Oil Depletion Debate

The following video about this recently released book is a excellent introduction to the topic of oil depletion. I recommend reading Hirsch's book.
The 12 videos will play in succession.
The Impending World Energy Mess by Dr. Robert Hirsch
12 part Q&A with Dr Robert L. Hirsch

Robert Hirsch Interview on Financial Sense

Robert Hirsch Biography

The Hirsch Report: Peaking of World Oil Production: Impacts, Mitigation, and Risk Management created by request for the US Department of Energy

Up until now I’ve been using this blog as a means to saving bookmarks. Since I know people are accessing these bookmarks I decide to put together links in an outline format.

So this post is for those wanting a general outline or flow of information to follow. My goal was to organize it from top down approach. I don't like to give personal opinions but would rather report the information and let it speak for itself.

It takes time to go through the audios and videos below but I think they are some of the more informative. The Crash Course, especially, is instructive for its easy to follow, broad-based explanation linking how energy and money work in any economy.

If global oil production is at or near maximum production, are there any bright spots to new energy? According to the International Energy Agency (IEA) while they see an oil shortfall over the next 5 years the world will see a natural gas glut coming from shale production: Dr. Fatih Birol on World Energy Outlook post Copenhagen

People talk about the Bakken Shale having 300 billion barrels of oil as a resource play. A resource isn’t necessarily a producible reserve. Since the US consumes 7 billion barrels per year, people reason the Bakken alone could supply the US for 40-45 years. Are they correct? Consider, the USGS estimates the Bakken’s total recovery at 3 to 4.3 billion barrels, or about 6 months’ worth of US consumption.
3 to 4.3 Billion Barrels of Technically Recoverable Oil Assessed in North Dakota and Montana’s Bakken Formation—25 Times More Than 1995 Estimate

US oil production peaked in 1970. At that time the US daily production was about 10M bbl/day. Today production has declined to 5.4M bbl/day today. Yet US daily consumption of oil has increased to about 20M bbl/day (7.1 billion barrels per year).

Graph 1

With different regions’ production around the world now in decline the obvious question is: Has the world’s production peaked or when will it peak?
For the global economy, however, the better question is: When will spare capacity be gone and consumption transitions from a Buyer’s Market to a Seller’s Market?

The Peak Of World Oil Production
http://www.propertyinvesting.net/cgi-script/csNews/image_upload/specialreports_2edb.peak-oil-chart.jpg

USGS: Graph 2 Are We Running Out of Oil?

Since 1980 annual world consumption has exceeded discoveries of new reserve estimates

BP
Graph 3

ExxonMobil
Graph 4

Graph 5

Graph 6 Since 2004-2005 global production has flattened into what many analysts predicted would occurred, a plateau. Peak oil, or peak production, is simply that point where global new production just equals global decline rates.

Graph 6 is for both conventional oil, unconventional oil, and natural gas liquids.
Conventional oil production has been around 74 million barrels per day with a slight downward decline

What some of oil industry experts are saying about the production plateau or peak

Because these are oil industry insiders the following videos are some of the most important interviews

Evaluating World Reserves: How Much Is Left?, featuring Sadad al-Husseini

Acknowledging Peak Oil, featuring Sadad al-Husseini

Peak Oil Reality: Discovery & Production Won't Meet Future Demand, featuring Sadad al-Husseini

The first UK Peak Oil Task Force Report, featuring Jeremy Leggett

James Schlesinger, former CIA Director and Energy Secretary

Oil & Gas Journal; Hess Chief: Action needed to avoid oil crisis
"Given the long lead times of at least 5-10 years from discovery to production, an oil crisis is coming and sooner than most people think. Unfortunately, we are behaving in ways that suggest we do not know there is a serious problem," Hess said...With OPEC now down to 2.5 million b/d of spare capacity, Hess said, "We no longer have the safety margin for supply interruptions and demand spikes to ensure price stability. OPEC, with approximately two thirds of the world's proven conventional crude reserves and one third of its production capacity, certainly has the resource base to relieve the pressure." However, he said, "All oil producers—OPEC and non-OPEC alike—simply are not investing enough today to ensure sufficient capacity to meet oil needs in the next 10 years."

The Rainwater Prophecy; Richard Rainwater made billions by knowing how to PROFIT FROM A CRISIS. Now he foresees the biggest one yet. By OLIVER RYAN
December 26, 2005

Investment guru Jim Rogers’ Financial Times Interview 11.03.09 Part 3/4

Investment guru Jim Rogers’ Financial Times Interview 11.03.09 Part 4/4

A plateau in global production acts as a ceiling to economic growth.
The price economic model looks something like the following:
Price/supply/demand model

In the above ASPOTV videos Brown University PhD Sadad Al Husseini (recently retired VP of Saudi ARAMCO) said he believes spare capacity will be gone within a few years. That’s echoed in this following quote from the United States Joint Forces Command’s Joint Operations Environment Report 2010

United States Joint Forces Command:
U.S. JOINT OPERATING ENVIRONMENT REPORT 2010
“A severe energy crunch is inevitable without a massive expansion of production and refining capacity. While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India. At best, it would lead to periods of harsh economic adjustment. To what extent conservation measures, investments in alternative energy production, and efforts to expand petroleum production from tar sands and shale would mitigate such a period of adjustment is difficult to predict. One should not forget that the Great Depression spawned a number of totalitarian regimes that sought economic prosperity for their nations by ruthless conquest...By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day...The implications for future conflict are ominous, if energy supplies cannot keep up with demand and should states see the need to militarily secure dwindling energy resources.”

According to the Energy Information Administration (EIA)out of approximately 19 million barrels of oil the US consumes each day 8.989 million barrels of oil is consumed as gasoline with an addition 3.945 million barrels consumed as Distillate Fuel Oil (Diesel Fuel and Heating Oil).

Using an analogy to put into perspective the U.S. JOINT OPERATING ENVIRONMENT REPORT 2010, a 10M-barrel per day shortfall in global supply would be similar to having every gasoline station in the United States going dry. Imagine every road, every city street, every state highway, and every interstate highway across all 50 states vacant of automobiles. Yet that global capacity shortfall could be upon us by 2015. Even without global production actually declining increasing demand from developed and developing countries can push demand to those shortfall levels.

Jeffrey Brown, petroleum geologist, has put forth “The Export Land Model.” As wealth grows in exporting countries middle class standards of living increase which in turn increases the domestic consumption for the exporting country’s own production. As the country’s oil production peaks and goes into decline Net Exports decline faster than the country’s production decline rates. Mexico (the US’s 3rd largest import supplier) is expected to become a net oil importer within 5 years. When Mexico becomes an oil importer who will replace it as the number 3 importer into the US?

Referencing the US Joint Forces Command’s report, what is “a massive expansion of production”? According to the International Energy Agency’s World Energy Outlook 2008 the oil industry must put on line the equivalent of a new Saudi Arabia every 5 years just to keep global production at present capacity.

National Geographic editorialized the International Energy Agency (IEA) report by saying it would be like putting online a new Kuwait’s worth of oil output every year: "The Energy Information Administration, an arm of the U.S. government, forecast last year that, all things being equal, world energy consumption would increase 50 percent by 2030. That's a good round number, summing up the desire of people across the world for refrigerators, televisions, ice cubes, hamburgers, motorbikes, and maybe even a little air-conditioning in the tropics.”

“But it's not at all clear where that energy can come from, because we happen to be alive at the moment when the oil is starting to run out. In November 2008 the International Energy Agency estimated that production from the world's mature oil fields was declining 6.7 percent a year, a rate that is expected to get even worse over time. Offsetting this decline will require finding a new Kuwait's worth of output every year, or somehow squeezing that much more from existing fields. Many observers think we've already passed the peak of oil production. An optimist in this world is someone who thinks it might still be a matter of years. But there's little question where the future lies, which is why the cost of a barrel of oil spiked to $147 last year. It took the prospect of a Great Recession to bring it back down to $40. Curbing high gas prices with recurrent economic slumps is probably not the smartest of remedies."

Since we have developing countries, such as China and India, increasing their oil consumption, the IEA World Energy Outlook 2008 is projecting that to not only offset decline rates with four new Saudi Arabias 2 additional Saudi Arabias need to be brought online between the years 2007 to 2030. Six new Saudi Arabias in that timeframe would be like putting online a new Saudi Arabia worth of production every 3.8 years.

IEA World Energy Outlook 2008
Main text
The projected increase in global oil output hinges on adequate and timely investment. Some 64 mb/d of additional gross capacity — the equivalent of almost six times that of Saudi Arabia today — needs to be brought on stream between 2007 and 2030. Some 30 mb/d of new capacity is needed by 2015. There remains a real risk that under-investment will cause an oil-supply crunch in that timeframe. The current wave of upstream investment looks set to boost net oil-production capacity in the next two to three years, pushing up spare capacity modestly. However, capacity additions from current projects tail off after 2010. This largely reflects the upstream development cycle: many new projects will undoubtedly be sanctioned in the near term as oil companies complete existing projects and move on to new ones. But the gap now evident between what is currently being built and what will be needed to keep pace with demand is set to widen sharply after 2010. Around 7 mb/d of additional capacity (over and above that from all current projects) needs to be brought on stream by 2015, most of which will need to be sanctioned within the next two years, to avoid a fall in spare capacity towards the middle of the next decade.

IEA Word Energy Outlook 2008 Press Release
The prospect of accelerating declines in production at individual oilfields is adding to these uncertainties. The findings of an unprecedented field-by-field analysis of the historical production trends of 800 oilfields indicate that decline rates are likely to rise significantly in the long term, from an average of 6.7% today to 8.6% in 2030. "Despite all the attention that is given to demand growth, decline rates are actually a far more important determinant of investment needs. Even if oil demand was to remain flat to 2030, 45 mb/d of gross capacity - roughly four times the current capacity of Saudi Arabia - would need to be built by 2030 just to offset the effect of oilfield decline", Mr. Tanaka added

Wall Street Journal: Peak Oil: Get Ready for the Oil-Supply Crunch, IEA Says

About the IEA
The International Energy Agency (IEA) is an intergovernmental organization which acts as energy policy advisor to 28 member countries in their effort to ensure reliable, affordable and clean energy for their citizens. Founded during the oil crisis of 1973-74, the IEA’s initial role was to co-ordinate measures in times of oil supply emergencies. As energy markets have changed, so has the IEA. Its mandate has broadened to incorporate the “Three E’s” of balanced energy policy making: energy security, economic development and environmental protection. Current work focuses on climate change policies, market reform, energy technology collaboration and outreach to the rest of the world, especially major consumers and producers of energy like China, India, Russia and the OPEC countries. The most recent meeting of the Governing Board of IEA member countries at Ministerial level was held on 14-15 October 2009 in Paris.

Is there any mainstream media articles?

Guardian: Key oil figures were distorted by US Pressure, says Whistle blower

On September 1, 2010 Der Spiegel reported the following:
'Peak Oil' and the German Government
Military Study Warns of a Potentially Drastic Oil Crisis
By Stefan Schultz
Partial quote: “A study by a German military think tank has analyzed how "peak oil" might change the global economy. The internal draft document -- leaked on the Internet -- shows for the first time how carefully the German government has considered a potential energy crisis.
The term "peak oil" is used by energy experts to refer to a point in time when global oil reserves pass their zenith and production gradually begins to decline. This would result in a permanent supply crisis -- and fear of it can trigger turbulence in commodity markets and on stock exchanges.”

Oil isn’t simply liquid fuels. “The United States highway network consists of 4 million miles of roads and streets.”80% of the asphalt gets recycled for road repairs. Asphalt is less than 2% of a barrel of oil yet that 2% paved all those miles

A partial list of consumer products are made from petroleum. The list includes consumer good not normally thought of as being petrochemical. Items such as shampoo, toothpaste, and even aspirin.

Many in the Green Movement believe we could simply switch from petroleum to biomass (bio diesel from algae). If you took the 85,000,000 forty-two gallon barrels of oil consumed by the world each day it would fill 64,909,090 fifty-five gallon steel drums. (I convert to steel drums because it is easier to visualize.) At 3 feet tall and laid end-to-end those drums would stretch 36,880 miles long. Since the earth circumference is 24,900 miles, that daily consumption of oil would fill enough steel drums to encircle the earth 1 1/2 times every day, or 540 times per year.

(85,000,000bbl x 42gal) / 55gal = 64,909,090 fifty-five gallon steel drums
(64,9090,090 x 3ft) / 5280ft = 36,880 mile
36,880 / 24,900 = 1.48 or encircling the planet 1 1/2 times each day
(36,880 x 365days) / 24,900 miles = 540 times per year

The energy density for a 42 gallon barrel of oil is 5,800,000btus How do grow enough biomass for vegetable oil and ethanol equivalent to those energy densities and still produce enough food?

Dr. Robert L. Hirsch, Ph.D., Senior Energy Advisor, Management Information Services, Inc. (MISI)
Audio The Decline of World Oil Production & Its Possible Impacts

A Conversation with Robert Hirsch, "The Impending World Energy Mess"
October 16, 2010 interview

Chris Martenson admits he isn't an industry expert. However, Martenson’s The Crash Course is an excellent broad-based, conceptual understanding for bringing together the economy, energy issues, and resource issues. In addition to energy, an important point to take away from the course is an understanding of how a fiat, debt-based, monetary system works to loan money into existence.

Because a fiat monetary system loans money into existence there will always be more debt to GDP. Implicit to a debt-based monetary system is the requirement for perpetual economic growth to service debt obligations. If economic growth requires increasing energy supplies then global oil depletion becomes a threat to the monetary system itself. Can we go nuclear? As you’ll hear in The Crash Course chapters on peak oil, the energy equivalent of the oil we import into America is equal to output of 750 nuclear power plants. Out of the 437 nuclear plants worldwide the US operates 104. There’s only a few thousand available nuclear engineers capable of keep those 104 plants in operation. Even then, electricity and batteries are a poor substitute for the energy density provided by oil. The immediate problem is having relatively cheap, available liquid fuels.

As a liquid fuel Matt Simmons was working on a project to manufacture ammonia from seawater using wind turbines of the coast of Maine. This link is to an audio interview with Simmons. The second half of the audio with with Titan Oil Recovery

The Crash Course

Seeing the World Through an Energy Lens by Mary Logan, University of Alaska.
In this power point lecture Logan presents a "Big Picture" systems view of economics. Through the lecture she develops her argument and then presents her conclusions for her view of future living standards.

In addition to the Crash Course, this September 2010 interview with Martenson is worth listening to:

Episode-515- An Interview with Chris Martenson – Author of The Crash Course

Episode-516- A New Look at Peak Oil

Economist Jeff Rubin on Oil and the End of Globalization [FULL]

As oil prices increase resources like oil shale becomes economically producible, right? Those arguments ignore The Law of Receding Horizons. As oil prices increase so will the input costs to extracting alternative resources like oil shale. The result of The Law of Receding Horizons is that an investor never attains an economic profit due to the increasing input costs.

Energy and Capital; Receding Horizons
The Next Big Thing
By Chris Nelder

FinancialSense.com - Preparing For and Learning to Survive the Coming Perfect Storm: Part 1

Preparing For and Learning to Survive the Coming Perfect Storm: Part 2

If peak oil affects the debt obligations and unfunded promises, will the Federal Government be able to meet its debt obligations and unfunded promises for future Social Security and Medicare payments?

According to the Dallas Federal Reserve President, in this speech “Roadblocks to Recovery” the Federal Government owes $104 Trillion in present value terms.

Roadblocks to Recovery (With Apologies to W. H. Auden and Gershon Bleichröder)
Remarks before the World Affairs Council of Dallas/Fort Worth
Dallas, Texas
February 10, 2010
“We cannot count forever on the largess or the misfortune of others to mask our own imbalances here at home—for fiscal profligacy in Washington today hinders our ability to address fiscal challenges tomorrow.”
“These challenges are coming. Off balance sheet, there lie two massive, unfunded liabilities not accounted for in the "conventional budget accounting" of the federal government—most significantly, Social Security and the government obligations of current Medicare programs.”
“Pundits and analysts like to focus on the year in which Social Security will go permanently into the red on an annual cash flow basis—which recently was projected to occur in 2019 but could occur as early as 2016. But they largely ignore the severity of the broader problem: accumulated entitlement debt over the infinite horizon. According to our calculations at the Dallas Fed, that unfunded debt of Social Security and Medicare combined has now reached $104 trillion—trillion with a 'T'—in discounted present value. And while much attention in recent years has been devoted to Social Security, the lion's share of the total entitlement shortfall (nearly $90 trillion) actually comes from Medicare. This is a prodigious number. Others—like Pete Peterson's foundation, which uses a different time horizon in its methodology—calculate the unfunded liability at north of $40 trillion, growing by a sum of $2 trillion to $3 trillion per year. No matter. The problem is frightful, whether you take his numbers or ours.” - Richard W. Fisher, Dallas Federal Reserve.

In April 2008 John Williams of Shadowstats gave this interview on Financial Sense: Hyperinflationary Depression 2010. At that time nobody knew who the next president would be. In the previous month, March 2008, Bear Sterns had been bailout for $80 billion and the Treasury Secretary, Hank Paulson, was saying we were over the worst of it. In the interview Williams was saying the Federal Reserve and the Government bailouts were just beginning and that if stimulus money wasn’t pumped into the market we’d see a collapse not unlike the Great Depression. In the following September 2008 the market collapsed. It was reported that Hank Paulson had gotten on his knees to beg Nancy Pelosi and the Congress for the funds.

As of today, October 2010, Williams is saying theirs a high probability of a hyperinflation beginnng between the months March 2011 and June 2011.

July 2010 interview with John Williams.

Two years ago (September 2008) the global economy almost collapsed. Hank Paulson was on his knees before the Congress, followed by world governments coming together in emergency meetings.

What was the extent of the Paulson and Congressional meetins?
CSPAN Rep Paul Kanjorski Reviews the Bailout Situation
Capital Markets Subcommittee Chairman

The Mortgage Meltdown is intertwined with all this
First broadcast September 17, 2007

Overdose - The Next Financial Crisis Part 1

Overdose - The Next Financial Crisis Part 2

Overdose - The Next Financial Crisis Part 3

American Enterprise Institute panel discussion Oct 6, 2010
This is a technical discussion on the global financial markets. The audio begins after 7 1/2 minutes. Question: if the economy is as bad as these men illustrate and global production has peaked, or facing a shortfall in supply, how do world economies grow out of debt if liquid fuel supplies cannot increase?

What could Rep Paul Kanjorski's collapse have been like that he spoke of on CSPAN?
FSN In Depth: Joseph A. Tainter PhD, The Collapse of Complex Societies.

So what is the solution? The answer to that depends upon what you want the outcome to be. We might have “to face the brutal facts whatever they are” that no solution to what we want actually exists. The Sockdale Paradox

Oil Depletion Debate

Catalyst - Oil Crunch, ABC TV

At 88,000,000 Barrels Per Day....

The Crash Course by Chris Matenson

Financial Sense The Trade of the Century

For those who access this blog

The Sockdale Paradox

Trends in World Oil Supply/Consumption and Net Exports/Imports

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