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Forget Peak Oil, Time To Worry About Peak Oil Labor
By EconMatters
In a recent working paper, researchers at the the IMF (International Monetary Fund) attempt to reconcile the Peak Oil debate that whether resource constraints will dictate the future of oil output and prices, or advance in technology motivated by high oil price would eventually provide a solution to more production, as well as higher oil prices.
An economic model was developed incorporating both views, and identified two biggest factors contributing to the recent run-up in oil prices:
- Relative price insensitivity on the supply side - We have to point out that this IMF observation is partly due to oil production increase/decrease typically significantly lags the oil price movement.
- "Shocks to excess demand for goods and to demand for oil" due to the recent phenomenal growth from countries like China and India.
The paper also gives out this dire warning:
"....our prediction of small further increases in world oil production comes at the expense of anear doubling, permanently, of real oil prices over the coming decade. This is uncharted territory for the world economy...."
In general, various forecasts by different agencies seem to agree that world oil production will likely continue to have small increases with producers venturing out to exploit the more difficult and challenging formation.
However, what most forecasts as well as the IMF paper did not discuss is the scarce human capital that's already seriously plaguing the oil industry, which could have serious implication in the future oil production and technology development.
With the aging and retirement of the boomer generations that began their careers in the late 1970s (see chart below), the oil industry is suffering an acute shortage of experienced skilled professionals.
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Chart Source: Schlumberger presentation, March 1, 2012 |
This will only add to the cost of an oil barrel and become very disruptive (see graph below) as oil projects are getting more complex, more difficult and expensive to execute.
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Chart Source: Schlumberger presentation, March 1, 2012 |
A separate study by the Petroleum Human Resources Council estimates about 39,000 workers will be needed in Canada alone to replace those who are expected to retire before 2020 just to maintain the status quo. The industry could need as many as 130,000 new hires by the end of the decade with more bullish oil and gas prices.
Already at least one analyst firm is scaling back its drilling activity forecast for 2012, in part because there aren't enough workers who can drill big, complicated wells. For now, NES Global Talent sees a depletion of skilled workers in oil and gas fields in the United States, Great Britain and Australia, three of the busiest oil and gas regions, will become a major problem.
Schlumberger, the largest oilfield services company in the world, sees significant negative effect from peak oil labor manifesting by 2015, a short three years from now, with increasing inexperienced oil professionals, and that the talent problem will only get worse.
For now, most forecasts expect crude prices would remain high in 2012, mostly due to the Iran tension. Meanwhile, OPEC just revised its 2012 world oil demand outlook slightly upwards citing a stable US economy and the shutdown of nuclear plants in Japan. So if the IMF prediction comes true, it seems the peak oil labor could be just enough to tip the scale for doubling in oil price scenario a lot sooner than year 2022.
The future will not be easy.
Further Reading - Another Oil Price Shock, Another Global Recession?
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the technical skills supply and demand curve in first world is going to look like the concrete bubble-trouble curve soon.
Blame it all on Internet Pornucopia, where the new generation just wants to lie back and earn on WS type "funny money" jobs that allow them to binge or impinge on other peoples private lives via the NET. Facebook and twitter and pornucopia jitters; who reads a book, who actually wants to do some hard work in real economy, hard landing all around. Well, our generation learnt a few things and forgot the essential.
Falak
You're right. These porn/narcissism producing conduits ought to try growing food using the binary system.
Physical labour is no longer fun, its dirty, draughty and even dangerous. Better sit at a table more or less nine to five, no emergencies that require more than finger flexing.
In the field you have no reset button., no erase. A different discipline and a different challange.
More robots in the field?
I watched 8 bridge construction workers moving refuse materials and equipment for one hour while they upgrade a tourist vista point (obviously using stimilus funding). Only one of these geniuses had gloves on. The old guy. Most work can be safely accomplished unless you are a horse's ass.
I can tell you that I'm starting a paid internship at a very large energy company in the San Ramon area. the other interns had way better GPA's then me (3.4 vs 3.9 and 3.975) and way more extra curricular activities then me. I really think when they saw I minored in Mechatronics, computer electronics and plc and pneumatics and such, that got there attention.
EDIT - I'm an MIS major.
doofus, I have an Electrical Engineering degree (and a CS degree too) and have submitted my resume to hundreds of engineering jobs, not receiving a response. In the Bay Area too. Would you care to back up your claim by posting an address to which I could submit my resume for immediate consideration/interview?
I know all the 3 phase stuff, have worked with relays, power systems, PLCs, DCS, software, in addition to a good chunk of the communications/SCADA stuff. And I speak perfect English. Management-experience-wise, I managed a field crew as one of my summer jobs during undergrad -- heavy transformer/circuit breaker maintenance/overhauls/erection.
Of course, if you're only offering $60k as a starting salary in the SFBay area for such talent...then don't waste my time. But otherwise, I'd love to speak with you.
Don't waste your time Pitz. You "write white" so unless you're a flaming LGBT that is from fuckyuistan, you'll get no reply.
You mean he's not only not "young" enough, he's also not "ethic" enough? Good call Turtle face.
Pitz - Does this site have a personal message feature? How can you get me a resume? We're looking for guys with relay experience. Oh and I'll echo what the other dude said about your comment about the $60K base and wasting your time. Poor form on your part, especially if I was the hiring manager. Your resume & experience will determine what's what.
This job does require a fair amount of weekend work and requires some holiday work (never Christmas), but that gets my crews at/over the $100K mark annually. Its a great opportunity for someone who wants to hustle and make money. Its likely very similar to what you did during the summer job you listed. Get me a resume and I'll forward it on. Im not the hiring manager.
Part of the problem is the fucks they hire in HR who act like Napoleans because hiring is the only power they ever possessed, and the only actual contribution they make to the company is setting the bar low by the pitifully low salary they are willing to take for their non-work.
"...have submitted my resume to hundreds of engineering jobs, not receiving a response....if you're only offering $60k as a starting salary in the SFBay area for such talent...then don't waste my time."
With that attitude you will not be working anywhere soon.
really - "don't waste my time" What the fuck is that, and you would love to speak with him?
Hey, 60k in the santuary city of SF will have you carrying a gun to walk from your car to your crappy by the hour motel and eating ramen noodles, 3 times a day not to mention if you're a regular looking guy being hit on for a session in a steam room. Back off the man's attitude.
Money Squid, $60k isn't survivable for a professional in the SFBay area, and isn't indicative of an employer that is actually looking for talent ($60k barely buys a warm body, nevermind anyone with a brain). If an employer is only willing to offer that sort of money, then, quite frankly, its not worth either his time, nor my time, to even have the conversation.
I'm just being up-front as I prefer the direct approach.
You must have worthless degrees and/or are unable to demonstrate basic level skills. I'm also a manager trying to hire a EE or CS in the bay area and it is near impossible.
yeah, what provence you from in India? and I'd like to talk to your subordinates to see if you're a "manager". The word goes out pretty quick on who is and isn't.
I am an EE, with patents and PhD research to my name; a track record of developing products and inventions worth $milllions, and I can't even get an entry-level job as a technician's assistant.
Why? Because I have grey hair and look too old.
So, go fuck yourself with your bullshit excuses.
You don't add to the CULTURE dude. Just look at Facebook HQ photos. What ever happened to age discrimination laws anyway? Facebook, Google, all the rest of the dot.coms flaunt their age discrimination and enjoy their billions. Life ain't fair. Get the fuck used to it. We created and supported a culture that exhaults youth and dismisses elders. It's called the Woodstock generation. Now their selfish kids are driving the bus and nobody else matters anymore. So, basically Americans can reap what they sow and slowly go to hell.
may I say Sumo, Sir, well said.
Sumo - I feel for ya!! Your story is not an isolated one. I think it scares a lot of guys like me who are only a few years away from that phase of career. One bad turn and who knows.
Keep fightin', man! Pick up some Just For Men, start hitting the gym again.... and maybe hide the PhD thing. That might be scaring employers. (real talk- sorry) Good luck, tho.
Thanks D.
And remember to vote for Obama so your economic suffering at the hands of his Czar administration continues for another 4 years.
Maybe should apply for the PHD Czar role. I'm sure they are looking
I agree but think another facet of the problem, and not hiring people who are 40 or 50 is a problem (a big one) and I'm 30, is that I feel like companies are waiting for the perfect employee and nothing else will do. As taxpayers we forked over almost a trillion bucks to fix the economy and there was no requirement that jobs get created and money gets lent. I don't know how you do that since you can't force someone to hire someone but they didnt have to take the money so...
" I feel like companies are waiting for the perfect employee and nothing else will do"
That is true. I've seen it myself.
Even further, I have gone for jobs which demanded rare specialist expertise, which I had. Not only that, I had worked sucessfully with some of the existing employees in the recent past, in that role, so I was a "known quantity" and a low-risk choice. I still didn't get a second interview, even though I enjoy interviews and know how to make the most of them.
The hidden requirement that I couldn't meet was the unspoken upper limit on age.
You may have a successful technical career, you may keep up-to-date with your field and help advance it. And while you're young, it may seem pretty easy to get your next job.
But the day will come when you lose your job - due to a takeover, a corporate bankruptcy, budget cuts, whatever - and you look around, and getting your next job is suddenly very hard. You don't feel different, but everyone treats you differently. You're older, but no-one says it to your face. And it seems like the longer you're out of work, the harder it is to get considered on your merits.
It will start to happen in your late 30s. It will be set in stone by your late 40s.
You run and you run to catch up to the sun, but it's sinking, racing around to come up behind you again. The sun is the same in a relative way, but you're older, shorter of breath and one day closer to death......
Abso-fucking-lutely. I got laid off at 59, with a top-of-the-line reputation and contacts all over the industry, and I got exactly one -- that's o-n-e -- interview and no call back out of several hundred applications over the next 12 months. The reason was obvious -- as soon as they saw I had 35 years experience in the field, they did the math and round-filed my resumé. I had friends in the industry admit it privately -- there was no way they could sell hiring me to their bosses, who were without exception in their 30s and 40s.
The other big drawback was that I am a white male, but that's a different rant.
I feel you brother on the "other rant" It dicked me over many times in a 45 yr career. I finally did a john galt on their ass and scooted on over to the retired ranks. Didn't have a life scarambling all those years but saved enough to get the hell out before "she" told me one more time "It's not your job to identify problems and propose solutions for life threating issues, I'll call the safety dept, in 15 minutes when they get off break, to see when they can get send somebody out".
One major trend I've seen in the last 15 years -- as soon as a woman reaches the top spot, all the men below her are replaced with women within the next 18 months. During my job search (before I too went Galt), I used to amuse myself by predicting who would be hired for the jobs I applied for. If the supervisor was a woman, the job invariably -- and I mean every single time -- went to another woman, and three times out of five to one of ethnicity.
This happens all the time in the bay area. Boom and bust. We are back on an internet bubble where you pay through the a** for good programmers. The other thing you can also see is some IT depts get loaded with Indians/Pak/Bangladeshi plus some others and they make sure no Americans get in there.
This is pretty common in NYC at the big companies like banks. The places and systems are a disaster. I have an American buddy in the NE/MidLantic who tells the headhunters - no banks. He used to get phone calls at 3 am from Mumbai when they ran jobs for a bank that almost every here hates that lost a lot of money. The Indians would run jobs overnight or change the code and blow things up. My buddy was fixing their sh*t at 3 am.
Companies want to be in the Bay Area but you better fork over big bucks. You think they might get smart and move but they won't. The CEO wants to play golf 4 days a week at Pebble.
I find this incredulous. However, since HP is laying off 20,000 workers, I'm sure your resume inbox at Jiffy Lube will overflowing in a few short months.
Again, post a link or address, and I'd be glad to submit. Near impossible, hardly, the HR staffers at the positions I've applied to claim they receive 300+ resumes for a single advertised position.
Don't just sit there and whine about your particular problem when I'm willing to help you out.
300+ agrees with my experience. I had one interviewer, a startup CEO, tell me he normally gets 500 in the two weeks after a position gets advertised.
"Don't just sit there and whine about your particular problem when I'm willing to help you out"
Exactly. The fact that he is whining in the face of offered solutions tells you he's a either a troll, or some shit-for-brains disaster right out of Dilbert.com
I think you are blind to why kids in Gen Y or any other generation go for Wall Street or Google...wages they can survive on. Those foreign born filled jobs pay crap wages. Ask me how I know. Please.
Google's wages aren't particularly hot. San Jose police officers earn more than most of them.
go on. Lets hear it.
" So if the IMF prediction comes true, it seems the peak oil labor could be just enough to tip the scale for doubling in oil price scenario a lot sooner than year 2022."
The doubling in oil price scenario will happen through inflation first.
or WAR.
Doubling of oil prices HAS already happened through inflation, a number of times. Gasoline was 32 cents a gallon in 1971. It is now approx 12 times that price and its only 80 per cent gasoline. the rest is alcohol from corn.
I think the governmnet is deliberately misunderestimating the problem, because it can't do a damn thing about it, and a massive die off of unsuspecting morons who don't prepare for interuptions in business as usual, is deemed a good and needed thing by those nesting in the upper rungs of the food chain who are prepared. They know less mouths make things last longer, things like food and water and oil.
They'll deny and undereport peak oil right up to the day you can't buy a gallon of gasoline for an ounce of gold.
It may or may not matter if oil gets more expensive. In the short run, yes, it's a problem. Over time, however, rising prices won't have an impact on things. Alternatives become viable and new resources come online.
In the meantime, the scary thing is listening to people try to justify keeping costs low - or somehow saving 'what little' we have left. This is clearly manipulation of data and information in order to maintain a particular status quo.
In the long run, prices are just signals which cause people to alter their vision. Either there are no alternatives that are viable, and we continue to pay higher prices but get used to it, or we find new oil resources which cause prices to stabilize at a higher level, or we find alternatives which keep prices from skyrocketing.
I worry very little about the price of oil, except over the next year. Beyond that, it's not worth worrying too much.
"It may or may not matter if oil gets more expensive. In the short run, yes, it's a problem. Over time, however, rising prices won't have an impact on things. Alternatives become viable and new resources come online."
I do this a lot on ZH, but there is a pointlessness to it. OTOH, I have nothing better to do this moment.
It may or may not matter if it gets more expensive? You're right, but that's not too profound. The truth is that it doesn't matter. Scarcity doesn't care about price because money is an artificial construct, and no, this is not another gold hype.
What it is . . . is physics. Price is determined not by central banks, but by physics. Yes, you can convert all the natural gas on Titan into oil and have lots of oil, provided you have nearly infinite . . . not money . . . physics. It can be done if you can get infinite effort. Infinite food to feed the people trying to do such an insanely huge task.
Of course, it will never happen. Oil scarcity will grind down civilization because civilization can never afford . . . in physics -- calories -- BTUs -- the cost of undoing the scarcity.
Price doesn't matter. Death does. And it's coming for most of the 7 billion soon.
As long as we're talking physics, then let's call the physics for what it/they really are: thermodynamics, mass conservation, infrastructure dependence, and complex systems. Each of these as a piece and all together as a whole impact both in why the peaking of cheap oil is destroying the current economy and facilitating a human population die-off, and why peak oil ultimately wouldn't matter. Yes, that's a contradiction.
"What happened was at some point I realized that I didn't really see a good ending to any of this--I still don't, you can smell the end coming, you can smell it! We don't know we've already had peak oil, we've already had peak water in the Southwest and the Southeast, people don't know this, they go about their business ... " -- George Carlin, WNYC, November 2007
The Eagleford Shale play in south texas alone will significantly reduce current US oil import demand. There are 167 rigs listed as drilling this play as of last week. They can drill the hole in 21 to 35 days if no problems. Each well can produce anywhere from 300 to 3000+ per day, no good data yet on a realistic average per well, but assuming the low end of 500 bbl per day per well, and lets just say they are only able to complete 1000 wells per year due to labor shortages. Thats a 500,000 per day increase in one year. In one play in the US.
Oil and nat gas liquids are being produced in every shale play in the US. If the numbers are closer to 2000 wells per year brought online and the average production is 1000 bbl per day then you are looking at a 2,000,000 per day increase per year, 5 years of that will meet current US oil import demand.
Look at the price history of Natural gas over the past 5 or 10 years. I would predict much cheaper oil prices very quickly (within 5 years) but price changes create new variables. If the west does not need opec oil then the stability of the mid-east is of no concern, a million futures become possible.
I dont expect OPEC to just let it happen either, but they seem to be attempting the same strategies as the 70's, with Iran sabre rattling to extend the high price, followed by price collapse to make competing producers uneconomical.
For an analysis of the situation that involves actual numbers, start here: http://en.wikipedia.org/wiki/Cubic_mile_of_oil
The bottom line is that what's being brought online in the USA is not very much, quantitatively, and even less when you look at the energy-return/price ratios. The numbers only look big to uneducated journalists who have been instructed to churn out happy-talk filler for the rubes.
In short, the world uses 30 billion barrels of oil a year, more or less. The USA uses 8-9 billion of that each year. The USA still needs to import oil to cover current demand, and always will, until demand declines, which will happen when prices rise.
Eagleford has only 3 billion barrels of oil and perhaps the energy equivelent of 2 billion barrels of natural gas. It if was all extracted tomorrow without energy loss, it would run the USA for about 7 months. Marcellus dwarfs Eagleford with 410 trillion feed of natural gas (ftp://ftp.eia.doe.gov/natgas/usshaleplays.pdf), but it takes 8000 sq. ft. of gas to make the energy equivalent to 1 barrel of oil. You do the math.
The bottom line is that energy independence for the USA at current consumption levels is a pipe dream. We either use less or find another energy source.
Price does matter because before death comes to us all we suffer the slings and arrows of misfortune while the scumbags that arranged all this mess are trippin the light fantastic on our borrowed dime. I'm just saying, I don't think it's such a big deal, after all Jamie Dimon said he's "doing God's work". I can go now, comforted by physics and my pastor.
Death will actually come for All, not just some, it is after all, the great equalizer.
As for the physics of energy generation / consumption issue, as long as the seasons continue, the cycle of water is probably the best overall multi-generational source of power available. The initial outlay is substantial but hydro-electric projects handed to us from our fathers continue to produce at reasonable expense to the environment and maintenance wise.
Sometimes I think whitewater rafters should have to pay for the privilege of using rivers that could otherwise produce energy for everyone rather than the pleasure of the selfish few. (testing the limits of politcal correctness)
Death will come for all. I said soon.
There is no energy crisis. There is no Peak Energy. Energy is not the issue.
The issue is oil. Not Propane. Not natural gas. Not electricity. Not heat.
Oil. Only oil moves calories the 1500 miles an avg calorie travels to your mouth today. Electricity will NEVER do that because there are 745 watts in 1 horsepower and you need 400 horsepower in an 18 wheeler truck that brings food to your grocery store.
A John Deere tractor at 450 horsepower will NEVER be electric because that many kilowatts will require batteries that are heavy? No. That's an engineering problem and engineering problems are solvable. No, the reason it will NEVER happen is physics. The laws of physics. You can't charge the batteries in less than a month. You can't plow the 10,000 acre fields before planting season has expired.
Oil. Only oil. Find me another liquid fuel with 5.6 million BTUs per barrel and you have a solution. Find me an electricity battery, and you have useless weight that can't come remotely close to what is needed.
Most of the 7 billion will die, and soon. You'll know it's happening when you hear that population declined at the end of a decade. Then the next decade it accelerates. Then someone objects to their slice of the pie getting smaller because the pie is getting smaller, and they start a war to get some of someone else's slice, and that accelerates it further.
When you get down to 1 billion people, the population stops declining. But it doesn't grow. It can't. Oil relentlessly will get more and more scarce. After a few centuries, extinction is pretty credible. Lack of growth does that.
You do know you can make methane with just air, water electricity and the right catalysts right? Petrol engines can be cheaply modified to run on it too and liquefied methane has very decent energy density. Sure it's not terribly efficient yet, and more complex hydrocarbons are harder ... but that's just a question of science, not physics.
If you have enough energy you can simply make oil ... and whether it be through solar or nuclear, there is more than enough energy up for grabs (just not always in the "right" places, the US is lucky both with Uranium and deserts ... Europe, not so much).
And the sky is falling.
As relative prices rise, alternatives abound.
As oil rises, trains (the Buffett play) replace more trucks.
Physics isn't our limit. Understanding physics and economics is.
When you get down to 1 billion people, the population stops declining. But it doesn't grow.
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Where does this figure come from?