The Death of Peak Oil (at least for now)

[happyslug]

10. Peak oil has two huge problems, that generally are ignored till it is to late.

First, is even OPEC acknowledge by its public records that its production of oil will start to slow down after 2030. No one trusts those records for every OPEC member has good reason to LIE about their recoverable oil, thus 2030 has always been the LAST date for peak oil to kick in and NO ONE BELIEVES IT TO BE THE DATE. We are CLOSE to peak Oil, unless we have already passed that point.

Second, and in many ways most important, peak oil is when peak production of oil occurs, but oil will continue to be produced for anyway for 140 to 160 years. Yes, some people tried to tied in peak oil with the end of civilization, but I for one never saw it as such. What I foresee is a society slowly changing to a world where the demand for oil exceeds its supply and that difference is resolved by pricing oil so that demand equals supply. I have also pointed out that the price of oil, once it is no longer under the control of any "Swing producer" will fluctuate radically, much like the price of coal, which has never had a "Swing producer" who could control price by increasing or decreasing its supply of coal. i.e prices for example only, you would see the price of gasoline vary from $5 a gallon to $2 a gallon. The high price will continually go up, the low price will follow, but you will see massive switch between the two. Thus today's low prices is compatible with Peak Oil, we are just in one of those low price periods, which will lead to a reduction in production as the price drops below the cost of some oil producers. Sooner or later the price will bottom out, mostly do to people seeing the price of oil so low that they believe that using oil, rather then some other alternative, is the most cost effective and this leads to increase demand. As the demand for oil increases, so will its price, till it hits a point where the increase production at some price, exceeds the demand for oil at that price, then the demand will drop, as will the price.

Such price fluctuation will become the norm as peak oil hits and oil production CAPACITY drops. Now, one of the side affects of high prices for oil, is what were considered oil plays to expensive to drill in previous years become profitable. This is what happened in 2006-2008 period. Oil fields no one had thought would ever become profitable, where suddenly profitable when oil reached its highest price since the Civil War.

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=F000000__3&f=A

http://econweb.ucsd.edu/~jhamilto/oil_history.pdf

http://www.resilience.org/stories/2015-08-16/what-is-the-price-of-oil-telling-us

http://www.resilience.org/stories/2015-08-14/double-dip-oil-rout-why-an-oil-glut-may-lead-to-a-new-world-of-energy

Now, the price of oil has been dropping since 2008, as demand for oil in the US DROPPED for the first time ever, the drop was marginal but real (and even greater in the other Developed countries) but more then offset by the increase in Oil usage in the Third World, including China and India:



http://oilindependents.org/global-demand-for-oil/

Now, the key is Saudi Arabian Oil Production, which has been relatively flat (Only a slight increase in recent years, and most of that heavy sour oil NOT the light sweat oil preferred by most refineries), while US oil production from Fracking has been increasing:

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Details on Saudi Arabia Production:

http://www.eia.gov/beta/international/analysis_includes/countries_long/Saudi_Arabia/saudi_arabia.pdf

Most of the increase in World Wide Oil Production has been in the Fracking fields of the US, but given these have a decline rate of up to 90% in the first year, you need constant drilling to keep up the production, a rate of drilling that WAS maintained till 2014, when, due to the drop in the price of oil, drilling of new wells slow down:

http://carnegieendowment.org/2014/11/01/tight-oil-in-united-states-recent-developments-and-future-financial-sustainability/hvm6

http://carnegieendowment.org/2015/05/21/saudi-arabia-and-shifting-geoeconomics-of-oil/i8vv

Please note, one of the reason we have had increase oil production since 2005 is that most producers have adopted secondary and Enhanced recovery methods, both speed up the depletion of a well. Secondary is simply pumping water into a wells, for oil floats on top of water and this will force oil up to other wells into the same oil formation.

"Enhance recovery methods" are more complicated then water, there are three types, often used together:

Thermal recovery, which involves the introduction of heat such as the injection of steam to lower the viscosity, or thin, the heavy viscous oil, and improve its ability to flow through the reservoir. Thermal techniques account for over 40 percent of U.S. EOR production, primarily in California.

Gas injection, which uses gases such as natural gas, nitrogen, or carbon dioxide (CO2) that expand in a reservoir to push additional oil to a production wellbore, or other gases that dissolve in the oil to lower its viscosity and improves its flow rate. Gas injection accounts for nearly 60 percent of EOR production in the United States.

Chemical injection, which can involve the use of long-chained molecules called polymers to increase the effectiveness of waterfloods, or the use of detergent-like surfactants to help lower the surface tension that often prevents oil droplets from moving through a reservoir. Chemical techniques account for about one percent of U.S. EOR production.

Each of these techniques has been hampered by its relatively high cost and, in some cases, by the unpredictability of its effectiveness.

http://energy.gov/fe/science-innovation/oil-gas-research/enhanced-oil-recovery

Just a comment, that the low prices of today is compatible with Peak Oil. From what I have read today's low prices should last till 2017, when most of the fracking oil wells would have played out and given the low level of replacement wells are being drilled today, supply will drop and demand will exceed supply once again. This up and down pattern in typical of extraction industries as supplies of the mineral in question comes into short supply.

On the other hand, watch out for those peak oilers who foresee doom in peak oil. Peak Oil will NOT lead to any massive change, but will lead to slow gradual change as the price of oil keeps going higher. I see more and more people moving closer to where they work, and the stores catering to those workers moving with them. Suburbia will probably die, but urban cores will boom. If moving back to the city from Suburbia is your nightmare, then Peak Oil will be a disaster, but for most people Peak Oil will be just a small change in how they live (i.e. walking to where your shop and work instead of driving).