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Tilting at Windmills

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November 19, 2007
By: Kevin Drum

OIL WOES....The Wall Street Journal reports that a lot of mainstream players in the energy industry are suddenly buying into peak oil theory. But with a twist:

The new adherents — who range from senior Western oil-company executives to current and former officials of the major world exporting countries — don't believe the global oil tank is at the half-empty point. But they share the belief that a global production ceiling is coming for other reasons: restricted access to oil fields, spiraling costs and increasingly complex oil-field geology. This will create a global production plateau, not a peak, they contend, with oil output remaining relatively constant rather than rising or falling.

....On Oct. 31, Christophe de Margerie, the chief executive of French oil company Total SA, jolted attendees at a London conference by openly labeling production forecasts of the International Energy Agency, the sober-minded energy watchdog for industrialized nations, as unrealistic....This is "the view of those who like to speak clearly, honestly, and [are] not just trying to please people," he bluntly declared.

The French executive said many existing oil fields are being depleted at rates that will damage their geologic structures, which will limit future output more than most people allow. What's more, some nations endowed with large untapped pools of oil are generating so much revenue from their current production that they feel they don't need to further develop their fields, thus putting another cap on output.

The Journal reports a growing feeling within the industry that oil production could start to plateau at 100 million barrels per day by about 2012, a projection that seems pretty reasonable to me. My own instinct is that 100 million is sort of a theoretical maximum, and that the real-life plateau will be closer to 95 million or so, but 2012 is still probably a decent judgment for when we'll get there.

A big part of these projections is some guesswork about how fast current oil fields are declining. If they're declining slowly, then we need only a small amount of new exploration to keep total production climbing. If they're declining quickly, then it's almost impossible for new exploration to make up for lost production and produce enough extra to keep total production climbing. On that score, Stuart Staniford has a lengthy post today at The Oil Drum that "looks at how existing oil fields are apparently declining, and finds a trend suggesting those declines are worsening, though the reasons for this are not clear yet."

If you're interested in this stuff, read both pieces. The field production data is sort of hardcore peak oil wonkery, while the Journal focuses on real-life issues like political instability and oil exploration investment that will cause problems whether or not peak oil theory is correct. Unfortunately, they both point in the same direction.

Kevin Drum 1:43 PM Permalink | Trackbacks | Comments (39)

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Reality is at last asserting its ugly face. Denial was not helpful. Last month a German think-tank issued a report concluding that oil production peaked last year. James Howard Kunsler (in his apocolyptic book, The Long Emergency) noted all of this and more; what remains of oil is of lower quality, harder to extract, where people (now) hate us.

Posted by: MaxGowan on November 19, 2007 at 1:56 PM | PERMALINK

I never had the slightest desire to become an expert on oil production dynamics, which is what it seems to me you'd have to be to sort out the conflicting Peak Oil claims. And that's assuming you could get enough reliable data, which is also questionable.

The general notion behind Peak Oil, however, is pretty much inescapable. Oil takes millions of years to form, and we are pumping it out much faster than it is being made, so inevitably we will eventually run low. That alone ought to compel some prudence in managing this finite resource. Ours wouldn't be the first civilization to collapse due to overexploitation of natural resources.

Posted by: jimBOB on November 19, 2007 at 2:00 PM | PERMALINK

Stuart, as always, is spot-on. The WSJ position is as much an attempt to "spin" the Dan Yergin-CERA/Big Oil bullishness on oil.

Posted by: SocraticGadfly on November 19, 2007 at 2:04 PM | PERMALINK

This will create a global production plateau, not a peak, they contend, with oil output remaining relatively constant rather than rising or falling.

The net effect would much the same either way. Demand is going to much greater than production at some point and then the obvious consequences follow.

Posted by: e. nonee moose on November 19, 2007 at 2:13 PM | PERMALINK

Isn’t this a good thing? Decreasing oil consumption may stave off global warming.

Posted by: Joe on November 19, 2007 at 2:14 PM | PERMALINK

Joe, not necessarily. If coal gasification becomes a primary response to Peak Oil, global warming, and general environmental pollution, could be worse.

Westexas, from here in Dallas, had a great comment on Stuart's post:

Regarding the base supply, like a lot of people, I think that we tend to find the big fields first. Peak Oil is really the rise and fall of the big fields. We can make money finding smaller fields post-peak, but it doesn't look like we can make a real difference, e.g., Texas & the North Sea--virtually no restrictions on drilling, best available technology, developed by private companies, resulting in declining production.

In other words, in the most technologically advanced spots in the world, the limits of new technology and new drilling methods in getting production out of oil fields, has definitely been demonstrated.

Posted by: SocraticGadfly on November 19, 2007 at 2:31 PM | PERMALINK

>Isn’t this a good thing? Decreasing oil consumption may stave off global warming.

Not if the globe shifts to coal. And we're not safer overall if much of it shifts to badly engineered nuclear, either.

It's a turning point, and whether it's good or bad depends on the rate of decline after the peak, and the level of selfishness and panic in the response to that decline.

A perfect time and opportunity for the developed world to show global leadership though. We could fix three problems in one go, turned around in ten years and solved in a generation. Hmmm. 10 years...not much more than 8, funny that.

Posted by: Bruce the Canuck on November 19, 2007 at 2:32 PM | PERMALINK

The Oil Drum is a fascinating blog.

Here's a post about world population declining to 1 billion by 2100.

Posted by: Horatio Parker on November 19, 2007 at 2:48 PM | PERMALINK

Oil will never run out! God gave us an unlimited supply, but those California liberals won't let us get at it! It's our Divine Right to drive as much as we want and create as much plastic as we want. Rape the earth, God said via his prophet, Ann Coulter.

Posted by: Right Wing Troll on November 19, 2007 at 2:53 PM | PERMALINK

The Oil Drum... no relation, I presume?

Posted by: ymr049c on November 19, 2007 at 3:01 PM | PERMALINK

restricted access to oil fields.

Now, now, only if we're not dependent on Western oil contracts in the Mideast does the US have to worry about "restrictions" to oil fields. Before Bush became Prezenut via partisan court appoinment, there were basicly no local oil drilling going on in the US, BECAUSE, as I've said before, OPEC's 18 dollar per barrel oil made domestic drilling to costly and unwarranted.

There is only this "peak oil" BS now because Bush has seriously created instablity in the Mideast.

If we leave Iraq, the oil price will go down again, not up, AND staying in Iraq is unsustainable anyway since there is not enough manpower, not to mention the unstablity of our continued financial solvency the longer this war drags on and Bush pays his favorite no-bid contractors whatever they want. OPEC is headed toward the euro, which is a vote of no confidence in the US dollar.

Posted by: Me_again on November 19, 2007 at 3:31 PM | PERMALINK

Big Oil like the Bushs have made more money since his time in office then what should be allowed, Why do you think the price of gas is what it is today? Because of the Fvcking Republicans getting richer under Bushs Watch.

Posted by: Al on November 19, 2007 at 3:38 PM | PERMALINK

We are past peak oil ... they are now using oil equivalents to report barrels per day ...

Michael Klare has an excellent article on this ...

" Beyond the Age of Petroleum "

Posted by: mckinl on November 19, 2007 at 3:41 PM | PERMALINK


You're clueless about what Peak Oil is; instead, you're buying the story line of the WSJ. Read The Oil Drum, learn what Peak Oil actually is, and learn that we're actually at the top of the bell curve.

Posted by: SocraticGadfly on November 19, 2007 at 4:07 PM | PERMALINK

As the major fields decline in output, it will cost more to drill deeper into smaller reservoirs or implement tertiary recovery on existing fields. The American public never seems to quite understand, but this won’t result in gasoline being unavailable, only in it being more expensive. That’s how our much vaunted free market (or not so free for that matter) system deals with such things.

Posted by: fafner1 on November 19, 2007 at 4:13 PM | PERMALINK

To confound this, a quietly released report (can't remember the source; in NYT a few weeks back, but some official government body) concluding the world-wide demand for oil will increase 50% in the next 25 years. No mention of the actual supply, of course. It really is amazing the level of denial out there, a large portion of folks who think we will see the return of $2.39 gasoline.

Posted by: MaxGowan on November 19, 2007 at 4:19 PM | PERMALINK

Hubbert was an optimist. At the time he posited the Peak Oil theory, soda pop was sold in bottles and cans, alcoholic beverages were sold in glass, plastic had not yet overtaken other packaging materials.

Personally, speaking as a scientist, it blows my hair back that a resource so chemically unique and versatile as oil is simply burned for fuel! It's idiocy bordering on madness!

Posted by: Blue Girl, Red State (aka G.C.) on November 19, 2007 at 4:48 PM | PERMALINK

The difference between a prolonged plataeu and a peak with a sharp dropoff is actually quite significant. The former allows time for the world rconomy time to adjust to decreasing oil supply. For the later the supply decline would be higher than any reasonable adjustment, implying hard times ahead for the world economy.

Posted by: bigTom on November 19, 2007 at 5:09 PM | PERMALINK

Do none of you read the papers? Please note that Brazil has now quantified and announced they have a major oil field in their Atlantic waters.

Posted by: Robert R Clough - Thorncraft on November 19, 2007 at 5:11 PM | PERMALINK

Personally, speaking as a scientist, it blows my hair back that a resource so chemically unique and versatile as oil is simply burned for fuel! It's idiocy bordering on madness!

Yep, sort of like burning the furniture to stay warm. So many amazing and life saving materials come from oil including many of the resins and plastics used in the manufacture of renewable energy sources like wind and solar. Eventually we may reach the point where we no longer have the materials to replace oil as a fuel. It remindes me of the great line in Jared Diamond's book 'Colapse', something like "What was going through the mind of the Easter Islander cutting down the last tree on the island?"

Posted by: Adventuregeek on November 19, 2007 at 5:11 PM | PERMALINK


The Tupi field in Brazil according to Petrobras is about 5-8 billion barrels in recoverable reserves. Perhaps this will grow somewhat in time. The world currently uses about 30 billion barrels/year, and most oil comes from large fields. So we need about 4-5 Tupi's per year to keep pace with what we are consuming. Unfortunately, we only find 0-2 /year. So while Tupis in indeed a big find by current standards, and the overall play is significant to Brazil, it only changes the world situation a little on the margin.

Posted by: Stuart Staniford on November 19, 2007 at 5:22 PM | PERMALINK

The information I gleaned from the links generally seems to summarize and point to (ignoring politically charged "access" issues):
1) Large oil field discoveries are becoming fewer with time.
2) Larger oil fields appear to be depleting at a more rapid rate than smaller ones.
3) Unconventional sources, whether large or small in size (shale/sands) can only be extracted at a limited rate.

That leads to the conclusion that in the future, oil will come from a lot of smaller fields that deplete more slowly. Continued high prices should keep new (albeit smaller/numerous) sources coming onstream. This all would tend to "flatten out" the peak effect. But as e. nonee moose says above: Demand is going to much greater than production at some point and then the obvious consequences follow. That is going to push hydrocarbon prices so high, you won't need carbon taxes, cap/trade, or anything. It seems to me that alternatives will be heavily invested in no matter what. Government mandated efficiency improvements will be required just to keep our economy out of a permanent recession, or worse.

Posted by: Doc at the Radar Station on November 19, 2007 at 5:45 PM | PERMALINK

I think what's inevitable is a large-scale return in this country (if not the rest of the world) to nuclear energy production. I am NOT saying this would be a wise thing or the best solution to our energy needs, but is the most likely given our current economic, political, and industrial conditions.

Bruce's reference to badly-engineered nuclear is key; are there nuclear technologies that are not badly-engineered?

And how to make the tradeoff between the relatively moderate contributions to global warming of nuclear power plants vs the known nuclear waste issues? For myself, if I had to choose between living downwind of a nuclear power plant or a coal-burning facility, I'd choose the nukes without hesitation. I'd bet there are hundreds of millions of Chinese who'd make the same choice. At what cost to their heirs, though?

Science fiction writers decades ago envisioned satellites converting solar radiation to microwaves, which would then be beamed down to the surface for conversion to usable power forms. Sounds great, but the technological and engineering challenges are probably decades-long in answering. Too bad we didn't get started 20 years ago.

Posted by: bluestatedon on November 19, 2007 at 5:56 PM | PERMALINK

Stuart, thanks for showing up for the discussion! Of course, you need to be on Kevin's other post, too: "Kill the Cable."

Bluestatedon: How are you going to address the "NIMBY" problem with nuclear waste?

I'm in favor of nuclear if it's not given a bushel basket full of incentives AND if each nuclear power plant OKed for construction is REQUIRED to have a long-term nuclear waste repository site contractually guaranteed as part of the approval process.

Posted by: SocraticGadfly on November 19, 2007 at 6:13 PM | PERMALINK

Nuclear; when the cost of plant design, oversight, construction, decommissioning, and waste management is factored in, DOES NOT EVEN BREAK EVEN - let alone turn a profit!

Unless you consider the fast-breeder fuel cycle.

(also - Uranium prices are due for a very nasty spike soon.)

For those who have done the math: Wind is the ONLY viable long-term sustainable energy source right now. Solar could be - if we could get a good handle on the longevity of cells. But nobody really knows how long individual cells last - and what the long-term maintenance costs will be, because they've varied so much.

Posted by: osama_been_forgotten on November 19, 2007 at 6:50 PM | PERMALINK

I would think an apparent plateau would be a natural deduction from peak oil theory. Certainly, a higher equilibrium price for oil is going to have a modest effect in terms of creating this plateau, prolonging the approach along the plateau, and, probably, setting up the cliff on the far side.

The economic dynamics of a plateau are going to be somewhat different from the dynamics of steady growth, which have characterized the industry since the formation of Standard Oil. And, the economics of accelerating decline, which are certainly out there, by 2020 or so, if not before, will be quite different from plateau.

I wonder, who will be surprised by the changes.

Posted by: Bruce Wilder on November 19, 2007 at 7:33 PM | PERMALINK

Nuclear is an option. The recent track record of U.S. plants is good. A lot of the historical problems resulted when designs for reliable 300 Megawatt plants were hurriedly reworked into 1000 Megawatt plants back in the sixties. The larger plants had teething problems, and the governments response to increasing safety concerns was to require multiple layers of poorly engineered alarms which created total confusion when a problem occurred. Three Miles Island can be viewed as a worst case accident for a Pressurized Water Reactor. Sited in a populated area, when a cooling valve failed the emergency automatic core cooling came on, only the operators, totally confused by multiple alarms, shut off the core cooling and proceeded to melt down the core of the reactor. Yet at the end of the day the radiation release was minimal.

New plants need to be designed with a high priority on safety, and sited together on reservations in sparsely populated areas. This will allow them to share support functions such as security and spent rod storage.

Unlike American PWRs and BWRs, Russian graphite moderated reactors can blow up, as demonstrated by Chernobyl. In the book “Wormwood Forest” Mary Mycio studied the evacuated Chernobyl nuclear preserve and ironically found it to be a thriving wildlife reserve. The conclusion? While the human cost of the disaster was horrendous, people appear to be far deadlier to wildlife than radiation.

Posted by: fafner1 on November 19, 2007 at 8:05 PM | PERMALINK

I've always wondered: what's the half-life of a Chevy?

Posted by: MaxGowan on November 19, 2007 at 9:06 PM | PERMALINK

Hydrocarbon conservation efforts will do most of the work of keeping our economy alive. We consume 25% of the worlds oil output and we waste humongous amounts of it. Our personal transportation system is far too heavy. We will have to go on a major crash diet using mandatory, aggressive CAFE standards and probably rationing at some point. By doing this it reaps additional energy savings by reducing the amount of energy needed to manufacture new cars not only from reduced weight but the amount of older heavier vehicles that can be recycled to make a larger number of newer, lighter vehicles.

Posted by: Doc at the Radar Station on November 19, 2007 at 9:48 PM | PERMALINK

Doc, the feds could do a tremendous amount to address both Peak Oil and global warming if they simply did a buy-up of cars more than, say 15-20 years old, except those that are certifiable antiques.

Posted by: SocraticGadflys on November 19, 2007 at 9:56 PM | PERMALINK

Actually, the peak in oil production was May 2005. Since then we filled in with gas condensates and things such as the oil from the Canadian tar sands. According to Matt Simmons suggested recently that the shortfall between supply and demand for the last few years has been made up from stocks of stored oil. That and demand deconstruction as some nations have been priced out of the oil market. He also suggested that as supplies become very tight what we might see is some trigger event that will lead to a panic where everyone decides that they'd better go out and top off their tanks just for safety. This spike in demand could crash the system much like a run on a bank leads to an emergency.

I think we've got about two more years of relative calm before things start getting bad. I don't expect a Mad Max scenario. But the good times are over for quite a while as we adjust to a new world.

The situation is this. People think that as prices go up they'll just tough it out and spend more. What is really going on is that less oil will be available and it will be sold to the highest bidder. Once it is gone there is none available at any price till the next tank truck arrives.

There will be some new nuclear plants but I don't see that rescuing us. It is just too complex to site and build a reactor compared to numbers we need.

The biggest source of new energy will be conservation. We waste huge amounts of energy. If all cars got over 40mpg and all cars carried at least two people we'd slash our oil consumption by a factor of four at least. Even if we kept our current vehicles but filled every seat we'd cut oil consumption a lot. This might not be pleasant but it is possible.

Posted by: JohnK on November 19, 2007 at 9:57 PM | PERMALINK

Give JohnK a cigar. Smoke it quickly, before Dick Cheney waterboards you for being unAmerican by saying the magic word "conservation."

Second note contra nuke power to BlueStateDon:

Now that we know just how hazardous depleted uranium is, you wanna think even more about the byproducts of nuclear power?

Not adressing IN ADVANCE how to environmentally (as best as we can) dispose of DU tailings, as well as the nuke waste from plants themselves, simply is a no-go from where I sit.

Posted by: SocraticGadfly on November 19, 2007 at 10:31 PM | PERMALINK

"Bluestatedon: How are you going to address the "NIMBY" problem with nuclear waste?"

damn good question, and a more difficult thing to solve than any of the engineering challenges involved in building "well-designed" nuclear power plants. Virtually all municipalities or governmental units (or their voters) will fight any plan for storage facilities within their boundaries, and if you've got a powerful (a term I use with some irony) Senator like Harry Reid to fight on your behalf, then you can forestall any such plan indefinitely. Ocean placement is a non-starter, and placing them in environmentally-rich areas has its own obvious problems. Places like Nevada seem the best candidates, but I know virtually nothing about the land there and realize it is probably a far more environmentally sensitive area than I'd guess. (Maybe we should store wastes under Vegas casinos. I'd bet the folks feeding the slots at 3am with cigarettes dangling from their lips wouldn't care.)

What do the French do?

Posted by: bluestatedon on November 19, 2007 at 10:47 PM | PERMALINK

The Las Vegas casino idea for nuclear waste sounds like a good one. When Las Vegas runs out of water, most of the people will have to leave and then we can move the waste in. Problem solved!

Posted by: Doc at the Radar Station on November 19, 2007 at 11:47 PM | PERMALINK

Don, the French haven't addressed the waste issue a whole hell of a lot more than us. They just went ahead, went ape-shit, and built a bunch of nuke plants.

IF, if, we could "solve" the waste issue (that's why I said I would insist new nuke plants have ironclad advance agreements), I'm not anti-nuclear pro se.

The U.S. and Canada have also peaked in natural gas, and the world peak will probably only be a decade or so behind peak oil. If we want to be responsible with coal usage, and don't want to expect wind/solar to come that close to meeting a major part of our electrical needs, I think nuclear has to be in the mix.

We just have to do it FAR more responsibly than what Bush and Sen. Nuclear, Pete Domenici, propose.

And, Doc has Vegas' water problem damn straight. Maybe after the Anasazi-level drought gets done running its course in 20-30 years and we have "just" global warming desert drought, everybody WILL have moved way the fuck out of Vegas and we could use Yucca Mountain with less worry, for that matter.

Posted by: SocraticGadfly on November 20, 2007 at 12:49 AM | PERMALINK

>don't want to expect wind/solar to come that close to meeting a major part of our electrical needs, I think nuclear has to be in the mix.

I used to believe this but now think it's a technical and economic possibility. Just not a market possibility (yet).

Just one example - Stirling Solar's technology. They've contracted to build a 500 MW thermal-solar plant, at around $50k per unit, each unit 25 kw peak with a 24% load factor. Cheaper I'm sure if you'd be making millions of them.

Crunch the numbers and I get electric generation equal to half the nation's coal plants (1/4 of total usage) for about $1.5 Trillion. A lot of money...in fact, just about what Iraq has cost so far in direct spending. It would take a fraction of that to motivate the private sector. The area of land would be about 100x100 square miles.

Now, that's intermittent power - but even if it had to be baseload, several storage technologies *are* economic. Flow batteries, hydro storage, and underground high-pressure reservoirs boosting NG turbines cost, if I remember right, about 2 to 3c extra per kwh using current technology. That's not competitive now, but it is affordable.

$1.5 T sounds so unreasonable - but imagine an parallel reality where instead of the war in Iraq, north america had thrown an equal amount at incentives and mandates to replace oil/coal with such sources.

By the 2015 or so, the middle east could just be an ignored backwater, peak oil a non-issue, and the required CO2 emmission reductions would be met to boot. And NA would have the technologies and economies of scale in place to dominate the world market in the next generation of energy supply.

Posted by: Bruce the Canuck on November 20, 2007 at 1:54 AM | PERMALINK

One factor not yet mentioned is the increasing trend among oil-producing nations (e.g., Russia) to export less and keep more for domestic consumption. So, even if global production is flat, the amount of oil on the spot market is declining. All this is happening while demand is increasing. (This too from TOD.)

Posted by: DevilDog on November 20, 2007 at 3:18 AM | PERMALINK

The curve for oil demand is inelastic. The demand does NOT change significantly with price changes.

Economic activity is the only primary vacillator of oil demand, and that is within really fairly narrow limits.

That constructs a very volatile price structure, with high fixed costs.

Only structural changes would change that, structural changes primarily based on conservation, so that the demand for oil does not play within a 96% utilized supply chain.

A manufacturing plant that runs at 96% capacity has no ability to respond to equipment failures, materials limitations, labor limitations, other disruptions.

A plant at 80% capacity, CAN adjust its scheduling to accommodate anticipated and reacted changes.

We need to conserve.

Nuclear is not a good option as the problem of its waste has not been successfully addressed. It is a material that is NOT reassimilable into the biosphere, in any manner.

Posted by: Richard Witty on November 20, 2007 at 8:53 AM | PERMALINK

Richard Witty, I would modify your claim to "almost inelastic." You get prices ramped up enough, and change will happen.

The problem is, the way our car-centric America is structured, Peak Oil-related changes will take a LONG time to work their way through the system.

Posted by: SocraticGadfly on November 20, 2007 at 3:11 PM | PERMALINK



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