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By Robert Rapier on Mar 28, 2017 with 57 responses

The Peak Oil Estimate You Won’t Believe: A Tale Of Two Sigmoids

Introduction

Over the years, I have often pondered what the world’s ultimate oil production might be before it peaks and inevitably declines. I can recall around 2005-2007 on the website The Oil Drum, that there was a raging debate about just how close the world was to peak oil. Some insisted that it was happening right then. Others, like myself, were in the camp that we still had a few more years and a few more million barrels per day (BPD) of production to go. Those who thought the world would ever reach 100 million BPD were definitely in the minority.

Today I bring you a post from returning guest Todd “Ike” Kiefer who makes an oil production estimate that is far beyond anything I would have personally imagined. He takes on a topic that I have also addressed in the past – the accuracy of some of M. King Hubbert’s estimates. Some will dismiss Kiefer’s estimate out of hand, but I can say from experience that most who dismiss these estimates haven’t done any sort of rigorous estimates to come up with their own estimates. They will just say things like “keep dreaming.” That’s not a very helpful approach. If you disagree with the work, please critique the logic and the numbers.

Previously Mr. Kiefer wrote an article critical of the Navy’s efforts to promote biofuels in a periodical that is sent to Congress and top military leaders. The article was entitled Energy Insecurity: The False Promise of Liquid Biofuels (discussed here). He also wrote guest articles here in the past called EPA’s Sleight of Hand on Cellulosic Fuel Rule Change and A Critical Review of the 2015 Energy Balance for Corn Ethanol. His biography can be found at the end of the article.

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A TALE OF TWO SIGMOIDS

Todd “Ike” Kiefer
Captain, U.S. Navy (retired)

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Figure 1 – Symmetric Sigmoid (red) v. Classic Sigmoid (blue)

 

Contrary to widespread misunderstanding, Dr. Marion King Hubbert did not fit a generic or Gaussian bell curve to his data plot of oil production numbers.  Rather, his eponymous curve is a specific mathematical construct that emerges from his mathematical assumptions.  I will show below why I believe that those assumptions and the curve are both wrong, and suggest a substitute curve and worldview for crude oil production.  The real power of a theory is its predictive power.  Based on my modeling and analysis, I predicted in 2012 the exact level of U.S. oil production at which prices and production would collapse in 2014.  The same methodology leads me to predict that U.S. crude oil production will perpetually seek a natural level of 9.5 Mbpd (mmbpd), and that global oil production/demand will continue to grow to eventually plateau at approximately 160 Mbpd.

 

The Math of the Hubbert Curve

There are dozens of different mathematical functions that yield bell-shaped curves.  The “Hubbert” or “Peak Oil” curve is actually a special case of a class of s-shaped curves called sigmoids.  While most sigmoid functions begin and end at different values, Hubbert’s curve is constrained to begin and end at zero by the formula and boundary conditions imposed that represent a perfect mathematical translation of Hubbert’s worldview.  The curve reflects a battle between two competing forces or trends – one for growth and one for contraction – where the balance shifts between the two along the way.

The curve is usually plotted as the annual quantity of oil produced on the vertical scale against the year of production on the horizontal scale.  However, the math of the curve is best understood as a differential equation relationship between the rate of oil production (dQ/dt) and the cumulative quantity of oil so far produced (Q).  This is because Hubbert derived the curve by assuming the forces that affect oil production were related to Q, not a function of the year of production.  There are three variables that are adjustable to shape the curve: first is Q0 that starts the curve and is usually set to be zero in the year 1859 when the first commercial oil was produced in the USA; second is a rate scalar r that symmetrically adjusts the steepness of the rising and falling slopes; third is Qmax – the postulated maximum amount of oil which can ever be produced from the geographic area under consideration, and which corresponds to the area under the curve.  By adjusting r and Qmax, Hubbert and his acolytes have been able to get a good fit to historical U.S. oil production through about 1990 with some significant caveats.  Hubbert’s 1956 predicted production curve for USA based on his estimate of total recoverable reserves of 200 billion barrels is shown below.  It is followed by a plot of his curve overlaid with actual historical production through 2015.

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Figure 2 – Excerpt from Hubbert’s 1956 Paper (annotated)

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Figure 3 – Hubbert’s Curve v. Historical U.S. Crude Oil Production

The formula for the rate of production dQ/dt shows the two trends that are competing with each other.  First there is a term rQ that tries to increase production in linear proportion to how much oil has already been produced.  This term essentially models a scenario where more oil production stimulates proportionally increased consumption, driving more producers to enter the oil business and drill more wells.  Unchecked, this portion of the formula would cause the curve to grow exponentially.  However, the check comes in the second term, 1- Q/Qmax, that applies brakes on the rate of production in proportion to how close Q approaches a pre-determined maximum value.  The second term essentially models a scenario where there is a fixed amount of a resource in the ground and it becomes harder to find and extract as the balance remaining decreases.  Qmax is the key assumption and guiding worldview of Hubbert’s approach and curve.  The two terms work together to produce a symmetric sigmoid, where unconstrained growth dominates initially, but is eventually overtaken by insurmountable resistance, and production reaches zero as Q reaches Qmax.  Hubbert’s curve is an elegantly simple model of more and more people looking for a scarcer and scarcer resource.

 

Limitations and Hidden Assumptions of Hubbert’s Worldview:

The Hubbert curve is appealing because of its simple logic and because of its close apparent fit with the data through the U.S. production peak in 1970.  But is the math too simplistic?  Indeed, there are three principal weaknesses that flow from questionable assumptions.  First of these is that Hubbert simplistically focused only on production, with no separate consideration for the demand side of the economic equation.  Whatever is produced is assumed to be readily consumed and thereby to maintain a constant economic pressure favoring increased production (i.e., keeping the rate coefficient r positive and stable).  Secondly, he assumed that  scarcity alone limits production, as discussed above.   Thirdly, his approach has baked into it the assumption that the rules are largely fixed for the entire lifespan of production – particularly the rule that oil is monotonically more difficult to extract with every barrel.  To be fair, Hubbert did allow for some minor growth in reserves over time due to continued exploration and improving technology, and this is seen in the fattened post-peak tail of his curves as plotted in his 1956 paper.  But he did not allow for the possibility that technological progress and evolving geophysical understanding might be great enough to actually reverse the overall trend of slowing production that was supposed to be inexorable beginning with the 1952 inflection point he saw in U.S. production data and built into the Hubbert Curve.

In the case of U.S. oil production, Hubbert also made a fourth mistake – he assumed a self-contained economy where U.S. production was firewalled to satisfy U.S. consumption.  The truth is that oil was already well-established as a global commodity by 1956, and it has only become more so with time.  Today there are more than 80 countries offering crude oil for sale on the global market.  U.S. refineries were never obligated to buy only domestic crude, but rather shopped the international market for best price.  In the real world where oil-producing nations compete, oil production is a function of market share (the demand side of the equation intrudes again).  And, since the bulk of U.S. oil company exploration and production investment from WWII forward was overseas, it is only natural that the fruit of that investment would be overseas.  The “lower 48” U.S. production data that Hubbert was trying to fit with his curve does not include imported oil resulting from U.S. capital investment in Saudi Arabia and Nigeria and many other locations that arguably produced U.S. oil, regardless of nation of origin or subsequent nationalization of assets.

History has invalidated each of Hubbert’s assumptions.  A host of technological and scientific innovations has dramatically recalibrated reserves, costs, and efficiencies for both terrestrial and offshore oil.  Whole new realms of reserves have become accessible and economic, including terrestrial source rock and offshore “pre-salt” oil, upending long-held geologic assumptions.  As oil production has continued beyond the 1970 U.S. peak, neither the U.S. curve nor the global curve has cooperated in following the mathematical predictions.  Instead, U.S. production has waxed and waned and waxed again dramatically reflecting how, like all commodities, oil production remains responsive to factors which have always affected competitiveness and market share such as government policy and regulation, capital investment cycles, and economic boom and bust cycles.

Hubbert’s initial prediction in 1956 was that U.S. oil production would peak between 1962 and 1967 at no more than 3 billion barrels per year (8.2 Mbpd) based on 200 billion barrels of ultimately-recoverable oil.  His global prediction was for production to peak in 2000 at 12.5 billion barrels per year (34.2 Mbpd) based on 1.25 trillion barrels of ultimately recoverable oil.  Instead the USA has now twice peaked at 3.5 billion barrels per year (9.5 Mbpd).  Global production has already exceeded Hubbert’s estimate of ultimately recoverable oil, and global proved reserves have been growing faster than production on a secular basis since 1980.  Global crude oil production is already 150% of his predicted peak production rate and still climbing.  However, those who have convinced themselves of the Peak Oil thesis see the world ever on the edge of their imagined cliff, and they hail every momentary dip in production due to acute economic or supply disruptions as the beginning of the end of oil.

Apologists have tried to excuse Hubbert’s poor fit with U.S. production data after 1970 by saying he could not have anticipated Alaskan oil.  But he probably also could not have anticipated the fact that the oil-saturated California coast he did include would soon be virtually barred from oil production for political reasons, and this would have reduced his production estimates.  Another contrived effort to redeem Hubbert’s prediction consists of ignoring all production that falls outside a recently invented narrow categorization of “conventional oil.” Some define conventional oil by its extraction methods (migrated crude in shallow terrestrial reservoirs accessed with vertical rigs).  Others define conventional oil by its viscosity and the characteristics of the oil-bearing rock (API gravity >10, porosity > 5%, permeability > 10 millidarcies).  Peak Oil theory is thus supposedly excused from failing to address the flood of new, light, sweet crude being produced by directional and horizontal wells from terrestrial source rock and ultra-deep offshore reservoirs.  Earlier generations of oil producers would have viewed conventional oil differently as the years marched on and technology progressed.  Conventional oil for thousands of years would have been asphaltic bitumen in surface pools or sand formations.  For much of the 19th century, it would have been oil produced from human-powered drilling of wells less than 100 feet deep and east of the Mississippi river.  Even using the modern and specious categorization of “conventional oil,” there is no evidence of a peak or cliff in global crude production, but rather continued responsiveness to capital investment.  So obvious has been the absence of the predicted scarcity that many governments and activist organizations are now frantically trying to figure out how to pile on new regulatory and tax burdens to keep oil production and consumption from accelerating further.  Concern about scarcity has been replaced by concern about how to “keep it in the ground.”

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Figure 4 – Global Peak Oil Predictions

 

A New Curve

Rather than trying to patch up the Hubbert theory, it is past time to reconsider the assumptions and choose a better curve.  The better curve is the classic sigmoid, also known as the logistics curve.  The logistics curve is one of the most ubiquitous naturally-occurring mathematical forms in science and nature, empirically emerging as titration curves in chemistry, population growth curves in biology and demographics, and market penetration curves in economics, to name but a few.  The math of the logistics curve is very similar to the Hubbert curve, but it substitutes P (the rate of production) for Q (the quantity of production), where P = dQ/dt.  In other words, the logistic function is essentially the integral of the symmetric sigmoid – where Hubbert’s curve was limited in maximum quantity of production, the logistic function is limited in maximum rate of production.  So the first term in the logistics equation produces exponential growth in the rate of production, and the second term sets a maximum boundary on the rate of production.  Instead of total oil production being limited by Qmax, oil production rate is limited to Pmax, which in logistics terminology is known as a carrying capacity.  Such natural limits to growth often appear in complex systems with many interdependent variables.

Whereas Hubbert was modeling only the throttling effect of a single variable (i.e., scarcity of oil), real life is much more complicated.  Production of oil is a function of many things other than oil: capital, labor, mineral rights, exploration technology, extraction technology, refining technology, geopolitical stability, trade barriers, economic stability, demand, market competitiveness, substitution, etc.  At any moment in time and any particular location, any one of these might be the ultimate limiting factor.  And in the aggregate, factors other than scarcity of crude oil appear to dominate.  In fact, other factors seem to be so dominant that crude oil production appears to follow the trajectory of a renewable resource, with reserves and production still continuously growing to fill petroleum’s niche share of the global energy market.

When applying the logistics function in the field of population growth, it is understood that people themselves are a renewable resource, and the asymptotic limit occurs where balance is achieved between birth and death rates.  In oil production, the natural emergence of the logistic curve and its approach to a sustainable limit seems to describe a dynamic balance between new well development and existing well decay, rather than the exhaustion of oil.  There is no need to attribute this limit to any single factor – it is most likely a confluence of many factors that have in the past and will continue in the future to constrain oil production across time and geography. Biology and physics themselves are powerful constraints.

 

Biophysical Limits to Growth

The best conception of human civilization is as a giant collective organism.  We happen to be an autotrophic organism that uses technology to make food (high-quality, readily assimilable energy) from crude resources in the environment.  We have learned from studying the physics of living things that there are biophysical constraints on the size and density of organisms that arise from bottlenecking of energy and waste flows.  It is fundamentally a geometry problem.  As a creature grows larger, its demands for food and production of wastes scale up in proportion to its mass, which scales as the cube of its size.  However, energy and waste are exchanged across membranes (lung walls, air intake screens, heat exchanger surface area) and through tubes (e.g., blood vessels, pipelines) whose cross-sectional areas scale as the square of size.  Thus the demands for energy and waste flows increase with size at a higher order than the means to satisfy them, and this creates natural, internal, structural barriers to growth – i.e., carrying capacity limitations.  These limits exist even if the energy sources and waste sinks external to the organism are unlimited.  This straightforward power and waste engineering challenge is what limits the size of termite mounds and cruise ships.  It follows that continued growth depends upon ever more concentrated fuels and wastes.

Concentration of energy is measured in metrics of energy density, power density, and energy return on investment (EROI).  Each of these attributes of energy has power to constrain the growth of civilization and its resulting demand for oil.  And the actual trajectory of the growth of civilization and its energy appetite so far indicates that these broad energy factors in general, rather than oil scarcity in particular, are indeed what is shaping growth.  The interdependence of growth with energy density, power density, and EROI also explains why the progress of civilization has been in step with migration to ever more high-performance energy sources.  We have moved from agriculture (annual harvestable power density of ~ 1.0 Watt per square meter of land cultivated) to the Wright Flyer (110 Watt/kg of gasoline and engine) to the Space Shuttle (10,200 Watt per kg of LH2, LO2, and engine).  And it is why biofuels and PV solar and wind turbines, with lower EROIs and far lower densities, cannot sustain existing developed nations at their current energy-intensitive standard of living without support from fossil fuels and nuclear power.

 

Follow the Data

Below is a logistics curve fit I did in 2012 for U.S. oil production data available at that time.  I have since updated the data through 2015 (most recent available), but have had no need to adjust the curve.  The logistics curve best fit to empirically match the data revealed a natural plateau for U.S. production of about 3.5 billion barrels per year (9.5 Mbpd).  A positive and premature spike to that level in the early 1970s was explainable by a set of special circumstances including a surge in Vietnam, the Apollo program, record cold winters, and the oil embargo.  Alaska oil production, rather than being an anomaly, actually appeared to be a natural progression that fit the curve perfectly.  A major break with the curve occurred in 1986, which was a year when the global oil market belatedly recognized a glut of overproduction, and prices collapsed for a period that would last 17 years until 2003.  U.S. domestically produced oil, made uncompetitively expensive by the world’s most restrictive drilling policies and environmental regulations, could not compete, and market share quickly dwindled even as global production and consumption continued to rise.  And the oil not produced in the USA was displaced by imported oil, much of it the fruit of U.S. oil company investment overseas.  Thus the dip in the curve was more about market share and EIA accounting limitations (no data tag to denote overseas oil production that is the fruit of U.S. foreign investment) than about domestic crude oil scarcity.  However, a coming revolution in domestic production would indeed show up in the data.

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Figure 5 – Kiefer Curve

Based on 3 previous boom and bust cycles in global production in the 20th century, it was clear that it was only a matter of time before the march of U.S. technology would improve oil exploration and production efficiency enough to again make U.S. domestic production competitive and recapture market share.  In fact, this was already well underway in the form of a massive wave of capital investment by the world’s remaining privately held oil and gas companies benefiting from the rising prices accompanying another cycle of perceived scarcity that had arrived in 2003.  As had happened many times before in its history, panic about the end of oil helped create profit margins that financed the investments that renewed the supply.  By 2006, all of the technologies that enabled the fracking revolution were already fielded (3-D seismology, directional and horizontal drilling, sophisticated bore-head sensors and real-time telemetry, bore cementing and sequential perforation, hydraulic fracturing, advanced drilling fluids and proppant, etc.). Additionally, the first commercially successful ultra-deep “pre-salt” offshore well in the Gulf of Mexico was drilled in 1993, and by 2007 similar wells were being drilled off Brazil, ushering in another revolution of less notoriety but likely equal import with fracking that has yet to really make itself felt.  Both of these revolutions depend upon specific technology and expertise for which the USA is unsurpassed.  The stage was set by 2010 for U.S. oil production to come roaring back.  The trend lines in 2012 indicated that U.S. production would reach the logistic curve carrying capacity of 9.5 Mbpd sometime before the summer of 2016.

In January of 2014 I specifically predicted a price collapse to $50-$60 bbl approaching this natural limit.  According to EIA data after the fact, U.S. crude oil production hit 9.0 Mbpd in September 2014 and peaked at 9.6 Mbpd in April of 2015.  WTI Cushing spot price peaked at $108/bbl in June of 2014 before beginning the plunge that would see prices below $50/bbl by January 2016.  Current U.S. production is stable at 8.8 Mbpd.  I expect to see U.S. production remain at or a bit below the 9.5 Mbpd limit, though not dip as low as it did following the 1986 glut.  This is because most global oil companies have now been nationalized and foreign innovation and technology migration is thus slower today, allowing the USA to maintain a more enduring competitive advantage and preserve more market share.  Private land and mineral rights ownership is also key to the economics of oil and gas, and this almost exclusively favors the USA as well.  I don’t believe perceived scarcity will again come into play to significantly boost prices for well beyond a decade.  Of course the global market is always susceptible to short-term spikes from geopolitical crises.

 

The Global Carrying Capacity for Crude Oil

We have already seen that Hubbert’s prediction for U.S. oil production was pessimistic and completely failed to predict our current condition.  His prediction for global production was equally flawed.

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Figure 6 – Hubbert’s Global Oil Prediction

 

According to Hubbert’s prediction, 2017 global crude oil production should be 12 billion bbl/yr and falling irretrievably.  Instead it is over 30 billion bbl/yr and climbing steadily.  And while oil is now being more properly priced as a premium transportation fuel and industrial feedstock rather than as a bulk combustion fuel, there is still an unquenchable thirst for this commodity in the developing world representing a huge latent demand.  Applying the same logistics curve fit technique to global production data is illuminating.

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Figure 7 – Kiefer’s Global Oil Prediction

If trustworthy, this logistic curve shows that global production and consumption are only halfway to the natural plateau.  You can see in the figure some reasons for why progress may have departed from the ideal curve to a more linear path of growth.  These factors include international market dysfunction beginning in 1971 due to U.S. abnegation of Bretton Woods and the subsequent global transition to pure fiat currencies and floating exchange rates, the emergence of the OPEC cartel, socialist evolution of western nations leading to crippling debt and tax burdens, nationalization of reserves and oil companies, implementation of restrictive environmental regulations and anti-energy policies, etc.  The fiscal economy of the entire globe is way over-leveraged and is operating with a huge debt drag on it.  All ability to stimulate economies with monetary policy and cash injection has been exhausted by the governments and central banks.  The only way out now is for a massive influx of cheap energy to cause a surge in the creation of goods and services that will elevate the real gross world product to catch up with the global money supply, and thereby reduce the leverage.  Right now, the USA seems to be uniquely positioned to benefit from the cheap energy revolution of fracking, while pre-salt hydrocarbons may be more globally accessible.

Nevertheless, continued growth in global production toward the predicted carrying capacity is my prediction – one which will not bring much comfort to those who demonize CO2 and think the Earth is on the knife edge of climate catastrophe.  I’m not sure which nations will be contributing which fractions to this production plateau, but I believe it will come to pass.  Even if the world added a new 2,000-megawatt nuclear plant every week for the next 50 years, we would not displace the need for this energy, particularly for air and sea travel, when the growing demand of developing nations is considered.  Fortunately, fossil fuel energy has proven an excellent resource for helping civilizations cope with a host of threats.  Hydrocarbons excel at reducing human exposure to and harm from severe weather, and in making crops much more fruitful and far less dependent upon the vagaries of nature.  Climate change adaptation and mitigation would appear to be the only reasonable strategy going forward, as it has been for all of human history.

 

Finite v. Sustainable

If the logistic curve is indeed the better fit than the Hubbert curve, what does that tell us about the underlying commodity and the forces shaping its production?  The essential difference between the two curves is that a Hubbert curve describes a finite resource whose production is being choked down by scarcity, while a logistics curve describes a sustainable resource who production is stabilized by any of a host of natural limiting factors at a level below which scarcity comes into play.  The question of finite v. sustainable is really where the prevailing worldview is most challenged.

For oil to appear to be a resource that can be sustainably consumed, there are two possibilities.  First is the case that the amount of ultimately producible oil is very, very large compared to its stabilized consumption rates, and essentially dwarfs demand, so that true scarcity will not be a factor for a very long time.  A second possibility is that oil is indeed a renewable resource, and that the geologic processes that created the oil already extracted are still at work creating more at a significant rate compared to consumption – there is the potential for balance between demand and supply.  A combination of these two is also possible.  Experienced petroleum geologist and geophysicist David Middleton recently submitted an excellent online essay on what is known and theorized about the thermogenic processes that produce oil.  He makes a point about how much reservoir quality sedimentary rock there is in the oil and gas zones of the Earth’s crust.  The amount is so vast that every millionth part of it can hold 100 billion barrels of oil, though we really don’t know how much of it is charged with oil.  Additionally, there is no reason to assume that the Earth is not continuing to cook more crude oil from existing kerogen in the crust.  Pre-existing oil and kerogen may be enough to sustain the logistics curve of consumption for generations, or for millennia.  If there should prove to be any truth to the controversial theory of abiotic oil formation from rock and seawater in the deep crust, this would only add to the Earth’s endowment of hydrocarbons available to man.

There are other reasons why I hold to the sustainable oil view, including my own research and analysis of fossil fuel energy return on investment (EROI) and oil production versus drilling effort.  An essential part of this analysis that many get wrong is to ignore the often lengthy delay between oil industry capital investment and ROI.  During the crisis window of perceived scarcity, there is much capital investment and negative cashflow as a flurry of wildcatters chase prospects.  Once the glut is recognized, the capital investment dries up and there begins a lean period of low prices which includes a painful battle for market share and brutal consolidations, as most of the wildcatters fold up and are absorbed by larger companies with more fat to live on.  Then finally comes a long period of steady, profitable production from reserves that seem to miraculously grow and grow without much further investment – this is the payback period that is usually ignored because the crisis is long past.  Any ROI or EROI analysis that does not include the full bust-and-boom cycle will yield false results.  When the accordion-effect lag between capital investment and ROI is properly considered, U.S. oil production EROI has remained above 10:1 for its entire commercial history, except for brief dips associated with recessions.  Oil yields today are still about 40 barrels per foot drilled, the same as in the mid-1980s, only now we are drilling horizontally as well as vertically.  If scarcity starts to rear its head as an emerging force in shaping oil production, we should first see it in irretrievably falling EROI and yield per foot.

The ultimate limiting factor for energy consumption is human population.  The good news is that birthrates continue to fall, and they fall the most where energy intensity is highest.  This is another self-regulating externality not accounted for in Hubbert’s theory.  The worst-case prediction from the U.N. today is a peak of 11 billion people by 2100.  Based on the trend lines of energy and other resource consumption, that appears to be within the carrying capacity of the Earth as enabled by evolving human technology.  I believe a strong case could be made that more rapid economic development of underdeveloped nations using the highest EROI energy available would lead to a lower peak population and a smaller perpetual burden on the Earth’s resources.  This is exactly the opposite of what restrictions on CO2 emissions are achieving by putting the brakes on development.  The correct worldview of energy is essential to making good energy policy and genuinely helping humans and the environment.  The evidence is that crude oil today remains a plentiful and high-performance resource with considerable prospects to grow in production and consumption for another century.

Biography

Captain Todd “Ike” Kiefer, USN (ret.) is director of government relations and economic development for East Mississippi Electric Power Association and president of North Lauderdale Water Association.  His career in public utilities follows 25 years as a naval officer and aviator.  He has degrees in physics, strategy, and military history, and diverse military experience that spans airborne electronic warfare, nuclear submarines, operational flight test, particle accelerators, Pentagon Joint Staff strategic planning, and war college faculty.  Deployed eight times to the Middle East and Southwest Asia, he spent 22 months on the ground in Iraq and Commanded Al Asad Air Base and Training Squadron NINE.  Author of several published papers on energy and energy security.

Link to Original Article: The Peak Oil Estimate You Won’t Believe: A Tale Of Two Sigmoids

  1. By Fenimore Hardy on March 28, 2017 at 4:26 pm

    … prospects to grow in production and consumption for another century?

    Most people have already made up their minds, but I am not one of those people.

    You present an interesting contrarian conclusion, and an even more interesting data-filled argument. In fact, your argument is so fascinating that I am willing to suspend judgment on your conclusion for several years in order to have time to reconcile new data with new theories of “sustainable” oil.

    Almost no one actually believes that oil is being produced in the crust faster than it is being produced by humans. But the second possibility — that the true amount of oil in sedimentary basins is something far vaster than previously suspected — is something that serious people should prepare themselves for.

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  2. By Forrest on March 29, 2017 at 8:54 am

    Interesting read. I think of those alarmed when looking at the earth from the moon and fear we have a blue dot for habitat and need to conserve every ounce of resources. For those prospecting the earth resources they appear unlimited. As you post, so much of our resources is bound by technology. I did read the harvesting of sea bed methane frozen crystals is just now beginiing. These stores are estimated to be above that of earth’s crude oil. You open the viewpoint of understanding the supply of crude oil, but you may be closing the viewpoint as in ignoring the same need for crude oil. The same dynamics impact competing energy supplies. Remember, are survial depends on ancient low power sunshine. The hydrological cycle powered by solar is probably the largest energy force on the planet. Wind is an ancient energy sorce that has yet to be fully exploited. That enegy force has a energy record that dwarfs anything crude oil could accomplish. Biomass has enormous energy reserves and history, that again dwarfs that of crude oil. So, much of our energy needs are bottled up within economics and not so with EROI.

    Modern energy analysis is based on entire sociatal cost. The analysis is begining to uncover the real or true cost to citizens. This includes factors of habitat destrubance, pollution, health costs, military costs, job creation, supply stability, quality, intrinsic value, etc. Results uncover the lowest cost and highest benefit to civilization. This math waxes and wanes, as well, within technology. Once wind power and water wheels were the cutting edge of effortless energy supplies. Some years later the same energy source is experiencing a rebound in production per advancment in technology.

    Technology improvements occur all across the energy supply spectrum as well as the consumption spectrum. We have falsely equated the curve of improving standard of living and population increase with a required proportionate increase of energy demand. Technology, science knowledge, improved methods, inventions are continually decreasing the need of earths resources. We learn to augment energy needs with renewable power, construct higher efficiency devices, and change our habits. For example, who would have thought a fully loaded semi truck could acheive 15 mpg? They have acheived this with a reinvented truck. Light vehicle passenger fleet is expected to exponentially improve the decrease in energy consumption. Light vehicles powered by hybrid ultra efficient engines running on midlevel ethanol blends. The battery car opens up a whole new fuel flexibility. Nuclear plant is poised to become much more efficient within construction and maintenance. Hydro power is expected to move into all the dams that currently go unpowered. Modern trubine design software is powerful tool and with the advent of AM single piece manufacturing that requires no access to cutting tool, should result in the industry becoming more cost effective and efficient. The ICE may harvest as much power from the turbine as the crankshaft.

    Consumers of energy learn methods that lower their energy bill. Constructing smaller more efficient homes. Utilizing walking paths or bike paths for a boost in health and budget needs. Decreasing lawn turf, increasing plant diversity, and lowering irragation needs. Planting and trimming the plant kingdom for diversity, habitat, lowering fire threat, and maximizing plant growth with harvests that minimize GW emissions. This fits in well with the biofuel or biomass energy supplies.

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  3. By jjhpor on March 29, 2017 at 7:21 pm

    Having been following the peak oil movement since the early days of the Oil Drum I’ve gotten completely cynical about curves showing the final oil peak next month or next year so I was pretty much with him until we got to abiotic oil. I’ve read enough about oil development to think that the fossil basis of petroleum is well established. That means to me that it is finite.

    I think there is ample evidence that tech advancement can make it possible to extract more oil from existing reservoirs and to make previously depleted resevoirs productive. However oil is only valuable to the extent that it is affordable to burn as transportation fuel. The history of fracking, I think, tells us that that price is around $100/bbl today which limits the amount that will be extracted, but that amount looks like enough to cook us all

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    • By Robert Rapier on March 29, 2017 at 8:44 pm

      Count me among those who put no stock in abiotic oil theory. It’s certainly possible to produce oil abiotically, but crude oil has biological markers that indicate its origins.

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  4. By Ben G on March 30, 2017 at 8:44 am

    Wow, 160Mbpd is rather fantastic. Is it technically achievable? Probably. More to the point is the fundamental question as whether it will be necessary. Instincts, as much as any attempts at technical analysis, suggests that it will not be required. By mid-century the combination of demographics, technological innovation and societal consensus on what constitutes “sustainability” will militate any need for such a dramatic increase in traditional energy supplies. Indeed, one might anticipate that a peak in demand for traditional energy may occur well before mid-century depending on progress with energy storage, efficiency standards and distributive energy applications quite apart from new, alternative sources. An eternal optimist? Hey, I’ve been called far worse–and that from my friends!

    Thanks to Capt. Kiefer for his rigorous, thought-provoking and (in some quarters) feather-ruffling piece!

    Ben G

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  5. By Douglas Gray on March 30, 2017 at 10:31 am

    Very interesting, but the whole world is trying to use less oil. Put a few million electric cars on the road over the next 5 years and there will be a huge oil glut. Big oil companies will lose value and many will go bankrupt. When all transportation is electric we will need 60-70% less oil. I think we will get closer to 60 before we ever hit 160.

    [link]      
    • By Jeff Clyburn on March 30, 2017 at 7:18 pm

      How is that electricity/battery power produced?

      [link]      
      • By Douglas Gray on March 30, 2017 at 7:26 pm

        Solar, wind, hydro,thermal and other renewable will cover it.

        [link]      
        • By Jeff Clyburn on March 30, 2017 at 7:50 pm

          Providing the level of base load for a fleet of 800 million vehicles, despite inherent storage limitations? I’m extremely skeptical. But I pray you’re right.

          [link]      
          • By Douglas Gray on March 30, 2017 at 7:57 pm
            [link]      
            • By Ike_Kiefer on March 31, 2017 at 6:55 am

              @Douglas,
              Strange you would use for your example a state that has invested half a billion dollars on wind energy and shuttering fossil fuel generation only to suffer international shame for it’s power grid collapsing.

              [link]      
            • By Forrest Butter on March 31, 2017 at 4:41 pm

              Douglas, how about we prove that solar and wind can do it all, before burden the grid with more demands. I think wind and solar have a very steep hill to climb to prove the energy resource is less expensive and more dependable power given the non-dispatchable power character and the hyper cost of batteries.. Let’s forget any dreams of powering transportation until that happens.

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            • By Douglas Gray on March 31, 2017 at 4:58 pm

              Hawaii is going to have all electric cars and be totally dependent on renewable and batteries within 10 to 15 years.

              [link]      
            • By fleeb on March 31, 2017 at 7:22 pm

              I would hope so. No place is as idyllic for solar power and battery car. Tropical sun and temperature combined with minimal travel needs, low travel speeds, and wealthy inhabitants. All competing energy sources at a large import price premium. If Hawaii can’t go solar no other state can. They do have good wind power, but that is a environmental disaster given the multitude of endangered bird species being chopped up. My concern is not that they plan to go solar, is that why haven’t they done so? If the U.S. solar industry claims are anywhere relevant to reality, Hawaii should have been 100% solar years ago. Why the delay?

              [link]      
            • By Douglas Gray on March 31, 2017 at 8:28 pm

              Price and the use of batteries now make it a no brained. ..more birds are killed by neighbourhood cats than will ever die hitting a wind mill

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            • By TimC on April 4, 2017 at 1:55 pm

              “Hawaii is going to … be totally dependent on renewable and batteries within 10 to 15 years.”

              You must surely realize what a ridiculous exaggeration that is, Douglas. Hawaii imports thousands of tons of goods each year, all of it manufactured elsewhere using non-renewable energy. Those goods include foods, medicines, building materials, batteries and BEVs, solar panels, etc. In order to become totally dependent on renewable energy, Hawaiian residents would have to stop consuming all of that stuff. That isn’t going to happen in 15 years, or in 150 years.

              [link]      
            • By Douglas Gray on April 4, 2017 at 8:42 pm

              Of course I was referring to power generation. ..and you realize that all of those things you speak of will be made with renewable energy, sooner than 150 years.

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            • By Ike_Kiefer on April 5, 2017 at 6:38 am

              If wind and solar cannot even make wind turbines and solar farms without help from fossil fuels, how can your statement be true? The low-energy density, low-power density, geographically remote, diffuse, intermittent, low-EROI energy produced by wind and solar is quite different from the concentrated, fully controllable, easily storable and transporable, high-EROI energy that fossil fuels deliver. Industrial applications such as mining and metalworking and cement works and glass works and long-haul transportation need the latter.

              [link]      
            • By Douglas Gray on April 5, 2017 at 3:20 pm

              wind and solar can make solar farms and wind turbines… I do not if your info is just outdated or you need to do some reading to catch up but in 30 years when every country is running on renewable energy of some sort life will go on as usual.

              [link]      
            • By Ike_Kiefer on April 5, 2017 at 4:38 pm

              Please provide us links to your current research for mines, concrete plants, steel foundries, glass foundries, silicon foundries, tractor-trailers, mobile cranes, freight trains, etc. with a meaningful fraction of its gross power consumption being satisfied by solar or wind.

              [link]      
            • By Douglas Gray on April 5, 2017 at 4:50 pm

              I googled electric transport trucks and found millions of entries with Nikola, Mercedes and BMW at the top. Perhaps you could do the same with your other questions.

              [link]      
            • By Ike_Kiefer on April 5, 2017 at 5:27 pm

              The question was not electric, it was wind and solar providing a meaningful fraction of the energy consumed. Try again.

              [link]      
            • By TimC on April 5, 2017 at 5:13 pm

              Ike, I’m afraid that Douglas accurately represents a large swath of public opinion. The news media has convinced a great many people that the US and the world are effortlessly and inevitably zooming down the path to a 100% renewable future. I’m sure you’ve read some of the gee-whiz science articles about all of the shiny new solar and wind capacity being installed, with of course no mention of how little of that energy is actually consumed. I’ve seen the same stories that Douglas has, claiming that electric power generation in Hawaii will be 100% renewable in 15 years. It’s complete nonsense, but I’m worried that a lot of people are falling for it. How can a democracy make rational, fact-based decisions about energy policy, when so many people are so badly deluded?

              [link]      
            • By Ike_Kiefer on April 5, 2017 at 5:22 pm

              It’s hard to blame the masses when this fairy tale is being spread by innumerate college professors like Stanford’s Jacobson & Delucchi funded by Tom Steyer and published in Scientific American.

              [link]      
            • By TimC on April 7, 2017 at 12:04 pm

              You’re missing the point, Douglas, probably deliberately. The only reason Hawaii can even dream of 100% renewable electric power generation is because they manufacture so little. Meanwhile, Hawaiian residents live a first-world lifestyle, consuming all sorts of stuff made elsewhere. If states like Michigan or Indiana tried to consume more than 30% renewable electric power, the cost in both dollars and lost jobs would be unaffordable.

              That said, even Hawaii will not achieve 100% renewable power generation in 15 years. Despite having a manufacturing sector that provides less than 2% of the state’s domestic product, Hawaii will still not average more than 50% renewable electric power before 2050. The costs of redundant generation capacity and storage become too high when renewable power penetration exceeds 30%.

              And all of those things will still be made with fossil energy and fossil-based materials more than 150 years from now. Except of course for the solar panels and BEVs, which will be obsolete by then.

              [link]      
            • By Craig Teller on April 8, 2017 at 8:07 pm

              Here’s the news on Honolulu:

              http://www.bizjournals.com/pacific/news/2017/04/04/honolulu-ranks-top-in-the-nation-for-solar-energy.html

              The reality is that many investors are diversifying their portfolios and including more clean energy such as solar.

              What people in the oil news business should be doing is discussing the percentages one should hold in a portfolio. Solar, wind and electric cars are already a fact of life. And their market share is growing.

              [link]      
            • By Forrest Butter on March 31, 2017 at 4:54 pm

              My question to you is, why no data from your provided link? I want to see the raw investment cost, duty cycle, and power generation. This is basic stuff and more important than sycophants posting glorious truisms of benefits of cheap antipollution energy. When evaluating cost effective power generation, as a comparison, the power purchase agreements should be omitted. Same with lucrative taxpayer and ratepayer provided incentives. It has to be a level playing field or were just fooling ourselves. Also, non-dispatchable power is below base power generation. In other words deep cheap power if you can use it. I will give credit for low fuel cost and low emissions, but lets get real with evaluations and omit the flowery attributes. My evaluation of this energy resource is a work in progress. Meaning we have to work very hard and be very clever to make it practical.

              [link]      
    • By Ike_Kiefer on April 5, 2017 at 6:29 am

      The “whole world” apparently does not include Asia, Africa, or South America by actual consumption trends. Don’t confuse Paris Accord promises for actual policy or action.

      [link]      
  6. By DVK on March 31, 2017 at 1:21 am

    The famous Sheikh Yamani observed that the Stone Age did not end from lack of stones. Fossil fuels have a limited future because of technology. How limited we do not know at all

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    • By BonzoDog1 on March 31, 2017 at 11:05 am

      Lacking the ability to bribe politicians, the stone club clan was quickly vanquished by those wielding the bronze sword.

      [link]      
  7. By Forrest Butter on April 1, 2017 at 7:34 am

    Oil reserves is not a concern anymore.

    Speaking of “energy trends” , I just reviewed the EIA projections of U.S. oil consumption for the 21 century. Their track record is way off of actual. They started off predicting huge increase in oil and each latter year progression to current day was a leveling and now a downward slope. U.S., Europe, and the rest of the OECD countries have experienced shrinking demand since ’07. Thirty five countries have already in the shrinking demand cycle. Ask yourself why is Saudi Arbian Oil is going IPO route. They fear the future and want to share the risk while the going is good.

    Is the battery car doing this? Maybe some of it as the vehicle never existed before and the operations of such a car would directly impact oil sales. My overall opinion is technology is the disrupter. First, SA never saw the fracking revolution coming into play as the countries most vicious competition. This technology changes everything from income and supply. SA has the short end of the rope as their projections of wealth and future wealth now way off. Second, technology is impacting the entire transportation sector to radically decrease petrol needs. As most know, their is a confluence of break through technologies that will change everything. Lighter, safer, more aerodynamic vehicles, autonomous transport of passengers and freight haulers that never run empty. Convoy bumper to bumper operation to minimize air drag. Hybrid technology that blurs the line of ICE with exhaust turbine generators vs EV. Hydrogen storage and fuel cell improvements, Software, hardware, is making all of engineering and supply chain management more efficient. Just about every useful piece of equipment from drilling rigs to tractor trailers have undergone amazing improvements. Advanced manufacturing is providing economical production lots of one piece and without limitations of a cutting tool access point. The equipment is but a fraction of high cost multi axis CNC tooling, currently used for prototype work. They are already field testing a fully loaded semi that achieves 15 mpg. Even above basic MPG improvements such as platooning, late night operation at low speed, and freight efficiency should double or triple the effect in lowering fuel needs. Efficient warehouse operation and combining vendor shipments is yet another highly efficient practice. What Amazon is talking about with airship warehouse and drone delivery would drastically change cargo transport. Biofuel is on the march to improve fuel and supply to all internal combustion engines making higher efficiency possible.

    [link]      
  8. By Joe Clarkson on April 4, 2017 at 3:58 am

    First is the case that the amount of ultimately producible oil is very, very large compared to its stabilized consumption rates, and essentially dwarfs demand, so that true scarcity will not be a factor for a very long time.

    I will ignore the Kiefer’s second case, which is the prospect of continuous abiotic oil creation.

    If Kiefer’s first case is true, there are definite implications for oil production and marketing. Lacking any scarcity of oil, average cost per unit volume should decline continuously due to improvements in production technology. Lack of scarcity also implies that EROI should also continuously increase for the same reason. While something like those effects might have been true very early in the history of oil production, neither of these implications are in accord with oil production history over the last several decades. The trend for price per barrel and capex per barrel over the last half century is generally up, not down.

    In fact, there is a vast amount of evidence that oil is indeed getting harder to find and produce. Why would anyone drill for oil in the ocean floor or in places where production requires hydrofracturing if there is an unlimited amount of oil sitting in conventional reservoirs on land? And why would there be a decline in oil discovery if the amount of ultimately producible oil greatly exceeds the amount produced to date? Would Kiefer claim that oil discoveries are dropping because people have stopped looking, presumably because they have already discovered more than enough to cover production for the next several millennia?

    One last question. If the supply of oil is basically unlimited, why would any country reach a peak in production so early in his estimation of the world’s production history? And yet, here we are with the majority of all the countries that have every produced oil now past their peak production rate. For example, what is wrong with Great Britain, Norway and Indonesia? Don’t they know that their reserves are unlimited?

    Kiefer’s whole thesis is laughable.

    [link]      
    • By Ike_Kiefer on April 4, 2017 at 5:26 pm

      Peak oilers play games with the word “discovery,” just as they do with the specious definition of “conventional oil.” Laherrere in particular looks at the world as a two-dimensional map of oil and non-oil regions, and considers any new well drilled into a broad geographical region with any existing well as just an expansion of an existing discovery. So the genuine discovery of huge quantities of unknown oil in new formations at the unexplored margins of existing fields, or in different formations and different depths than current production, or in formations previously discovered, but long written off as impossible to produce before recent technological breakthroughs, are all classified as “reserve growth” instead of “discoveries.” However, if you compare a map of oil basins and a list of producing formations from 1960 to today, globally or especially within the United States, you will see how the size and number of oil plays in both have both increased dramatically. And existing fields continue to produce economically if they enjoy a reasonable stream of recapitalization. Kern County California has been producing economically for over 100 years. Where recapitalization falls off, (e.g., the North Sea, Mexico, Venezuela), production predictably falls off. And when recapitalization resumes (i.e., the North Sea, Mexico), there are new discoveries and production ramps up again.

      The number of oil-exporting countries has increased over time and is now more than 80. The percentage of dry holes has been decreasing. It is getting rarer to drill and not find oil. And when oil is found, it is more often in huge formations. The sub-salt oil discovered off of Brazil has a continuous pay (oil-bearing formation) that is 500 feet from top to bottom and the same formation has been penetrated by wells spaced at 20-mile intervals, with the lateral limits of this underground ocean of oil still unknown. And a similar formation has been found in mirror image off of West Africa. New tech and deeper wells are expensive, but the oil being found is of higher quality and at high pressure that reduces lifting costs, while production yield and efficiencies continue to climb. When the capital and O&M costs are amortized over the number of barrels produced during the production lifetime, these wells are producing oil with the same inflation-adjusted cost per barrel as in the 1930s and 1960s and 1990s.

      Here is a partial list of new oil discoveries in the past 30 days:

      UK: https://www.ft.com/content/2e6c8dea-1855-11e7-9c35-0dd2cb31823a

      Oman: http://timesofoman.com/article/106315/Business/Oman-Oil-Exploration-strikes-oil-and-gas-discoveries-in-Block-60

      Guayana: http://www.guardian.co.tt/business/2017-03-31/another-oil-discovery-offshore-guyana

      Mexico: https://www.ft.com/content/3c52824c-0fdc-11e7-b030-768954394623

      Alaska: http://oilprice.com/Latest-Energy-News/World-News/Repsol-Announces-Largest-US-Onshore-Conventional-Discovery-In-30-Years.html

      More Alaska: http://www.alaskapublic.org/2017/03/08/what-does-it-take-to-prove-a-big-oil-discovery/

      Columbia: http://www.energylivenews.com/2017/03/30/new-oil-discovered-in-north-eastern-colombia/

      [link]      
    • By Ike_Kiefer on April 5, 2017 at 6:19 am

      ” The trend for price per barrel and capex per barrel over the last half century is generally up, not down.”

      Actually, no. The refiner acquisition cost for a barrel of crude oil in 1983 was $29.08. In 1984 dollars, the refiner acquisition cost of a barrel of crude oil in 2016 was $16.96. (EIA data adjusted by CPI)

      “why would there be a decline in oil discovery?”

      Peak oilers play games with the word “discovery,” just as they do with the specious definition of “conventional oil.” Laherrere in particular looks at the world as a two-dimensional map of oil and non-oil regions, and considers any new well drilled into a broad geographical region with any existing well as just an expansion of an existing discovery. So the genuine discovery of huge quantities of unknown oil in new formations at the unexplored margins of existing fields, or in different formations and different depths than current production, or in formations previously discovered, but long written off as impossible to produce before recent technological breakthroughs, are all classified as “reserve growth” instead of “discoveries.” However, if you compare a map of oil basins and a list of producing formations from 1960 to today, globally or especially within the United States, you will see how the size and number of oil plays in both have both increased dramatically. And existing fields continue to produce economically if they enjoy a reasonable stream of recapitalization. Kern County California has been producing economically for over 100 years. Where recapitalization falls off, (e.g., the North Sea, Mexico, Venezuela), production predictably falls off. And when recapitalization resumes (i.e., the North Sea, Mexico), there are new discoveries and production ramps up again.

      The number of oil-exporting countries has increased over time and is now more than 80. The percentage of dry holes has been decreasing. It is getting rarer to drill and not find oil. And when oil is found, it is more often in huge formations. The sub-salt oil discovered off of Brazil has a continuous pay (oil-bearing formation) that is 500 feet from top to bottom and the same formation has been penetrated by wells spaced at 20-mile intervals, with the lateral limits of this underground ocean of oil still unknown. And a similar formation has been found in mirror image off of West Africa. New tech and deeper wells are expensive, but the oil being found is of higher quality and at high pressure that reduces lifting costs, while production yield and efficiencies continue to climb. When the capital and O&M costs are amortized over the number of barrels produced during the production lifetime, these wells are producing oil with the same inflation-adjusted cost per barrel as in the 1930s and 1960s and 1990s.

      Here is a partial list of new oil discoveries in the past 30 days:

      UK: https://www.ft.com/content/2e6c8dea-1855-11e7-9c35-0dd2cb31823a

      Oman: http://timesofoman.com/article/106315/Business/Oman-Oil-Exploration-strikes-oil-and-gas-discoveries-in-Block-60

      Guayana: http://www.guardian.co.tt/business/2017-03-31/another-oil-discovery-offshore-guyana

      Mexico: https://www.ft.com/content/3c52824c-0fdc-11e7-b030-768954394623

      Alaska: http://oilprice.com/Latest-Energy-News/World-News/Repsol-Announces-Largest-US-Onshore-Conventional-Discovery-In-30-Years.html

      More Alaska: http://www.alaskapublic.org/2017/03/08/what-does-it-take-to-prove-a-big-oil-discovery/

      Columbia: http://www.energylivenews.com/2017/03/30/new-oil-discovered-in-north-eastern-colombia/

      [link]      
    • By Ike_Kiefer on April 5, 2017 at 4:40 pm

      ” The trend for price per barrel and capex per barrel over the last half century is generally up, not down.”

      Actually, no. The refiner acquisition cost for a barrel of crude oil in 1983 was $29.08. In 1984 dollars, the refiner acquisition cost of a barrel of crude oil in 2016 was $16.96. (EIA data adjusted by CPI)

      “why would there be a decline in oil discovery?”

      There is no decline. Peak oilers play games with the word “discovery,” just as they do with the specious definition of “conventional oil.” Laherrere in particular looks at the world as a two-dimensional map of oil and non-oil regions, and considers any new well drilled into a broad geographical region with any existing well as just an expansion of an existing discovery. So the genuine discovery of huge quantities of unknown oil in new formations at the unexplored margins of existing fields, or in different formations and different depths than current production, or in formations previously discovered, but long written off as impossible to produce before recent technological breakthroughs, are all classified as “reserve growth” instead of “discoveries.” However, if you compare a map of oil basins and a list of producing formations from 1960 to today, globally or especially within the United States, you will see how the size and number of oil plays in both have both increased dramatically. And existing fields continue to produce economically if they enjoy a reasonable stream of recapitalization. Kern County California has been producing economically for over 100 years. Where recapitalization falls off, (e.g., the North Sea, Mexico, Venezuela), production predictably falls off. And when recapitalization resumes (i.e., the North Sea, Mexico), there are new discoveries and production ramps up again.

      The number of oil-exporting countries has increased over time and is now more than 80. The percentage of dry holes has been decreasing. It is getting rarer to drill and not find oil. And when oil is found, it is more often in huge formations. The sub-salt oil discovered off of Brazil has a continuous pay (oil-bearing formation) that is 500 feet from top to bottom and the same formation has been penetrated by wells spaced at 20-mile intervals, with the lateral limits of this underground ocean of oil still unknown. And a similar formation has been found in mirror image off of West Africa. New tech and deeper wells are expensive, but the oil being found is of higher quality and at high pressure that reduces lifting costs, while production yield and efficiencies continue to climb. When the capital and O&M costs are amortized over the number of barrels produced during the production lifetime, these wells are producing oil with the same inflation-adjusted cost per barrel as in the 1930s and 1960s and 1990s.

      Here is a partial list of new oil discoveries in the past 30 days:

      UK: https://www.ft.com/content/2e6c8dea-1855-11e7-9c35-0dd2cb31823a

      Oman: http://timesofoman.com/article/106315/Business/Oman-Oil-Exploration-strikes-oil-and-gas-discoveries-in-Block-60

      Guayana: http://www.guardian.co.tt/business/2017-03-31/another-oil-discovery-offshore-guyana Mexico: https://www.ft.com/content/3c52824c-0fdc-11e7-b030-768954394623

      Alaska: http://oilprice.com/Latest-Energy-News/World-News/Repsol-Announces-Largest-US-Onshore-Conventional-Discovery-In-30-Years.html

      More Alaska: http://www.alaskapublic.org/2017/03/08/what-does-it-take-to-prove-a-big-oil-discovery/

      Columbia: http://www.energylivenews.com/2017/03/30/new-oil-discovered-in-north-eastern-colombia/

      [link]      
    • By Ike_Kiefer on April 6, 2017 at 1:22 am

      “The trend for price per barrel and capex per barrel over the last half century is generally up, not down.”

      Actually, no. The refiner acquisition cost for a barrel of crude oil in 1983 was $29.08. In 1983 dollars, the refiner acquisition cost of a barrel of crude oil in 2016 was $16.96. (EIA data adjusted by CPI)

      “why would there be a decline in oil discovery?”

      There is no decline. Peak oilers play games with the word “discovery,” just as they do with the specious definition of “conventional oil.” Laherrere in particular looks at the world as a two-dimensional map of oil and non-oil regions, and considers any new well drilled into a broad geographical region with any existing well as just an expansion of an existing discovery. So the genuine discovery of huge quantities of unknown oil in new formations at the unexplored margins of existing fields, or in different formations and different depths than current production, or in formations previously discovered, but long written off as impossible to produce before recent technological breakthroughs, are all classified as “reserve growth” instead of “discoveries.” However, if you compare a map of oil basins and a list of producing formations from 1960 to today, globally or especially within the United States, you will see how the size and number of oil plays in both have both increased dramatically. And existing fields continue to produce economically if they enjoy a reasonable stream of recapitalization. Kern County California has been producing economically for over 100 years. Where recapitalization falls off, (e.g., the North Sea, Mexico, Venezuela), production predictably falls off. And when recapitalization resumes (i.e., the North Sea, Mexico), there are new discoveries and production ramps up again.

      The number of oil-exporting countries has increased over time and is now more than 80. The percentage of dry holes has been decreasing. It is getting rarer to drill and not find oil. And when oil is found, it is more often in huge formations. The sub-salt oil discovered off of Brazil has a continuous pay (oil-bearing formation) that is 1,500 feet from top to bottom and the same formation has been penetrated by wells spaced at 20-mile intervals, with the lateral limits of this underground ocean of oil still unknown. And a similar formation has been found in mirror image off of West Africa. New tech and deeper wells are expensive, but the oil being found is of higher quality and at high pressure that reduces lifting costs, while production yield and efficiencies continue to climb. When the capital and O&M costs are amortized over the number of barrels produced during the production lifetime, these wells are producing oil with the same inflation-adjusted cost per barrel as in the 1930s and 1960s and 1990s.

      Major new oil discoveries just in the past 30 days include the UK, Oman, Guyana, Mexico, Alaska, Columbia.

      [link]      
    • By Ike_Kiefer on April 6, 2017 at 4:22 am

      @disqus_GRhQiGgcC3:disqus “The trend for price per barrel and capex per barrel over the last half century is generally up, not down.”

      Actually, no. The refiner acquisition cost for a barrel of crude oil in 1983 was $29.08. The refiner acquisition cost of a barrel of crude oil in 2016 was $16.96 In 1983 dollars (EIA data adjusted by CPI).

      @Douglas Gray “why would there be a decline in oil discovery?”

      There is no decline. Peak oilers play games with the word “discovery,” just as they do with the specious definition of “conventional oil.” Laherrere in particular looks at the world as a two-dimensional map of oil and non-oil regions, and considers any new well drilled into a broad geographical region with any existing well as just an expansion of an existing discovery. So the genuine discovery of huge quantities of unknown oil in new formations at the unexplored margins of existing fields, or in different formations and different depths than current production, or in formations previously discovered, but long written off as impossible to produce before recent technological breakthroughs, are all classified as “reserve growth” instead of “discoveries.” However, if you compare a map of oil basins and a list of producing formations from 1960 to today, globally or especially within the United States, you will see how the size and number of oil plays in both have both increased dramatically. And existing fields continue to produce economically if they enjoy a reasonable stream of recapitalization. Kern County California has been producing economically for over 100 years. Where recapitalization falls off, (e.g., the North Sea, Mexico, Venezuela), production predictably falls off. And when recapitalization resumes (i.e., the North Sea, Mexico), there are new discoveries and production ramps up again.

      The number of oil-exporting countries has increased over time and is now more than 80. The percentage of dry holes has been decreasing; it is getting rarer to drill and not find oil. And when oil is found, it is more often in huge formations. The sub-salt oil discovered off of Brazil has a continuous pay (oil-bearing formation) that is 1,000 feet from top to bottom and the same formation has been penetrated by wells spaced at 20-mile intervals, with the lateral limits of this underground ocean of oil still unknown. And a similar formation has been found in mirror image off of West Africa. New tech and deeper wells are expensive, but the oil being found is of higher quality and at high pressure that reduces lifting costs, while production yield and efficiencies continue to climb. When the capital and O&M costs are amortized over the number of barrels produced during the production lifetime, these wells are producing oil with the same inflation-adjusted cost per barrel as in the 1930s and 1960s and 1990s.

      Here is a partial list of new oil discoveries in the past 30 days:

      UK: https://www.ft.com/content/2e6c8dea-1855-11e7-9c35-0dd2cb31823a

      Oman: http://timesofoman.com/article/106315/Business/Oman-Oil-Exploration-strikes-oil-and-gas-discoveries-in-Block-60

      Guayana: http://www.guardian.co.tt/business/2017-03-31/another-oil-discovery-offshore-guyana

      Mexico: https://www.ft.com/content/3c52824c-0fdc-11e7-b030-768954394623

      Alaska: http://oilprice.com/Latest-Energy-News/World-News/Repsol-Announces-Largest-US-Onshore-Conventional-Discovery-In-30-Years.html

      More Alaska: http://www.alaskapublic.org/2017/03/08/what-does-it-take-to-prove-a-big-oil-discovery/

      Columbia: http://www.energylivenews.com/2017/03/30/new-oil-discovered-in-north-eastern-colombia/

      [link]      
    • By Ike_Kiefer on April 6, 2017 at 1:15 pm

      “The trend for price per barrel and capex per barrel over the last half century is generally up, not down.”

      Actually, no. The refiner acquisition cost for a barrel of crude oil in 1983 was $29.08. The refiner acquisition cost of a barrel of crude oil in 2016 was $16.96 In 1983 dollars (EIA data adjusted by CPI).

      “why would there be a decline in oil discovery?”

      There is no decline. Peak oilers play games with the word “discovery,” just as they do with the specious definition of “conventional oil.” Laherrere in particular looks at the world as a two-dimensional map of oil and non-oil regions, and considers any new well drilled into a broad geographical region with any existing well as just an expansion of an existing discovery. So the genuine discovery of huge quantities of unknown oil in new formations at the unexplored margins of existing fields, or in different formations and different depths than current production, or in formations previously discovered, but long written off as impossible to produce before recent technological breakthroughs, are all classified as “reserve growth” instead of “discoveries.” However, if you compare a map of oil basins and a list of producing formations from 1960 to today, globally or especially within the United States, you will see how the size and number of oil plays in both have both increased dramatically. And existing fields continue to produce economically if they enjoy a reasonable stream of recapitalization. Kern County California has been producing economically for over 100 years. Where recapitalization falls off, (e.g., the North Sea, Mexico, Venezuela), production predictably falls off. And when recapitalization resumes (i.e., the North Sea, Mexico), there are new discoveries and production ramps up again.

      The number of oil-exporting countries has increased over time and is now more than 80. The percentage of dry holes has been decreasing; it is getting rarer to drill and not find oil. And when oil is found, it is more often in huge formations. The sub-salt oil discovered off of Brazil has a continuous pay (oil-bearing formation) that is 1,000 feet from top to bottom and the same formation has been penetrated by wells spaced at 20-mile intervals, with the lateral limits of this underground ocean of oil still unknown. And a similar formation has been found in mirror image off of West Africa. New tech and deeper wells are expensive, but the oil being found is of higher quality and at high pressure that reduces lifting costs, while production yield and efficiencies continue to climb. When the capital and O&M costs are amortized over the number of barrels produced during the production lifetime, these wells are producing oil with the same inflation-adjusted cost per barrel as in the 1930s and 1960s and 1990s.

      Here is a partial list of new oil discoveries in the past 30 days:

      UK: https://www.ft.com/content/2e6c8dea-1855-11e7-9c35-0dd2cb31823a

      Oman: http://timesofoman.com/article/106315/Business/Oman-Oil-Exploration-strikes-oil-and-gas-discoveries-in-Block-60

      Guayana: http://www.guardian.co.tt/business/2017-03-31/another-oil-discovery-offshore-guyana

      Mexico: https://www.ft.com/content/3c52824c-0fdc-11e7-b030-768954394623

      Alaska: http://oilprice.com/Latest-Energy-News/World-News/Repsol-Announces-Largest-US-Onshore-Conventional-Discovery-In-30-Years.html

      More Alaska: http://www.alaskapublic.org/2017/03/08/what-does-it-take-to-prove-a-big-oil-discovery/

      Columbia: http://www.energylivenews.com/2017/03/30/new-oil-discovered-in-north-eastern-colombia/

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    • By Ike_Kiefer on April 6, 2017 at 9:40 pm

      The number of oil-exporting countries has increased over time and is now more than 80. The percentage of dry holes has been decreasing; it is getting rarer to drill and not find oil. And when oil is found, it is more often in huge formations. The sub-salt oil discovered off of Brazil has a continuous pay (oil-bearing formation) that is 1,000 feet from top to bottom and the same formation has been penetrated by wells spaced at 20-mile intervals, with the lateral limits of this underground ocean of oil still unknown. And a similar formation has been found in mirror image off of West Africa. New tech and deeper wells are expensive, but the oil being found is of higher quality and at high pressure that reduces lifting costs, while production yield and efficiencies continue to climb. When the capital and O&M costs are amortized over the number of barrels produced during the production lifetime, these wells are producing oil with the same inflation-adjusted cost per barrel as in the 1930s and 1960s and 1990s.

      Here is a partial list of new oil discoveries in the past 30 days:

      UK: https://www.ft.com/content/2e6c8dea-1855-11e7-9c35-0dd2cb31823a

      Oman: http://timesofoman.com/article/106315/Business/Oman-Oil-Exploration-strikes-oil-and-gas-discoveries-in-Block-60

      Guayana: http://www.guardian.co.tt/business/2017-03-31/another-oil-discovery-offshore-guyana

      Mexico: https://www.ft.com/content/3c52824c-0fdc-11e7-b030-768954394623

      Alaska: http://oilprice.com/Latest-Energy-News/World-News/Repsol-Announces-Largest-US-Onshore-Conventional-Discovery-In-30-Years.html

      More Alaska: http://www.alaskapublic.org/2017/03/08/what-does-it-take-to-prove-a-big-oil-discovery/

      Columbia: http://www.energylivenews.com/2017/03/30/new-oil-discovered-in-north-eastern-colombia/

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      • By Joe Clarkson on April 6, 2017 at 11:11 pm

        https://www.bloomberg.com/news/articles/2016-08-29/oil-discoveries-at-a-70-year-low-signal-a-supply-shortfall-ahead

        This Bloomberg article notes that the recent near total collapse in oil discoveries has had a lot to do with the price declines since 2014, but the article contains some interesting charts, including the history of the number of exploration wells drilled worldwide. Note that when prices were high in 2012, about the same number of exploration wells were drilled in that year as in 1960. In 1960 ten times as much oil was discovered than in 2012.

        With the fantastic increases in subsurface imagery quality since 1960, one would expect that, if the amount of oil to be discovered was essentially unlimited, as you claim, oil discovery per exploration well would have increased dramatically. Instead, regardless of oil prices, the long term discovery trend is down, down, down.

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        • By Ike_Kiefer on April 7, 2017 at 12:32 pm

          Don’t be fooled by backdated discoveries. This is the classic Laherrere technique. He and other count new wells and new oil as being discovered when the first well in that broad geographic region found oil. Most new drilling is right on top of existing wells but going to different depths and formations, or on the periphery of existing production because that is where the geophysical data has been collected and is near existing collection networks which are essential for getting product to market. Oil companies tend to drill “under the street lights,” as they say. But each new productive well is a discovery, just as each new dry hole is not, regardless of where it is drilled. And as reserves have been growing faster than consumption since 1980, it is deceptive to argue that oil discovery is somehow lagging.

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    • By Ike_Kiefer on April 6, 2017 at 9:44 pm

      @Joe Clarkson said, “The trend for price per barrel and capex per barrel over the last half century is generally up, not down.”

      Actually, no. The refiner acquisition cost for a barrel of crude oil in 1983 was $29.08. The refiner acquisition cost of a barrel of crude oil in 2016 was $16.96 In 1983 dollars (EIA data adjusted by CPI).

      @Joe Clarkson said, “. . . why would there be a decline in oil discovery?”

      There is no decline. Peak oilers play games with the word “discovery,” just as they do with the specious definition of “conventional oil.” Laherrere in particular looks at the world as a two-dimensional map of oil and non-oil regions, and considers any new well drilled into a broad geographical region with any existing well as just an expansion of an existing discovery. So the genuine discovery of huge quantities of unknown oil in new formations at the unexplored margins of existing fields, or in different formations and different depths than current production, or in formations previously discovered, but long written off as impossible to produce before recent technological breakthroughs, are all classified as “reserve growth” instead of “discoveries.” However, if you compare a map of oil basins and a list of producing formations from 1960 to today, globally or especially within the United States, you will see how the size and number of oil plays in both have both increased dramatically. And existing fields continue to produce economically if they enjoy a reasonable stream of recapitalization. Kern County California has been producing economically for over 100 years. Where recapitalization falls off, (e.g., the North Sea, Mexico, Venezuela), production predictably falls off. And when recapitalization resumes (i.e., the North Sea, Mexico), there are new discoveries and production ramps up again.

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      • By Joe Clarkson on April 6, 2017 at 11:37 pm

        http://www.macrotrends.net/1369/crude-oil-price-history-chart

        This chart of inflation adjusted oil prices since 1946 shows the two years you mention. Rather than cherry pick a couple of years, just look at the chart and see that since the end of WW2 the general trend is up, up, up. Even in 2017, with oil prices at half the average of 2011-2014, the average price of oil is twice what it was from 1950 to 1970.

        Capex has fallen off dramatically with the recent decline in oil prices, even though those prices are still quite high in historical terms. It will take much higher prices to induce much “recapitalization”. That can only be true if oil is harder to find and extract than it was in the mid twentieth century.

        Yes, Kern County is still producing meaningful amounts of oil, yet even with enhanced oil recovery methods, such as steam-flooding to get heavy oil to flow, production peaked in the late 1980s.

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        • By Ike_Kiefer on April 7, 2017 at 12:08 pm

          Don’t stop at 1946. The full historical perspective if essential.
          Here is a chart of U.S. wholesale crude oil prices back to 1859 corrected to 2016 dollars (with no log-scale funny business like the chart you linked) http://i66.tinypic.com/2wqbb15.jpg. Oil really wants to be below $40/bbl. It takes bad governance and bad geopolitics to push the price up. And even then, technology gets out ahead of regulation and central planning and brings it back down again.

          Bretton Woods allowed the USA to offload its inflation to the rest of the world via trade fixed to the dollar. When Nixon closed the gold window in 1971, it made that robbery obvious to the rest of the world, particularly to OPEC and those who deal directly in the crude oil commodity that is the real global currency. The price of oil had to snap back to catch up to the inflated dollar, and it did in 1973 and in 1981 with help from proximate causes such as wars in the ME.

          The price spike in the 2000s was the fruit of a successful environmental and regulatory campaign against oil and gas exploration that began to seriously hinder domestic capex in Western nations in the 1970s. Virtually all of Alaska and the U.S. East and West Coasts remain off limits for O&G exploration. Yet even so, a package of many evolved technologies which is collectively called “fracking” has been able to overcome these obstacles to again deliver cheap oil. But it is a race to see how efficient the O&G industry can get before bad government catches up and misguided elites try to ban cheap energy again.

          We are now on the backside of a huge wave of global capital investment in oil and gas. It began in earnest with the rising prices in 2003 and faded in 2015 as the new normal of low price became apparent. That bow wave of capex will yield fruit for the next 20 years, and it will appear as mysterious “reserve growth” to Laherrere and those who don’t understand the accordion lead-lag cycle of oil:

          perceived scarcity->price spike->massive capex->wave of discoveries->overproduction & glut->price collapse->battle for market share and consolidation as margin shifts from upstream to midstream->decade or more of steady production and reserve growth relatively low capex while prices remain low->perceived scarcity . . . lather/rinse/repeat.

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          • By Joe Clarkson on April 7, 2017 at 12:55 pm

            Your chart makes perfect sense. At the beginning of the oil age, oil was plentiful, but the technology to get at it was immature, making it hard to get and relatively expensive. Oil prices dropped steadily as extraction technology improved, bottoming out with the invention of the Hughes rotary bits in the 1920s and 1930s.

            After WW2 demand increased rapidly, but there was still plenty of oil to be discovered. Ghawar was discovered in 1948. The US was a huge oil exporter after WW2. Your thesis implies that many more Ghawars are waiting to be found and that the US could easily have supplied all its oil needs without ever importing a barrel.

            Note that the first significant price increase happened in the early 1970s just as the US peaked and US exports ended and imports began. OPEC finally had the clout to manipulate oil prices. Your thesis suggests that such a thing is impossible.

            There is only one reason why prices rose. Demand could not be supplied as cheaply as previously. Your thesis of unlimited supply means that such a thing can’t happen. If depletion didn’t matter, prices would never go up, only down. We could get it out of the ground more and more easily and cheaply as extraction technology has improved and made the oil’s “low hanging fruit” hang lower and lower.

            The only realistic explanation of oil prices since WW2 is that oil is depleting. What is left is more expensive to extract. It’s as simple as that.

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            • By Ike_Kiefer on April 7, 2017 at 11:34 pm

              Your strawman bears no resemblance to my thesis. If you read the article or my subsequent comments, you would see I mention a wealth of factors that affect prices, and even predict cyclical price spikes due to perceived scarcity, as well as spikes due to geopolitical events. Supply is not unlimited, it is always limited by exploration and infrastructure, regardless of the quantity of resource in place in the ground. It is clear you don’t want to have a serious discussion.

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            • By Joe Clarkson on April 8, 2017 at 1:59 am

              You say,

              Supply is not unlimited, it is always limited by exploration and infrastructure, regardless of the quantity of resource in place in the ground.

              and also,

              the amount of ultimately producible oil is very, very large compared to its stabilized consumption rates, and essentially dwarfs demand, so that true scarcity will not be a factor for a very long time.

              So oil scarcity will not be a factor in supply, but only scarcity of “exploration and infrastructure”. If so, why, in the context of historically high oil prices, is there a scarcity of exploration and infrastructure? Are you saying that the oil majors are too stupid to realize that they can make fabulous profits if only they would invest more in exploration and infrastructure? Why has capex plummeted if there is no “true scarcity” at all?

              I want to have a serious discussion, but I don’t see how your analysis of the oil market makes sense. You seem to be saying that there is plenty of easily accessible oil to be extracted, affording oil companies plenty of opportunity to make money at low prices, but somehow they just don’t want to bother until prices go up even further. This after the oil majors slashed capex in 2012 through 2014 even with oil prices at their peak.

              There is a reason why a relatively small number of giant oil fields supply the majority of the world’s oil. Oil is easy and cheap to extract from them. Outside those giants, not so much. How can that be if there is no “true scarcity”?

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            • By fleeb on April 8, 2017 at 4:11 am

              It’s not scarcity, but ROI. The supply demand curve is controlling exploration and drilling and it is not a smooth curve as technology will punch through and open up another curve with new economics. Also, these corporations are attempting to maximize market force per collusion of controlling supply. They decide to pump or drill upon trajectory of sales price. Also, corps work the crony capitalism route to entrench their product line need. Notice how petrol is always attempting to cut the support legs from beneath competition, hence the historical hatred of ethanol fuel. Why does petrol spend so much money smearing ethanol fuel at the same time they put up as much structural barriers for the fuel to expand? And of course they spend a lot of money on the internet of things to phony up environmental harm, engine harm, low ROI concerns, and low production volumes to make the public think all of it is a waste, especially taxpayer waste. Like I said if that was close to being accurate, why is petrol spending so much to head the supply off? I guess they just are good samaritans and want to minimise any waste? I’m sure they have much virtue.
              Once you realise how are political system works, no wonder we suffer the highest cost health care and drug cost. The poorest and most expensive education system. Once we hand it off to politicians, I’m sure it will improve. Again, they have many virtues within their humble public service commitment.

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            • By Ike_Kiefer on April 9, 2017 at 12:05 am

              Oil companies do not make “fabulous profits” by creating a glut; they create fabulous profits by creating perceived scarcity and spiking prices. That is why cartels like OPEC exist in every major commodity. But when there is a technology breakthrough that lowers a particular producer’s costs with respect to the rest of the producers, that producer can shift strategies from collaboration to competition, and increase his returns by underpricing his peers to capture market share. That is the phase of the grand cycle of the crude oil economy we are in now.

              The oil majors understand the oil market much better than you do. They and I and others who knew what to look for saw in 2012 that there was already an oil glut building, that crude oil in storage was growing to new highs around the world, and that full oil tankers were crisscrossing the ocean trying to find places to offload. The oil majors knew a price collapse was coming, but didn’t want to precipitate it by announcing the glut to the market because they wanted the price to stay high as long as possible. They rode the wave until the market caught on in mid 2014, but the smart oil companies were already battening down the hatches for the storm by reining in capital spending and building cash war chests to endure the coming lean years.

              Fleeb explains pretty well above how shifting EROI and politics and environmental activism and competition and collusion and market manipulation shape supply and demand. We seem to see the same forces at work.

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  9. By GregS on April 5, 2017 at 3:06 pm

    By 2060 the World population is estimated to be just over 10 Billion, up from 7.5 Billion today. Despite that increase of over 33%, I believe that oil consumption will be substantially lower than now, maybe even half of where we are at today.

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    • By Ike_Kiefer on April 5, 2017 at 5:36 pm

      Oil is used for both transportation fuel and feedstock for chemicals. I doubt you believe that the billions of people in the developing world won’t want the same quality of life as the West currently enjoys, and will not seek to own cars or travel by air or use things made of plastic and synthetic fibers and resins. Do you think energy efficiency will increase more rapidly than energy growth? Do you think something will replace liquid hydrocarbons as suitable transportation energy for land, sea, air, and space vehicles? Something else?

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  10. By fleeb on April 7, 2017 at 6:37 pm

    My profession was Industrial Engineer. I am familiar with cost accounting, efficiency, technology and the rest and with such experience, I’m not confused of the historical supply of oil. Of course oil is harder to find, but that does not equate to diminishing resources. Yes, oil recovery is getting more expensive, but high costs are moderated by higher efficiency and accuracy (no waste). Recovery of oil is dependant on technology, selling price of the commodity, cost of recovery, and efficiency. So, the number of bore holes is irrelevant nor the depth or location of the drill rig. It is merely the cost of production and capability of technology.

    The planet is huge and man’s capability is meager. Consider the U.S. has the best of the best oil companies and our country is leading upon technology and cost efficient oil recovery. We are relatively a small geographical country, but produce a very respectable quantity of oil. Suppose we put such effort to produce oil within Russia land mass? Alaska, oceans, Africa, Canada, and the rest.

    How could we possible deliver more crude oil? Consider the Hughes roller cone drill bit is archaic technology. How much improvement would it be to invent yet another cutting tool? Laser? How about a down the hole propane hammer? How about underwater drill rigs with robotics? There really isn’t much limitation over time and talent of engineering to deliver valuable product.

    The crux of supply limitation does lie with the value of product. If in fact oil continues to be most valuable, supply will meet demand for a very long time. But, just as technology helps oil production, it also helps all the competing energy resources. Often, we read of posts that claim we will never run out of crude oil. I agree. But, that does not mean oil will not lose most of it’s value over time.

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  11. By Ben G on April 11, 2017 at 2:22 pm

    I found Capt. Kiefer to be most charitable in his comments about the perspectives offered by Fleeb. While Fleeb may very well have been a fine industrial engineer, the
    ramble that he offers as analysis to ETI readers can only be viewed as sort of a jaundiced ramble as to how the market dynamics of the energy industry actually function. Regrettably, there is much less collusion (let alone conspiracy) involved in the global marketplace of oil & gas production/distribution.

    There is, indeed, a great deal of new oil discovery emerging from remote regions of the world. And these supplies are increasingly made recoverable by the advance of technology and accompanying efficiency, enhanced risk-sharing arrangements involving multiple, project-financing platforms and price-mechanisms allowing for a re-balancing of capital allocation bearing on energy production. The energy industry has entered a golden age of sorts in that the influence of OPEC is receding even as a range of emerging markets continue movement along the learning-curve, as they take their place in a global energy marketplace that continues to evolve and diversify.

    It is arguably the challenge of economic growth–challenge in the sense that growth in most of the industrial worlds has significantly moderated–that will principally influence the performance of the energy sector in the years ahead. In reviewing the trajectory of GDP output in the US and in the other leading nations of Europe, Asia and Latin America, there is a notable decline in the pace of growth since the advent of burgeoning debt-service obligations against the backdrop of eroding demographic trends and other nascent challenges resulting from the relentless displacement of labor by technology and/or the smoothing of capital and labor flows to accommodate shifting forces in a global economy. The deceleration in economic growth in the world’s most industrialized nations has, on average over the past twenty years,
    been by approximately one-third. If this trend were to continue, the need for
    increases in traditional energy supplies will moderate and the price-points of the resulting supplies will remain correspondingly manageable. The prospects of some measure of moderation (and, hopefully, stability) in the energy markets may be welcome, but if they are bought at the price of a secular (vice cyclical) decline in
    economic growth than the wealth required to otherwise help achieve a marked reduction in world poverty let alone an improvement in living standards among those enjoying gainful employment among the most developed nations.

    There is increasingly (if routinely muted in the corridors of power and among the ivy-towers), a recognition that we’ve not only experienced an extended period of
    de-leveraging/ and financial repression by the monetary authorities aimed at a “soft landing,” but we are now witnessing an attempted reflation to improve the pace of economic output. The jury remains out as to whether such policy handiwork will secure the intended results. My own analysis suggests that the goal of reinvigorated growth, at home and abroad, very much remains in doubt until the policy prescriptions in the various capitals around the globe begin to reconcile the creative tension that necessarily arise between worthy buy competing policy objectives.

    Ben G

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  12. By RodT on April 18, 2017 at 4:59 am

    Robert, I bow to your far superior knowledge about oil, but a climate scientist you are not.

    You do a major disservice to trivalise, saying ‘those who demonize CO2′, and ‘adaptation and mitigation would appear to be the only reasonable strategy’. You sound like a smoker saying don’t worry, I’ll do chemo when I get cancer.

    It suprises me greatly to see you dismiss the consequences of global warming, which is far more than just a few warmer days. As we pump more energy into the climate system it will become chaotic, shifting weather patterns and disrupting rainfall among other effects. You might be able to predict the future of oil, but nobody really knows what is going to happen as we fiddle with a vastly complicated system.

    Your solution? Keep burning fossils. There’s no doubt we will need energy, but burning more oil is telling the smoker to puff more cigarettes.

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    • By Robert Rapier on April 19, 2017 at 12:26 am

      It’s a guest article, Rod. I am not the author.

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      • By RodT on April 19, 2017 at 8:31 pm

        My apologies Robert, I should’ve read the preamble more carefully.
        I have high regard for your opinions.

        In your blog (Oct 10, 2011), you adopt a descriptive rather than an activist tone: “trying to explain why things are the way they are, and predict where I
        think things are going. This is very different than presenting an
        idealistic version of how things could be in the future…”

        Those of us who are alarmed by our climate future might want everyone to be activist, but perhaps it is better that someone like yourself is simply analytical. However I would not say the goal of averting the worst is ‘idealistic’.

        My earlier comments therefore apply to Mr Kiefer.

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        • By Ike_Kiefer on April 22, 2017 at 6:28 am

          You should read the climate science more carefully. My views are in line with what is actually written in IPCC 2013 Working Group 1 report, the single document in all of AR5 actually written by the scientists, not political appointees. If you want to have a discussion with me, let it be based on the IPCC 2013 consensus of scientists in the WG1 report, not emotional conjectures.

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