Guest Post: Selling The Oil Illusion, American Style

Submitted by Chris Martenson guest writer Gregor Macdonald

Selling The Oil Illusion, American Style

"The task of the real intellectual consists of analyzing illusions in order to discover their causes." ~ Arthur Miller

US production of crude oil peaked in 1970 at 9.637 mbpd (million barrels per day) and has been in a downtrend for 40 years. Recently, however, there's been a tremendous amount of excitement at the prospect of a "new era" in domestic oil production. The narratives currently being offered come in the following three forms: 1) the US has more oil than Saudi Arabia; 2) the US need only to remove regulatory barriers to significantly increase production; and 3) the US can once again become self-sufficient in oil production, dropping all imported oil to zero.

Let's first take a look at over 70 years of US oil production.

The US is currently enjoying its second stabilization phase since the peak in 1970. (Daily oil production has rebounded from a deep hole in 2008, from below 5 mbpd to above 5.5 mbpd). The first stabilization period lasted for more than 7 years, from 1977 to 1985. While it did not reverse the overall decline trend, which had resumed by 1990, this was certainly good news, just as our current production increases are good news. But the production history laid out graphically here is instructive and gives a clear warning: It would be unwise to herald the recent uptick in domestic production with a "new era" headline. Deepwater drilling, Gulf of Mexico, and Alaska were all "new era" events in their day as well. Or so they seemed.

Now, three respectable publications have recently cast the advent of new oil extraction in America as a kind of miracle. And indeed, technologically, the refinement of hydraulic fracturing techniques -- first used to extract natural gas, and now used to extract oil -- is miraculous. But a technique such as this, although replicable and repeatable, will not change the fact that newer, unconventional resources are developed and produce oil at a much slower rate. One year after the Black Giant of East Texas was discovered in the early 1930s, it was producing just 1 mbpd. The US no longer has resources such as this to exploit. The history of US oil production over the past 40 years should make this clear.

However, this did not stop the Telegraph of London from making triumphant assertions in their October 23 piece:

World power swings back to America

The American phoenix is slowly rising again. Within five years or so, the US will be well on its way to self-sufficiency in fuel and energy.

The US was the single largest contributor to global oil supply growth last year, with a net 395,000 barrels per day (b/d)," said Francisco Blanch from Bank of America, comparing the Dakota fields to a new North Sea. Total US shale output is "set to expand dramatically" as fresh sources come on stream, possibly reaching 5.5m b/d by mid-decade. This is a tenfold rise since 2009. The US already meets 72pc of its own oil needs, up from around 50pc a decade ago. "The implications of this shift are very large for geopolitics, energy security, historical military alliances and economic activity.

(Source)

The claims made here (or should I say the conjectures here), are completely over-reaching -- but worse, the data is completely wrong. This matters because the article was widely distributed and sustained a very popular position for several days on Twitter and in other media outlets. I have written extensively on the problematic nature of energy data that’s produced by the Energy Information Administration (EIA) in Washington and International Energy Agency (IEA) in Paris. So it’s not really surprising that the public, the average reader, cannot fact-check these numbers easily.

In Secrecy by Complexity: Obfuscation in Energy Data and the Primacy of Crude Oil, I explained how difficult it can be -- even for journalists -- to obtain a time series of commodity production and flows that is continuous, let alone understandable. For example, if one includes biofuels (which, of course, are not oil in any sense and do not contain the dense btu content of oil), perhaps one could claim that 2010 oil production in the US outpaced the rest of the world. But according to the EIA in Washington, 2010 saw China make the largest new contribution to world oil supplies at 277 kbpd (thousand barrels per day), followed by Russia at 199 kbpd, and then Canada at 153 kbpd. The United States? US oil production grew by an average 114 kbpd.

So in a world of global crude oil production currently running around 74 mbpd, we are asked to believe a new era has dawned for the United States on the back of an additional 114 kbpd? That would be funny, if it were not so ridiculous. Let’s also include the 2011 additions to US oil production, at 141 kbpd. Are you feeling excited yet? These are the volumes that will allow the US to re-conquer the world with new oil production, and wean itself off global oil imports? The New York Times is quite enthused about these “major developments,” as evidenced by this October piece:

New Technologies Redraw the World’s Energy Picture

This striking shift in energy started in the 1990s with the first deepwater wells in the Gulf of Mexico and Brazil, but it has taken off in the last decade as a result of declining conventional fields, climbing energy prices and swift technological change. The United States may now have the means to reduce its half century of dependence on the Middle East.

(Source)

Sigh. The New York Times has been selling that dream for several years now. Indeed, if you are old enough to have followed the presidential election cycle since the 1970’s, you’ll know that “energy independence” has been a standard, vague promise trotted out since the Carter Administration.

But let’s say the US did indeed want to become less dependent on foreign oil. How would the country achieve such a shift, if not through a huge increase in production? After all, the recent “rise” or stability in US crude oil production is made partially on the back of a steeper four-year production decline that carried into 2008, when the rate fell to below 5 mbpd. So far in 2011, US production of crude oil just about matches the rate last seen in 2003-2004, around 5.5 mbpd. Despite the hype, the supply side of this equation has not changed enough. Could we do something about the demand side?

So, now you know. The longest and deepest recession (actually a financial crisis and a depression) in the post-war period reduced oil consumption by 12.8%. The “miracle,” if you can call it that, of US oil independence lies not in the illusion that 5.5 mbpd of oil production can be lifted to wipe out 11.5 mbpd of oil imports. Instead, it lies in a further de-industrialization of the US economy, a huge reduction in miles driven on the nation’s roads and highways, and no doubt some energy efficiency.

Perhaps some of these are good things. Even very good things. But they are not unequivocally good things. To the extent that portions of the US economy that can shift to the power grid have done so in the past three years, for example, much of that new grid demand has been met by coal. But more broadly, it is not so much that the US is wisely and strategically conducting energy transition as a matter of policy. No, a whole tranche of the US economy has been literally kicked off oil, mainly due to the financial crisis and high unemployment, but also partly due to the inelasticity of demand in emerging markets. I would remind readers that 100% of the new demand for global oil since 2005, mostly coming from the non-OECD, has not been met by new supply. Instead, in a world of flat oil production, the resources for the developing world have come solely from a reduction of demand in the developed nations. Global oil supply is now a zero-sum game. Let’s stop litigating this fact.

Of course, no tour through the world of badly mangled energy data or energy optimism would be complete without noting the opinion of Dan Yergin. Interestingly, Yergin’s research group CERA has produced one of the best indexes of rampant cost inflation in the global oil and gas industry over the past decade. This is a key point that often eludes even the educated reader not familiar with the complexities of resource economics, and which was a ghosted irony in the New York Times article cited previously: The unconventional resources on which we now depend are complex and costly. Most important of all, they are slow. The tar sands are slow. Ultra-deepwater off the coast of Brazil is slow. However, this does not stop Mr. Yergin, who has been given free range once again to make vague, grand forecasts about future supply. In an October 31 piece in the Financial Times, he is quoted:

Pendulum swings on American oil independence

“Over the past couple of years, there has been a great U-turn in US oil supply,” says Daniel Yergin of IHS Cera, the research group. “Until recently, the question was whether oil imports would flatten out. Now we are seeing a major rebalancing of supplies.”

(Source)

It no longer amazes me to hear Yergin make such claims. U-Turn in US oil supply? A major rebalancing? Yeah, sure; whatever. This pabulum is, of course, not taken seriously by energy investors as a whole, and certainly not by some of the more notable hedge fund managers, who took it upon themselves to get out in front of oil depletion early last decade. Mr. Yergin is useful to a political complex that wishes to avoid the career risk of actually having to do something about our increasingly uneconomic transportation systems and the developed world’s dependence on oil. This is as true here in the States as it is in Europe. Indeed, why take the political risk of telling Americans they should choose to transition away from automobiles, when price will start to do some of that work regardless?

Department of Transportation: VMT - Vehicle Miles Travelled, 12 Month Moving Average on All Highways, (in Billion Miles):

Continuing with our theme, the Telegraph of London was completely wrong when it claimed that the US now meets 72% of its own oil needs, up from 50% a decade ago. Worrying to the cause of mathematical accuracy in journalism, that 72% figure nearly describes the amount of crude oil the US must import -- which is currently running at 68% of US consumption. Moreover, given the peak and decline in VMT (vehicle miles driven), we once again confront the myth that the US economy is recovering and has new oil supply to do so. This is a nasty combination of normalcy bias, which plugs in to the wish for resurrection and the plain old fallacy of composition. A very small amount of new oil production has been blown up beyond all scale and proportion. To the Arthur Miller quote in the header of this essay, the question is: Why has the media presented this illusion now, to the American audience?

We need to examine even more closely, however, the actual prospects for lifting US oil production, were we to imagine a kind of War on Oil Depletion in the United States. (No, we're never going to extract the kerogen deposits of the Green River Formation, despite the investment-opportunity (!!) spam in your email). Environmentalists probably believe for example, especially in the wake of their victory this week on the XL Pipeline, that the US is unlikely to ever adopt a full-on, drill, drill, drill policy for oil. I think that's a mistake, and I would point to a country like Australia, which, despite a new tax on carbon, has increasingly become a single, vast territory of resource extraction.

Unfortunately, our oil transition effort has only just begun. It's still taking place only in very minor fashion, at the margin. The balance of this decade must be tackled first, and it will be felt as an ongoing battle between oil prices bumping up against a ceiling as economies repeatedly fail to recover.

In Part II: How To Postion for the Next Great Oil Squeeze, I also show the specific data on US Imports of crude oil, and why Canada, with its very slow-flowing tar sands, is hardly going to save the US, XL pipeline or not. Most importantly, I will explain how oil depletion will likely mean quite a profitable future for America's independent oil and gas companies and address the key questions: how can the average investor position themselves for the next great oil demand shock? and when will it happen? All within the context of overall, energy-induced economic decline in the OECD, as resource depletion of oil -- which remains the master commodity and the primary energy input to the global economy -- means that a higher level of economic volatility will be the new normal until energy transition unfolds more fully.

Click here to access Part II of this report (free executive summary; enrollment required for full access).

Comments

[Flakmeister]

See my comment above regarding rates.... Abiotic oil is a crock....

[trav7777]

HALLELUJAH!

We will just go into DEEP SPACE to get our oil.

Someone help me out here...Titan and Deep Space appear to have INFINITY reserves...what should I expect the PRODUCTION RATE from these infinite reserves to be?

[PierreLegrand]

Well I honestly don't think we can round up enough help for you...but the point of the matter is Peak Oil fanatics believe that oil was produced biologically and because of that it must be limited. But if they are wrong and it is being produced in the earths core then our supplies might be a lot less limited then these modern cassandras might hope for...

[tmosley]

And that, ladies and gentlemen, is the sound of the point whizzing over Trav's head.

[Arkadaba]

As much as I would like Abiotic oil - science just doesn't support it.

[PierreLegrand]

Well science may need to adjust to the new reality.

[tmosley]

You would be surprised.  Oil digesting microbes have been found in rock a kilometer under one of the Atlantic plates, thousand of miles from any subduction zone.  Their very presence indicates some source of oil, and loosely interpreted, means at the very least that oil is produced from lower hydrocarbons or hydrogen deep in the crust by these microbes themselves (ie not "Abiotic" but certainly "Aplanktonic", and produced continuously).

The fact is that abiotic oil exists.  The only questions are a, "at what rate do they produce oil?" and b, "where does it accumulate?"

Thus far, we have seen an answer to neither, but jsut because we don't know the answers, doesn't mean there isn't one.

Edit: also, please note that these discoveries do not indicate that the oil that is currenty in production around the world originated in that way.  Standard theory for oil production is probably correct, but there is more than one way to press a fatty acid.

[Flakmeister]

You say that abiotic oil exists, prove it...

If it is from some obscure microbes as you hypothesize, it is by definition, not abiotic...

[Bring the Gold]

Nor is the "tank refilling" anywhere near the speed at which we are siphoning it out, at least where we can reach it. Otherwise why are we spending BILLIONS on offshore drilling and TRILLIONS on wars to acquire land where the stuff is near surface, sweet and light? Oh right because it's easy to find anywhere and just gurgling up out of the ground like Pennsylvania circa 1908.

[FeralSerf]

<<Otherwise why are we spending BILLIONS on offshore drilling and TRILLIONS on wars to acquire land where the stuff is near surface, sweet and light? >>

To make Wall St., the bankers, and their ilk fucking rich and to maintain control over we the people.

[Seer]

"To make Wall St., the bankers, and their ilk fucking rich and to maintain control over we the people."

So, introducing chaos is a sure way to maintain a stable position?  I'm not disagreeing what people's motives MIGHT be, and I am quite aware of distracting the masses (H.L. Mencken's Hobgobblins), but I highly doubt this isn't anything other than a last ditch effort, rather than some brilliant sure-fire strategy.

[PierreLegrand]

Hey Mr. Smartypants maybe you are wrong about oil?

In today’s issue of the journal Nature, astronomers report that organic compounds of unexpected complexity exist throughout the Universe. The results suggest that complex organic compounds are not the sole domain of life but can be made naturally by stars.

Prof. Sun Kwok and Dr. Yong Zhang of the University of Hong Kong show that an organic substance commonly found throughout the Universe contains a mixture of aromatic (ring-like) and aliphatic (chain-like) components. The compounds are so complex that their chemical structures resemble those of coal and petroleum. Since coal and oil are remnants of ancient life, this type of organic matter was thought to arise only from living organisms. The team’s discovery suggests that complex organic compounds can be synthesized in space even when no life forms are present.

The researchers investigated an unsolved phenomenon: a set of infrared emissions detected in stars, interstellar space, and galaxies. These spectral signatures are known as “Unidentified Infrared Emission features”. For over two decades, the most commonly accepted theory on the origin of these signatures has been that they come from simple organic molecules made of carbon and hydrogen atoms, called polycyclic aromatic hydrocarbon (PAH) molecules. From observations taken by the Infrared Space Observatory and the Spitzer Space Telescope, Kwok and Zhang showed that the astronomical spectra have features that cannot be explained by PAH molecules. Instead, the team proposes that the substances generating these infrared emissions have chemical structures that are much more complex. By analyzing spectra of star dust formed in exploding stars called novae, they show that stars are making these complex organic compounds on extremely short time scales of weeks.

Not only are stars producing this complex organic matter, they are also ejecting it into the general interstellar space, the region between stars. The work supports an earlier idea proposed by Kwok that old stars are molecular factories capable of manufacturing organic compounds. “Our work has shown that stars have no problem making complex organic compounds under near-vacuum conditions,” says Kwok. “Theoretically, this is impossible, but observationally we can see it happening.”

Most interestingly, this organic star dust is similar in structure to complex organic compounds found in meteorites. Since meteorites are remnants of the early Solar System, the findings raise the possibility that stars enriched the early Solar System with organic compounds. The early Earth was subjected to severe bombardments by comets and asteroids, which potentially could have carried organic star dust. Whether these delivered organic compounds played any role in the development of life on Earth remains an open question.

[Flakmeister]

This is all very interesting but I fail to see its relevancy.... Unless you are saying that the earths oil came from outer space...

Could you address my post about the production rates? If not, cease and desist defending a discredited hypothsis on the origin of oil.

[Seer]

It would be cheaper, and it would quiet down our nest here if all you energy-seekers would send yourselves to somewhere where there's a near infinite amount of energy- might I suggest the Sun?

Meanwhile, back on earth... humans require numerous other resources.  Food, Shelter and Water.  Hm... don't see "energy" there, nor "transportation;" seems that these are already accounted for: Sun; feet.

[JOYFUL]

Excellent summary, thank you.

In hindsight, the collapse of the Amerikan Empire will likely be viewed not as of primarily economic origin, but rather, the consequence of a failure to engage the world outside it's own self imposed blinkers.  The scientific caste charged with fertilizing the fields of technological advancement via new ideas has totally abandoned that responsibility (outside of the creation of new gizmos for people to distract themselves with); the consequences of which will be dramatic. That the Empire has managed to impose the same blinkers onto most of the rest of the world in no way makes it less insular or barren of ideas. Just harder to see the obvious.

This story about  abiotic oil theory is a case in point -hubris and laziness(plus declining educational standards) set the stage for Amerikas' decline into third world status -by embargoing fresh ideas.

Equally, in an era when the medical establishment has been more interested in creating new infectious diseases than in creating cures for those which exist, the onslaught of anti-biotic resistance has the makings of a new plague - logical minds would have set to researching and developing the remarkable phage medical system which utilizes virus as a tool to destroy malignant forms of bacteria (with great success!) But sadly, as that therapy was developed behind the 'Iron Curtain' it is not available for use where most needed. 

The declining efficiency of anti-biotics, the declining stocks of 'biotic' oil -a double whammy of a threat tsunami to a society whose ability to pay for it's medical care system has already eroded past recovery.

Weird, this strange collusion of interest between greens and the corporate kleptocrats who have used their energy monopolies to keep humanity from advancing past it's self imposed limitations.

[Bring the Gold]

It's obvious to anyone with two neuron's to rub together, let alone someone gifted with more than two, that we are at or near peaks for many resources from silver to oil to indium even credit/debt seems to be at or near a peak.

What isn't peaking? Bullshit, we've clearly been running a steady surplus of that since Adam bit that fucking apple (metaphorically speaking) with no end in sight.

[trav7777]

are you fucking stupid?

what the FUCK do RESERVES have to do with PRODUCTION?  Answer: NOTHING.

ALL WELLS AND FIELDS HIT PEAK THEN DECLINE.  There IS NO ARGUMENT ABOUT THIS.  100% of them have done so.

It does not MATTER if oil is biotic or abiotic or comes straight out of your asshole!  I am honestly SICK of reading the crap from you idiots who think that the amount of RESERVES is somehow material to an issue of the PRODUCTION RATE of those reserves.

[Bicycle Repairman]

Trav, tell me about the zirconium cladding fairy tale again.

[trav7777]

ok, zirconium was cladding your idiocy which corroded it

[Bicycle Repairman]

Well that certainly is a fairy tale.  It's a new one, though.

[Flakmeister]

Almost as good as the fairy tale that you believe, 4000 years old eh, or was it 6000?

[Bicycle Repairman]

What are you burbling on about now, Rumpelstilkien?

[Flakmeister]

Ahh.. Grima... you should have been a jester for some right wing demagogue.

Never did answer the question about the age of the sedimentary source rock and how long it would take to form?

[green888]

deleted

[rosex229]

Anyone with proper education knows that its important to have a diverse array of sources to reduce confirmation bias.

I don't look at zerohedge to confirm what I believe, but to investigate what the truest reality is. The same reason I will go to chrismartenson.com, oilprice.com, theoildrum.com, I'll read the IEAs 2011 WEO, watch CNN, CNBC, MSNBC, and FOX, while also listening to Daniel Yergin. Once you take in information from ALL sources (no matter the slant or bias) only then can you come to a reasonable estimate of what the truth is.

[John Law Lives]

Who are you lecturing?

I have no beef with The Oil Drum as a website. However, I do not want to see it promoted here. The Oil Drum does not appear to promote ZH on its site (correct me if I am mistaken). That was my original point.

[Seer]

If this bothers you so much then why don't you fucking take over this site (looks like you're trying to), or, perhaps, stop stepping into these threads?

You're starting to become annoying with your insistence on what people can or cannot post here.

[John Law Lives]

Seer,

Jaded?

I did not say ONE WORD about the merits of the article.
I did not say ONE WORD about the merits of 'The Oil Drum'.
I did not say ONE WORD about the merits of "Peak Oil".

I read the article. I made the comment that the article is of a nature that seems like a good fit for The Oil Drum. I said that because I have followed The Oil Drum website for 6+ years, and I am quite familiar with its content. I invested heavily in the energy industry from the 1980s until 2008, and I looked to websites like that one (among many others) for information re. the energy industry. However, if ZH wants to publish more articles re. Peak Oil, they are certainly free to do so. They are free to disregard my input on the subject, and ZH participants are free to disregard your input. This is an open forum.

Have a nice day!

[Seer]

Fucking Internet Police!

Hey, is that your ass on fire?

[John Law Lives]

Only when I light a fart.

ZH is not an energy website. Let the theorists debate Peak Oil somewhere else.

[Seer]

Then quit ADDING to the discussion.  You're adding energy to something that you don't think should exist.  Brilliant way to eliminate it.

Take it up with Tyler and quit whining at the rest of us.

[John Law Lives]

"Then quit ADDING to the discussion. You're adding energy to something that you don't think should exist. Brilliant way to eliminate it."

You are delusional. Aside from that, this is an open forum. Unless you are an administrator of this website, you get no more say re. how discussions are conducted on ZH than any other ZH participant.

[Lednbrass]

So...its an open forum, but they should not run guest articles on subjects you deem somehow improper because they do not meet your entirely personal idea of what you feel this forum should be about.

Brilliant, just brilliant.

Personally I, glad they cover a range of topics here, and suspect (and hope) that you will be ignored.

[John Law Lives]

"So...its an open forum..."

Yes, it is.  I am glad to learn that you agree.  People are free to express opinions here.

 "...but they should not run guest articles on subjects you deem somehow improper because they do not meet your entirely personal idea of what you feel this forum should be about."

I offered my OPINION that the aforementioned article was of a nature that seems suited for The Oil Drum (or sites akin to that one).  As you said, this is an open forum, and people are free to express opinions here.

"Brilliant, just brilliant."

It was my opinion, and I do not share your opinion.  As you said, this is an open forum, and people are free to express opinions here.

"Personally I, glad they cover a range of topics here, and suspect (and hope) that you will be ignored."

They are free to ignore me.  They are free to ignore you.  I am free to ignore you.  As you said, this is an open forum, and people are free to express opinions here.

Have a good day.

[Andrew G]

Oil production charts are pretty meaningless without showing the corresponding energy efficiency, i.e. how much energy it's used for extraction (as well as for energy used for transportation, refining, to build the tools to extract...) For example, from what I read, bio-fuels are essentially total crap - their total energy input is higher than output.

[John Law Lives]

This sort of article belongs on 'The Oil Drum' and not ZH.

[Taint Boil]

I disagree; if you stop the flow of oil you stop the world. If something can stop the world it would be reasonable to think one would run across it here at Zero Hedge – No?

[John Law Lives]

You are free to disagree.  That is a great feature of an open forum like this.

[WonderDawg]

I'm sure the Tylers will consider your feelings before posting any other articles. "Will John Law Lives approve?" they'll ask themselves. I bet they place a high value on your feedback about what they should and should not put on THEIR site.

[Bicycle Repairman]

John Law is entitled to his opinion and the Tylers do screen material for this blog.  You see any celebutard stuff here?

That being said, TOD blows.

[trav7777]

yes because morons like you are incapable of understanding most of what's on that site.  You have to have a fair bit of intelligence to get geology and energy issues.

[rosex229]

This is what worries me about some of the individuals who frequent ZH (actually worries me about humanity in general since I consider ALL ZHers far more educated than the masses). * negative reviews because you suggested that it may be important to expand the scope of sources one investigates.

Many people here chastise the MSM and the sheeple, but then give a negative review when someone says something that disagrees with their narrow view of reality. Can you say double standard?

[John Law Lives]

+1

Excellent point, rosex229.

[Idiot Savant]

What's your beef with TOD?? There's a lot of highly intelligent, educated and experienced people, from many different fields, that contribute to the site. If you're going to make a blanket statement like that, you ought to quantify it with some specifics.

[Bicycle Repairman]

You can start with the origin of oil being dead dinosaurs.

[Flakmeister]

Why don't you go to the drum and explain that to them....

You will be laughed at.... They are a pretty polite bunch though..

[Bicycle Repairman]

Why don't you go to the drum and stay there?  You're getting laughed at here.

[rosex229]

I'm assuming thats a /sarc statement since oil is not composed of dead dinosaurs, but primarily the accumulation of plankton over millions of years.

[Bicycle Repairman]

Let me know how plankton got 10,000 feet into the earth and how they ended up on Titan.

[rosex229]

The plankton were subducted by means of plate tectonics (its the same reason we have a Pacfic Ring of Fire and mountain ranges). 

Titan has hydrocarbons because the production of hydrocarbons is a natural process. Just as the formation of life is a natural process. The difference is in the amount of abiotic oil that exists on earth compared to the amount of biotic oil that exists.

We use biotic oil which is evidenced by the geologic composition of the oil fields we produce from (sedimentary rock not igneous rock).

[Bicycle Repairman]

10K to 20K below the earth's surface.  Nope.  Not even with plate tectonics.  The earth moving around does involve a lot of energy, however.

Has anyone made oil from plankton in a lab?

[rosex229]

It seems quite likely that neither of us will relent, so I will say instead that in the short-term the global financial system is hanging by a thin thread, and anyone with good enough eye sight an see the thread won't hold much longer.

Anyone agree?

[Flakmeister]

How old are petroleum source rocks?

If you deposit 0.1 mm per year of sediment, how long does it take to get a 100 ft pay zone?

Do the calculation....

I've asked you before and you and either too lazy intellectually or incapable.

Oh, yea, I forgot, you believe the earth is 4000 years old...

[PierreLegrand]

You sure? Then explain how those cute little plankton got into space?

For the longest time folks have been pointing out that we can find methane in other places around the solar system…the peak oil lobby simply claimed that yea yea sure we can find simple hydrocarbons in space but we arent’ ever gonna find complex hydrocarbons…cause for those we need Dino the dinosaur or Pauline Protozoa. Well apparently Dino and Pauline get around a bit more than expected…

In today’s issue of the journal Nature, astronomers report that organic compounds of unexpected complexity exist throughout the Universe. The results suggest that complex organic compounds are not the sole domain of life but can be made naturally by stars.

Prof. Sun Kwok and Dr. Yong Zhang of the University of Hong Kong show that an organic substance commonly found throughout the Universe contains a mixture of aromatic (ring-like) and aliphatic (chain-like) components. The compounds are so complex that their chemical structures resemble those of coal and petroleum. Since coal and oil are remnants of ancient life, this type of organic matter was thought to arise only from living organisms. The team’s discovery suggests that complex organic compounds can be synthesized in space even when no life forms are present.

The researchers investigated an unsolved phenomenon: a set of infrared emissions detected in stars, interstellar space, and galaxies. These spectral signatures are known as “Unidentified Infrared Emission features”. For over two decades, the most commonly accepted theory on the origin of these signatures has been that they come from simple organic molecules made of carbon and hydrogen atoms, called polycyclic aromatic hydrocarbon (PAH) molecules. From observations taken by the Infrared Space Observatory and the Spitzer Space Telescope, Kwok and Zhang showed that the astronomical spectra have features that cannot be explained by PAH molecules. Instead, the team proposes that the substances generating these infrared emissions have chemical structures that are much more complex. By analyzing spectra of star dust formed in exploding stars called novae, they show that stars are making these complex organic compounds on extremely short time scales of weeks.

Not only are stars producing this complex organic matter, they are also ejecting it into the general interstellar space, the region between stars. The work supports an earlier idea proposed by Kwok that old stars are molecular factories capable of manufacturing organic compounds. “Our work has shown that stars have no problem making complex organic compounds under near-vacuum conditions,” says Kwok. “Theoretically, this is impossible, but observationally we can see it happening.”

Most interestingly, this organic star dust is similar in structure to complex organic compounds found in meteorites. Since meteorites are remnants of the early Solar System, the findings raise the possibility that stars enriched the early Solar System with organic compounds. The early Earth was subjected to severe bombardments by comets and asteroids, which potentially could have carried organic star dust. Whether these delivered organic compounds played any role in the development of life on Earth remains an open question.

[PierreLegrand]

Oh fuck I guess that is the end of that peak oil bullshit...find another crisis to run around and scream the world is ending over.

[trav7777]

GFD you are stupid.  All of you deniers are.

You are claiming that production of oil can grow FOREVER.  do you get that?

I mean, if you were intelligent enough to take a step back and examine the implications of your assertions, you would immediately realize what fuckin idiots you all are.

[Seer]

Settle down, Trav.  The entire aim of these folks is to waste our energy so that they can keep control of the status quo.

Careful about the use of "forever."  Oil CAN "grow" for a LONG time.  The question, however, is how long can humans can "exploit" it.  NOTE: I'm pretty sure that the "growth" isn't occurring at a pace that's greater than humans can extract it, otherwise we'd get blown off the planet as it exploded under the pressure of increasing oil reserves.

[John Law Lives]

Thanks for your input.  It's nice to know that a site I respect so much actually values my opinion... even if you do not.

Have a nice day!

[Seer]

Oh, well thank you Mr. Internet Police!

There's a difference between agreeing and disagreeing and of being a troll.

[samsara]

Exactly,   Lets just continue the financial discussion that are predicated on a real economy that is backdropped by a  fundimental requirement of infinite growth and perfect product replacement in the case of scarity.

These peak oil nuts that keep bringing up Geology and the first few laws of thermodynamics have no place here where we discuss 'Printing' value and relative worth.

Brahahahahahaha

(Falling back into a painful reality in 10,9,8,7,6,5........)

[PierreLegrand]

You know before you let that smug look get stuck on your silly ass face you might want to consider that you are wrong about oil being limited...

[trav7777]

you stupid fuck.

Reserves might be unlimited but PRODUCTION RATE has peaked.

Go fuck your abiotic unlimited oil.

[Seer]

Trav, abiotic oil IS possible.  The ISSUE is rate.  Clearly some morons believe that it's happening at such a high rate that we could NEVER use it all up.  As a matter of fact, it's being generated at such a rate that the entire mass of the earth will, at some point, be comprised of NOTHING but abiotic oil!

I'm sure that the retort from the deniers of peak will be that it's all cycled back.  Yeah, like humans can speed up geologic activities w/o any consequences. But, if it means letting Darwin educate these folks, once and for all, then what the hell, let's just go for It (whatever It really means)!

NOTE: Since the planet's mass is limited ANYTHING ON IT is limited, this includes resources (fucking duh).

[John Law Lives]

There is a forum for a community of people to discuss Peak Oil.  It is called The Oil Drum.

[Seer]

Then I suggest that you go there and actually read up before coming here and TRYING to play with the big boys.

Now then, run along and go put out that fire on your ass.

[John Law Lives]

"Then I suggest that you go there and actually read up before coming here and TRYING to play with the big boys."

You are delusional. I have known about The Oil Drum since it was created in 2005. The POINT of my original comment is that The Oil Drum serves as a forum SPECIFICALLY to discuss developments in the energy industry. ZH was not created for that specific purpose. If people want to debate "Peak Oil", let them do so on The Oil Drum or another forum dedicated to the energy industry. Gee, does that make sense?

http://en.wikipedia.org/wiki/The_Oil_Drum

As an FYI, troglodyte, I never said ONE WORD re. the merits of Peak Oil on this thread.

[Seer]

Just fucking go away, troll!

And wipe that fire off your ass!

[John Law Lives]

This is not your playground. You are not the website administrator, and I am not a troll. You, however, appear to be jaded.

[Caviar Emptor]

Data keeps rolling in lately confirming peak oil. Crude production costs are rising. Gasoline prices in several US arkets including CA hit an all time peak for October this year, surpassing 08. And demand actually fell off.  That's biflation

[Rainman]

....let's just keep it simple. The fix was/is/will be in forever with oil !

[trav7777]

Dude, you need to let go of your idiotic delusions.

You morons are sitting here asserting that oil production can rise exponentially FOREVER.  And you don't even REALIZE THAT.

Please, follow my previous suggestion and STFU

[rosex229]

Trav I feel and have felt your frustration for many years now. Its as simple as the second law of thermodynamics and yet somehow friends, family, co-workers, even some ZHers can't comprehend it.

[tmosley]

Second law of thermodynamics is germaine to conversion of energy sources in a closed system.  Of course, ours is not a particularly closed system, as we live on top of a heaving mass of fissile power, underneath a massive sourse of fusile power.

Only a fool looks at the way a system works and thinks it can't work any other way.

[Seer]

"Of course, ours is not a particularly closed system"

"Particularly."  So, how much is necessary above that "closed system"  level?

That something is POSSIBLE doesn't mean that it should be done, nor does it even mean that it's PROBABLE.

[FeralSerf]

If one assumes that oil is abiotic, it does not necessarily follow that "oil production can rise exponentially FOREVER".

Nothing can rise exponentially forever.

[trav7777]

By this I can reason that an oil peak is inevitable.  You yourself are saying that it is.

Anyone who CONCEDES that nothing can rise exponentially forever is saying they believe in peak oil.  Anyone who denies peak oil is claiming the opposite.

[FeralSerf]

It's an economic issue.  As oil consumption rises the cost of the stream increases, which limits the increase of consumption.  Oil has been too cheap.  This is changing.

[Seer]

Quick, better hit that back door because they're closing in on you!

Drop the weed and face  the music.  Even IF there's some united "fix" on, it still doesn't change the fact that you, I, and everyone else on here (except those working for TPTB [trolls]) won't have abundant access to it.  Missed in this is the notion of what individuals will do about decreasing per-capita energy supplies.

If there's a FIX it's that we've been operating under a grow-and-die paradigm since day one.  That the end result is population collapse shouldn't be a surprise.  Who knows, maybe we're just something's science project (or, future food?), and that the big hand from the sky (God or Technology) will come down and fix everything?

[navy62802]

Geek style note ...

The spelled-out version of the abbreviation should have been printed before the parenthetical. So, it should have been "US production of crude oil peaked in 1970 at 9.637 million barrels per day (mbpd)" instead of "US production of crude oil peaked in 1970 at 9.637 mbpd (million barrels per day)."

[Grinder74]

Eh, that's how we write it in Austrian.  But since you're not as smart as Obama you wouldn't know that.

[Flakmeister]

Tough crowd.... Sure you weren't at my thesis defence?

[RobotTrader]

UNG hit new record lows again today.

We are swimming in natural gas, even after most government fleets and buses in in Los Angeles are now running on CNG these days.

[somethingisrotten]

Who give a flying rip about UNG, NFLX, FSLR, and all of the other crap that keeps your motor mouth running every second.

[John Law Lives]

UNG is one of the worst ETFs ever created (imo).  UNG's track record is deplorable (unless you have been consistently short since June of 2008).

[FeralSerf]

It's been very hard to borrow shares to short in my experience.  Methinks the back room boyz borrow them all.

[Taint Boil]

Note: UNG is not designed to track the price of natural gas...

[trav7777]

yep...and the massive INCREASE in consumption of NG means that we don't have the "100s of years" remaining at consumption levels that were CURRENT before the massive increase!

[Seer]

Don't ya know that you can make your beverage last LONGER by drinking it FASTER?

Can't wait to be the scapegoat for these morons when their world doesn't work out for them.  Perhaps we should just think positive and click our heels together?

[navy62802]

Oil will eventually run out, and that is a scary thought.

When I look forward 100, 300 or 1000 years, I envision a society that has named our time, our period of history the Age of Oil. Much as we have labeled past civilizations the Bronze Age or the Stone Age.

I only hope that I am no longer alive to witness the oil running out, for it will be a calamitous time full of terrific fear and death.

[kaiserhoff]

You won't look so pretty a hundred years from now either;)

[LongBallsShortBrains]

Long horses

And horseshoes

And hay

[navy62802]

... and hay

I'll drink to that.

[Bicycle Repairman]

Hay is now a pollutant, so you cowboys had better understand you aren't escaping the EPA.

[Seer]

Everything in excess is a pollutant.  That's really the definition of "pollutant."  But, yes, it's getting a bit absurd.

Funny, however, is that autos were orginally touted as being environmentally friendly because they displaced all the horse poop.  What goes around...

[blu]

Nice thought experiment, but not the Age of Oil.

The Age of Fail.

[TheMerryPrankster]

The Age of Fools.

[tmosley]

You don't want to witness the Nuclear Age come into its own after the Western Ponzi collapses?

Hell, I might have a micro reactor on my property in a few short years: http://en.wikipedia.org/wiki/Toshiba_4S

[Bicycle Repairman]

Sweet.  Then everyone can have the bomb.

[trav7777]

one of the biggest bleaters about the dangers of nukeyaler after Fukushima and you're doing a total flipflop this soon?  LOL

[tmosley]

What are you talking about?

Make up more shit.  I love nuclear, and always have.  I DON'T like government intervention in nuclear energy production that forces maintenence of an unsustainable status quo in the form of forever polishing the turd that is 50+ year old reactor designs.  I have wanted to own a micro nuclear since I first read about them in 2008.

[trav7777]

whose responsibility is the waste?

[tmosley]

Who-ever wants the energy still contained therein.

We don't have breeder reactors on a widespread basis because of government policy.  That is the only thing stopping it.

[Seer]

"forces maintenence of an unsustainable status quo in the form of forever polishing the turd that is 50+ year old reactor designs."

The depreciation schedule could be, what, 30 years?

[navy62802]

You and most likely the people to your left and right will not survive the end of oil, let alone live to see the birth of the Nuclear Age. The transition away from oil to anything else will be extraordinarily difficult if not impossible. Even if humans successfully migrate from oil to some other energy source, we will lose billions of people in the process. Ironically, I think those who live in poverty right now (namely in Africa and Asia) will fare the best through such a crisis, as they do not have such an insatiable dependence on oil.

[tmosley]

Note that I did not say the "birth of the nuclear age", because it has already been born.  We just need governments to stop choking it in the crib.

Thorium will give us plenty of time to develop a much less exhaustable form of energy.

[Seer]

Massive debt AND rolling out a new energy source are possible, how?

"Thorium will give us plenty of time to develop a much less exhaustable form of energy."

Always the "next thing," eh?

And then there's the issue of all that stuff that we rely on that's made of plastic...

[FeralSerf]

If you get one, there will be those that wonder if you've got a (large) pot plantation with that much power use.

[myne]

Liquid Fuelled Thorium Reactor.

Its day is coming.

[FeralSerf]

Big problem:  TPTB will have problems controlling the fuel cycle.  I think, besides the obvious "need" for plutonium bombs, that's the reason they haven't been built so far.

[mynhair]

I'm starting a business selling Flintstone feet.

http://www.hark.com/clips/lqdlctdfxw-yabba-dabba-do

[blunderdog]

If we just skip the charts and tables and research and numbers, there'll be plenty enough of oil for everyone forever.

[blu]

+1 FTW

[peekcrackers]

slippery when wet ! Lube her up!

[blu]

You'll know we've hit peak-oil when the industrialized nations are invading under-developed oil-producers on flimsy pretexts, like unseating tyrannical regimes or something equally out of character.

When that happens, wake me up. Until then, drill baby drill!

Okay knuckleheads, do I really need a sarc flag? Huh? Is anybody around here paying any attention at all?

[navy62802]

Ah, when oil runs out ... make up your own zombie apocalypse thriller. Because that will become reality. Imagine a barbaric society killing itself for the essentials of life. Because that's what will happen. When oil runs out, the human population will be reduced by 75% ... that's the effect oil has had on our civilization.

[blu]

Doesn't even have to run out actually. Just if it becomes expensive, or strategic, or we have other uses for it than creating surplus government cheese to give to the poor.

And now I think about it ... we're already there.

[Seer]

And, the magic word is "expensive."  Cost is relative (as the USD wobbles all over the place, and as people lose incomes).

Economies of scale in reverse.  Gonna be a bitch...

[alex_g]

Net oil imports aren't 11.5 Mbpd, they are 8.8Mbpd, you never mention that we EXPORT over 2.6 Mbpd of distillates.  Most of the #'s stated in this "article" are factually wrong.  Very unprofessional...

[in4mayshun]

Not to mention I didn't see him address ANWAR and other reserves that are not allowed to be touched...for now.

[trav7777]

lol...ANWR?  Might wanna brush up on the USGS numbers from the great northern hope

[hardcleareye]

Sigh....  good point Trav, more victims of US Media propaganda, I think that was one of the points of the article! lol

[FeralSerf]

Or:

http://thecommonconservative.com/?p=63

[CrashisOptimistic]

Distillates are not oil.  They are refined product.  No reason to net them against something they are not.

[alex_g]

Reading comprehension would help...If a country imports raw materials (oil) and then exports refined product (distillates) then the volume is netted out of the import (see China).  It's not even math...

[hardcleareye]

Setting this issue aside. does the "shape" of the chart look substantially different for "Net Consumption"?  Does it change the basic point of the article?  I must say that the folks at the oil drum have discussed this issue of "oil data definations" adnauseum, it is a "fine point" and in the correct context warrents discussion but it doesn't really change the big picture or conclusions of the above article. 

You're parsing minutia.

[Flakmeister]

Here is a chart

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WTTNTUS2&f=W

Depends on when the data is quoted for... I have to check..

[alex_g]

http://www.eia.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_w.htm

Better data from the same site.

http://www.eia.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_4.htm

4 week ave of imports is static, 4 week ave of net imports is falling.  7,872 last 4 week average.  We haven't seen numbers like this since the mid '90s...

[hardcleareye]

In all fairness, he isn't saying it's Net Oil Imports, just consumption... 

[El Viejo]

Fracking = Trading Water for Oil

[gwar5]

Must be what it was like when we hit peak whale blubber...

The Manswer:  Thorium reactors. They've been around for 40 years and can now be supercharged with proton accelerators and other improvements.  Thorium is way more plentiful than uranium and doesn' have to be refined. One ton has as much energy as 200 tons of uranium, and 3.2 million tons of coal. We can even build small scale ones cost effectively to run towns. No danger of radiaion and can't make bombs. What is not to like?  Once you have cheap energy you can run electric cars, and/or use the energy to produce hydrogen from water and run vehicles. 

[FeralSerf]

<<What is not to like?>>

How do The Flockowners keep The Sheep corralled if they don't control their energy resources?  Access to energy is a life or death issue -- good for keeping sheep under control.

[RobotTrader]

Peak Oil may go down as one of the greatest investment theme failures of all time.

Just like Y2K

[blu]

Y2K was a technical problem caused by coding conventions that didn't factor in business decisions to run COBOL applications beyond a certain date. Human error, in other words.

Peak oil is the end of growth (economic and otherwise) beyond our physical means as a species.

Only one of those is a hard stop.

[tmosley]

Yes, because since the dawn of time, oil has been the one and only source of energy for man.  Now that we are out, we are all doomed...DOOMED I SAY!

[hedgeless_horseman]

Have you ever considered the current population and the calories it takes to support it?  

[FeralSerf]

It's just an engineering problem!

[hardcleareye]

Yeah, that's what Tesla said about trying to send electrical power through the atomsphere............

[trav7777]

gonna be hard to support 7B people without it, idiot

[CrashisOptimistic]

It's not investment relevant.  Low supply crushes the economy.  Price decline from that is a happenstance result and will reverse if an economy attempts to increase oil consumption, to be crushed again on a downward sloping sawtooth.

It's not about trading.  It's about dying.

[hardcleareye]

Robo, I think I need to give your Mom a call and tell her your trolling again....

[bankonzhongguo]

Maybe we should attack Iran and close Hormuz to tanker traffic. 

Why not send oil to $300 for the next 120 days.

Why not?

Everything else is going crazy.

As my grandmother used to say; "Let the meshugana speak."

If the soft underbelly of the US is imported energy - even though we get most of our oil from Canada and Mexico and heavy industry is fading away, and the best way to accelerate/protect all the global finance schemes is war, then the best way to foment a wider Sunni-Shia conflict and save Israel and herald an anti-Iranian nuke crusade is to turn the gulf into a bath tub of burning tanker hulks that requires the US and British to keelhaul the Saudi leadership and seize the whole peninsula.  I think Cheney had the plan to paint up PT-109 as a Persian gunboat and sink some fat tanker. Maybe a Predator can melt the TSS radars on Mussandam and we can blame Quds with their crafty radio controlled Heath Kit drones. Presto!  30% of global oil is instantly shut down for non-delivery.  The oil profiteers get their oil, the US gets more war, Israel gets "saved" until Egypt wakes up and a 20 year Persian conflict gets anointed - no more pesky faceless ninja jihadists. Its all downtown Tehran  Oh yes.  Russia and China get a wholesale market into Iran.

That was easy.

What's next?

Alien invasion?

Ok.  So they want our women, right?  Here is what we do.  Everyone loves Oprah, but they don't all like Rosie ...

[ian807]

Peak oil is about energy return and price. When oil gets expensive enough (It was $12 a barrel in 1997 and it's about $100 a barrel today), and the energy return gets low enough, it's no longer worth using as a fuel source, and so we lose about 1/3 of the world's energy input.

It's not that simple, of course. The problem is the transition. The transportation and food production sectors are completely dependent on this one source of energy and raw materials for fertilizer. There are substitutes, but no quick, scalable substitutes. The problems will be to hold together the world's supply chains while we get it together to use electrically driven systems more universally and work out fertilizer substitutes at a scale that matters. We may fail at this, in which case, a lot of people starve. If we succeed, perhaps only a few will.

[nmewn]

...

[FeralSerf]

You need to stop thinking in $/barrel and start thinking in oz (of gold)/barrel.

[Yellowhoard]

Half of the homes in America have access to natural gas.

Honda has a car that has a range of 400 miles on NG.

The government, which stands in the way of this natural solution, refuses to allow this.

[tmosley]

God, just don't get into an accident.

I think I would rather ride the space shuttle to work.

[alex_g]

Total myth.  Bring the proof.  All bullshit.

[tmosley]

Gasoline powered car crashes, gas spills on the ground, might catch on fire and kill the occupants, given the correct air, gas mixture is exposed to a spark.

Natgas powered car gets into an accident, highly pressurized gas rapidly decompresses.  If there is a tiny spark or ANY type during that decomression--BOOM.

Much better off with zinc-air batteries. 

[FeralSerf]

It's a good thing the authorities don't allow natural gas to be used in homes for cooking and heating and permit it to be piped practically everywhere under high pressure where someone could dig through the pipe.

Oh wait. . .

[AGuy]

Not to forget the Illusion of abundant Natural Gas in North America.

Prior to widespread fracking (tight NG in shale formations). the Price of NG was headed for the $12-$16 MMBTU. The media, DOE and Frack drillers have hyped up and spun the recoverable NG from Shale formations. Currently they are drill the few economical recoverable regions (and economic recoverable is marginal). Frack drilling is advertized as very large regions that have shale formations contain tight gas. But that's not really true since much of it is simply too expensive to drill, the density of the NG is too low, or the permeability of the shale is too low to economically recover. Drillers will alwasy target the low-hanging fruit first, so for the short time being, we have artifically cheap NG.

In a few years Fracking will come to end as just another bubble and die. Already e-mails are leaking out that fracking isn't profitable, but drillers are looking for suckers^H^H^H^H investors to hand over these near worthless assests. As long as they can find investors to offload to, fracking will continue. This might go on for years, considering that stock bubbles take 5 to 7 years., and 4 to 8 for asset bubbles (aka real estate) to pop.

In a few years time when the fracking bubble finally pops and the price of NG rises back up its going to be a big hit to the economy:

1. Higher heating costs ( approximately 77 Million homes use NG for heating). Most commerical and Industrial buildings also rely on NG

2. Oil sands production in North America depends on cheap NG. when the price of NG rises it will be unprofitable or nearly unprofitable. They use NG to to extract tars sands oil as well as extract the Hydrogen  from NG to convert the tar, very heavily oil into distillates (Gasoline, Diesel, etc)

3. 25% of US electricity is produced from NG. NG is very useful for electricity production because large Gas fired turbines can bee powered in less than an hour, where as Coal, Nuclear can take more than a day to bring online. Gas turbines also don't need much water to operate compared to nuclear and coal which use vast amounts of water for steam production and cooling.

4. Of course NG is heavly uses in industrial manufacturing and agraculture (fertializer, pesticides, and grain drying).