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How close to peak?

Permanent Linkby wisconsin_cur on Wed Dec 09, 2009 3:25 am


I want to take a step back from the details from the switch to nuclear because it seems to me that there is a more fundamental difference of opinion which undergirds each of our outlooks. You are concerned about what I think can fairly be called "undue alarmism." In contrast, I am more concerned with what I see as "undue ease" in the presence of a real threat. Both alarmism and undue ease are often emotional reactions to situations and, depending upon the individual and event, will be rooted in fact to one degree or another. I would like to make my case on why I think we are closer to peak and the need to begin mitigation efforts are, at least, more immediate or way past due.

Before I do that, however, I would just like to quote Matt Simmons on the issue of when we KNOW that decline is a fact,

"peaking is one of these fuzzy events that you only know clearly when you see it through a rear view mirror, and by then an alternate resolution is generally too late."

If we wait until we know that we are in decline to act then we will have waited too long. The social, economic and net energy available effects of decline are significant enough that they hamstring any mitigation efforts. To date countries have just transitioned to becoming oil importers after peak. This will no longer be an option when the globe crosses into decline; unless of course we have crossed the technological threshhold to import methane from Titan.

But I digress from my main concern, why I believe we are at the precipice of global decline in world oil production.

The globe is a geographic entity comprised of smaller entities just as a nation is an entity comprised of many other entities. The globe has a finite number of oil fields just as any nation has a finite number of oil fields. I do not think it is too great of an assumption to propose that oil exploitation on a global scale will progress much as it does in any other, albeit smaller, geographic entity. Global decline is yet future and, hence, is unknown and unknowable. We can, however, look at other geographic entities which have experienced a decline for clues as to what to expect.

Lets start with some representative examples:

United States:



North Sea:


Each of these areas has a different shape to the curve but a curve is observable none the less. Russia's is the most interesting with the secondary bump in production. This demonstrates how "above ground" factors, like the economic collapse of the Soviet Union, can effect production. Likewise the much smaller bump in United States production arose from the completion of the Alaska pipeline and the addition of Alaskan supply. While there can be surprises or variencies of various sorts each demonstrates a "curve" in production; a curve that is not dependent upon free market or governmental control, it is not for lack of innovation or trying, but the geological realities of oil extraction.

The rate of decline following peak is rooted in a number of factors. Key among them is the degree of technology used to exploit the oil in the first place. Many of the technical advancements we have made over the decades, the advancements that have allowed the oil companies to keep up with demand up until this point, have drawn their primary efficacy from drawing out the oil faster not extending the ultimate recoverable reserves. Those advances which have been able to recover previously unrecoverable reserves have not, to date, been able to reverse the decline in oil production.

The former Soviet Union is the example which proves the rule: their earlier decline was due to economic destruction rather than geological limits. Russia has claimed for almost 5 years that they expect to reach a geological peak in production around 2010 and then go into geological decline. I have no reason not to believe them. Only in the future will we know how steep their decline in production will be.

But looking again at our declining charts I want to point out the plateau in production that occurs before a decline. Only in retrospect does the decline in production look unavoidable. At the time nations often act fervently, doing all that they can to maintain or continue to increase production. At the time the decline is not a fore-gone conclusion, at least not in the minds of policy makers but after they have done all that they can it happens anyway. Geology does not care about our doubts.

Today the decline in global oil output is not a foregone conclusion, at least not in the mind of policy makers but looking at production over the last decade or more is an interesting experience:


If we ignore the forecast and just look at what we have data for, the image is disconcerting. We know the cause of the earlier slump in production, the twin crises of 1973 and 1979 and the demand destruction that followed. Since 2005 we have seen plenty of demand (at least throug 2008) and prices of $147 a barrel, yet production did not increase despite this incentive.

Perhaps I am wrong and there is another leg up yet to come but there is no publically acknowledged or even privately rumored oil find which promises to make any dent in the decline that seems to be approaching. When we look at the finds and do the math of how much they are currently or even promise to provide and subtract the amount of supply going off line from fields already known to be in decline; there is little reason to hope for another leg up.

In the face of silence, I assume meaningful new supply is not approaching and am left with looking at that plateau in world supply and wondering what will come next. The geological history of smaller geographic entities inform my opinion and my opinion is that what we can expect in the near future is terminal decline.

I mentioned in my last post that it take ~5 years to build a shovel ready nuclear power station. I have no way of knowing how long this plateau will last before it goes into decline. Heck, I cannot with philosophical certainty know that it will result in decline but I cannot know with certainty that the universe existed before I was born. But I think I have good reason to belive both that the universe existed before I did and that decline is approaching. If we are lucky, we have five years, hence the need to act now. It is not alarmism to yell "grenade" if there really is a grenade. Like Peak Oil, it does little good to yell grenade after it has already gone off and like a grenade it is necessary to deal with it before it goes off.

“It does not do to leave a live dragon out of your calculations, if you live near him.” J.R.R. Tolkien

Sevareid's Law: "The leading cause of problems is solutions."
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Re: How close to peak?

Permanent Linkby Jack on Wed Dec 09, 2009 4:18 pm

Nice analysis - clear, direct, and well illustrated with charts.

The Indonesian chart is telling. Consumption increased even as total production declined until the country became a net importer. This suggests to me that Indonesian growth is likely to be impaired by the cost of oil. This in turn might create additional challenges in capital formation for any large project, including nuclear reactors.

In the U.S., politicians face the problem of how to allocate available funds. The existing economic situation creates pressure for both stimulus and social programs, which in turn diminish the ability to build infrastructure. I suspect that the outcome is already past the point of no return - we will do nothing until the decline is not only obvious, but painfully obvious. At that juncture, we will be able to do little other than attempt some form of triage.

I suppose that's why I don't yell "grenade" very often anymore. It would take 3 seconds to get out of the foxhole - but the grenade will detonate in 2 seconds.
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