Category Archives: Peak Oil

Links for Week Ending 16th February

Posted on February 17, 2013 | Leave a comment
  • Professor Jim Hamilton is one of the few economists to give peak oil considerations a proper hearing. Moreover, as one of the world’s leading econometricians and author of the popular text book “Time Series Analysis” he cannot be accused of not knowing his numbers. This last week he has posted twice on oil (here and here) on his blog Econbrowser that he co-authors with Menzie Chin. Frequently, in any discussion of resource depletion, the standard economics response is that ‘price begets supply’. Hamilton points out that such logic only extends so far for an exhaustible resource. 
  • Dana Nuccitelli has a good post at Skeptical Science entitled “A Glimpse at Our Possible Future Climate, Best to Worst“. It delves into two of the major climate risk parameters: climate sensitivity and emission paths. Other major determinants of climate risk are changes in the carbon cycle, methane release and the extent of climate-related economic impacts themselves. And that is just the ‘known knowns’ and the ‘known unknowns’.
  • Veteran observer of the Chinese economy Michael Pettis has long argued that China’s supercharged growth rate is unsustainable. Here and here are recent restatements of his belief that we face a great re-balancing. This has major implications for both climate change-related CO2 emissions trajectories and resource depletion rates.
  • The Washington Post asks why monetary policy no longer works and economies fail to grow around the world. Personally, I think the answer is no longer solely to be found in the study of monetary and fiscal policy. Jeremy Grantham, the ever-thoughtful Chief Investment Strategist at GMO is squarely in my camp, with his firm predicating strategy on a U.S. long-term growth rate of 1.5%. Against this background his analogy is “of the Fed beating a donkey (the 1% growing economy) for not being a horse (Bernanke’s 3% growing economy)”. Read his last GMO letter on decelerating growth and the impact on investment here.
  • Grantham references an article by Chris Brightman of Research Affiliates which pegs long-term U.S. growth rates at 1% due to trends in population, employment and productivity. If true, and we then add in the impact of resource depletion and climate change over the next two decades (the pivot decades for me), we could easily be looking at a no-growth U.S. economy by 2030-2040.

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All Liquids Are Not Created Equal

Posted on February 15, 2013 | 2 comments

Once upon a time when we talked about oil, the presumption was we were talking about crude oil (or perhaps crude oil plus condensate if you were a petroleum wonk). Nowadays, when BP, the Energy Information Administration (EIA) or the International Energy Agency (IEA) publish their flagship yearly reports (see here, here and here) the lead-in charts highlight ‘All Liquids’ (click for larger image).

I’ve taken the numbers below from Table 3.4 in the IEA’s World Energy Outlook 2012 (click for larger image). Apologies for the lack of a link since the report needs to be ordered and is not freely available on the web.

Oil and Liquids Supply jpg

As can easily be seen, traditional conventional crude oil is making up an ever smaller share of total liquids in percentage terms, falling from 88.8% in 1990 to 63.1% in 2035 under the IEA’s Current Policies scenario (basically business as usual).

This would be irrelevant if all liquids are perfectly substitutable amongst themselves; i.e., they are fungible. Unfortunately, they are not. The EIA released a great graphic yesterday showing two key determinants of fungibility (there are others): energy content per unit volume and energy content per unit weight here (click for larger image):

EIA Energy Density jpg

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Shale and the Ridiculous Talk of Revolution

Posted on February 13, 2013 | 2 comments

How do you tell if we have a revolution in either Resource X or Product Y? Simple. Volume goes up and price goes down. Think computing power. Now that’s a revolution.

So do we have a revolution in the production of tight oil in the U.S.? Let’s take a look at the projections of the U.S. government agency the Energy Information Administration (taken from an EIA staffer’s presentation to accompany the publication of the Annual Energy Outlook 2013; click for larger image):

U.Sl Oil Production jpg

So according to the EIA’s numbers, we have a five-year bump in production which puts us back to the level of output in 1990 and then a gentle decline out to the year 2040. Good, but hardly revolutionary.

And price (note in inflation-adjusted dollars)? Well, that goes up:

EIA Oil Price jpg

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Data Watch: US Natural Gas Monthly Production November 2012

Posted on February 6, 2013 | Leave a comment

The U.S. government agency The Energy Information Administration (EIA) issues data on U.S. natural gas production, including shale gas, on a monthly basis with a lag of roughly two months. The latest data release was made on 31 January 2013 and covers the period up until November 2012.

Data is reported in billion cubic feet (bcf). Key points:

  • November 2012 natural gas production: 2,001 bcf, +1.2% year-on-year
  • Average monthly production for 12 months to November 2012: 2,001 bcf, +5.5% year-on-year 

Since the end of 2011, the rate of production increase has levelled off (click chart above for larger image).

US Dry Gas Production jpg

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Links for Week Ending 2nd February

Posted on February 3, 2013 | Leave a comment
  • This blog covers two subjects that have the potential to morph into existential threats to civilisation if various factors align. The two in question are climate change and resource depletion. Unfortunately, any consideration of existential threats have been viewed as the province of cranks for the last few decades—or at least of fiction authors with a taste for the dystopian. Now at last the topic is getting some respect with the establishment of the Centre for the Study of Existential Risk at Cambridge, England. The NYT has a good introduction here, and CSER’s web site is here (note the impressive line-up of founders and advisors—no cranks!). 
  • To the Financial Times’ credit, the dark side of the shale gas revolution is given some sympathetic coverage; for example, these articles on shale gas flaring here and here. This contrasts sharply with the Wall Street Journal, whose mantra appears to be “drill baby drill”.
  • Photographing Climate Change in the New Yorker show cases a committed few. I am reminded of Bill McKibben’s lament “where are the goddamn operas“. The artistic community often appears missing in action when it comes to climate change, despite the fact that global warming poses a monumental threat to mankind’s artistic endeavour.
  • The New York Times has a lovely article on “The Preppers Next Door“.
  • A thoughtful post by David Altig from the Federal Reserve Bank of Atlanta at his Macroblog on Robert Gordon’s ‘end of growth’ hypothesis.
  • Climate change was directly addressed in President Obama’s inauguration speech (what a contrast with the Presidential debates). But what could really change? Here is the somewhat gloomy view of Harvard’s Robert Stavins.

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Posted in Climate Change, Peak Oil, Post Growth, Resource Constraints, Technology

The Club of Rome, Skeptics and Myths We Believe

Posted on January 19, 2013 | 5 comments

On Wednesday I attended a Cafe Scientifique talk in my home town of Henley. The presentation was on peak oil theory and given by Professor Chris Rhodes (who blogs at Energy Balance).

While the talk was of interest itself, what jumped out at me the most was one of the questions within the Q&A session. It went along the lines:

We have seen forecasts of future resource scarcity before, but in reality technology and the market have shown such forecasts to have been ridiculous. Didn’t the Club of Rome predict that the oil would run out 50 years ago?

At the mention of the Club of Rome, there was a general nodding of heads and murmur of approval.

At this point, I need to give a bit of an explanation of what Cafe Scientifique does and the kind of people attending (for those unfamiliar with the organisation). Its aim is to foster debate on the scientific and technological issues of the day within a non-academic context. Cafe Scientifique, and its sister organisation Skeptics in the Pub, attract a certain kind of person: highly educated, numerate and questioning. Many of them view themselves as “skeptics” (or “sceptics” if you like) in the original sense of the word (before the rise of the “climate skeptic”); that is, individuals who will not accept a proposition as a fact until it is subject to analytically robust evidence-based testing. Accordingly, I believe that few in the room didn’t have a science or numerate-based degree, and many had advanced degrees.

With this is mind, the statement within the Q&A session that the Club of Rome had predicted the world would soon run out of oil and other resources appeared to be taken as a fact by all those highly educated and very “skeptical” people. Except, of course, it isn’t a fact—it is pure fiction. Continue reading →

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Global Trends 2030: Futurology Fit for a President? (Part 2 Energy Constraints)

Posted on January 14, 2013 | Leave a comment

This is my second post on the  National Intelligence Council (NIC) briefing for the  U.S. president called “Global Trends“, a report that looks at potential risks to the United States 20 years ahead. The first post (here) dealt with climate change, but in this post I want to take a look at how the Intelligence Community views the potential threat of a future energy constraint on the U.S. and world economy.

The quick answer: not much of a threat at all.

In a likely tectonic shift, the United States could become energy-independent. The US has regained its position as the world’s largest natural gas producer and expanded the life of its reserves from 30 to 100 years due to hydraulic fracturing technology.
The one-hundred-years-of-gas refrain was also a feature of President Obama’s State of the Union address back in January 2012. I blogged about the authenticity of the claim then. Enough to say that both the President and the NIC appear to be confusing resources with reserves. The industry association Naturalgas.org has a good explanation of the difference here, including the following  component chart (click for larger image):
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Total Oil & Gas Resource Base copy

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Links for Week Ending 5th January 2013

Posted on January 5, 2013 | Leave a comment
  • NYT dates the start of the Great Recession from Q4 2007 and 5 years on has a great graphic showing the current state of play. No recovery to pre-recession levels in Britain, Japan, France, Italy and Spain. Has the end of growth already arrived in these countries?
  • The knock-on effect of earlier-than-expected Arctic sea ice melt will be greater-than-expected absorption of sunlight and, therefore, higher Arctic circle temperatures and faster-than-expected permafrost thaw. NYT highlights a study (here) confirming the first part of this causation chain.
  • National Geographic has a nice piece all about methane.
  • Since the economist Robert Gordon came out with his technological stagnation thesis earlier in the year, the flood gates have opened for economic comment in this area. The FT’s Izabella Kaminska has put together a wonderful linkfest on the subject at her blog Towards a Leisure Society.
  • The Oil Drum (TOD) is reposting its top 10 articles for 2012. Among them, I recommend Art Berman’s take on shale here and Ron Rapier on tight oil, shale oil and oil shale here.

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Peak Oilers Now Welcome at the IMF

Posted on May 11, 2012 | Leave a comment

Taking a short interlude from my recent treatments of technology, I feel the need to do a quick post on Peak Oil’s continued transformation toward respectability. Some months ago, I highlighted the fact that the IMF had openly recognised the Peak Oil argument in even its most prestigious publication, the World Economic Outlook (see my post here). In particular, IMF staffers now appear to be thoroughly acquainted with the work of Steve Sorrell, who has provided us with some of the most in-depth reviews of the Peak Oil literature (see my post here).

Now, when I say ‘recognised’ that did not mean ‘accepted’. Rather, the IMF acknowledged in the World Economic Outlook that price alone had not brought forth sufficient supply or substitutability over a multi-year time frame, as had previously been predicted. Economists at the IMF, therefore, seem to have decided to widen their intellectual net to bring in some fresh ideas. Continue reading →

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Technology: Singularity or Collapse? (Part 1: For Ever Exponential)

Posted on February 28, 2012 | 1 comment

In the opening chapter of Ray Kurzweil‘s “The Singularity Is Near” we are presented with the following parable:

A lake owner wants to stay at home to tend to the lake’s fish and make certain that the lake itself will not become covered with lily pads, which are said to double their number every few days. Month after month, he patiently waits, yet only tiny patches of lily pads can be discerned, and they don’t seem to be expanding in any noticeable way. With the lily pads covering less than 1 percent of the lake, the owner figures that it’s safe to take a vacation and leaves with his family. When he returns a few weeks later, he’s shocked to discover that the entire lake has become covered with the pads, and his fish have perished. By doubling their number every few days, the last seven doublings were sufficient to extend the pads’ coverage to the entire lake. (Seven doublings extended their reach 128-fold.) This is the nature of exponential growth.

While ‘the water lily and the lake’ appears a strange choice of metaphor since if nothing else it highlights the importance of boundaries to growth, what Kurzweil was trying to communicate was how technology has barely begun to transform our lives.

By contrast, consider the 1972 report to the Club of Rome published under the title “The Limits to Growth.” Much maligned and mostly misrepresented, The Limits to Growth (LTG) was nothing more than a mathematical analysis of linear and exponential growth rates and ultimate constraints. According to the authors, the tyranny of exponential growth rates would eventually lead population and industrial production to explode, setting off a negative feedback in terms of burgeoning pollution and the eventual exhaustion of food and resources. The report never provided specific dates for the depletion of individual materials, although nine our of ten commentaries on the report claim it did (for a post I did on this particular urban legend, see here). Nonetheless, what the report did do was suggest that the idea of inevitable constant human progress was a dangerous myth. Continue reading →

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