could avoid a big drop in productivity.
While some people could live off the farms, I am doubtful that you would have as much produce to send to the city as is the case today. Thus, I expect that even if your farm (and other farms like yours) could get by, the lower amount of food available for the city would limit city populations.
I am not in agreement with the “peak oil scenarios” you talk about, with a slow decline in production. In my view, the scenario that actually happens depends on the financial situation. This could cut off quite a bit of oil production, and of purchases of oil. See my post, An Economic Theory of Limited Oil Supply.
The way we farm today is not necessarily the way we’ll farm in 5 years. 200 years ago, people farmed without tractors, with natural soil amendments, natural irrigation, natural pesticides and herbicides. They had no metal fences because they used animals in ways that would help the soil and keep pests out.
We did not use fossil fuels in any quantity before 1750. The age of steam was powered by coal, yet wood can also fuel trains and steam engines:
We can have heat in a world without fossil fuels. We are indeed limited in what we can do, but what we can do is still a lot. Not all of the advances made during the industrial revolution are dependent upon coal or oil.
My farm is in my back yard. I doubt very much it would have a drop in productivity. I’m pretty sure I’ll have to expand it, but I have lots of space to do that. As for sending produce to the city, I would expect that people in the city will have to start farming too, on whatever land they have. Your argument seems to hinge on people just sitting idle while their fossil fuel driven world comes crashing down around them. I just don’t think that’s likely.
I totally agree with Ikonoclast and Ian here about conserving. I feel that even with our current infrastructure there is lot that can be done about conserving energy. A good example to reduce CO2 emissions is simply to fly less. People are very restless it seems, wanting to fly everywhere as often as possible – personally I cant stand travelling. Why most people would be more educated about a place by reading a wiki page than going to the place. Its a mentality thing that needs to be fixed and regulated. Same so with “business travels” which are just incredibly stupid. I am sure 90% of them could have been done over Skype or some other electronic communication.
As for travel I believe electric cars are the future to reduce energy use on transport to at least 1/4 of what we use today – and along that a reduction in CO2 emissions.
I believe what our society needs to ask is more “what do we need to get by?”, instead of “what can we make to continue our energy glut?”. Its amazing how much debt people put up with when in reality they dont need all the stuff they buy, including the huge size of the house they live in. Its because we have been taught to be good consumers, and media has way too much influence on peoples decisions to buy stuff. Basically you could blame capitalism for this, but in the end its us, the consumers who make choices. In some places our choices have been limited due to energy high infrastructure, but I am quite sure that with some effort (getting off your lazy butt) – you could as Ian say, cut your energy use to 10% of what you are used to.
I believe what Gail assumes is that people are just too lazy to change anything, and so the collapse will be a self fulfilling prophecy due to our inability to take action. As Ikonoclast demonstrates with his choices, its all down to the individual. It surely helps if enough people were motivated by a reality check about our energy predicament. 🙂
With respect to wind and solar, the issue we have is that we are already getting way to close to maxing out on them. The grid simply cannot adapt to them, without a lot of cheap storage (which we don’t have).
The Los Angeles Times had an article yesterday, Hawaii’s solar power flare-up: Too much of a good thing?
Subhead: So many private solar panels are returning power to the grid that utilities fear their systems can’t handle it all.
Germany is having problems too right now. One of the problems is that the subsidies for wind, and the way the pricing works, tends to make gas-fired power plants unprofitable . Another article talks about the need to subsidize natural gas in Germany, if wind and solar are subsidized.
Another problem is grid instability. Der Spiegel had an article, Instability in Grid Comes at High Cost for German Grid
ANother problem is the need for major changes with respect to the electric grid, if it to accommodate offshore wind. Renewable Energy World says,
The Canadian Free Press reports, Germany’s Energy Policy: Man-Made Crisis Now Costing Billions This is a Nicole Foss article on intermittent renewables, pointing out yet other problems.
As far as I am concerned, the EROEI of Wind and Solar, as they are calculated without the impact on the grid, and the energy cost of mitigating this impact, really are irrelevant. The EROEI might be 18 or 10 for the first wind turbine or solar panel put on the grid, in a place where the grid can really accommodate them. But as the number scales up, the problems quickly become huge. Maybe salt storage is part of the solution, but we will need to watch and see in the months ahead. I think we are going to be hearing more and more of the, “WHat a mess we have made for ourselves,” stories.
I had a little smile about ianbrettcoopers ideas of ‘city dwellers farming on any land they can find’. Let’s hope Ian’s backyard farm is a long way from hungry citydwellers looking for land.
At least comments in here are good for revealing the bizarre thinking of many people, one cannot ignore such comments, they should be widely read, they form the core beliefs of millions.
As I’ve pointed out before, the American nation and the viable steam engine came into being in the same year. Everything we have, literally everything, is dependent on the output of some form of hydrocarbon energy. Every industrial advance has been dependent on oil coal and gas. without it, we do not have a civilisation.
anyone with the delusion that we can chop down trees ad infinitum should look at undeveloped nations where they’ve done just that; Ethiopia is a prime example, where woodland has now become desert They have to walk miles to find enough wood to cook food, and here we see suggestions that you can run steam trains on wood.
I have an even wackier idea–though it does work. During WW2 in europe, cars used to have wood fuelled gas engines. A wood burning oven was fitted behind the car, the wood produced gas, which was fed to the engine like gasoline.
Now where did I put that axe?
Well said. All this talk about local products is amazing. I’ve studied logistics, and if I learned one thing, it is this: our lifestyle depends COMPLETELY on economies of scale and global supply chains.
So true. I can imagine the inhabitants of New York taking a bucket down to the river for water and then carrying out their excrement to dump it there later on in the day, with no access to antibiotics either..
Return to a simple life style actually means return to a massively reduced population level in which your choices are reduced to one. Find enough food and shelter and live, or die.
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I always wonder about the potential of electric vehicles. Is enough lithium available to build millions of them? Would enough coal, natural gas, and uranium be available to ramp up electricity production to charge them, as more people had to abandon petroleum fueled cars as the price of fuel skyrockets, and it gets severely rationed by the government, so as to save as much oil as possible for critical users? It would take some study to figure that all out !
I had guessed that oil would be about $200 a barrel by 2020, and $400 by 2030. But with China and India, it could be double that, unless electric cars become predominant in the developed world. I think most cars sold after 2025 in the USA will probably be electric, if the lithium is available to make the batteries, because by then, gasoline will cost a fortune. It might even be severely rationed, depending on geopolitics of oil exports. I see most 18 – wheelers using LNG for long trips. Railroads might switch to LNG locomotives with the engines fed by hoses from tank cars behind the engines. I doubt if coal burning steam locomotives will make a comeback, but they do work. And pollution beats starvation.
These IEA people believe everything they read on the Internet about shale oil. They watch the pitch men and con men on CNBC too much. Go to too many conferences trying to separate rich investors from their money too much too. They will discover that there is a lot less oil in a thin strata of oil shale than in a thick conventional oil field that can be hundreds of feet thick and extend for many miles. Is shale oil and gas the next housing bubble? We shall see, but I won’t be shocked if it is. Remember how real estate prices could never fall was the traditional wisdom? That didn’t work out too well.
As I have often written, we will run out of money to pay for the oil long before the oil runs out. The problem won’t be that you can’t get any oil. The problem will be that you won’t be able to afford it. The demand destruction form trying to pay for that expensive oil might just wreck the entire global economy.
“The demand destruction form trying to pay for that expensive oil might just wreck the entire global economy.”
And that’s why I think we’ll probably never see oil at $200 a barrel. The problem is, by the time 2020 rolls around, the economy will be so screwed-up that no one will be able to afford oil even at current prices. So the price of oil will drop until no oil company will be able to profitably extract the difficult-to-reach oil that’s left.
Unfortunately, I think you are right. The economies will be so screwed-up that no one will be able to afford oil even at the current prices. So the price of oil will drop until no oil company will be able to profitably extract the difficult-to-reah oil that is left.
I don’t know about lithium precisely. It has the same problem as most resources–there is some available for the price we are paying now, but if we want very much more, it looks like we will have to pay quite a bit more. So the problem likely will be that the lithium doesn’t run out; it will just be that electric cars become even more unaffordable than they are now, because of the high lithium cost. It is related to declining EROEI.
The issue with the high price of oil is that it leads to recession and job layoffs. So there are two ways we may not be able to afford it (1) high price, and (2) out of job, so we can’t afford it at any price. As I mentioned in the post, I think high oil prices are already having a very adverse impact on the finances of oil importing nations. They are very much related to the debt crisis several governments are having.
The basic premise and headline of Gail’s post is 100% correct. BlackVoid has also got it right. The IEA “has an abysmal track record of forecasting”. The key point is that organisations like the IEA are run by managers (more specifically managerialists). Yes, they do employ scientists and economists but the managers are in control and determine and mandate what most actually go into the reports.
This business managerialism worldview is a corporate mindset now common to both government agencies and private corporations, especially but not solely in the USA. This mindset denies empirical reality because perceiving empirical reality is deemed to be bad for business as usual and general business confidence. Actually talking about empirical reality is bad form, very bad business or agency etiquette and will get you sacked or black-balled from almost any business and most government agencies. I know because it happened to me.
Denial of reality is programmed into the entire system. If you talk about uncomfortable realities you lose your job. The only people left in jobs are those who comply with unreality of the entire system. This is how business, public and political discourse are kept at such an unrealistic setting. Only those who keep to the unempirical business line (that the growth party can go on forever) get to keep their jobs and get promoted to positions of decision making, policy setting and influence.
It’s very scary isn’t it? To think that the criterion for promotion and success in our society is the denial of all the more fundamental big picture aspects of empirical reality on earth! It explains why we are heading for total disaster.
I hope the total disaster doesn’t come before Monday. I was hoping to go surfing this weekend.
I also have to speak a word in favour of Gail.
I’ve been reading an earlier post from july 2012 where there was a discussion about individuals dominating comment threads only looking for weak points in main articles to give huge controversial replies, thereby discouraging other (maybe newcoming) readers to stay tuned. imho, sounds like people working in the energy sector and recently feeling superior to us peakists.
Some commenters – and I can see they’ve been on this blog for months and years – seem to be missing the big point always being made by Gail that cannot be disproved: we are already DEEP in problems like debt, for pretending BAU in the face of expensive oil / energy. Without the bailouts we would already have seen “Greece” all over the place. Now even if there is a US oil and gas boom at somewhat lower prices than world market, that is FAR FROM “BALANCING” anything. Remember debts are higher than anytime in history and growing unchanged. You would have to go PAYING BACK DEBT AND BALANCE YOUR BUDGET by using cheap US energy, for decades. Now how likely is that? And then you have some of your trading partners still deep in recession, so how long will your success story last?
The IEA has an abysmal track record of forecasting. None of their important forecasts in the last decade or so has been proven right.
In the mid 2000s they consistently projected oil prices around $30 and they also projected a constantly rising production.
The IEA report is foremost a political report, it is too widely distributed to contain anything but a grain of truth. But actually, reading between the lines it is obvious that the IEA is aware of the coming energy crunch, but they are just not allowed to say it.
In spite of that, the latter temperature rise reports are serious consequences of our current lifestyle. Knowing that they tend to underestimate for the good of politics, we are sure in for a serious ride if the temperature blasts up in e.g. 10 C more on average during this century. I guess thats why people like Guy McPherson has practically resigned the idea of us getting out of this and even promote the idea extinction of all life by 2050. No doubt a desperate way to try to wake up people, but I am beginning to think he believes this more and more for each year that nothing seems to change about climate policies.
I am not so sure though. Perhaps a serious global economy collapse can bring the emissions down to something that gives the planet a necessary “breather” to get the excess CO2 out of the atmosphere… although we are most likely talking about thousands of years to get it back to what it was. Unless the methane dangers in the north is really tipping over and wreacking havoc to it all – in case Guy McPherson was right on the money. (I normally dont believe in doomerism, but serious methane outbursts could really bring the planet to its knees if you study the models for that).
There are some forms of life (some plants) that might welcome a methane build-up. If we think of the world in terms of what we humans want, it is not at all good, though.
Thanks for a great blog post. I have learned long ago never to trust analysts, so not surprising that IEA has got some things wrong.
I argued in a blog post yesterday that they got the projections for road based transportation very wrong as well: http://blogs.dnv.com/lng/2012/11/world-energy-outlook-natural-gas-stands-out-from-fossil-fuels/
I guess the only thing we know for sure is the future will not be as they project.
I agree with you in part. However, I note you say, “And in terms of reserves, we can ride the natural gas wagon for quite some time; at current consumption rates there is enough gas for 230 years.”
It is never valid to make projections “at current consumption rates” when the world population and economy is still growing exponentially. Exponential growth makes such projections soon look very unrealistic indeed.
In addition, any plan to use up all our fossil fuel reserves (oil, coal and natural gas) is a plan to inflict disastrous, civilization destroying and humanity extinguishing climate change on the world (of the order of 5 to 7 degrees C warming or even worse). Empiricism forbid that we should ever start using or relaeasing methane clathrates from the ocean floor. The earth in that case will suffer runaway climate change and possibly even end up like Venus with 500 C surface temperatures.
Don’t forget the sun is hotter now than at the time of the last postulated methane clathrate out-gassing on earth. “… there is … evidence that runaway methane clathrate breakdown may have caused drastic alteration of the ocean environment and the atmosphere of earth on a number of occasions in the past, over timescales of tens of thousands of years; most notably in connection with the Permian extinction event, when 96% of all marine species became extinct 251 million years ago. – Wikipedia.
Indeed, compounded by the simple fact that it is cumulative emission totals which, not ‘growth’ in emission levels, which do the damage.
‘growth’ merely accelerates the process; non-growth doesn’t stop or reverse it.
The ‘growth’ meme is so wrong, because it distracts us from the real issues of cumulative overload (emissions / pollution) and capital depletion (use of non-replenishing resources).
You have a point there. It is not growth per se that is the problem with resource depletion and CO2 emissions. There is a different problem that is growth related though, and that is that our current debt-based financial system needs growth, the way it is constructed. This is part of the reason why I say the financial system is the part of our current system that is most at the edge of breaking. If we had only the other problems, the date of breakage is less certain.
What happens is that we have a number of different problems going on simultaneously. The financial system problem adds to the other problems. If nothing else, it makes it harder for governments to hang together. If governments collapse, the rule of law and order that we are used to becomes less certain. All of the various problems we have work together to bring down the current rule of humans, and transition to the earth’s next state.
One post where I talk about the cyclic nature of the world is How energy shapes the economy?
I guess this is what Albert Bartlett has been trying to tell people too, our brains inability to grasp the exponential formula. In my opinion, logarithmic scales should be banned from all statistics, as its the cumulative sum that is always what we have to deal with in anything, and not its growth rate.
I think the IEA is very much influenced by political objectives. See my post Objectivity of the IEA from a couple of years ago.
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For the record, my basic theses on this topic are;
1. The earth is finite.
2. Growth cannot continue indefinitely in a finite system.
3. The masses pay little of no attention to warnings from knowleadgeable experts.
4. The masses would rather reason from faith than from science and logic.
5. If we don’t limit ourselves to sustainable populations and economies then natural forces will do it for us.
6. Doing it for ourselves would be tough and even ugly.
7. Nature doing it for us will be 10 times tougher and uglier.
No one disputes 1. The dispute is with the timing of 2. It now looks to be delayed for at least a decade, perhaps ten.
I think you will know that “peak energy” issues are returning to the forefront when everyone agrees “peak energy” is dead (the way people thought in 1999). This will take a while, the last time took 25 years, that seems a good guess this time as well.
Peak oil delayed a decade or ten? In your dreams!
The only thing making people think that peak oil is dead is the Bakken shale play, and that is about to go south (see https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats.pdf ).
Peak oil, even if it is delayed, cannot be dead. It’s a mathematical certainty for goodness sake! The whole idea that it is ‘dead’ is wishful thinking, and shows a level of desperation that is quite telling. The peak in world crude production happened in 2005. All liquids cannot be far behind – ten years at most.
Hear! Hear! The voice of logic from ianbrettcooper.
I am always astonished that people cannot understand the two very simple propositions (and empirical realities) that, as I said above;
1. The earth is finite.
2. Growth cannot continue indefinitely in a finite system.
My theory is that most people do not understand the difference between “big” and “infinite”. Their basic thinking is that the earth is big, really really big, and humans and car and trucks and houses are small, really small by comparison. Therefor such small things could never affect such a big thing as the earth earth by, for example using up, most of the accessible oil or changing the climate with CO2 emissions. *
Buttressing this inability to quantify and do simple operations like add, multiply, divide, etc. there are the emotional / religious beliefs that Nature (or God) is an actual being and a benign being at that. Nature (or God) will always look after us humans. After all, hasn’t the universe evolved / been created solely with humans in mind, who are of course the centre and meaning of the whole universe?
That is the basic mindset of 99% of the population.
* Note: If people used a little imagination they would realise from everyday experience and standard common knowledge that really small things (like virus molecules or bacteria) can affect really big things (like people). So by extension… You get the picture.
“Bakken shale play, and that is about to go south ”
OK, let’s bet on it. The Long Now has a site for public bets. I bet the North Dakotas annual total maketed production of oil + natural gas (total BTUs) will be higher in each of 2013 to 2023 than it was in 2012.
2012 was a massive record setting year, as you indicate.
The next 10 years, each of them, will be better
The Bakken will actually be an energy juggernaut for more like 20 years. It’s “decline” phase will be more like a transition from a wet play to a dry play. It has a fortune of natural gas to produce, even at current prices.
Look, peak oil is going to spend the next 5 years, minimum (and probably the next ten) being publically humiliated by the media. Better prepare for that now.
I do think peak oilers had some interesting and thoughtful things to say. But they became prideful and media obsessed, and overstated their case. Now they are reaping whirlwind, as the media has turned from “peak oil is real” to “peak oil is dead”. If you think the latter phase will be shorter than the former, think again. Every year that the total US production of oil goes up, that’s another year that the US based media says “peak oil is dead”. Until they get tired of saying it. Because US production of oil will go up for at least the next 10 years.
And come on guys, you think Alaska can’t be fracked? Geez louise, once they get bored fracking CONUS they will just move up and frac Alaska. They’re just waiting to get some sort of natural gas infrastructure put in. As soon as that happens, boom, another decade of frack-tastic stories.
Personally, I’m sort of looking forward to it. The peak oilers mislead the public. They overstated their case, and acted like obnoxious know-it-alls. Now comes their come-uppance.
I don’t bet.
But I give it until 2015. After that, everyone – even you – will be able to see it for what it is – a ponzi scheme.
In order for production to keep increasing in fields like the Bakken, the number of wells has to increase exponentially. No matter how productive they are, these wells all have a lifespan that’s very short indeed. In order to keep increasing the production of the entire field, the oil companies need to keep drilling more and more wells to outpace depletion of older wells. At a certain point, a law of diminishing returns kicks in. Just watch Bakken over the next three years.
We can see the beginnings of it in the Bakken now – as of 2010 it already seems to be beginning to falter. Output per well has reached a plateau and all the increase is coming from new wells brought online.
The increase in production of the field is most likely due to the fact that over 1000 wells have begun producing this year alone. Half of all the Bakken wells that are now producing began output within the last 18 months. That is not the profile of a long-term prospect – it’s the profile of a flash in the pan. Once growth of rigs reaches its natural limits (whether it’s lack of workers, lack of land or some other limit) oil production must fall off.
Look at the Bakken figures – since 2008, every time they’ve run into limits in regards to getting oil wells set up out there, the production falters. This was the case after November 2008 on a whole field basis, and in July 2009 and June 2010 on a per well basis. This means that the per well figures are only staying high because the massive influx of new wells is camouflaging the depletion rate of older wells.
This is why the big oil companies are not all that interested in shale oil plays. These are prospects that smaller oil companies go into in the hope that they can get private investors to assume the risk, which is large – and the payoff is not there unless you’re really only in the game to sell oil wells to gullible investors and take initial profits. In effect, it’s a ponzi scheme. I believe we’ll see this play out over the next three years.
So if you want to bet, do so by investing in Bakken shale – if you’ve got the nerve.
“So if you want to bet, do so by investing in Bakken shale – if you’ve got the nerve.”
Right, well, I did that already.
Apparently you lack the nerve. I’m happy to make a public bet with you, but you won’t do the same. So it’s clear who has nerve and who doesn’t.
The reason I don’t bet is that I’m a Quaker.
The reason you’re so sure that the Bakken is a good bet seems to have a lot to do with the fact that you’ve already bet on it. I think if you could look at it impartially, you might not be so quick to bet on it now.
But either way, I advise you to withdraw what money you have while you’re still making a profit – if the terms of the deal allow you to do so.
“The reason I don’t bet is that I’m a Quaker.”
The Long Now does public bets with the proceeds going to charity. Quakers have no problem with this, my wife is one.
Does your wife represent all Quakers?
“Quakers recognise only one standard of truth, and consequently do not swear legal oaths. This attitude is also reflected in their avoidance of speculative business deals and gambling.”
Quakers recognize the inner light in our individual consciences.While your wife may have found a way to reconcile her conscience with an acceptance of gambling, I have not.
wow, what a cop-out.
Again, the proceeds go to charity, so it doesn’t violate any Quaker tenants, even the most extreme.
Why not just admit you’re probably wrong and don’t want to be humiliated by the silliness of “Bakken about to go south”. Bakken is easily 5 years from peaking, and if you measure total BTUs (to include gas) it could be 20.
Minimum – it’s really hard to say where it will go, could be 50 years of OPEC sized production.
“They overstated their case, and acted like obnoxious know-it-alls. ”
To be clear, Gail simply overstated her case, she never acted obnoxious.
But the rest of the crew – Jeff Rubin, Chris Nelder, James Howard Kunstler, the late great Matt Simmons. Cmon, half of the media problem that peak oil has now is a reaction to the completely obnoxious demeanor of those guys. They set the whole peak oil movement up for a big fall. And so it begins.
Burning all those straw men should power us for millennia
The item that limits growth in a finite world is the financial system. Governments in particular start having troubles with their finances, because of the indirect effects of high-priced oil.
The thing needed to prevent collapse of the financial system, because of the collapse of governments, is much lower-priced oil. It would also need to be available in quantities needed so growth could continue. I don’t see this happening, and I don’t think you do either.
The possibility of oil production continuing at high prices, doesn’t really fix the situation. Neither do the gas and coal possibilities.
The US has a huge capacity for substituting gas for oil and coal. As does the global economy. These things are happening right now, and will continue to happen.
If you look at the aggregate energy bill of the US in any sort of inflation adjusted way you will see that it is not high. I can only assume you don’t do this analysis because it disagrees with your thesis.
“2. Growth cannot continue indefinitely in a finite system.”
Actually, CONSUMPTION (of non-replenishing resources) cannot continue indefinitely in a finite system.
Resource consumption and pollution (e.g. CO2 emissions) are cumulative; the damage is done wheteher we have ‘growth’ or not.
What can and does happen in a finite system is that it shifts from one state to another. While humans are the dominant species now, and we have certain environmental requirements, the earth could very well shift so that another species is dominant, with different environmental requirements. If the level of CO2 is high, the new species could very well be some type(s) of plants, that do not consider CO2 and changed climate a problem. This type of state shift has happened many times in the past. There was a recent article in Nature called, Approaching a State Shift in the Earth’s Biosphere.
Those sound like good points.
Trying to limit population seems like an exercise in futility. We overcame “survival of the fittest” long ago, and this seems like the natural outcome.
Everyone may argue as much as they like. Empirical reality will have the final say. I am through arguing. I have scarcely ever seen anyone change their views from unfounded opinion to considered position based on empirical facts. This is once unfounded opinion is fully formed and butressed by religion, ideology or other faith-based “reasoning”; ie. the position of most opinionated, poorly educated adults in our society.
I don’t have the time to rebuttal your entire post, but in short you are very wrong. You hand picked your sources to portray your message, but most of your sources are seriously
Energy return on energy invested is actually improving for tight shale plays. The most recent break even price I have seen for the bakken is $55/bbl (2010-11). That is down from around $75/bbl 2005-08.
We have not yet seen a new technological plateau in drilling technology.
The problems you identified with current shale plays mostly have to do with infrastructure and manpower issues.
Even with increased drilling rates it would take more than 10 years to fully develop the bakken/three forks play.
There are several other geologic horizons (formations) that haven’t even been targeted in that area yet.
I actually expect we will see oil prices stabilize by around 2015 for some period of time.
Long story short we are going to see the same thing happen to liquid petroleum products as we did with natural gas.
Demand is the only uncertainty at this point. It is possible that demand may outpace production increase, but I think that for the next decade or more domestic production increase will easily outpace demand growth. (global scale may be a different issue all together)
It is best to think of continuous resources as something totally new. Old energy models are not easily applied.
I think Ben has a lot of good info in his post.
However, it’s hard to see how “we are going to see the same thing happen to liquid petroleum products as we did with natural gas.”. At least within the next 10 years.
It will take at least ten years for global expertise in tight oil to come up to speed with the US. During that time, it seems unlikely that the US will produce enough oil to crash the global price – the demand is just too high.
I think it is more realistic to say we will see tight oil plays using the oil market to guarentee profitability and the natural gas sales will just be a bonus. They will dry for tight oil even if henry hub pricings fall below $2. If henry hub goes above $4 there is all the more incentive to drill, both the dry shales and the wet shales.
So henry hub is braketed for at least 10 years (with possible short term spikes), while oil is somewhat expensive that entire time. And, of course, the US enjoys a discount relative to other countries even on oil, as oil does not ship for free.
But a true oil glut on a global scale – that is hard to fathom during the next decade, at least. The global oil market is so much bigger than the american gas market, it will be an entirely different thing to glut the former, and much less likely than the ongoing glut in the latter.
Pete, we are in agreement for once!
you agree that henry hub will remain cheap for a decade? that’s a lot of cheap energy for the US to use.
It has always been pretty volatile, and that won’t go away, but coal prices do put a cap on price. The amount of natural gas extracted is likely to go down a lot if it remains cheap for another decade.
“The amount of natural gas extracted is likely to go down a lot if it remains cheap for another decade.”
No, if it remains cheap it will be used more, not less, and supply must balance demand.
But that’s all thinking the wrong way, the price is capped from above, so it will remain cheap(ish).
The supply will not go up indefinitely with low price. Suppliers will look at their costs, and move on to something else.
US natural gas production has been pretty much flat since December of 2011, if we believe EIA data.
But there is no doubt that a great many analysts (especially peak energy people like Gail) are simply in denial about the fact that there is a learning curve in play here, and that the industry is still in the steep part of this curve. The EROI of shales has been improving and will continue to improve. It is very hard to get accurate, non-pessimistic forward estimates of reserves and production because it is very hard to see where the technology curve will flatten with re: to shale energy extraction. It seems like that the current predictions will look foolishly pessimisstic in 7 years, just like the 7 year old predictions do now.
Thanks for your reply!
Lets think about this, leaving aside the question of whether Bakken in reaching limits.
The problem of rising cost of oil production a general problem, not necessarily related to the Bakken. For example, there were recent reports that mining Canadian oil sands is suddenly not a sure thing, due to rising costs. If prices were higher, production would still make sense. This kind of thing is happening elsewhere too. Sometimes, it can be more for political reasons– Middle Eastern countries need higher oil prices, so that they can provide more subsidies to their people, and keep things in line. Even Putin in Russia is at the edge of needing higher oil prices to keep have enough revenue to pursue the kinds of programs he would like.
World oil prices need to be high enough to sustain even oil with fairly high costs of production, if world production is to continue to rise. Thus they will tend to rise from current level, perhaps by the 7% a year I am suggesting. The higher world oil prices will feed back to affect production costs in Bakken, so that they will be somewhat higher, because of the need to buy oil for production at prices that reflect world prices. The price Bakken oil will sell for will be based primarily on world prices. (Of course, if world prices are lower than production costs, this would be a deterrent to production.)
So if production does ramp up, it will likely be at high world prices.
The question of whether Bakken and other tight oil plays can ramp up, and can stay at a high level, depends on whether all necessary pieces stay in place–capital for the cost of fracking, workers for the oil fields, and drilling rigs, for example. We are talking about something like four times as much production. Where would all of the horizontal drilling rigs come from, and all of the trained workers, not to mention capital? Bakken can probably ramp up some more, and we can add some other plays, but it is hard to see all of the pieces going into place very quickly.
So I think most of what I am saying is true, whether or not Bakken is running into production limits. I would agree that basing my analysis on one analysis that concludes that Bakken is already running into limits would be applying a lot of weight on one person’s conclusions. But I think it is pretty much true, with or without his analysis.
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My largest frustration these days is the generational gap of understanding and/or caring about this issue. Some of it is just plain lack of interest or denial from people.
I explained what was happening to my mother (60) a few years back in the hopes that she’d start making moves to live more sustainable, save more and plan for the future. Short of buying a firearm (and I do think this is a good idea, despite some of the anti-gun nonsense out there), she’s done nothing. I gave her a book on how to grow food using the raised bed method…nothing. Nope, since she’s retired she’s gone travelling all over the world, saved nothing and pretty much brushed off any suggestion of being more responsible and acknowledging that one of her sons (25) can not find a job to save his life or is working terrible part time jobs and the other one (me, 31) is stuck in a go-nowhere finance job where wages have stagnated and the extreme capitalist owners are using the ongoing contraction as a way to underpay everyone. It’s like her vacations and money spending are her denial therapy.
My mom does not get that eventually it is very likely that her pensions from the State and the Federal Gov are likely to either be cut off or will have seen so much inflation that her purchasing power is diminished greatly, despite my constant explanations of why this is. Broke governments with high unemployment and poverty can’t tax people to pay for these pensions. Not to mention that it’s not ultimately a money problem (we can print that all day long), it’s a resource problem.
The tragedy here is that she HAS the resources we need collectively as a family to prepare and be in good shape…I only have a portion of them and I keep working in my frustrating job hoping that I can manage to last long enough to get everything I need…but I don’t know. Either way I see my mother, if she continues on the path she is on, losing what relatively meager wealth she has accumulated and then relying on her sons for the rest of her life (and the women live long in our family). The irony is how many options we collectively have now, but how she has no interest in doing anything or even reading about the issues herself. It’s like self destruct mode but it just seems selfish to my brother and I. I guess the lesson for me here is to be more concerned about my kids (if I have them, there’s another issue) and teach them about lack of selfishness among the family.
The Baby Boomers are starting to be despised by many in my generation as they keep getting wealthier why we get their scraps. No one ever said life is fair but these transfer payments…guaranteed not to be there for my generation…are a mockery of what they were initially intended to be.
wow, your mother sacrificed years of her life raising you, and now you’re begrudging her golden years so she can continue to take care of you and your brother?
your mother faced her challenges in her time, now it’s your turn, and your brother. Sounds like you want to ruin her retirement so that you feel less unhappy about your own misreable state of affairs. And you think she’s selfish?
Let me guess…you are a baby boomer. Figures….
Why don’t you spend some time reading about how families did things before the industrial revolution and the nanny State? It was NOT retire at 60 years old and then live the high life off good and unsustainable pensions while your kids see lower wages, decline and eventual unemployment. Get some nuance, boomer.
I don’t need support, buddy. Read between the lines. I didn’t ask for anything. I just want some sensible planning as a family instead of the Baby Boomer selfishness. You party while the younger generations burn. THAT is selfishness.
I’m not a boomer. I’m bout 10 years older than you.
I don’t think it makes sense to hassle your 60 year old mom because her garden isn’t big enough. Or even to dump the whole “burdens of your generation” on your mom.
Have you been to a grocery store in the last decade. News flash – frozen spinach costs 30 cents a serving. Ditto frorzen carrots and peas. If her budget gets a bit squeezed, do you really think she’ll be saving big bucks substituting some high maintainance garden.
Yeah, I’m jealous of the pensioners too. They ripped off the system, shamelessly. But that was a whole large group, of which your mom is a tiny part. And that has nothing to do with this weird idea that she’s irresponsible because she doesn’t have a garden.
Honestly, it would be less obnoxious if you just asked her for a little financial help for you and your brother. There are ways she can adjust her situation so she’s leaves little to nothing behind when she does, in exchange for a little help for her kids in the here and now.
Did you expect her to say, “Oh yes, I see now that you are right. Everything I have worked for throughout my life has been for nothing. Every achievement that I have been so proud of has actually made things worse. And now, at 60, I have to start learning how to grow my own food – digging the dirt, instead of going on holiday.” ?
The Government, IEA’s WEO and the mainstream media provide people with every argument they need to avoid having to change, see https://en.wikipedia.org/wiki/Cognitive_dissonance
No, I did not exactly…but our closeness and openness as a family…I guess I expected her to see the bigger picture over time. That has not happened yet. I know of cognitive dissonance and I think that is precisely what it is. I get completely where my mother is coming from and I don’t begrudge her the right to enjoy some retirement…it just seems selfish given where we are headed and the shape the younger generations are in. The interesting thing about selfish is how relative it is.
It is hard for my generation not to come to the conclusion that the Boomers partied, mismanaged and took all they could get and left their kids with little. Jobs? Gone due to offshoring and tech improvements designed to eliminate jobs. We spent gobs of money developing the undeveloped world so they could eat our lunch and now look where it has led us…unemployment, debt and a very bad future.
I find the ‘generational issue’ rather tiresome. (I am the last of the depression era children). I do agree that many retired people are spending their money rather frivolously (in my opinion). But then I run into people who used to be retired and now work retail to bring in enough money to pay the rent. And I know rather elderly people living on quite small amounts of money by choice.
I work on a farm with college educated young people who obviously expected quite a different future back in 2007. I find them to be remarkably level headed and hard working (but maybe they are a self-selected group and not representative). Back in 2005, it seemed that all the college kids could talk about were hook-ups at dance clubs. Now they seem much more sober about the real world.
So I find the generalizations about generations to be tiresome. I think they were invented as marketing hype to sell stuff. Sort of like USA Today and its dreary stories about how ‘it’s Super Bowl time and we are all so excited’. Or stories about the latest celebrity and how ‘everyone adores her or him’.
I think we CAN make some generalizations about different time periods. For example, the 1950s were an easy time to grow up–unless you were gay or black or a pregnant teenage girl. It is sobering to watch Cary Grant in North by Northwest as he pleads guilty to drunk driving and pays a two dollar fine–today he would be in jail. But each individual reacted differently to the times, just as each individual is reacting differently to the challenges of this time period.
So I would a lot rather hear about individual strategies for coping with challenges and those who are ‘being the change they wish to see’ rather than debates about generational generalizations. What am I supposed to learn from stereotypes?
As a Boomer of 63, I quit my yuppy lifestyle at 31, and tried the self-sufficiency thing, living in communes and on rented farm land. What I learned over the years was that it is a lot of hard work, and subject to the vagaries of the weather and “Hey, where did my tomatoes go? !!!” .
I then started to write a book trying to bring together all the threads of consumerism, deforestation, pesticides, biodiversity loss, the hole in the ozone layer, and the latest alarm of global warming. As part of my research I came across the book “It’s a matter of survival” by Suzuki and Gordon (1990), which was in essence my book. There is no shortage of books, and now web-sites, making the information available for anyone who cares to look, so that can’t be the solution.
Tired of people saying, “Who are you to be telling me what I should do?”, I decided to go back to university and get a degree in ecology, then I could speak as “an expert”. That didn’t improve my standing in the community either. I turned to politics, and failed to make any impression. I turned to journalism and failed utterly.
Then I discovered Peak Oil, and thinking the Government didn’t know about it, I started emailing politicians and journalists about it. But eventually I realised the brick walls I found everywhere were not due to ignorance, and never had been. The powerful have been briefed about all the problems for ages, and their response is to organise a disinformation campaign to prevent any movement for change catching on. They have massive amounts of (our) money available to use to run propaganda campaigns, steer scientific research in certain directions, think-tanks to write reports, and the media laps it all up uncritically because the media-owners are friends with the politicians and share the same political interests.
So don’t be too critical of the Boomers. We railed against the establishment too in our day, in fact we were going to change the world! – I know, pathetic isn’t it.
There are always too few of us railing and too many of them going along to get along. But at least we tried, and are still trying. At least we never gave up.
You deserve congratulations for all you did over the years.
It is frustrating. Yesterday, I was on a group phone call with Jim Baldauf, who is the President of the Board of Directors of ASPO-USA yesterday. He remarked that all of this is in some ways an extension of all of the anti-peak oil messages being put out over the years. In some ways, this seems worse, though. It is coming up with really strange projections to justify some preconceived answer.
“, this seems worse, though.”
Agreed, it is the worst time to be a peak energy person in the last 10 years, perhaps ever.
It is not a bad time at all though to be a “peak oil causes huge financial problems, now” person! We can’t directly substitute natural gas or coal for oil. You just said in another comment that you see oil prices staying high for the next 10 years. Problems from high oil prices “concentrate up” to the financials of the governments of oil importing nations, for the reasons that I described in the last section of the report. It is these near-term financial problems that are our undoing (US fiscal cliff, Euro Zone debt problems, Japan high debt rate), regardless of how much high priced oil we think we can get out of the ground, and no matter how much natural gas and coal there is. It is the financial problems that will most likely interfere with the production of all three!
It’s always darkest before the dawn. That’s why I like it when things like this get worse. When people really start ridiculing us, that’s when I really start sensing that we’re about to be proven right.
“. When people really start ridiculing us, that’s when I really start sensing that we’re about to be proven right.”
I felt that way in 2008 when gas and oil were incredibly expensive and peak oilers were being taken seriously on the news.
I wouldn’t hold my breath waiting for expensive natural gas or declining American oil production anytime within the next 10 years though. This is a technology shift, not a one-off discovery. You think they aren’t reevaluating geologies all over north america because of what happened in marcellus, bakken, eagle ford, bartlett? Exploration means something different now, they will find more of these, now that they know what to look for. And the technology learning curve is a long way from flattening. You peak energy people are completely hosed.
Pete, I have read your comments here on many of Gails post and in one way its nice to have some opposition here to bring out the worst in people. 🙂 – Often a lot of concealed truths come out in these cases.
But it seems to me that you deny peak oil? I am not quite sure where you stand on the energy predicament? Gail’s blog is after all a blog about a finite world – an in fossil fuel is a finite resource. For many of us it doesn’t really matter if peak oil is now or in 20 years time, I doubt many of us will take pleasure in “I told you so” kinds of cocky attitudes when the economy is suffering from energy production problem (like we have experienced).
The point is that at one point we really need to realize that our civilization has been created on the foundation of finite resources stored in the ground for millions of years and you cant deny that a discovery rates of late has been very bad? Or do you still believe that there is a big Ghawar just lurking around the corner? Do you consider fracking the new Ghawar that will supply the world the next 100 years? What kind of timeframe do you operate on when you criticize Gail’s theories? I am at a loss here, as its an important message trying to come out here from the people who do believe we have energy supply issues, that we really need to work on conserving energy and not believe that we can wish more oil in the wells whenever we need it. This IEA report is a dangerous one that really seems to ignore all the signals from both an ecological and energy standpoint – it seems almost fabricated to please investors in some way that it should bring back the economy on track, although I oppose that kind of conspiracy thinking. They might be right that fracking has indeed created a “breather” with regards to US oil production – but its highly likely that this is only for a short term, and whatever IEA recommends should be to take action into finding ways to conserve energy, not use it in the rate that stimulate growth in the traditional way.
At least one good thing has come out of it, the pressure for the US to do more military operations to secure the flow of oil has been put on hold for a while, hopefully for a long time – although I cant see “fracking” without energy conservation happening at the same time helping in the long run.
JohnAnderson – for all practical purposes, peak oil ended when it was discovered that America has a huge supply of natural gas that can be extracted economically (sub $5 mmbtu).
The almost equally huge quantity of American oil that can be extracted for sub $70 prices is almost as signficant, but captures more attention because people are most familiar with oil.
The significance for America is huge, but more important is the global fracking opportunities.
Peak oil has been deferred for at least a decade, probably 2 or 3. In that time, other energy technology will be developed, energy tech that looks just as silly now as fracking did 15 years ago.
“It is hard for my generation not to come to the conclusion that the Boomers partied, mismanaged and took all they could get and left their kids with little.”
Name a generation that the next generation won’t say that about. Heck, if your parents were boomers, you’re Generation X – the MTV, video game and grunge generation. In terms of partying, Generation X makes baby boomers look like shut-ins. And you think you have it rough with mismanagement and unemployment? You should have entered the job market, as I did, in Thatcher’s Britain.
I was born in 1962, so I’m stuck right between two generations and I can see both from a bit of an outsider’s perspective. Trust me, no generation is pure as the driven snow, and every generation has people who are trying their best to do what’s best. You shouldn’t tar everyone with the same brush.
The day will come when your generation will be accused of messing everything up – and it will have done, because every generation does. The important thing is to rail against those of your peers who are doing the screwing up for your generation.
That is a good point. With all of the stories out in the press now, no one needs to even think about the problem.
I’m not sure it is entirely a generational issue. A lot of people find this issue difficult to think about, much less attempt to take action on. About all we can do is inform our friends/family, educate ourselves, and take what steps we ourselves personally can.
The area I personally am most active in is writing posts to try to educate folks. I do a little gardening, but I don’t claim that I could support myself with what I do.
Another outstanding analysis of reality. I have always like your Fig. 3. It is admittedly oversimplified but very telling of what is happening. i would just like to see you to put more emphasis on the “slower to extract” aspect. One of the reasons we are in the opening act of peaking oil production is that the resource base we are trending toward is the “very slow” remaining portion. That will become more evident as the years pass. This is why the analysts who are constantly trying to change the narrative to “look at the size of that resource base” are misleading the general population. It is not the resource that counts – it is the flow rate.
That is a good point. I may not have emphasized the “slower to extract” issue point enough in this post. Even if the base of my triangle is bigger, with the finite amount of investment capital we have, we cannot invest fast enough to get it out at the rate we did in the past.
“In fact, there is evidence that the “tight” oil referenced in Exhibit 1 is already starting to reach production limits, at current prices. ”
OK, let’s look at some of the production limits.
Golly, where are the production limits in those graphs, exactly? They are going up. month after month, for the last 3 years.
By “production limit” do you mean “increasing production”? Usually those terms mean opposite things.
Some tight oil areas have already peaked, why did you exclude them in the rosy picture?
The point exactly of the article is that you need to drill ever harder just to keep production flat. To up production 10 times in that environment is hard and will likely not happen. Remember that the decline rate in tight oil fields is often around a whopping 40%! If you cant afford to drill for just two years your production will have decreased by 2/3.
And obviously the best tight oil is what is being brought up now, the oil thats left tomorrow will be slower and more expensive to produce.
here is what an older shale play (a dry shale play) looks like
skip down to the Barnett shale graph.
See, the rig count collapses, and the production amount meanders along.
That graph goes to jan 11, I believe the results since then are similar – almost no drilling in the Barnett, but still healthy production.
After time, they can come back and refrack for more production, it’s cheaper than drilling the first time.
And this is a dry shale. If the price of natural gas was higher, they would go back and drill more.
Barnett is an old play, so its a good indicator where things are heading. The gas will set there and wait for us to drill more when price recovers. Collectively, all these plays are a price ceiling on gas in the US. The wet shales will still yield gas for years even after they are done yielding liquids, and plays like the Bakken are 5 years old and still booming.
Rune Likvern is sort of like Chris Nelder and Art Berman. They have funny theories, but the production data refutes their theories.
Read Rune Likvern’s report I mentioned. It has to do with number of wells to produce a given amount of production.
Perhaps we will have to wait and see.
Thanks for this rebutal Gail, I was truly amazed by this report, and the stream of articles that have followed in the MSM all over, with people truly buying it.
You end up wondering what is the strategy around it.(even if the “US energy rennaissance or revolution” is only one message amongst several in it).
I don’t know to which extend the “financial bubble” aspect (pumping investment capital to cover opex, and then exiting at the right time) of shale gas and oil is a reality, as described for instance by Deborah rogers in :
But if it really is the case, you could also see this report as some form of “investment advice communication”.
Would be interested to have your views on this.
Also creates some “funny” reactions, like :
(although overall seems to me Exxon for instance is still betting and investing more on Kurdistan conventional oil than North Dakota tight one …)
> “what is the strategy around it”
Firstly our leaders are NOT stupid, as is often claimed. But they are caught in a bind – they cannot admit to Peak Oil because that implies Peak Energy (eventually), Peak Industry, and Peak Capitalism. So they hope to hide Peak Oil and postpone the peoples’ realisation that this Capitalist paradigm simply won’t work in the future.
The work of Hubbert was disregarded, even after US oil production peaked in 1970. The Limits to Growth report was derided, and still is. Peak Oil is repeatedly mis-defined as “running out”, and attention is drawn to Reserves, when it is production rate that is the issue. The Hirsch Report (2005), which EIA commissioned, was removed from their web-site. Oil was redefined to include a lot of things that aren’t oil. The distinction between Crude Oil and Condensate was omitted from their statistics. Daniel Yergin is treated like a god, when he is just an industry shill. New oil finds are described as “giants” when they are mere minnows. And on and on it goes.
This doesn’t happen by accident – it takes a lot of effort to hide something as critical as this. The ace up their sleeve is the ability to start World War 3, when they can bring in a “war economy”, which allows them to impose severe austerity, especially in fuels, crack down on dissent, find jobs for unemployed youth in the military, and grab land and resources without paying for it.
While I have much more complicated opinions on the intelligence of our leaders…nefarious, clueless and self serving are the words I would use, I do think the way they will handle the fallout due to PO that you laid out is pretty much dead on. They will indeed take us to war.
Society already has its cult leader…Obama….who can do NO wrong…to follow into some war…probably under false pretenses. I just wonder who the Democrats (possibly the Republicans but they don’t do charismatic BS as well as the Democrats) find next to replace Obama and if he’ll be as good at conning people.
Spot on. Look at Gaza. third world slum next door to a first world country with a mushrooming population..
What it needs rationally is emotionally unthinkable. A neutron bomb.
If you think that first world values should prevail.
Or alternatively a Mugabe style ‘kill every Israeli’ and wipe Israel from the map, so everyone dies equally young and miserable.
However the latter solution is no solution at all.
I’m not sure at all of the war strategy right now, I think for the US (and more or less OECD) it is more about maintaining the status quo, that is :
– operating the oil security job
– oil traded in $ and $ reserve currency
– ability to sell bonds
Iran could be considered a special case as the only major middle east current producer not under direct US influence, and Iran tension is very much linked to its “relationship” with Saudi Arabia. And Iraq being more or less in the process of being split right now (with the result of the war being a lot a much stronger Iran influence in Iraq).
But this declaration about shale gaz and oil being really a game changer in the US is really something, a lot of it has to do with the need to restore confidence for sure, but I wouldn’t be surprised about direct financial motives behind it, the report also mentions the high growth of necessary investment in the oil & gas industry.
But overall yes, there is the inability to pass the message (and in fact Fatigh Birol in some more “off line” interviews was much more direct, but maybe won’t be the case anymore).
I hadn’t thought about the issue from this view.
The IEA has recently been very much worried about climate change. The IEA has a lot of political ties too, so it needs to show the growth will continue as well. This time they seem to have manufactured a report which would come up with a way to theoretically prevent climate change, but also all the economies sail on. The US actually has the largest number of votes in the organization (when I looked a while back), so it may be that US folks liked this kind of outcome.
I don’t think these folks think through consequences very well. If they want people to conserve, why in the world would they put out a report that seems to be widely interpreted as “The world is awash in oil. We have no problems at all.”
The Bakken and such seem to be handled by smaller companies, rather than the majors. This makes them more dependent on outside financing than otherwise.
You keep repeating this canard, despite the fact we have been over this at least twice.Theory being if repeated often enough, people will believe it? One more time.
First off, there are plenty of soft foods around which can be eaten raw. Insects, worms, grubs etc are ubiquitous in nature and all can be eaten raw. Fish remain fairly plentiful and can be eaten raw. Fruits and most veggies can be eaten raw.
Even foods that benefit from cooking like grains can be cooked in solar ovens quite easily in most parts of the world (not where I live except for a few months in summer, but most places). Besides that, if we JUST used Nat Gas.Coal for cooking, it would last indefinitely, and so would wood. These fuels get consumed rapidly in the smelting of metal, transportation and heating, not in their use for cooking.
On the “Powerful Jaws” issue, we don’t need them, we have hands and rocks. A Lion needs a powerful jaw to crush bone and get marrow out, a human performs the same task with a couple of rocks. Tough meat can be pounded to tender. Nuts which animals crack with their jaws a human cracks with a rock. Etc etc etc.
On the livable environment issue, clothing is what extends our range of living environments, and does not require fossil fuels at all. Skins of animals are the first obvious ones, and we still do know how to spin fibers of flax, hemp and cotton also.
Now, I do not make the case that 7B people can live on a planet this way, but to continue to make the case that Humans are biologically adapted so we MUST use fossil fuels just is not true, and is obviously untrue. You really gotta drop this stuff out of your articles, it absolutely destroys your credibility.
There is not enough soft food for 7 billion people. We have to process grain to eat it. It is a major factor in our food supply today–directly, and through what we feed to animals.
There are some things we will simply disagree on.
But doesn’t the coming fuel crisis mean that there will not be 7 billion people on the planet in 50 years?
I think there are likely to be fewer than 7 billion people on the planet in 50 years, but I didn’t think this article was the place to tackle the issue.
Why not? Because the Editors at Biz Insider can’t HANDLE the Truth?
When WILL you write an article which is the “right place” to tackle the issue? I’ve been reading your blog for a couple of years and I have yet to read an article where you don’t sugar coat what you write. One of the wags over on the Diner said I should have Retitled this article as “Delusional Lunatics at IEA Claim US Will Be Net Oil Exporter By 2030; Staffers Decline to Cut Back on Crack” when I cross posted it. LOL. Its a little closer to the TRUTH.
Different readers like different titles. That is why I told you that it was OK to title it the way your readers would like.
I will be interviewed by Jim Puplava on the Financial Sense Newshour in the near future with respect to this article.
I have read a bit about human history and how we evolved from hunter gatherers to cultivating the soil. It is quite clear that the “green revoluition” is only possible with a large portion of fossil fuel input. There is simply no way classical agriculture can feed 7 billion people today unless everyone is also a farmer. The nature can provide a lot, but the plannet would be pretty scraped if 7 billion people started eating anything they came across without putting energy into re-cultivating the soil and breeding livestock.
No doubt the future will have its fair share of new farmers on the fields, but along with it I think we will see a natural depopulation of the planet as resource conflicts start and less energy is available to health care and transportation of food. As John Michael Greer say, the changes will likely come slowly like any previous empire in change, so the changes might even seem natural for newer generations (just like the use of tablets and computers are a natural thing among kids growing up today). Their parents might miss the car, but the kids would think that taking public transit to get anywhere is the way things should be. Similarly the amount of people working in agriculture will also grow naturally to feed the population.
“But doesn’t the coming fuel crisis mean that there will not be 7 billion people on the planet in 50 years?”
Precisely the point.
No argument that we can’t feed 7B people without Fossil Fuels, what the Industrial Ag system does is take fossil fuel energy and turn it into food. Remove the fossil fuels, we’ll produce far less food, so far fewer people can be supported.
That is NOT the argument Gail makes when she says Human beings are BIOLOGICALLY ADAPTED to REQUIRE Fire to cook “hard” foods we can’t chew with our “small jaws”. The subtext of this argument is that when the fossil fuels run out, we’ll burn up all the forest then go extinct except maybe for a few in specific environments like Chimpanzees. The concept is so epically WRONG its hard to know where to begin.
First off about the only “hard” food I can think of here that we usually cook and don’t eat raw are grains like rice and wheat. Even if you accept these grains would be part of the diet of a smaller population, there are other ways to process besides cooking. You can ferment them. Rice Wine and Beer have a lot of easily digestible calories, just look at the belly of any J6P NFL FootbaLL Fan. 🙂 You can feed the grain to chickens and eat the eggs. You can feed it to goats and drink the milk. Besides that, as mentioned you can use solar cookers you can make from Automotive Windshield Glass, plenty of those around.
In trying to figure the carrying capacity for Homo Sapiens in the absence of fossil fuels, you first eliminate all the people living in Big Cities, who can’t survive for many other reasons besides the fact they won’t have fuel for cooking. The cities require FFs to pump water and sewage. They’ll quickly have epidemics from lack of potable water. So without this population to feed, you are probably closer to being able to grow enough food absent FFs for the population.
This then is further limited by water availability for Ag, and many areas like the Midwest aren’t getting enough rainfall to support much ag, the water has to be pumped up from the Ogalala Aquifer. Similar situations exist in other grain growing areas of the world, so you can eliminate more people because there just won’t be as much grain around to cook to begin with.
What you get left with is a population that mostly would live near rivers and in mountainous areas that get good rainfall and can be terraced for Ag. Add some coastal populations making a living from the sea.
Substantial reduction from current population, but the idea this remaining population is “Biologically Adapted” so they cannot survive without fire or “soft foods” is just Epic Fail Anthropology. When she makes these preposterous arguments, Gail the Actuary morphs into Gail the Failed Anthropologist. It compromises the credibility of the rest of her work, and should be dropped.
“In trying to figure the carrying capacity for Homo Sapiens in the absence of fossil fuels, you first eliminate all the people living in Big Cities, who can’t survive for many other reasons besides the fact they won’t have fuel for cooking. The cities require FFs to pump water and sewage. They’ll quickly have epidemics from lack of potable water…”
The only problem with that is that many big cities have been with us for thousands of years before the advent of mass fossil fuel usage. Water and sewage flow into and out of big cities using pressure and gravity and without fossil fuels. They have done so for centuries. sewage pumping stations are used in some places, but these can be powered by steam, as they were in London in the 1860s.
But even without adequate (or any) sanitation, big cities have thrived. Sure, there are epidemics, but epidemics rarely kill more than a small minority of a city’s population. The idea that cities will be uninhabitable after the end of the age of fossil fuels is nonsense. For that to be the case, cities would have to be a late 19th Century invention, and they were not. By 1851, half the population of Great Britain lived in cities and the population of London grew from 1.1 million in 1801 to 2.7 million in 1851.
“By 1851, half the population of Great Britain lived in cities and the population of London grew from 1.1 million in 1801 to 2.7 million in 1851.”
By the mid 1800s, the Steam Engine was already well established for pumping water in London and other cities, allowing their expansion.
As many people in NYC found out after Sandy, Gravity and natural water pressure only brings water up to around the 4th-6th story of any building, after that the Toilets don’t flush until the Power goes back on. NY, London, Singapore et all have large portions of their populations living in upper story apartments. The numbers of people we are talking about are not the 1M that lived in London, they are an order of magnitude larger, 10M-20M in places like Mexico City.
The way the infrastructure in cities has evolved since fossil fuels will make them virtually uninhabitable once the fossil fuels are gone.
I agree that cities have been around for a long time. In Guns, Germs and Steel, Jared Diamond in Guns, Germs, and Steele (page 205) says:
I presume that Diamond has studies to back up his thinking. If what he says is true, this may be the secret behind pretty much all of the cities in existence. With each mother giving birth to quite a number of children, a number of young in each family would survive until maturity. Only one could take over the family farm. The others needed to migrate to the city, or join the military, or otherwise occupy themselves. This may explain the apparent contradiction.
The festering, plague ridden stinking cesspools called Cities of the 17th & 18th century before the invention of the Steam Engine had nowhere near the population of today’s cities. The population of London was 550,000, today it is 8M. Paris, 515,000 in 1700, 10M today. Even if you project some kind of cities in the absence of Fossil Fuels, you are talking greater than 90% Die Off to approach this.
I recommend you visit – say te Brazilian favellas, or Soweto outside Johannesburg, or any slum in any third world country, before you claim that cities could survive without artificial energy input. And those areas are parasitical on the (fuel) richer cities they adjoin..on their own there would be no reason for them to exist, and no possibility either.
Actually, it is quite likely that when humans went from being hunter gatherers to settling down to cultivate the soil, the cities they built were exactly the conditions needed for diseases to spread. Archaeological finds of 6000 year old cities in Syria seems to indicate a higher number of younger people dying from diseases than previously. Settled civilization comes at a cost, and the way we fight it now is indeed with a lot of modern hygiene utilities and medicine. When helping teams travel to poor countries to help out, creating a system of good hygiene and a source for clear water is no doubt the highest on their task list after getting enough food. Its also the most common problem after floods, with quick spread of diseases in contaminated water.
I think even a low energy future, human beings will do a lot to keep these utilities running, although I agree that tall buildings is a challenge, and most likely people would have to spread out more in smaller buildings over time, leaving the skyscrapers to nature… although who would want to live around a decaying tall building anyway? 🙂 – The energy cost of servicing our infrastructure down to new plaster on the walls is immense, and is usually the first to go in a declining energy situation.
The scary scary thing John, is that a modern post industrial city has almost no reason to exist at all.
If we look at the history – I will restrict myself to the UK, because its a location I live in and have studied – we see that the early towns were more or less Roman, designed as military and administrative centers: they were not large.
Post the collapse of Rome, the native British were largely herders with a bit of agriculture: the population was spread more or less evenly wherever farmland was good, and in the absence of major conflict, not fortified. The family ‘village’ was about as good as it got.
Then later incursions by Angles Saxons Jutes and Danes and population expansions forced two changes – more collective habitation for defense, and more pure agriculture to feed the population. Major towns were ports or market towns of some note, but urban populations were not large even then.
With modification, that pattern persisted until the industrial revolution when two things happened to create huge urban settlements: the problem of transporting food from the hinterland was solved by the coal burning railway, and the overall efficiency gains of large scale manufacturing in ‘factories’ meant that urban centres attracted the rural poor into manual factory labour.
And the products OF those factories meant less labour and more productivity was available to the rural farmer. Not only in this country, but overseas as well, this leading to pattern of massively fossil fuelled manufacturing, purchasing its food requirements from a less sophisticated and global rural hinterland. And the British Empire was the result.
Now, in the 21st century it is hard to see what the function of those industrial towns is: Like Detroit in the USA they would be (without the massive social security support they get) ghost towns.
They exist solely as historical dormitories where people live from cradle to grave without much prospect of a job, and massively disconnected from the infrastructure and the hinterland that allows them to exist at all.
Today with robots and capital replacing much of the skilled labour, and low cost Asian labour filling in the gaps, its not only a question of what are the cities for anymore, but worse, what place have the Western countries in the world, at all?
Take away fossil fuel, technological superiority and there aint much left.
The only model I can see that actually allows anything like the preservation of a post industrial lifestyle is one where the infrastructure is massively automated and population is drastically cured to the level the agricultural hinterland can support at whatever level is deemed ‘civilised’
And the whole shebang run on nuclear power which is the only source that replaces the majority of things we use fossil fuel for. And finally some form of social contract is hammered out that accepts that the majority – the MAJORITY – of people in the gene pool have nothing of any value whatsoever to offer the nation in terms of real economic activity at all. They are pure consumers and will never produce anything of social value at all. They will hacve to be funded from the cradle to the grave by the output of the very few farmers, technocrats and so on, that actually have the narrow skills that make them valuable.
Or the other alternative is to ring fence the defunct cities and let them disintegrate in some sort of post apocalyptic scenario, and the people simply die. I.e ‘ the ‘Green/Renewable’ solution. A return to a mediaeval feudal system where life for most people is brutal nasty and short, and the few warlords who can keep the remainder in check become the new elite, the new ruling class.
Its happening already in the middle east. As the oil runs out the nations are left with populations whose aspirations cannot be satisfied and whose ability to do anything beyond hate and shout self righteous slogans is limited. They are sinking back into medieval barbarism with the exact religion that was created in those conditions as their mantra.
Hurricane Sandy showed what even a slight reduction in electrical power does to a city. The gasoline was there, but it couldn’t be pumped out. Families were left with no heating beyond a gas cooker. Food spoiled in refrigeration that no longer worked. A few days longer and water supply and sewage would have been an issue.
IF we have the power infrastructure, urban living is slightly less energy intensive for the people who do nothing, than rural living. But if we don’t have the power, the city becomes a death trap.
This all sounds pretty depressing. Perhaps we can all weave baskets in the city, if there are enough reeds (or whatever) for us to work with. We clearly need some people to make clothing and shoes, and perhaps operate small stores. But the range of occupations available is going to drop back greatly, and the need for big cities to house people with those diverse occupations is likely to go with it.
I quite agree that the future cities will look nothing like what we are used to. And as you say Detroit is a good example of an urban lifestyle left to cope for itself but its population still kept alive by government. Without a solid government to support the people in a down scaling of available energy, nature simply takes over, and people have really no choice but moving out unless they are able to acquire skills of use. I think this is where the big challenge is for people now, learning to cope with less and learn new trades. I am quite sure that a lot of people can live successful and happy lives if they just ditch the idea of a growth and technology future that will allow them to watch the telly or play video games all day long. Its quite clear that the only way any such future can happen is for a very small minority and only if the remainder of a dwindling population are able to maintain a highly automated society with whats left of our resources. Chances are that way before that there most people will be scrambling for scraps – trying to fend for themselves in the realization that the only reason they had food in their fridge was because of this huge fossil fuel infrastructure that is falling apart.
Like you say, the petrol was there, but the pumps didn’t work. So we really need to learn how to make manual solutions alongside the automated ones whenever the technology fails us. Its a general problem everywhere in the society today – we assume that if the technology fails someone will service it soon. In many cases the technology is left in a state where you really have no use for it until it serviced, which is really a stupid design decision by the initial creators. Lets imagine you have this fancy fridge that is connected to a food transport system (like tube-mail in the old times), and you ordered food from a touch screen on it – it deduct your credit card – and 15 minutes later the fridge has the food inside. Wow, would you say, amazing, I want a fridge like that – THAT is the future, that is real useful technology. But lets, say that we experience a power outage, and the door of the fridge wont even open because it has an electrical lock. I can imagine finding dusty skeletons lying in front of the fridge there… Haha. 🙂 – But a lot of our current infrastructure is designed like this – there is no plan B when the original design fails. This is exactly the reason why we have built our society on being able to transport goods far away, and why we accept stuff being made in China instead of in our local neighborhood. I am not so sure anyone really thought about a plan B if the supply chain fails at any given time. We seriously need to make our future more resilient to these problems, lessening the need for costly infrastructure for humans to get access to the necessary goods during a time of crisis.
“That is NOT the argument Gail makes when she says Human beings are BIOLOGICALLY ADAPTED to REQUIRE Fire to cook “hard” foods we can’t chew with our “small jaws”.”
I’ve not heard her make that argument. Her argument is that humans have not adapted biologically to all of the environments in which they currently find themselves.
This is true. Humans have solved their problems with technology (like fire) instead of letting the slow march of biological evolution do it for them.
The existence of technology has allowed some of the traits beneficial to life without technology atrophy. Take the appendix as an example.
Fire is directly responsible for the decrease in jaw size and increase in brain size.
Look down below TU, I dropped in Gail’s Quotes from the “Humans Seem to Need External Energy” article.
I am going to defend Gail here. I think this is a bit of an obscure and immaterial point you make. I completely recognize that there are other food sources that we choose not utilize out of preferences alone (Ex. Native Americans in NorCal use to leech acorns and then use the crushed nut to make a form of unleavened bread). The problem with your suggestion is:
1) Due to divisions of labor, what percentage of people can even cook, much less forage, hunt, or grow their own food? I think it is a very low percentage, especially the younger the generation. There is a knowledge issues here.
2) Do you think that cultural taboo issues are not going to come into play here? Of course they are. How many snooty Americans are going to try bugs for dinner? I think, pathetically, many would much prefer just to die. Is that crazy, yes, but it is a reality.
3) It is UNDENIABLE that are current food production methods are not intrinsically tied to fossil fuels. From the production to the delivery to the management (logistics), oil touches it all. As this breaks down, we will have food issues.
4) Okay, great, we start eating all the things that we don’t today. Then what? Extinction is what. We kill off entire species at the point at which the food chains breakdown. We over farm in haphazard and environmentally destructive ways. We Easter Island ourselves.
Ultimately, we live in a dynamic world that will adjust in real time both slowly when needed and quickly when needed to changing food situations, just like any population does. Eventually there will be an equilibrium. I don’t see how you can seriously say that the current food scheme is sustainable or can supply people. There is no freaking way!
I find myself alternately arguing against and for Reverseengineerre here, LOL.
“How many snooty Americans are going to try bugs for dinner? I think, pathetically, many would much prefer just to die. Is that crazy, yes, but it is a reality.”
Well, Americans (snooty or otherwise) seem to be fine with eating ground-up animal gristle and irradiated cow shit in their hamburgers. The fact is, if you package and market it properly, and as long as you take some pains to make sure it doesn’t kill too many of them, Americans will happily eat just about anything. All the meat industry has to do is call it Soylent Green and I reckon they’re onto a winner.
Thing is here, about anything Gail claims is impossible to eat without Cooking is possible to eat in many other ways. Grains which are hard to digest? Meal Worms eat them EASILY, and Meal Worms are VERY SOFT FOOD! LOL.
Eating worms Grosses you out? Man, if you grind them up into burgers, you couldn;t tell the difference between a Meal Worm Burger and a Big Mac! LOL.
I PERSONALLY have eaten MANY Bugs, starting when I was a kid, and I cannot say I really LIKE the texture as much as a nice Ribeye Steak on the BBQ but man there is no obstacle WHATSOEVER to eating them at all if you are hungry!
Gail is thoroughly immersed in the Age of Oil Paradigm, and it colors what she thinks is possible. I seriously doubt she ever ate a worm in her whole life.
Will lots of people just DIE because they can’t bring themselves to eat a Termite or a Worm? Probably. THAT is Darwinian Selection in ACTION!! LOL.
I’ve gone through all of her blogs and can’t find anywhere where she claims it is impossible to eat things without cooking them.
You seem to be constructing a false version of what she is saying so that it is easier for you to disprove. You’re not as logical as you think you are.
You must have missed Gail’s “Humans Seem to Need External Energy” article as you went through all her blogs. In the article she wrote:
“Strange as it may seem, humans seem to have evolved in a way that we have a need for external energy, such as energy from burning wood or fossil fuels. While the evidence is not 100% certain, it appears that we learned to use fire long enough ago that it is now necessary for our food to be cooked.”
“With the evolution to smaller teeth, smaller gut, and bigger brains, humans have a real need to cook at least part of the food they eat. So outside energy for cooking food is one real need for the 7 billion people on our planet today.”
In addition, in the commentary of that blog she wrote:
“But even if some people can get along now without external energy in the far North, it is pretty clear that are jaws are not made for chewing raw food, unless perhaps that raw food is just fish (which has reasonable nutrition and can be eaten raw). ”
Somehow Gail manages to forget a zillion things people can eat raw besides fish, from just about all fruits to tubers like potatoes and carrots to as mentioned previously most insects and worms.
Next time yougo though all Gail’s blogs, try not to miss the salient information.
You seem to forget that there are 7 billion people on the earth now. You and your friends can eat bugs and worms, but you are going to have a hard time feeding the whole crew on what you find tasty.
you cant extract natural gas from its sources without a huge amount of capital investment, neither can you use coal for the same reason. The industrial revolution basically kicked off through the steam engines used to pump water out of coalmines. Once they could get rid of the water, shafts could go deeper and more and more coal could be extracted.
As to wood lasting indefinitely, many of the deserts of the world have been created by too many people chopping down too many trees.
I totally agree here. In some way I think we can be somewhat happy that we found coal and oil as chances are the world would look like Easter Island if we had used wood to power our machines instead. The machine was indeed invented to help with coal extraction, but chances are that it would have been created even with wood as the primary power source – and chances are that some sort of “green revolution” would have happened too (although natural gas has a big play in that). Basically the invention of machines has enabled humans to work less and get more food for the exchange of energy. It would certainly have grown the population, although not by the insane amount that we have witnessed during our time of coal and oil as our primary energy source.
But who is to say what people will do when the oil and coal becomes hard to get? A lot of people talk about our fantastic big amounts of coal but they fail to account for how much energy goes into getting it out now. I’d like to see some future steam punk technology being able to extract coal from the bottom of the seas. A lot more people will turn to chopping down trees sooner than we want to imagine. This wasn’t a big problem 1000 years ago with around 250 million people, but with 7 billion who can imagine how the planet would look like after some decades?
As noted in QR’s comment, IEA’s optimistic scenario will be seen as a done deal. Smart money though at Barclays Capital and Goldman Sachs know something is wrong of course. For an analysis by Goldman, I see that FTAlphaville has another good piece, including a splendid GSachs’ graph of costs of oil projects. http://ftalphaville.ft.com/2012/10/19/1220571/oil-production-costs-in-goldmans-flatter-world/
“Oil production costs in Goldman’s “flatter” world
Masa Serdarevic | Oct 19 17:24
[FTAlphaville says] Goldman’s analysts, long-time oil bulls, are now expecting a “flatter oil price environment” in the next few years. In other words, they think prices in 2013 and 2014 will be “marginally” lower than current spot levels, and drift down to $85 by 2016.
Clearly not good news for the oil majors who have watched their own costs spike higher over recent years (our emphasis):
[Quote from Goldman Sachs] “We estimate that the global oil & gas industry needs c.US$115/bl to be free cash flow neutral after capex and dividends. Exhibit 3 shows that our estimate of the average breakeven oil price for the industry (for the purpose of this chart we include the seven US and European majors) is currently US$115/bl on aggregate, while it was US$84/bl only four years ago.
“The industry is effectively spending today for a high oil price environment, in our view. As the industry is already spending at a level consistent with US$115/bl, further capex growth from current levels will likely be more constrained unless oil prices move higher.
[cont….. ] “Our [GS]Top 360 analysis suggests that the industry has been extremely successful at discovering new barrels which break even below US$90/bl in two main areas: deepwater frontier areas, and unconventional liquids or ‘shales.’ …”
FTAlphaville adds “Which is just as well!”
So there is a limited time for US $80 – $90 per barrel, and then, … as you say.
There is another factor in exploration and development costs which is generally ignored: people. The median age of experienced people in the petroleum industry (at all levels, from drillers to geoscientists and engineers to university professors) is well over fifty. In the next few years we will be retiring or dying at a rapidly increasing rate.
The 1980s demonstrated that when new people are brought into exploration and production in large numbers, costs increase dramatically. Things go wrong (dry holes, blowouts, etc.) and projects run over budget because of poor planning. So when the current generation is replaced by much younger and less experienced people, we can expect to see dramatically increased finding and development costs.
This is a very astute point. I have a few friends in the industry who always point this issue out.
I know back when I visited some oil companies, aging staff was mentioned as a problem. Shell, I think it was, showed us how they had supervisory staff who could be contacted when workers had a tricky problem. The problem comes with recognizing a tricky problem–this is the benefit that experience gives.
In the BP Deepwater Horizon blowout, I believe lack of experience of a few employees contributed to the problems.
Out in North Dakota, I expect we are dealing with smaller companies and independent contractors, many with inexperienced employees. If they don’t have the answers, they may not have as much experienced back-up as the majors.
I agree that there is a limited time for US $80-$90 oil that agrees too.
There is a new Deutsche Bank Markets Research Report that says:
The International Energy Agency’s World Energy Outlook (WEO) is a must-read thought piece on global energy trends, that has garnered considerable attention on release this week, for one forecast within its 600 pages: ”The US overtakes Russia and Saudi Arabia before 2020 to become the world’s largest oil producer.“ That statement catapults oil forecasting into the mass media, and quickly gets us to the terminal (low?) point of US oil supply growth media analysis, namely “Should the US join OPEC?” That is a misguided and irrelevant question, in our view, and furthermore is strictly in the realms of “garbage in, garbage out”. Namely, we don’t think the US can become the largest oil producer in the world.
Why not? Price, cost, and returns. None are really dealt with by the IEA.
“Namely, we don’t think the US can become the largest oil producer in the world.”
But just a few years ago, you didn’t think the US could become the largest natural gas producer in the world, right?
the biggest danger in this ‘everything is OK after all” scenario is that there will be collective thinking that nothing or very little needs to be done to do anything to mitigate the difficulties we will meet in the future. If there’s enough oil to get through the next five years before decline starts in earnest, then much less will be spent on developing alternative energy systems because they will be uneconomic in current financial terms.
Most alternatives are already uneconomic based on our current cost structures and usages in our economy.
The primary things they needs to change is to allow local communities the ability to modify laws and regulations to help local economics thrive. Don’t expect this from either of the political parties, especially not the one that HATES local rights…the Democrats…as we are about to witness as Obama goes after the marijuana laws passed in WA and CO.
When I visited India, I could not help be impressed with how different it was. If you start from a background of being poor, you do not make a huge number of regulations about how things must be done. If you need light, you simply cut a hole in the ceiling. If you want to be fancy about it, you fill it in with something that will let light in, but not let rain in–ideally a glass panel, but a piece of plastic or other material might work.
In many ways, we need to start from a base of 0 when thinking about needed regulations. Until things completely fall apart, this won’t happen, though.
Many countries including India have climates that allow for less energy spending. A lot of western countries live in areas with cold and dark winters (like here in Norway). My town has more than 230 rainy days a year so I cant imagine what a hole in my roof would lead to. 🙂 – Although the vikings 1000 years ago still were able to live successful lives here, I doubt the majority of people here now are really ready for lower energy use now.
It is clear though that more work needs to be done into making housing more energy and service independent as the way it is now a lot of utilities need servicing every 5 years (for example I just had to change 5 thermostats and motors for the waterbased heating). I believe movements need to be initiated for shaking off the old “high service box house” thinking and making the place you live more efficient, including less driving to the gym and making pantries a bigger part of each house to lower the need to even leave the house in larger portions of your time. A family today could easily cut down their energy spending by half in no time. Most people now seem content with switching their light bulbs and pat their own backs for it. Also ditching the idea of having to visit every corner of the planet (or once a year which is common here) would seriously reduce our consumption of fossil fuels. But naturally with it goes the economy – or the way civilization works today.
No doubt the down scaling will happen sooner or later, but the “energy independent” and “everything is fine” – is just yet another signal to the economy to keep wasting energy for the sake of “growth”.
Hydrocarbon energy use enabled man to gradually expand out of the warm temperate zones and survive further and further north. We had fire and used the furs and flesh of other animals for survival. Essentially we were diverting their energy stores for our own use. The cities in the cold north continued with ‘energy diversion’ and cut down their seemingly unlimited forests to keep warm in winter. As our sophisticated civilisations expanded, we found better ways to create heat for our homes but now the energy ‘downsizers’ ignore the basic fact that we now heat millions of homes with hot water. You cannot downsize a water based central heating system. In cold countries it will eventually freeze. when it thaws your house becomes uninhabitable.
We no longer have the necessary resilience to survive extreme cold
Indeed, we have a water based central heating system where every thermostat end motors to control the valves (both from a company called LK) to the floors broke down in 6 years from it was new. I posted about this another place here (about missing plan B), but its rather terrible when I realised that when the motors controlling the valves failed the “default” proved to be max flow, so maximum heat – talk about fantastic construction. I dont know, but I feel the later technology boom has really just given us a lot of unsustainable technology with bad designs and what I refer to as “plastic fantastic” or a common term here now: “made in China” (sorry I dont mean to be rude to the Chinese people, but I really cant stand bad quality for a quick profit kind of thinking).
The free market economy has really evolved into a terrible beast with no thought about efficiency in the long run, but efficiency in getting money into the pockets of business owners. We really need to oppose this trend and start demanding that stuff is supposed to last longer than now. We have rather strict guarantee laws here in Norway so its not that bad here really – unfortunately the max is 5 years on stuff like the parts for my central heating – and it broke down 1 year after it ran out – it almost feels designed to fail after the guarantee period (I mean how can a passive thermostat sending some wireless signals fail after 6 years?).
I agree that cold northern climates will make it much harder to shrink of energy consumption.
I don’t know how populations got along years ago. I would expect that their homes were much smaller, and they were only able to heat one room.
In India, they talked about changing the time school started, with the season. I suppose the logical extension of that would be to only have school in the summer, or some such thing.
Thank you for the most interesting post on your blog today.
I note that the IMF Working Paper uses the DSGE method for the modelling exercise.
Professor Steve Keen, from the University of Western Sydney, is a trenchant critic of the assumptions made by neo-classical economists upon which the DSGE model is based.
I suggest that you might like to look at Steve’s blog: http://www.debtdeflation.com/blogs/
I am not an economist, but I find Steve’s view that the capitalist economies are not in a state of equilibrium, which if disturbed, then readily resettles back into an equilibrium again. The empirical observations of anyone show that capitalist economies tend to boom, with the occasional recession, but are punctuated by economic depressions once a lifetime or so. The cycle then tends to begin again. The models used by the neo-classical economists cannot predict those excursions from that “equilibrium”, but instead seem to rely on some ill defined “exogenous shock”, or “Black Swan” event. Professor Keen bases his ideas on the work of Hyman Minsky about the generation of private debt through profligate exponential lending by banks which finally collapses when the growth in debt and inflated asset prices can no longer be sustained. The precipitating shock is therefore endogenous in nature.
Steve’s email address is firstname.lastname@example.org I have found him to be very approachable.
Member, Whitehorse Transition Town
16 Malvern Road Mont Albert North Victoria Australia 3129
THanks for the suggestion. I know one of the issues with the model is that it assumes 1.5% a year technological gain.
Great Post. Thank you.
An excellent and timely post. The mainstream consumer media in the UK reported the IEA’s most optimistic scenario as pretty much a done deal, knowing that most readers will ‘hear’ that everything will be OK for the next 30 years. Only the Financial Times included opinions from analysts such as Barclays Capital, who are highly doubtful that anything like the IEA’s best-case scenario is possible.
Whether it was intentional or not on the part of the IEA, this story will be highly supportive of the centralised fossil fuel power generation interests that are currently successfully rolling back the small amount of progress the UK has made in building onshore wind capacity while it can still afford to invest in large(ish)-scale renewable infrastructure.
By the time shale oil is properly recognised as a false dawn, we’ll be several years closer to a hard landing.
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You make a great argument for regulations that keeps our economy out of the unemployment ditch
Control, control. control. You put way to much stock in politicians and their number crunchers (I am a number cruncher) to solve extremely complicated problems. From what I have seen, they almost ALWAYS make it WORSE.
It seems that ultimately, most modern citizens prefer autocracy over every aspect of their lives, with the mistaken belief that it leads to better outcomes for them and society, than true liberty. Sad, very sad.
Dear Red Cruncher in Blue Bay,
In 2008 the Divided States of America lost 8 million jobs from the financial crisis that was blessed by deregulation. Banks making zero down mortages to people without means. Insurance Companies covering risk bigger than themself. Four years later, the country with trillions of additional debt because of it, still has not fully recovered.
Above I was mostly refering to the part of the post under “My View of What is Happening Now”. Please review the part how everything is connected:
“As the price of oil rises, the price of food and commuting tend to rise. Both of these are considered essential by most consumers, so consumers cut back in discretionary spending, to have sufficient funds for the essentials. This leads to layoffs in discretionary industries, such as vacation travel and restaurant eating. The rise in laid off workers leads to an increase in debt defaults, and problems for banks. Housing and commercial real estate prices tend to fall, because of reduced demand, further adding to debt default problems.”
Without laws and regulations in a world of 7 billion humans we would not have the high level of civilization we have today. Actually when you think about it, without laws and regulations you don’t even have a country. That’s what makes a country what it is. It’s sad to see you have such a negative view of your fellow citizen (politicians), but you do get what you vote for.
Nothing in my above post was aimed at controlling the Number Cruncher. It was only intended to help the 7 billion of us on the plant to live together with a higher quality of life.
Do you really believe you would be better off today without regulations of clean air & water, medical care, transportation safety, building codes and human rights ? If you do, try moving to Haiti or some desert island and let me know how that works out for you.
I think the inconvenient truth is you can have 7 billion, or a higher quality of life.
Not both any more.
That salient fact, if it turns out to be a fact, is going to dominate the politics and economics of the globe for the next millennium.
Unfortunately the scale of Fig. 1 doesn’t allow anyone to see just how much historical tight oil data the projected data is based on. It looks like zero tight oil in 2009, if so, that means at most 3 years’ worth of data.
BP(2012) shows 2011 US consumption of All Liquids at 18.8 Mbpd, so IEA forecast production of 10 Mbpd in 2030, and being a net exporter, means you have to cut consumption by 3.5% per year for the next 18 years. Good luck with that.
There is not much tight oil extraction to date, and their report gave very little in the way of historical numbers. Theoretically, there should be a tiny thin line, going back a few years. Perhaps if I have a chance, I can redraw that part.
There are some other sources of “liquids” besides what is shown on the chart. “Refinery expansion” is missing, as are biofuels. (Biofuels added about 972,000 barrels a day in 2012; refinery expansion added 1,076,000 barrels a day in 2011.) Refinery expansion occurs when long hydrocarbons are cracked into short ones. I would expect that light shale oil wouldn’t add much refinery expansion; cracking of very heavy crude would. Biofuels are an unknown. One place the IEA talked about them increasing US biofuel production by 1.0 million barrels per day, over the long run. The renewables section shows consumption of biofuels increasing to 1.7 million barrels a day in 2035. It would appear that the IEA is expecting that some of our biofuel production will be exported.
I am unclear on exactly what happens to gas to liquids and coal to liquids. The world-wide amount of these is expected to be relatively small, even in 2035. It is possible that there is some increase in these that applies to the US data, but it is not broken out in the charts well.