August 13, 2004

COMMODITY PRICES ALWAYS TREND DOWNWARDS:

How Long Will the Oil Age Last: Geologists say the end is nigh. New recovery tech may tell a different story. (Kevin Kelleher, August 2004, Popular Science)

Chief among the pessimists is the Association for the Study of Peak Oil, a group of European scientists who estimate that maximum oil production around the globe will peak in 2008 as demand rises from developing economies such as China. "If you squeezed all the oil in Iraq into a single bottle, you could fill four glasses, with the world consuming one glass of oil each year," says physicist and ASPO president Kjell Aleklett. "We've consumed nine bottles since oil was discovered, and we have another 9 or 10 in the refrigerator. How many more are there? Some say five or six, but we say three."

Others believe, like Maugeri, that the number of glasses is virtually limitless. John Felmy, chief economist at the American Petroleum Institute, argues that peak oil- production estimates are so far off that for all practical purposes we might as well act as if oil will flow forever. "Ever since oil was first harvested in the 1800s, people have said we'd run out of the stuff," Felmy says. In the 1880s a Standard Oil executive sold off shares in the company out of fear that its reserves were close to drying up. The Club of Rome, a nonprofit global think tank, said in the 1970s that we'd hit peak oil in 2003. It didn't happen.

If there is an end to the debate, advanced oil-recovery technologies will most likely find it. A new seismic survey technique, for instance, sends sound waves of varying frequencies thousands of meters belowground. Microphones arrayed aboveground record the reflected signals, and computer software models a 3-D portrait of possible oil hot spots. The surveys have now added a fourth dimension, creating a time-lapse simulation of fluid movements.

Companies are also finding sophisticated ways to mine more oil from existing wells. Flexible, coiled-tube drills that carve out horizontal side paths are a marked improvement over conventional, rigid drills that move only straight down. Using such technology, companies hope to soon harvest 50 to 60 percent of oil from existing wells, up from today's 35 percent.

Biotechnology, too, is keeping the black gold flowing. University of Alberta scientists are searching for microorganisms that could dilute viscous, hard-to-recover oil and make it flow more freely.

"Technology can help push peak oil production further and further out," says Satish Pai, vice president of oilfield technologies for Schlumberger Limited. But only time will tell if it's enough.


If we want to shift away from oil we'll have to raise the prices ourselves, via taxation.

Posted by Orrin Judd at August 13, 2004 2:09 PM
Comments

If there's plenty of oil, and coming from places like Alberta, why would we want to "artificially" limit its use by overtaxing it?

I'm with all the other regulars here who think your anti-oil/anti-car vendetta is just wierd.

Posted by: Kirk Parker at August 13, 2004 2:23 PM

As I understand, there is "x" amount of oil in the world. Every year, "x" gets smaller and smaller. I mean, there is no Magic Oil Fairy who is creating more oil faster than we consume it.

It would seem prudential, then, to plan for a time when "x" reaches "0", IMHO.

Posted by: Karl at August 13, 2004 3:39 PM

Kirk:

Environmental impact, dependence on unstable sources, forced technological innovation, easy revenues...

Posted by: oj at August 13, 2004 4:13 PM

Karl:

Yes, but known reserves are y and every year we discover that y is actually y + 1, so we never come close to x = 0. It appears that we never will because we'll have moved on to some other fuel.

Posted by: oj at August 13, 2004 4:16 PM

If we want to shift away from oil we'll have to raise the prices ourselves, via taxation.

Ummmm, no: if oil really is running out, the price will naturally rise, no extra taxes required.

The recently deceased scientist Thomas Gold believed in the abiogenic origin of oil, that it was created deep within the earth and was pushed upwards. Some evidence for this does exist: the natural refilling of some "empty" wells, etc.

Posted by: PapayaSF at August 13, 2004 4:56 PM

Karl is right. What's the practical difference between running out of oil because it's all used up, or running out of oil because it's become to expensive to drill?

I also think we should be very careful about those reserve numbers. Shell recently admitted it overstated its reserves by a lot. And many of those "reserves" are simply stated by the Saudis or other OPEC members because the cartel's rules allows production based on reserves. There's a lot of incentive for them to overstate their reserves? Of course, that would mean the Saudis are corrupt...

The real danger is that demand will strip our ability to increase supply. There is more evidence every where that China's and India's industrialization is doing that. It is very likely that starting in 10 years that worldwide demand will outstrip the oil infrastructure which is expensive and time consuming to produce. When this happens it will cause shocks to the economy, shocks that can be prevented by some prudent planning.

Posted by: Chris Durnell at August 13, 2004 5:06 PM

Papaya:

It's not running out.

Posted by: oj at August 13, 2004 5:08 PM

Chris:

We hear that every ten years like clockwork and end every decade with more oil than we started with.

Posted by: oj at August 13, 2004 5:14 PM

oj's right: known reserves are irrelevant, and oil is not a finite resource in any meaningful sense. We have access to oil today that was technologically impossible to extract not long ago, and we get it more cheaply. (That's right, more cheaply, at least by the measure that matters: labor cost per unit of output).

We import more oil from the Middle East than anywhere else because that's where it's easiest and cheapest to extract it. In the near future, it will become economically feasible to start tapping sources like oil shale and tar sand. The oil in tar sand deposits in Alberta alone is estimated to be 10 times Saudi Arabia's crude reserves.

Scarcity creates its own remedy. That has been true throughout history (not just with oil but with all natural resources), and there is no reason to believe it can't continue indefinitely (or at least as long as the sun holds out).

The ASPO and the rest of the Ehrlich gloom and doom crowd are like a cult waiting for their spaceship arrive: every time it doesn't show up, they just assume they got the date wrong.

Posted by: Tom L at August 13, 2004 5:56 PM

>The ASPO and the rest of the Ehrlich gloom and
>doom crowd are like a cult waiting for their
>spaceship arrive: every time it doesn't show
>up, they just assume they got the date wrong.

Now if they'd just decide to go to their spaceship like the Bo-Peepers (Heavens Gate) did...

Actually, what is the origin of oil? I have heard speculation that oil deposits may be continually produced by deep-earth bacterial action, with no need to stew buried dinosaurs for 65 millon years. (However, even this could not replenish the deposits at the rate we're using them.)

Posted by: Ken at August 13, 2004 8:22 PM

"Ummmm, no: if oil really is running out, the price will naturally rise, no extra taxes required."

It is rising.

Of course oil is a finite resource. The only question is how much of that finite resource exists. Don't count on new discoveries to save our bacon. Oil companies have been scouring the planet for decades with ever more sophisticated technologies, but the amount of new reserves that are discovered annually peaked in 1966 at around 57 billion barrels, and have been declining since then. Last year less than 10 billion barrels of new reserves were discovered.

Speaking of predictions that never come true, since I've been a teenager the date for commercial production of electricity from nuclear fusion has always been about 15-20 years away. About the same for commercially viable solar generated electricity.


Posted by: Robert Duquette at August 13, 2004 8:23 PM

It goes up, then it goes down.

Posted by: oj at August 13, 2004 9:35 PM

The only problem with oil is that we have not built any new refineries in 20 years, and even if the Saudis gave the stuff away, we'd have a hard time increasing our consumption.

Posted by: Harry Eagar at August 13, 2004 10:10 PM

Oil is up because of Iraq, Venezuela, Yukos, the hurricanes, this weekend, etc. In sum oil is way up because of wild overspeculation. Last week oil dropped almost $2 a barrel simply because it was thought Yukos would be off the hook with the Russian govt. I have a bet with a coworker that oil will be about $35 a barrel or lower by 10/1/04 and I'm standing by that bet.

Posted by: AWW at August 13, 2004 10:14 PM
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