OIL DOWN SLOPE
Every time a minion
complains about my preaching to acquire junk land, bolt guns and wheat, an
angel gets its wings. I also do an
article on Peak Oil, just to show you bastards who’s in charge here. Actually, as I was casually perusing Kuntsler’s
Long Emergency ( I laboriously pulled it out of storage to give to a work
volunteer who I’m trading books with ) it got my mind back there, even though
it’s pretty much a rear view subject like economics ( all modern economics has
been based on resource growth, and we obviously don’t have that anymore- and
moreover, the markets are so obviously rigged by the Too Big For That Scrawny
Little Kenyan Puke To Refuse Another Bailout To Banks it doesn’t even pay to
pretend their signals are relevant anymore ) I don’t need to revisit all that
often. I could be wrong, but I think most of us take the oil bell
curve to mean the same thing. Since half
the curve, the left side up side, was all the cheap and easily extractable oil,
we all know the down side right side is the supply decline of far harder, far
more expensive energy. We have already
seen that in tar sands and fracking oil.
Yet, don’t we typically view this as a kind of global curve? You know, the average of an entire global
industry. I got to thinking ( and
forgive me if I’m the only one and you are all way ahead of me ) that we kind
of missed the down slope as practiced in the US. The importation of cheap and gushing middle
eastern oil kind of blinding us to this.
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The reason the North Sea
oil came to Britain’s and Europe’s rescue in the 80’s was because US companies
had already pioneered deep sea drilling in the Gulf of Mexico. And we had Alaskan oil, nobodies idea of
cheap to extract, at one time providing a quarter of our domestic production (
way down from there now ). My point is that
from our peak on, we’ve ONLY been pumping right side curve energy. Saudi Arabian oil masked that. Otherwise, we would have crashed and burned
economically long ago ( our economy being cheap and abundant oil orientated
). Now that Saudi production has
stalled, and they move to right side production, they can no longer hold back
our economic comeuppance. Now, not only
did we move to harder to extract oil, that itself is no longer even our primary
source of energy. Now it is tar sands
from Canada, the tropical equivalent from Venezuela, and ten percent of our gasoline derived from
corn. We have gone from 20 barrel oil
down to 2-5 barrel oil ( energy derived from one barrel invested ). In many cases we only get twice what we
invest. That is a far cry from Texas
Elephant Field of upwards of 100 barrels returned on one invested. You know, the oil that won us WWII.
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Fracking oil isn’t new
oil. It is old fields we couldn’t
deplete before ( you can never extract all the liquid out of a well ) that are now giving us a little more oil for
a lot more invested energy. We found a
way to squeeze a few drops out of all the old corpses. And that isn’t even going to last us to
2020. The US in domestic oil production
for the last forty years is the road map for the rest of the oil producing
regions that are just now depleting ( and, keep in mind, that is a minority of
fields globally. A LOT of areas also
depleted during our time frame ). And
the US has been the best managed contraction in supplies. Every one with a few exceptions is depleting
a lot quicker ( because they didn’t have the Saudi oil for Greenback deal, they
couldn’t slow their own production like we did ). There is no way the ride side of the curve is
going to last anywhere close to the up side.
END
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Good post, Jim.
ReplyDeleteEven crazy ol' Fred Reed is tumbling to it:
http://www.fredoneverything.net/Unstable.shtml
That guy can write! Reminds of reading William F. Buckley in the 70's.
Did you see thaty $1300 acre in Elko?
Neil
Hell of an article, and a hell of a good price on Elko land
DeleteYou say it doesnt look like fracking wont last us until 2020. Just for fun I would like to see your projected timeline of events.
ReplyDelete-sumdude
You can get more details from the Heinburg book, but the gist is that 2016 the majority of fields start a sharp decline. This is projected from all the fields own production data. He covers each one, if you need details. I give credence to him due to so many other writers claiming frac fields are short lived and that the frac bubble is primarily a financial scam.
DeleteTo all non-Peak believers - a simple rehash and reaffirmation of where Jim is coming from...
ReplyDeleteEROI rules everything. Don't believe it? try to find a someone willing to pay you a six figure salary for knowing and doing _nothing_ (no meetings, no attendance, no scam, etc). Or if you are willing to be the employer in such a setting, please immediately hire James here and then when he retires, myself (james you only get 3 years!). You cant do it. because an employer must get more value out of your work than he puts into your total pay package or go bankrupt.
Energy return on energy invested is the same thing applied to energy.
Plants get nearly free energy pumped out to them by the stellar hydrogen subsidized Sun. They take in enough water, minerals, and other resources to build themselves the best possible energy harvesting system *growing leaves branches, etc* AND propagate themselves through storage of the excess energy or creation of offspring. Animals come along and steal the plants excesses of energy or infrastructure and use it for their own (similar) purposes. Predators and parasites come along and steal the energy from the other animals. And so on and so on. And supposedly millions of years ago some of the solar energy trapped by plants got buried and stored and concentrated under the earth becoming fossil fuels that we dig out and use today.
It doesn't matter if there is some conspiracy stopping us from digging it out, or if we really have dug out the good stuff (the more likely option IMHO), or if it was a mineral instead of a biological process to create it (which would be sad as once gone it would NEVER come back). But if the ENERGY it takes to get one unit of energy becomes equal to energy extracted it CAN NOT be a self sustaining process. That is the final crash.
At one point a person could take a bucket out into the Pennsylvania fields dip it down and come up with a bucket with enough energy to make a thousand more buckets and bucket trips for the oil.
Then by using a 100 barrels of oil you could poke a hole in Texas and get 100000 barrels back.
Now it takes 1000 barrels of oil to drill a frack well in N. Dakota and you get back at most 30000 barrels of oil- at first and quickly declining-.
Add in the fact that global demand continues to grow exponentially--- And you get a 'Peak' in oil.
Well, a good thing frack oil will last a gabazillion years since we can't get a good EROI. Oh, wait...
Delete