Thursday, September 09, 2010

The Peak Oil Belief: Unfalsifiable, not Prone to Logic

Until we explore the entire planet as carefully as we did Oklahoma and Texas, our assessment of global oil reserves will have plenty of room for surprises. _Vaclav Smil

Repent, Sinners, The End is Near!


Deeply held beliefs go beyond evidence and logic. Thus they tend to be unfalsifiable, invulnerable to demonstrable facts or reason.

Take belief in Peak Oil Doom. There are several blurred and shifting definitions of "Peak Oil", but none of them stand up to sustained examination. With any belief -- such as belief in a deity -- as long as one is not pressed for a rigorous definition of exactly what it is one believes in, there is little point to the argument. So what, exactly is this "Peak Oil" that so many people either do or do not "believe in?" Is it:
  1. The point at which half the world's oil supply has been extracted and consumed?
  2. The point at which oil production is at its historically highest point?
  3. The point at which the cost of oil production can only go up?
  4. The point where it costs as much to produce the oil as the oil is worth?
  5. The point where oil consumption outruns oil production?
  6. The point at which old oil fields are depleted faster than new oil field can be found to replace them?
  7. None of the above
  8. All of the above (including none of the above)
You might point out to the peak oil religionist that "authorities" have been declaring "Peak Oil" since the 1800s or before. Geologists, oil executives, government leaders, spy agencies, military organisations -- a wide array of authorities -- have declared peak oil every few years over the past 140 years or so. There is nothing new about this belief. But every new generation of believers is certain that it is living in "the last days of oil." Their belief is strong -- and unfalsifiable.

You can never really know whether what you have is "true peak oil" or "fool's peak oil" except perhaps in hindsight, and even then you may not live long enough to ever know the truth. Price controls on gasoline, for example, might artificially create supply shortages that last as long as the price controls, but clearly that is only one variety of "political peak oil." It goes away when the price controls are revoked.

Peak Oil believers -- like all religious believers -- rely upon "revealed truth", or argument from authority. Whether a retired geologist, an investment banker, an energy economist, a sleazy con artist, or whatnot -- a believer must have someone in whom he can place his trust. Once a belief is established, it extends tentacles deep beyond ordinary logic into the territory of faith -- which is not subject to reason.

What is the finding and development cost per barrel of oil these days? The figure has varied over the years, going up and down. From 2001:
Thanks to new exploration, drilling, and recovery technology, the worldwide finding and development cost per barrel of oil equivalent (boe) has dramatically declined over the last 20 years, from an average of about $21 in 1979–81 to under $6 in 1997–99 (in 2001 dollars) (9). _EnergyBulletin
A recent Citigroup source says that the finding and development cost in 2010 has gone up to $18 from $14 in 2004. So you see that these costs can fluctuate over time, according to technology and politics. Keep in mind that the Obama dollar is worth less now than it was 30 seconds ago, so all costs in dollars should be standardised.


Another interesting question is the amount of oil that is left in the ground when a well is depleted. As technology improves, we are recovering a higher percentage of the oil -- meaning that we can now often go back to old and "depleted" wells and reap another rich harvest of oil.
At the same time, the recovery rate from world oil fields has increased from about 22% in 1980 to 35% to-day. _Energy Bulletin
By 2030 more than 50 percent of the known oil will be recoverable. Also, by that time the amount of known oil will have grown significantly, and a larger portion of unconventional oils will be commonly produced, bringing the total amount of recoverable reserves to something between 4,500 billion to 5,000 billion barrels of oil. What’s more, a significant part of “new reserves” will not come from new discoveries, but from a new ability to better exploit what we already have. _SciAm
What is the "life index of world reserves?" It is the ratio between proven oil reserves and current production. In other words, about how long can we expect reserves to last? Funny thing about that, the life index of world reserves has been improving -- the opposite of what one might expect in the face of "Peak Oil."
All these factors partly ex-plain why the life-index of world reserves...has constantly improved, passing from 20 years in 1948 to 35 years in 1972 and reaching about 40 years in 2003.

Today, all major sources estimate that proven world oil reserves exceed 1 trillion (10 12 ) barrels, while yearly consumption is about 28 billion barrels (10–13).

Overall, the world retains more than 3 tril-lion barrels of recoverable oil resources (14). _EnergyBulletin
North America has seen about a million exploratory oil wells, whereas the oil rich regions of the Persian Gulf have seen only a thousand or two. [S] The planet has barely been explored or surveyed for hydrocarbons.


What we are looking for here are demonstrable or refutable facts, observations, data. We are not looking for authority figures to put our faith in. That is for religious believers and disciples. The religious faithful argue from revealed authority. The rest of us choose to look at what we can see, touch, and reason with.

For example, the mundane reality that motivates modern oil production has a lot more to do with the development policies of oil dictatorships -- which shut out modern internation oil concerns -- than with how much or how little oil is in the ground.
Critics could note that new oil discov-eries are only replacing one-fourth of what the world consumes every year (fol-lowing a declining trend that began in the mid- 960s), and that increases in re-serves largely derive from upward revi-sions of existing stock. However, the real issue is that neither major producing countries nor publicly traded oil compa-nies are keen to invest money in substan-tial exploration campaigns. The countries richest in oil have minimized their oil in- estments during the last 20 years, main-ly for fear of creating a permanent excess capacity such as that which provoked the crisis in 1986 (when oil prices plummet-ed to below $10/bbl). In fact, countries such as Saudi Arabia or Iraq (which to-gether hold about 35% of the world’s proven reserves of oil) produce petroleum only from a few old fields, although they have discovered but not developed more than 50 new fields each. Moreover, in countries closed to foreign investments, the technologies and techniques used are, in most cases, obsolete.

Nevertheless, international public oil companies have faced two sets of limits to their expan-sion in the last 20 years. The first is inaccessibility to foreign in- estment in the largest and cheap-est reserves—those in the Persian Gulf. Second are the demands of financial markets, which for years have insisted that compa-nies provide unrealistic, short-term financial returns that are in-consistent with the long-term na-ture of oil investments. This has compelled private operators to reject op-portunities that would normally be deemed economically worthwhile. _EnergyBulletin
We would better understand the political undercurrents behind production fluctuations, if we were more aware of them and took them as seriously as they deserve to be taken. If a country lacks the technical expertise to develop an oil field -- or to retrieve as much oil as possible from that field -- production numbers are artificially depressed for political and bureaucratic reasons. The oil is still there, but you would never know this merely by looking at production figures.


Peak oil disciples and believers reap much secondary gain from their faith. An important bonus is the pride of knowing something that other people don't know -- the end is near. It takes something much more potent than mere logic and data to overcome such advantages.

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8 Comments:

Blogger Mobius said...

The same argument that you make for information sources of Peak Oil believers can be made for yours as well. The facts are:

We're not drilling for oil in 10,000 ft. of water because it seems like it would be fun.

We're not in Iraq because of a massive cache of WMD, or Al Queda or links to 9/11.

Saudi Arabia is not drilling offshore because Ghawar production is increasing.

Additional refining capacity is not being built and brought online fast enough to meet forecast growth in future demand

Betting on 50% recovery rates, and rediscovery of capped wells seems a bit ridiculous given the desperation on the part of the oil industry to drill in other riskier areas. If it was as easy as water injection and gas lifting we wouldn't be in 10,000 ft of water.

9:56 AM  
Blogger al fin said...

Yes, brother Mobius, all information sources are imperfect. That is why so many of the brothers talk heap big Peak Oil, but often fail to put their money where their emotions are. Deep down, they understand that living one's beliefs too thoroughly can be the way to abject poverty.

We live in an uncertain world. Unrealistic strength and certainty of beliefs is one way that humans deal with this uncertainty.

Until peak oil advocates learn to get to the point, and understand that a string of non sequiturs does not constitute an argument, there is very little hope for the brothers as a whole, brother.

10:18 AM  
Blogger al fin said...

One of my regular email correspondents suggested that I reply to a few of brother Mobius' points. Fine.

M: We're not drilling for oil in 10,000 ft. of water because it seems like it would be fun.

The Earth is 70% covered by ocean. It makes sense that over the billions of years of oil formation from building sediments of dead microscopic phototrophic sea creatures, that a good portion of productive oil wells would be beneath sea water -- at whatever depth. Look at the cost of discovery and development per barrel to see if these companies are making money. If so, why are you complaining?

M: We're not in Iraq because of a massive cache of WMD, or Al Queda or links to 9/11.

Yes, there does seem to be a strange attraction to the middle east -- at least since the days of Lawrence of Arabia, Napoleon, and Julius Ceasar. No doubt they all had their reasons.

M: Saudi Arabia is not drilling offshore because Ghawar production is increasing.

Shallow water drilling in the Persian Gulf may be easier and cheaper in many ways than drilling in the vast empty quarter, in some locations. What is the cost of locating and development per barrel? Be specific.

M: Additional refining capacity is not being built and brought online fast enough to meet forecast growth in future demand

Nobody wants to refine distillates that no one will buy at a good price. Excess production is death in the oil business whether at the oil well or the refinery.

In the case of the US, the EPA and a horde of other federal and state regulatory agencies also have something to do with whether refineries are built and where.

M: Betting on 50% recovery rates, and rediscovery of capped wells seems a bit ridiculous given the desperation on the part of the oil industry to drill in other riskier areas. If it was as easy as water injection and gas lifting we wouldn't be in 10,000 ft of water.

Perhaps. And betting against 50% recovery rates and new production from old wells seems even more ridiculous given how many times peak oil doomer brothers have been wrong.

You keep referring to 10,000 ft depth of sea water for wells, but the Macondo bore commenced at about 5,000 feet, and the Tupi fields commence at about 6600. If you are rounding up from 5,000 ft to 10,000 ft, you are using different rules of rounding than those I am accustomed to.

Again, you need to get back to cost per barrel of discovery and development rather than talking about "offshore" drilling as if it were an astounding or unheard of endeavour.

12:04 PM  
Blogger FUTILITIST said...

Why is "oil" being mined from the tar sands of Alberta, Canada? This "oil" comes at a very high environmental cost. It also produces a very low energy return on energy invested. Why would we need this "oil" if we are not at or near peak?

Why is there a rush to produce bio-fuels at a low or negative return on energy invested?

Why is there talk of drilling for oil in the arctic ocean if there is plenty of oil left?

Why did the 2008 oil price spike not lead to increased production? Oil at $147.50 should have inspired quite a lot of healthy greed amongst oil producers, yet the only thing that stopped the super-spike was an economic recession. This is very strong EVIDENCE that the world the world past peak oil in 2005. This is not a religious belief. How do you explain this?

Since July of 2008, production hasn't reached 2005 year over year levels. It is just now beginning to creep close. When it reaches those levels in the next couple of months, I predict we will have another big price spike or a really bad economic crash. Or both. This is a TESTABLE HYPOTHESIS, not a religious belief. Dork.

6:44 PM  
Blogger al fin said...

Brother Futilist, I see that you have signed your comment "Dork." Please decide on one designation that you prefer: either Brother Futilist or Brother Dork.

We in the Sacred Brotherhood of Peak Oil Doom do not allow our brothers to retain more than one moniker, even as a nom de plume.

Your arguments, by the way, are not up to Brotherhood standards. If you wish for deeper indoctrination into the Brotherhood, apply for an extended deep programming session with our most experienced mind-benders.

Remember: Futilist or Dork. You can't have both.

9:20 PM  
Blogger al fin said...

Another correspondent has stated that Brother Dork's set of non sequiturs deserves at least a brief reply. Fine.

BD: Why is "oil" being mined from the tar sands of Alberta, Canada?

Bitumens are being mined from Alberta and Saskatchewan because doing so is profitable. Should oil prices drop below $40 a barrel, bitumen mining activity is apt to drop somewhat.

BD: Why is there a rush to produce bio-fuels at a low or negative return on energy invested?
Your question is vague and poorly formed. Biofuels come in a wide variety -- some of which are ready for market and some of which are around a decade or more from profitable marketing. It is the potential for the widespread production of liquid transportation fuels and high value chemicals which drives the bioenergy industry. Of course, carbon hysteria -- climate change fears -- in public policy mandates etc. drives a great deal of the activity as well.

BD: Why is there talk of drilling for oil in the arctic ocean if there is plenty of oil left?

Oil companies will drill for oil wherever there is oil PROVIDED that they are allowed to drill. Russia, Venezuela, and many MENA oil states do not allow international oil companies to drill in their rich fields -- for reasons of state policy and corruption.

BD: Why did the 2008 oil price spike not lead to increased production?

Brother Dork, just how long do you think it takes to gear up a large oil project? In 2008 anyone with a brain understood that the upswing in prices was unsustainable. Any idiot who believed oil would simply keep going up -- any idiot who put his money where his mouth was -- lost his shirt and a great deal more.

BD: Since July of 2008, production hasn't reached 2005 year over year levels. It is just now beginning to creep close. When it reaches those levels in the next couple of months, I predict we will have another big price spike or a really bad economic crash. Or both. This is a TESTABLE HYPOTHESIS, not a religious belief.

Brother Dork, what do you think happens to oil production when demand goes down? Is it supposed to go up?

Brother Dork, I have been reticent to say anything disparaging regarding your name, and whether your arguments may reflect one of the definitions of the word, dork.

And I will continue to be mindful of your sensitivity in that regard. But you truly should consider a deep programming session with one of the top "benders" of the Brotherhood. Costs are actually quite reasonable.

5:23 PM  
Blogger Artep said...

Peak oil is the point of peak production. That point is not predictable because it is dependent upon too many uncertainties: the economy, accidents, weather, driving habits, etc. The peak will only become apparent decades after it happens. So put your straw in that thick shake and suck on it. You'll soon find it getting harder to get what you want.

11:33 AM  
Blogger al fin said...

Certainly if you say so, it must be so, Brother Artep.

But then again, peak production could also be the moment that humans walk away from oil because they have lost their taste for it, or because they have developed something cleaner, cheaper, and more abundant.

Peak production due to peak demand, in other words.

Demand is the crucial part of the equation that too many doomer brothers ignore.

4:04 PM  

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