Good news about oil, but for our grandkids – not us

A comment on this site said ”The data really do speak for themselves if given a chance.” Unfortunately this is not so. Change can disorient us, making it difficult to clearly observe and analyze the situation. Lawrence Solomon demonstrates this for us in his article about peak oil. Too many people make his mistakes, and we will pay dearly as a result.

Abundant energy will power future growth”, Lawrence Solomon, op-ed in Canada’s Financial Post, 12 July 2008 — Opening:

Up! Up! Up! The world is consuming more and more energy and, as if by miracle, the amount left to consume grows ever higher. Never before in human history has energy been accessible in greater abundance and in more regions, never before has mankind had more energy options and faced a brighter energy future.

Everything Solomon says about oil reserves is correct, yet his conclusions are almost totally wrong. How can this be? He commits one of the classic analytical errors, confusing stocks and flows (e.g., the annual fiscal deficit vs the total accumulated debt). He sees the problem as a lack of reserves (stocks), when it is a shortage of production (flows). It is a common mistake, despite countless explanations in the the peak oil literature that Peak Oil is not about running out of oil. Our great-grandchildren will still be pumping oil — just less of it.

Peak oil means shifting from conventional to unconventional reserves

Peak oil is a transitional phase, from conventional oil sources to unconventional sources – non-flowing deposits (Bakken Formation in the US), polar, deep sea (new finds off Brazil), heavy oil (Venezula), bitumen (Canadian oil sands), kerogen (US oil shale), and coal (converting it into a liquid fuel). The aggregate reserves of these are immense. But they are not directly comparable to conventional reserves in the way Solomon does. Unconventional sources differ from conventional petroleum in two ways.

  1. Their extraction costs — either initial capital outlays or operating costs (or both) — are usually far higher.
  2. Their production flows are lower. Nothing like the massive flows from the great fields of Texas and Saudi Arabian.

For example, by 2020 Canada’s bitumen mining might produce 5 million barrels/day — after tens of billions of capital costs, with incalculable costs to Alberta’s environment (much of it will look like the moon). That assumes sufficient water and natural gas inputs, both of which might be insufficient (nukes have been suggested as alternatives to the nat gas). But that will not nearly offset the natural depletion of other N. American fields, let alone replace the peaking of the supergiant fields like Cantarell in Mexico or Gwahir in Saudi Arabia.

Another distinction between conventional and unconventional petroleum: the latter often require far larger inputs of energy for their extraction and refining than conventional sources. For example: heavy oil, bitumen, kerogen — all must be mined, heated, and hydrogenated to produce useful products.

Unconventional sources are valuable, and will increasingly represent the remaining global oil reserves. But neither their flows nor costs can be compared to the ample and cheap conventional fields now being sucked dry. That is the missing element in their euphoric stories.

Here are two briefer explanations.

All unconventional oil needs time to be produced in great quantity, no matter how much effort is made. It is not possible to have a baby in a month with nine women.

Jean Laherrere (DOE internal energy briefing, August 2007)

An analogous situation between rate and “reserve” appears with water. The planet’s surface is covered with it (approximately 71%) and to great depths, yet we have “water shortages.” If the same approach of those advocating large oil reserves reserves meaning “no problem” was applied to water, how could we ever have a water shortage? However, it’s not in a usable form and much effort has to be expended to treat it for suitable use.

Comment posted at The Oil Drum, 25 October 2006 by “Starship Trooper” (a chemical engineer)

Solomon’s second error

“But most of the world remains unexplored — the interiors of Africa, Asia and South America have seen relatively little oil exploration. Oil exploration in the oceans, too, is in its infancy.

This almost qualifies as an urban legend. While there are certainly many yet undiscovered conventional oil fields, it is unlikely there are many giants — let alone supergiants — to be found. And hundreds of small fields must be found to replace fields now in rapid decline, like Cantarell in Mexico and in the North Sea.

Please share your comments by posting below (brief and relevant, please), or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).

Who is Lawrence Solomon?

  1. Wikipedia biography
  2. Executive director of the Urban Renaissance Institute.
  3. Here is an archive of his articles. Also the author of 5 books.
  4. Author of a ten-part seriesof articles in the National Post showing some weaknesses in the case for anthroprogenic global warming, later published in book for as The Deniers.

Of special interest: “Wikipropaganda – Spinning green“, National Review, 8 July 2008. This describes how a small number of people have in effect hijacked Wikipedia to promote their own views and censor others. An important issue to folks like myself, who frequently link to Wikipedia.

For more information about Peak Oil

  1. When will global oil production peak? Here is the answer! (1 November 2008)
  2. The most dangerous form of Peak Oil (8 April 2008)
  3. The three forms of Peak Oil (let’s hope for the benign form) (23 April 2008)
  4. The world changed last week, with no headlines to mark the news (25 April 2008)
  5. Peak Oil Doomsters debunked, end of civilization called off (8 May 2008)
  6. What does $120 oil mean for the global economy? (15 May 2008)
  7. President Bush begs for oil, and is refused (20 May 2008)
  8. Two valuable reports about global oil production! (30 May 2008)
  9. When the King of Saudi Arabia talks about oil, we should listen (2 July 2008)
  10. Red Alert: the Saudi Princes have annouced the arrival of Peak Oil (11 July 2008)

Here is an archive of my articles about Peak Oil.

Here are other resources about Peak Oil.

Originally published at Fabius Maximus and reproduced here with the author’s permission.Related RGE Content:

1) Forget Peak Oil Supply A Moment. What About Peak Oil Demand?

2) Oil Price Drivers: Supply/Demand Fundamentals

3) The ‘Peak Oil’ Debate

One Response to "Good news about oil, but for our grandkids – not us"

  1. Anonymous   July 29, 2008 at 5:20 pm

    You have not thought this through to the logical conclusion. The profit margins for developing the trillion+ barrels of tar sands and the trillion+ barrels of shale oil will be lower than what OPEC countries are currently receiving for oil, but that is irrelevant. Who is reaping the huge profits of $130 a barrel oil? Terrorist supporting Saudis! How are their huge profit margins benefiting the world? They are not.The world could easily stand to see lower profit margins, as long as the engines of commerce keep running (transportation, manufacturing, etc) and as long as the profits are coming to local production operations.Peak oil has not been very well reasoned, for all the hoopla. The Hubbert curves only apply to North America, where the geography has had the hell surveyed out of it. No other part of planet earth has had that much surveying attention. Gosh, how much did peak oilefers lose in the futures market? How much are they prepared to lose the rest of the year, decade, century?