

Peak Oil Perspective - devbug
http://physics.ucsd.edu/do-the-math/2011/11/peak-oil-perspective/

======
jofer
As a geologist in the oil industry, this is one of the few articles I've seen
on peak oil that absolutely nails the salient points. (And even gets the
geology correct.)

To quote: "Most simply, peak oil is about rates, not amounts."

Yes, there are a lot of unconventional resources. They're just a lot harder,
more expensive, and most importantly in this context, slower to produce.

On the upshot for me, and the downshot for the rest of civilization, oil (and
to a large degree, energy) prices are likely to stay high for the near future
for exactly this reason.

However, we haven't developed a viable alternative to liquid fossil fuels in
terms of energy-density fast enough. That very, very deeply scares me.

~~~
rayiner
The concept "peak oil" to me seems to misdirect the debate right off the bat.
Obviously the question isn't "when do we run out of oil" but "how does oil
supply given continually increasing demand affect oil price" and "what does
rising oil price do to the rest of the economy?

Inflation-adjusted, the price of a barrel of crude oil was $23 in 1960, and
has been averaging almost $88 in 2013. What does that do to, e.g., suburbs
designed around 1960's oil prices?

Most of the interesting questions when it comes to oil have nothing to do with
"what happens when it runs out?" The fun stuff is before then.

~~~
jofer
Well, the debate often gets off track, but the definition of the term "peak
oil" is "when production stops increasing due to market demands and starts
decreasing due to geologic control".

In other words, "when does long-term demand outstrip long-term supply?" The
concept isn't to blame, it's just misinterpretation of it in the popular
media.

At any rate, as you pointed out, the interesting question is "what does rising
oil price do to the economy?".

~~~
nostrademons
In a free market, long-term demand will never outstrip long-term supply. Why?
Because prices will rise to equalize them. As prices increase, long-term
demand drops, and long-term supply increases, until they eventually
equilibrate.

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rybosome
> The risk is asymmetric: starting a crash program toward replacement of
> finite fossil fuels too early has great up-sides and marginal downsides
> (opportunity cost); but failure to act has enormous downside for marginal
> upside. - See more at: [http://physics.ucsd.edu/do-the-math/2011/11/peak-
> oil-perspec...](http://physics.ucsd.edu/do-the-math/2011/11/peak-oil-
> perspective/#sthash.hrEoRVjP.dpuf)

This is a more intelligent way of stating something I've been saying for
years. I always explain my position on peak oil by offering an analogy of a
fire escape. If the owner of a building chose not to install a fire escape
(assuming they could dodge the law), then a fire in the building would be
absolutely disastrous; the law would certainly come down on them for anyone
who died, and there would major financial ramifications. On the other hand, if
they installed a fire escape but it was never used, then the only downside
would have been the initial installation cost. Between these two worst-case
scenarios, one is so significantly worse than the other that taking steps to
mitigate that risk is the logical thing to do, without regard to the
likelihood of worst worst-case happening.

Doing nothing with respect to peak oil feels utterly insane.

~~~
joshuahedlund
Sure, but that assumes we already know how to build the fire escape, how much
it costs, how long it takes, and what it's supposed to look like.

~~~
geden
erm, it's time to at least start finding out!

~~~
joshuahedlund
Fortunately, we've been working on it for decades. The issue is not so much
about whether or not to "do nothing" as it is about whether or not to devote
how many more (and whose) marginal dollars toward it, and how.

------
ChuckMcM
Note this is from 2011 (pre fracking) so it misses quite a bit. And it doesn't
plot home prices post mortgage crisis. Generally the whole 'peak oil' thing is
of interest perhaps to people trading oil driller stocks (or not) but I have
yet to see any way to apply any of the insights into something remotely
interesting or predictive.

~~~
thrownaway2424
You're kidding, I'm sure. The end of the Oil Interval is the most interesting,
possibly the ONLY interesting historical event that will take place in our
lifetimes.

~~~
glenra
> _The end of the Oil Interval is the most interesting, possibly the ONLY
> interesting historical event that will take place in our lifetimes._

That seems like a bizarre thing to believe. When humanity switched from wood
to coal for heating, or from coal to oil, were either of those an identifiable
"historical event"? If we switch from oil to other fuels in our lifetimes,
this will happen so gradually that nobody will notice when it happens. Any
more than we noticed as "an interesting historical event" the moment that
everybody got an email address, or started using google, or bought a
smartphone.

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ctdonath
How about the math of supply and demand? Oil dominates because it's cheap &
efficient. When it's not, other existing but relatively uncompetitive energy
systems will become viable within a sensibly short time purely as a matter of
demand & competition. Remember, oil (as we're speaking of it) was practically
nonexistent not all that long ago, yet a vast robust infrastructure has sprung
up around it.

Keep lofty-goal government subsidies out of it, as they distort the reality of
what's viable, boosting lesser technologies while denying funds to what really
will work as a matter of economics & physics.

In the meantime, put some of your own energy & money into getting "off the
grid": make an alternative energy source viable by actually making it happen
on a personal scale, not just hoping somebody somewhere will make it happen
the way you want it to.

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3rd3
[http://webcache.googleusercontent.com/search?q=cache:http://...](http://webcache.googleusercontent.com/search?q=cache:http://physics.ucsd.edu/do-
the-math/2011/11/peak-oil-perspective/&ie=UTF-8&oe=UTF-8&hl=en&client=safari)

------
Zaephyr
It would be interesting to see plots of per capita oil consumption against
population over time to see to the proportions of which the problem is being
driven by current lifestyle/modernisation trends and by global population
growth.

------
fleitz
Peak oil depends on oil price, the world is awash in oil at $110. Even up to
2005 oil's peak price was $60.

Peak oil also depends on consumption, with cars like Tesla coming out we'll
see a sharp decline in consumption over the next 20 to 30 years, at $300/bl a
Tesla starts to make a lot of sense.

The world will never run out of oil, its price will simply continue to
increase until other alternatives become economically viable, as those
alternatives become viable economies of scale and capital investment will make
alternatives that much better.

~~~
rybosome
This makes sense economically, but that doesn't address the difficulties we
will face as oil becomes too expensive for common, important uses. Our fleet
of oil-consuming vehicles won't magically convert themselves. The oil-backed
electrical grid will take a hit. Food will become incredibly expensive (or
more scarce) since the vast majority will come from far away, and have been
transported via oil.

~~~
gshubert17
Not just that. Most corn production heavily depends on oil-based inputs, such
as fertilizer, fuel for machinery, and natural gas for drying and storage.
Corn from the same county will become much more expensive, even without
transportation costs.

~~~
fleitz
Fertilizer does not come from oil. This is a myth. Natural gas is not an oil-
based input.

[http://en.wikipedia.org/wiki/Fertilizer#Inorganic_commercial...](http://en.wikipedia.org/wiki/Fertilizer#Inorganic_commercial_fertilizer)

~~~
gshubert17
Right. Hydrocarbons, then. Natural gas and petroleum have similar geologic and
economic characteristics.

~~~
fleitz
I hate to break it to you but pretty much everything is a hydrocarbon.

Natural gas and petroleum are about as similar as the hydrocarbons of corn and
cherries.

~~~
gshubert17
Does natural gas exploration and exploitation have peak phenomena similar to
petroleum? And does coal have its own reserves and peak phenomena?

Coal, petroleum, and natural gas are three large categories of energy
hydrocarbons. If gas is cheap relative to oil or coal, then at the margin,
some users will shift to gas. Prices of energy hydrocarbons will be
correlated, over the long term.

Then, as coal, oil, and gas are all depleted (with their own separate peaks,
perhaps), their prices will increase. Foods like corn which have many
dependencies on low-priced energy (farm equipment, fertilizer, drying, and
transport), will come under increasing upward price pressure.

Corn is used in perhaps a quarter of food SKUs in American grocery stores, so
won't a lot of food prices go up as energy prices go up, as a consequence of
peak oil (or coal or gas)?

------
olalonde
Sorry for the naive question but what is oil used for? Isn't most of it used
for transportation? If so, isn't the problem a bit overblown given that we
have electric vehicles?

~~~
ohazi
Transportation of physical goods everywhere on the planet, not just
transportation of your butt between work and home every weekday.

We have electric cars. We don't have (useful) electric trucks, or ships, or
passenger or cargo aircraft.

------
rnernento
Looks like the sysadmin has some math to do... Mirror?

~~~
seiji
We've reached Peak SQL.

------
joe_the_user
There is one thing I always like to mention with the usual peak oil math (and
resultant fear/glee concerning "the end of civilization" and such).

The traditional "Hubbert curve" shows exponential growth and decline in a any
particular region of oil production. Peak oil theorists generally extend this
to a world exponential peak/decline (the article doesn't directly say but it
take the "we have to plan for the peak" position).

The exponential growth part makes sense because traditional oil of the ground
is a really, "high quality", high efficient energy source (whatever the
externalities).

The exponential decline at a given location make sense because the supply
winds quickly replaced by some other even cheaper source.

But the thing is that since these aspect explain the shape of the Hubbert
curve locally, these is no reason to expect the global decline shape to have
any resemblance to the rise shape. Oil today is a efficient meaning you get a
lot more energy out than you put in. We're already moving to less efficient,
more costly forms of extract and the price has marginally increase.

There's no reason a-priori to think that any _cliff_ would be involved with
oil production peaking. Production gets harder, prices go up, consumption
declines, technology produces relatively more at the higher rate, iterate a
number of times and there you are. It's worth saying that shale oil is
arguably much less energy efficient than traditional production but it is
still efficient to get a profitable product to market (and does involve the,
uh, transformation of a large land area).

The main reason to put effort into alternatives to oil is the externalities -
especially since pricier oil is going to involve more energy and environmental
impact in its extraction. THAT is quite arguably a crisis but unfortunately
for people worried about these problem, there's no going to be a "peak point"
where oil isn't practical from a purely economic standpoint.

~~~
sergiosgc
Large evolutionary jumps in mankind's history have always been associated with
use of more energy per capita. The stabilization of oil consumption, visible
since 2000, means one of two things:

a) Humanity has plateaued in its energy usage; or

b) Some other energy source is increasing.

Any of these means oil has hit a peak (there'll be no cliff, though, as you
explained). The alternatives are not acceptable (evolution stopped or, for the
first time in five thousand years, stopped requiring more energy use).

~~~
joe_the_user
_Large evolutionary jumps in mankind 's history have always been associated
with use of more energy per capita._

This is typical of the hand-wavy peak oil arguments.

An increased richness of culture or an increased scientific knowledge clearly
don't require ever-increasing energy consumption.

Oppositely, the reason previous evolutionary jumps involved more energy per
capita has been that ... cheaper energy has always previously available (ie,
this a correlation, not a causation).

Edit: A modern laptop uses less energy than a desktop machine of twenty years
ago, yet the laptop's user certainly experiences a somewhat higher level of
"civilization" or whatever one would call it. Just a simple counter-example to
"evolution always requires more energy per capita" claim.

~~~
sergiosgc
You are proposing one of the possibilities I deem unacceptable, albeit without
explanation. Without going about a huge text, you are proposing that for the
first time in 5000 years, this chart will go flat:

[http://gailtheactuary.files.wordpress.com/2012/03/world-
ener...](http://gailtheactuary.files.wordpress.com/2012/03/world-energy-
consumption-by-source.png)

It rather looks quite the opposite...

------
devx
The faster the oil/gas price increases, the more attractive electric cars
become. Unfortunately, it could also mean US will _never_ cut oil subsidies,
unless they do it now, before the perceptible decline starts.

Hopefully, governments will at least resist the urge to _increase_ oil
subsidies to keep the prices the same. Instead they should be looking at
building electric car infrastructure in their countries, faster, so when the
gas prices start climbing, the population switches "smoothly" to electric
cars, and doesn't feel much of a shock.

~~~
fleitz
Most countries tax oil heavily. Europe and Canada come to mind.

~~~
thrownaway2424
Yeah. Last time I was in Europe the local gas tax was more than the entire
price of gas in the USA. Our low gas tax is, in effect, a subsidy, because we
(as a society) choose to ignore the externalized costs of burning gasoline.

Gas is currently 2CHF per liter (about $8 per gallon) in Zurich, in case you
haven't been out of the USA lately.

~~~
fleitz
You could call it externalizing the costs of burning gasoline, or you could
call it internalizing the profit of burning gasoline. The rest of the world
burning gasoline results in cheap credit for the US.

[http://www.newyorkfed.org/research/current_issues/ci12-9/ci1...](http://www.newyorkfed.org/research/current_issues/ci12-9/ci12-9.html)

~~~
thrownaway2424
The result of burning all that fossil fuel will indeed by internalized in the
end, but when it comes around I doubt you'll call it a profit.

