Peak Oil: A Shattered Myth?

Rigzone had an article this week regarding a suggestion in The Wall Street Journal that:

"The surging interest in Canadian oil sands is stark evidence that the world isn't about to run out of oil. Instead, it is running low on readily accessible light, sweet crude -- oil that flows like water, has few impurities and can be easily turned into gasoline. As the good stuff gets scarce, Big Oil is turning its attention and pouring money into extra-heavy crude, such as the giant deposits near Fort McMurray and another similar one in Venezuela."

For example, according to the Journal, if you include the tar sands and other low grade oil deposits:

"has vaulted Venezuela and Canada to first and third in global reserves rankings, although Venezuela's holdings in extra-heavy crude are a rough guess. Saudi Arabia is No. 2. Not including the oil sands, Canada would fall to No. 22."

In a separate article Rigzone points out some of the effects of oil sands development:

As Fort McMurray's population has increased to 61,000, from 33,000 in 1996, housing has become in such short supply that the average mobile home now sells for $277,000 and people are renting couches for $500 a month

The crowding and labor shortages pushed Canadian Natural Resources to build a jet runway long enough to accommodate Boeing 737s to allow workers to commute to their giant new Horizon project. Shell Canada has built a giant pipeline to transport diluted oil sand bitumen hundreds of miles south to a new upgrading plant outside Edmonton.

In Calgary, EnCana is about to build a corporate headquarters covering more than two blocks, the biggest real estate development project in Canada in two decades.

But the costs of developing these reserves has a dark side, according to the Journal:

"heavy oil has big economic and environmental drawbacks. It costs more to produce and takes more energy to turn into gasoline than traditional light oil. Recovering and processing Fort McMurray's heavy crude releases up to three times as much greenhouse gas as producing conventional crude. And upgrading it into refined products, such as gasoline or diesel, will require a gigantic investment to retool global refineries."

These effects are already visible:

"Canada, which exports more oil to the U.S. than any other country, already is having trouble meeting its pledge to cut CO2 emissions largely because of its mushrooming heavy-oil production. By 2015, Canada's Fort McMurray region, population 61,000, is expected to emit more greenhouse gases than Denmark, a country of 5.4 million people."

Rigzone points out that the battle lines have already been drawn:

Alberta's energy minister, Greg Melchin, says oil-sands development creates a minimal environmental disturbance that is outweighed by the opportunities and jobs created. "It's worth it. There is a cost to it, but the benefits are substantially greater," he said.

But the environmental groups have another view:

"The pace of development is outstripping our ability to manage the environmental issue," says Mr. Raynolds of the Pembina Institute. "Our unwritten energy policy is dig it up and sell it as fast as possible."

Sean Nixon, a Vancouver-based lawyer for the Sierra Legal Defence Fund, said The Supreme Court of Canada needs to put teeth into Canada's environmental assessment legislation. They need to interpret Canada's environmental assessment act that ensures there will be meaningful assessments of large projects."

This article reinforces my conclusion that we are not running out of oil, rather we are entering a period of ever increasing costs of oil, at a high environmental cost.  Our desire, in the US, to depend on personal vehicles for transportation is so high that many will continue to use their cars, as they do now, despite increasing fuel costs.   I don't think we will stop exploiting these reserves until either 1) the price of oil is so high that economic considerations cause us to implement, on a large scale, alternate means of fueling our vehicles, such as PHEVs and EVs (I assume this would happen before fuel cell vehicles are viable, before 2020, otherwise they would play an important role) and/or 2) we have such a large environmental disaster that legal measures are taken to reduce production from these sources of oil.  I would hope that the oil companies would at least develop means to extract these oils using energy produced on site rather than importing energy, especially natural gas, to power their projects.

CanadianTar Sands: The Good, The Bad And The Ugly, Rigzone, March 28, 2006
Oil Sands Shift Economic Power in Canada, Rigzone, March 29, 2006

Technorati tags: peak oil, oil sands, energy, technology

The Energy Blog: Peak Oil: A Shattered Myth?

Comments

[odograph]

It strikes me that "peak oil" is true, and that it is being "disproved" by broadening the definition of "oil."

There is an obvious movement (I think the SEC has to sign off on "reserves") to reclassify some "non-conventional" oils as just oils.

What's this mean from a peak oil perspective? To me the real story is the decline of conventional oils, as your story indicates. Of course we will find alternatives ... post peak (conventional) oil, the interesting stories will be economic and environmental (how expensive and how damaging?)

[Russ]

It strikes me that "peak oil" is an unfalsifiable argument in the Popperian sense. Nothing at all could possibly falsify "peak oil" in the eyes of the believer.

Still, Jim has it right. We are looking at higher prices, and higher non-monetary costs for fossil fuels currently. To claim that production has peaked when demand and consumption grow ever higher, is obtuse.

[odograph]

So how far are you going to take the redefinitions? If coal-to-liquids become widescale in production, does that mean "oil" has not peaked, because "demand and consumption grow ever higher?"

In my past I've been a scientist and engineer, and what I like is concrete nomenclature, upon which one builds meaningful knowledge.

To simply redefine oil periodically is obtuse.

[odograph]

BTW, no one who honestly understands the nomenclature of "peak oil" thinks that means "peak fossil fuels."

[marcus]

I think the overall jist of the popular peak oil idea is that the production rate of total liquid fuels, what ever they are, will peak and decline. I think if increases in the production rate for fossil fuel alternatives prevents this from happening then the doomsday scenario many people have envisioned and associated with "Peak oil" is proven wrong. We won't know if this is likely to happen or not at least until world wide fossil fuel production rates decline, which they havn't yet as far as I can tell.

[Cervus]

Another consideration is Enhanced Oil Recovery. Not only would it sequester CO2, but the supply of conventional oil would be increased very significantly.

[Rod Adams]

Jim:

Nothing you or your readers wrote disputes the basic theories that underpin the "Peak Oil" theory.

As understood by the people that have studied the theory, the idea is that there is a finite amount of oil in the world. Our rate of extracting that oil increases as we get better technology and have more demands for the oil. At some point, which appears to be in the reasonably near future, we will reach a point where the ability to increase our rate of production slows to the point where the rate of increase (the slope of the production curve) reaches zero.

Though the rate of production might remain at that level for some period of time, it will eventually begin to decline. The decline is not caused by running out of oil, it is caused by running out of oil that is relatively easy to extract. That easy oil also made it fairly easy to increase the rate of production quite impressively for many years.

When you start having to invest in the infrastructures required to process tar sands more rapidly or shale, or use enhance recovery techniques on old production fields, you necessarily reach a stage where it simply takes a long enough time to bring on new production that it is IMPOSSIBLE to sustain the production rate.

When the amount of oil available to burn each year begins to decrease - even when there is still A LOT of oil left in the ground - economics 101 predicts a rather significant price increase. This will help pay for the necessary infrastructure, but it will not make it any easier to build the machinery, drill the holes, or lay the pipelines from new production areas.

This whole concept is what "Peak Oil" is really all about and why I accept the logic as something that makes sense and helps to predict the general trend of future production and pricing.

[odograph]

"I think the overall jist of the popular peak oil idea is that the production rate of total liquid fuels, what ever they are, will peak and decline."

People abuse all kinds of precise, sceintific, definitions. (Look at abuses of Heisenberg.) That doesn't make the loose interpretations right, or the loose definitions valid.

FWIW, I think we can talk about the peak of any non-renewable/non-recyclable resource. Just be concrete about which resource you are talking about. Are we at peak fossil fuel? Not even. Are we at peak light-sweet crude, maybe now. Are we at peak conventional oil? Maybe in this decade.

But if you muddy it up with a constantly changing definition of oil ... you can't have a serious conversation.

[amazingdrx]

If the plentiful windpower on the Canadian plains were used for extraction and refining tar sands oil, the CO 2 release and environmental damage would be minimal. Electric plasma conversion extracts the oil and turns it directly into vapor ready for refining.

It compresses the extraction and refining into one process and leaves the sand where it's at, only removing the oil.

The present process uses steam necessitating the pollution of groundwater and the removal with huge mining equipment of the tar sands from the ground into the extraction equipment. After extraction the oil is separated from the water then transported to refinerires, which have to be specially modified to handle the thicker oil.

The only problem with wind powered electric plasma extraction is that it simultaneously develops wind power, which then can replace the need for oil. Thus cutting the demand for the oil. Companies who own oil do not like that result.

BTW, all this talk of peak oil is wrong headed anyway, peak global climate disaster is the serious issue. The oil reserves in Russia, for instance, have not even been explored or quantified.

CO 2 sequestration is a bad joke, just like "clean" coal. Who is going to verify that CO 2 pumped underground actually stays underground? The oil industry? hehehey.

Good old self regulation. It would be prudent for everyone to instead start noting the cycle of destruction unleashed by methane released from melting permafrost.

Peak oil, schmeak oil.

[odograph]

Global warming is a bigger, longer term, problem than peak oil.

But having a precise definition for peak oil allows you to discuss it, and the other environmental, economic, and political problems in context.

Peak oil has strong implications for global warming if we (world wide) move to unregulated coal.

Peak oil has strong implications for tropical agriculture if it spurs greater produciton of energy crops.

Etc.

[Joe Deely]

I must agree with amazindrx and his "Peak oil, Schmeak Oil'

This whole Peak Oil thing is just a joke. The real problem is that we have too MUCH cheap oil and too MUCH cheap coal.

Peak Oilers need to take Econ 101. As demand outstrips supply, prices will go up, we will extract more expensive reserves, we will find more oil and we WILL start to use substitutes... whether they are Oil sands, oil from shale (this seems to be ignored) and Coal to Liquid and finally we will find more ways to become more efficient and use less oil. The world economy will continue to grow.

As others have stated the true problem is CO2 and Global Warming. What we need is a large carbon tax and we need it soon. This is the only way we will sllow down our use of fossil fuels.

[odograph]

I don't doubt that there are "peak oilers" who need to take econ ... there are also peak oilers who are economists:

http://www.1000barrels.com/

It is really stupid to think that price feedback is being ignored in this.

[Cervus]

As our technology has increased in the United States, we actually use less oil per capita now than we did during the first crisis in '73. If memory serves, the same activities now only use about 55% as much.

I have high hopes for oil-from-algae. It solves two problems: energy independence, and CO2 emissions. While we will not stop using coal anytime soon, we can re-use that emissions to enhance growth from algae and thus get a net reduction.

[step back]

OK. So you jest us with this April 1 posting.
But for those that buy into the "running out of oil" lie that runs like so much frothing diaherrea from the mouths of anti-Peakers, note that we will never run out of the "oil" stuff. The language is chosen for its semantic spin mastery. There will always be one last drop of liquid hydrocarbon trapped between unseen rocks far underground. We will never "run out" of oil. We will merely pay more dearly for each drop that gets us closer to the ever-elusive last drop.

[Thomas]

step back,
Well said!

odograph,
While your point about definition is true in theory, as a PO believer I think PO is only relevant in terms of its perceived consequences. Anything else would be like pointing out that iron could no longer be mined from a particular mineral, while it was still in plentiful supply in others. Who cares!?

Well, when it comes to fueling a one-person-per-giant-SUV culture with extremely dirty tar sands, shale oil, coal, etc., I care!

It was always about the environmental consequences for me, and still is. I just think PO will come before any major environmental disaster/degradation and has the potential of being felt harder on Western economies. That being said, looking at the reduction in global consumption in 1980, I'd just like to point out that we all survived... And there was no warning back then. No plateu for a decade or two before that decline.

There may be a silver lining after all. Sustained high oil price (from high production costs) and plenty of energy may just be what the doctor ordered for renewable energy to finally become commercially competitive.

-Thomas

[Rod Adams]

Cervus wrote:

"As our technology has increased in the United States, we actually use less oil per capita now than we did during the first crisis in '73. If memory serves, the same activities now only use about 55% as much."

That is an incorrect statement. I agree that we use less oil per unit of GDP. However, the activities in the United States have changed considerably since 1973. Our steel, aluminum, chemical, and plastics production facilities have largely moved off-shore. Their energy consumption no longer shows up in our statistics, but the energy is still being consumed somewhere else in the world.

If we had to include the energy content on the bill of lading for imported goods, we would see that our energy consumption per person had increased quite considerably since the oil shocks of the 1970s.

[Arturo]

Does any one of you know what peak oil is? It´s not running out of oil, it´s simply peaking the maximum production capacity. And what happens whith the price of oil when the production is unable to satisfy the demands of the growing economy? Just what´s happening now, the price goes up. What happens when production starts to decrease on a daily basis in this growing economy? the same that happened in america in the 70s, prices whent caotic, only this time it will happen world wide.
As the article clearly states, the remaining sources of oil require a bigger energy input to extract the oil, meaning a higher price. Also, the oil extraction is much slower. The oil sources that remain now in the world are the ones that are harder to extract, and the plethora of technologies created to increase extraction are not keeping up fast enough to be able to fulfill the demand.
So, are we runing out of oil? certainly not. We are at the peak of production.

See you down the slope

[Khebab]

"has vaulted Venezuela and Canada to first and third in global reserves rankings, although Venezuela's holdings in extra-heavy crude are a rough guess. Saudi Arabia is No. 2. Not including the oil sands, Canada would fall to No. 22."

here we go again: don't worry, Canada is the new Saudi Arabia that will satisfy US addiction to oil for eons to come! as stated by Rod Adams above, peak oil is not about "how much oil left?" but rather "how fast (and at what cost) can I extract the available oil?". Canadian synfuel production from tar sands is planned to increase 2-3 mbpd by 2015 thanks to huge capital investment. At the same time:
1- US oil consumption will grow by the same amount!
2- Mexico's production is about to decline (Mexico is the second source of oil inports for the US)
3- conventional Canadian oil production is declining.

[Roland]

I doubt we'll be able to extract non-conventional oil fast enough to maintain a stupid US-style SUV culture. But they could help slow the decline and keep society running. As JD at Peak Oil Debunked says, the ideal thing is a long tail — oil that trickles out just fast enough to power agriculture, public transport, plastic manufacturing and so forth, but not fast enough for stupid, environmentally damaging uses. Also, that would mean high prices encouraging innovation. That's where I see things going at the moment.

[Frank]

Has anyone denying peak oil ever read Stephen Leeb's Book? It goes over the ideas behind the rhetoric and gives a very clear picture of where the price of oil is going and the impact that this will have on the world economy. People said Stephen was crazy when at $30 per barrel he predicted oil would go to $50. What is the price of oil today? Close to $65, at this price it will affect the economy. With lack of growth in the US Economy, burgeoning US debt and real estate going south, more expensive oil is going to put the breaks on economic growth. That is the only thing peak oilers really care about; the impact on the world economy. This makes for a volatile mix. When demand for oil from India and China, who combined will soon be the largest economies on the planet, start to take hold, prices will continue to go higher, up to $200 per barrel as per Leeb. If that happens it doesn't matter how much oil is left in the ground or in shale or oils sands, the world economy will struggle to bear the load.