3 Cats Stalking

Life in an Exporting Nation

Comments on my previous post, Could things be worse than what we doomers thought?, expressed the opinion that exporting countries probably would not dry up within the decade, and that they would find a way to continue to import the luxury goods they could not produce themselves. Tom R pointed out that it might be riskier being a producer, what with the threats to their markets. Kevin wonders if there will be a "peak oil income" in those producer nations.

I had addressed the problem from a USA-centric point of view, for as one, two, or four of our major suppliers begin to fail in their "duty" to provide us with what we need, we may "suddenly" find ourselves coming up short on meeting our energy demand. The key element is the "suddenly," for so many of the authorities like CERA and NPC and EIA and IEA and EM have been espousing the opinion that we have lots of time before any of this becomes a problem. My son says technology and the market will lead us out of this tight spot, but I worry it may not happen soon enough, especially if the time remaining is even less than I had supposed before reading Jeffrey Brown's hypothesis. And the numbers I see indicate this shortage could happen as soon as five years from now, when the exporters reach the 50% level. I follow Murphy's laws, including "if it is going to happen, it will happen at the worst possible time."

But let's talk about the exporter-centric point of view.  Most of the exporting nations have little other resources than petroleum. Russia and Venezuela have some water, farmland, and other resources, but the Middle East producers have desert lands and exploding populations. Iran has been subsidizing their citizens with fuel to keep them happy, but they must import almost all their gasoline and food. I see the time when they cannot find enough energy to keep their populace happy, and then it will turn very ugly. Kevin is right to offer his sympathies. Only if the regime suppresses the population  will they be able to squeeze "more blood out of the turnip," aka oil out of the production grid, and send it to the USA.

One more thing. What do we have that the producers will want? Dollars? I don't think so, in fact, some are already saying no more dollars. We have food grains, and maybe some manufactured goods and technology, but we should be looking for some better product mix to trade for our energy supplies from abroad.

Whatever happens, it is going to be an interesting world, and I now expect it will start to happen during my lifetime, rather than after I have died and gone away. That is a sobering thought for a great-grandfather.

Sam Penny
the Prudent RVer

Could things be worse than what we doomers thought?

I started counting myself among the "doomers" about nine months ago as I read more and more about peak oil. I judged the chances of a peak oil economic crash to be 100%, maybe in my lifetime. I am 70 and retired, so to be in my lifetime means major problems might develop within about ten years.

Then my latest readings exposed a situation that could make things worse.

Jeffrey J. Brown's post entitled Net Oil Exports and the "Iron Triangle" on The Oil Drum makes reference to ELM, the Export Land Model. This concept, introduced a year and a half ago, is that the populace of the oil and gas producing countries will use more and more of their country's production, even as production peaks and then falls. The effect is that the production available for export to other countries can go to zero after a few years, even though the country is still producing oil.

Jeff made an interesting point in a recent email. The US reached the point where it ceased to be an oil exporter in 1950, twenty years before its production peaked in 1970. So this effect has happened before.

Then there was the news report last fall that Iran, location of the second largest reserves of oil in the world, would cease to be an exporter of oil within 10 years. The Iranian government has been subsidizing the price of fuel for its citizens for years, and as a result, the internal usage has grown exponentially over time. In 10 years they are expected to be using everything they can pump out of the ground.

Mexico is nearing the point where their exports will fall to zero as the Cantarell field is depleted and lesser fields cannot make up the difference. The US will feel that point as a major supplier goes away.

Argentina is nearing a state of collapse as its energy crisis deepens after years of 8% growth fed by subsidized fuels. They are begging fuel from Brazil and have cut off gas exports to Chili. Russia is on a splurge of buying new, big cars. The sheikdoms of the Middle East are using more and more of the oil they pump for extravagant lifestyles.

National oil companies control 90% of the world's reserves. Each country has citizens who want a growing share of the production pie, and each is faced with an export rate falling faster than their production rate is falling.

The US is among the group of countries who must import oil. But too many of us doomers have looked at the world oil production curve and assumed there would be a peak soon, but oil would flow for decades. Yes, there would be less, but there would be some.

But consider what happens if the countries with the oil use all they produce? Then there is nothing to export. Then the US does not have less over time; it has nothing to import. In that case, we must live entirely on what we can produce ourselves, whether it be homeland oil and gas, coal, biofuels, wind, solar, fission, or whatever. And how soon might this happen? Early indications (like Mexico) are we could be seeing the effects in less than five years.

When you add up what we can produce here in the US, it comes to much less than what we are using now. Something has to give, and give sooner than later. Yes, things are worse than some of us doomers had assumed.

Sam Penny
the Prudent RVer

The Peak Oil Peak - Intuitively Obvious

My early training in science was mostly intuitive, supplemented by whatever I could find in the Carnegie Public Library in the town near our farm in Oklahoma. I left the farm to get my degree in Engineering Physics, a Masters in Solid State Physics, and experience in the beginnings of computer science while working for Dr. Luis Alvarez in Berkeley. I picked up some pretty solid training in science along the way, but I still find that thinking and intuition are my greatest tools for understanding natural phenomena.

Take King Hubbert's Peak Oil Theory, for instance. He reduced to a mathematical construction what to me becomes intuitively obvious given certain assumptions and after thinking the problem through.

The supply of oil in a particular field is finite and fixed. When you have used all you have, it is gone. Provided demand exists to encourage extraction, the production from that field will rise somewhat exponentially as the field is developed, but will then start to level out because there are a decreasing number of opportunities to extract more from the field by drilling more wells or using more sophisticated secondary and tertiary recovery techniques. Then, as the oil reserves are used up, the production must naturally fall, going to zero when there is nothing more to pump.

To me, that scenario is totally obvious. For it not to happen in that sequence, either the demand must go away or there must be some force to regenerate the supply of oil in the field. I can see demand disappearing as a result of an apocalypse or excessive costs, but I have seen no good evidence of the second event.

Hubbert was more explicit. He said the bell-curve was symmetrical in total production and indicated it was at least approximated by a Gaussian function.

As I learned in my courses on statistics, the nice thing about a bell-curve (the Gaussian function) is that it is a well-behaved function with continuous derivatives. I also learned it is a good approximation to many physical phenomena seen in nature, such as flipping coins and measuring the length of a stick over and over -- but it is only in theory that the Gaussian is truly the function that nature is using to enact the phenomena. We humans just find it is a close enough approximation to reality to be a very useful tool and one we can work with.

The Gaussian function can be subjected mathematically to various analyzes and yield a number of agreeable conclusions. One of the conclusions is that the sum of many bell-curves is itself a bell-curve.

Hubbert used that conclusion when he applied his theory to all the known fields in the 48 contiguous states and made a prediction of that total production rate would reach a peak around 1974 and then start to decline. His prediction pretty closely followed the bell-curve, and continues to do so. To me that is a good indication that the bell-curve he chose is a sufficient approximation of what is happening in nature. It fits the data and matches my intuition.

Now, petroleum geologists are applying the concept to all the petroleum fields around the globe. Others are applying the concept to other material resources and beginning to worry about world-wide peaks in the production of oil, coal, natural gas, potable water, etc. However, some are saying there is nothing to worry about because either it will never happen, or something (pick your savior) will mitigate the problem before it becomes serious.

Worry? What's this worry thing? Is there a reason to worry? Again, I must rely on my intuition, and experience, to answer this question.

Look at the Peak Oil curve near its top and try to understand what will be going on as demand exceeds supply. The reason the curve continues to rise in the first half of its phase is that demand is continuing to rise. Plans are made to build more roads, stronger vehicles, and more houses. More babies are born and fewer elders are dying.  The demand has a momentum, and it continues to increase.

At some point the supply cannot keep up with the increasing demand. As the physical supply drops, the momentum of the demand forces fuel prices to rise, and market forces ration fuel to those who can pay for it. Demand destruction begins by forcing those who fail to compete to live without fuel.

Time passes, and increasing unfilled demand forces prices higher and higher, until the economic systems starts to crumble. Inflation grips the world economy, and supplies of all kinds of goods begin to fall Manufacturing plants close, and the medical infrastructure deteriorates. At some point there might not be enough fuel to harvest food for the masses, and people begin to starve, again the least competitive first. Conflicts over the remaining resources may become commonplace.

Finally, at some distant time, the production of fossil fuels returns to what it was before the industrial revolution, very close to zero. The earth keeps turning, but it will be a far different society that what it is today.

So what is there to do?

I have found that most periods in my 70 years of life have been typified by one or more constant trends: I remained in relatively good health; my job, status, and income improved steadily; the price of food and fuel inflated but at a slow rate; the population of the globe grew at a fairly constant rate. Occasionally, some kind of major disruption to one or more trends required an adjustment in my lifestyle: I had heart bypass surgery; I retired to live on a fixed income; the cost of diesel doubled within months; concerns about resource depletion and climate change suddenly became important.

I have found that if I can identify the risk of trends changing, I can prepare for the eventuality, and reduce the impact: I was quick to recognize the onset of another heart attack on my recent rafting trip and do something about it; I invested in energy stocks when I first heard of Peak Oil concerns; I rearranged my travel to limit my driving when the price of diesel climbed. That is called mitigation. I was not always right, but my planning has made a difference.

The reason you should worry about peak oil is that it will force changes in several major trends. These changes will affect you. What trend changes are the most dangerous?

The population of the earth remained fairly constant until the industrial age was ushered in with the growing use of coal and then petroleum to produce increasing amounts of energy. Over the past fifty years the correlation between increasing worldwide energy use and population growth has been near one. If the supply of energy drops precipitously, the earth's population may also drop precipitously.

Operation of the USA business machine is based almost entirely upon cheap transportation using vehicles running on liquid fuels. The distance between source and destination for goods is irrelevant to the cost of the goods. When fuel is too expense to use, the machine cannot operate.

The foundation of the USA economy and globalization is growth, and that growth depends upon increasing usage of energy. Without more and more energy, there is no more growth.

Our vaunted technology, especially electronics, pharmaceuticals, and the Internet, consume huge amounts of energy. Technology advances cease when energy disappears.

Leaders in the USA and the rest of the industrial world operate on the assumption that trends will not change, and they often refuse to discuss the possibility of it happening. As a result, the general public is either unaware there may be a problem, or assumes everything must be okay.

How will these trends change as the production of oil (and other resources) peak and then fall? How can you prepare?

Without as much energy, the population of the earth must drop. Some estimate it will drop from 7.5B about 2020 to as low as 1B by 2085. My studies indicate only efficiency, fusion, solar, wind, and wave have a chance of providing the amounts of energy we are using worldwide today. You, your grandchildren, and your great-grandchildren must learn how to live sustainably and use much less energy to have a chance to make it through the bottleneck.

The cost of transportation will skyrocket, and the supply of transport fuel will dry up. Learn to live and work close to home in a sustainable environment. The cost of food grown in Chile or the Far East or even Mexico will be more than you can afford. Grow you own.

Globalization will largely disappear. A new paradigm must be found for the USA and world economy that is not based upon constant growth. Think about it. What do you want it to be (just no growth)?

Many assume technology is our ticket out of this problem, but technology has not solved the problem yet. If we stifle that effort before we solve the problem, we are toast. Are our research priorities in the right place, or do we have to learn how to live without electronics, pharmaceuticals, and the Internet. Can you?

In time the leaders in the USA and the rest of the industrial will come to realize the world has  changed. They will probably be the last to admit they were wrong, and their suggestions for what to do may be superfluous. The public reaction to being mislead for so long may be one of violent backlash. As for yourself, learn to take care of yourself and do not plan on depending upon your government to take care of you.

To me, it is intuitively obvious that the members of our society are racing toward a cliff with our eyes closed tight, assuming that all is well. Anyone who says it will not happen must be living in a different world where science and rational thought do not exist, where what they wish to be true will be true. I wish them luck, for that is all that they will have.

As for me, I will keep learning how to live on less and tell folks around me of what I think is about to happen. To me the dangers of Peak Oil are intuitively obvious.

Sam
the Prudent RVer

Peak Oil, the Almost Invisible Catastrophe

A very enlightening article entitled "Why is peak oil politically incorrect?" was published by Ugo Bardi in the June Italian ASPO Newsletter, and then conveniently translated to English and reposted at EnergyBulletin.net. Using the Google Trends tool to analyze worldwide curiosity, he compared the frequency of search terms, he found that "global warming" beat "peak oil" hands down. He looked at the scientific efforts and points out that

"...at present, a search on the database “sciencedirect” that lists peer reviewed scientific literature gives more than 1800 papers citing the term “global warming” in the title or the abstract and about 5500 with the words “climate change”."

and

"...on the database “sciencedirect” we find today only 24 papers which carry the term “peak oil” in the title or in the abstract; even a smaller number that mention the term “oil depletion.”"

Peak Oil, it seems, is almost invisible, and yet when you look at the time lines and the potential quick-term consequences, IMHO it is by far the greater danger to our civilization. With enough energy, we could overcome global warming, but without that energy, we are cast adrift with no engine and without a sail. And since so few are watching what is happening to the world, we have no rudder and no captain.

Ugo Bardi provides insight into why there is such a disparity in the awareness of these two dangers. He points out that the observation of anomalous phenomena led to theories about climate changes, and by the 1970s it had become a legitimate subject of study. In time attempts to model the entire weather system with its multiple feedback loops have become the centerpiece of the efforts.

Resource depletion studies began with economists studying the impact of depletion on the economy, but  early work was lost in the move of the economists to focus on trends rather than systems, producing models that have ignored the importance of resources on long term effects on the economy. After all, if resources appear to be infinite, current trends provide a perfect picture of the future. Using trends in the first and second derivative of population growth, demographers tell us that the world population will grow to 9.5B by the end of this century. Of course, that assumes the resources to feed and transport them are infinite and therefore not a factor. They are looking at economic trends, not the economic system.

When a simple geologist had the audacity to tell his industry that petroleum production in the US would peak and then decline, his work was ignored by economists. When Forrester did the early work that led to the publication of "The Limits of Growth," both the book and the work were vilified and ridiculed, leading to the situation where the very concept of resource depletion has become politically incorrect.

Civilization is now speeding past the point when enough can be done to mitigate the approaching catastrophe. Instead of being able to ease the world's population down to maybe 5.5B with reasonable planning, it looks more like we are heading for the bottleneck where only 1B will make it through.  I did not realize that by the measure of scientific attention, the score was 24 to 1800. Unfortunately, the winning issue is focused on the wrong problem. I applaud those who are concerned about global warming, but at this rate, there won't be a civilization left to care.

We must do more to expose the dangers of uncontrolled resource depletion.

Sam
the Prudent RVer