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Energy Insights: Energy News: Peak Oil: A Few Basics

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Peak Oil: A Few Basics


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By Richard Turcotte

We now have nearly an entire population in the United States and nearly an entire media establishment that believes that oil is abundant--not because of the objective facts, but because of the oil industry's highly successful public-relations campaign, a campaign that is still underway. The reason it is still underway is that it is essential to repeat the fake abundance story again and again in order to drown out any possibility that contrary facts will make their way into the public mind.

 There is no question that peak oil is a contentious issue among those familiar with the discussions and considerations. Some adamantly deny that we are even close to producing the maximum rates of oil, while others ardently insist we are--or that we have already passed that point.

 Consistent with efforts to keep the public sufficiently uninformed, the fossil-fuel industry downplays (or usually, denies) any adverse consequences from this process. Water pollution, health and environmental threats, damage to local infrastructure, and assorted other pesky, annoying facts are artfully ignored or spun to leave most citizens with the impression that fracking is about as destructive or harmful as picking daisies.

As Kurt Cobb noted in the excellent from which the above quote was taken,

When what you are saying is so obviously at odds with the plain truth, it is useful to choose your words carefully to obscure this fact.

More than forty years ago, U.S. crude-oil production maxed out at approximately 9.6 million barrels of oil per day. That's the fossil fuel we use for most of our transportation and industrial needs. In 2005, conventional crude-oil production peaked [or at least plateaued] worldwide.

 Suggestions that oil-production totals have increased well beyond those 2005 totals is a common rebuttal from those denying peak oil. Expanding the definition of "oil" to include products that are not substitutable for crude oil is a nice bit of misdirection. A disingenuous argument and nothing more. Looks nice on the computer screen, but not nearly as meaningful when the supply & demand topic pops up.

 There's no disputing that in recent years fracking has produced a remarkable surge in production. Were it not for the accompanying and just as maddening facts about fracking in addition to those noted above, we could put this issue to bed once and for all. But damn that reality!


 Anyone even remotely familiar with current discussions about oil supply is aware of "fracking" [hydraulic fracturing, which is the pumping of chemicals, sand--most often--and millions of gallons of water via horizontal wells which are first prepared vertically to a desired depth, so as to crack rock in shale formations in order to then release hydrocarbons otherwise trapped in those formations]. The average fracked well costs several million dollars to drill--a significantly greater amount than the costs associated with conventional crude-oil fields we've long relied upon. Fracked oil wells also have an irritating habit of depleting at rates much, much faster than conventional crude oil wells. On average the decline in production rates is somewhere between half and two-thirds after just the first year.

 Rapid depletion means several things must happen in response. More of the more expensive wells must be drilled in order to keep pace. No great surprise, wells are drilled (and thus depleted) in the "best" locations first. Once they've done their part, replacement wells have to be drilled in the not-best locations. That's more expensive, and more technologically challenging. An added fly in the ointment is that the energy efficiency of this fracked oil [commonly known as "tight" oil] does not provide the same bang for the buck as does conventional crude. More is needed to produce that same bang for the buck.

 High prices are necessary to sustain all of this effort, along with more investment dollars. We lowly consumers aren't thrilled with high prices. Investors spending more to get less of a return tend to be less than enthused about the process as well.

 The result: fewer purchases lead to lowered prices, and when fewer dollars are invested, the oil industry suddenly does not have the funding it needs to work as hard as it does to go after all of this Plan B fossil-fuel supply.

 The world began using more oil than it was finding nearly thirty years ago. Nothing has changed since. All of the noise about "reserve" increases is just that: noise. Until and unless reserves are actually produced in quantities sufficient to justify the energy and expense, they are impressive-sounding big numbers and nothing more.

 Reserves are not discoveries, and the largest fields have not only already been discovered, they've been in use for decades. Finite resources are ... finite. When you draw from them over many decades, they have this curious habit of depleting and not magically replenishing themselves, which is why we are now relying on tight oil to make up the difference. This is not a good Plan B if a future extending beyond a couple of years matters to any of us.

 Worth noting that the fabulous bonanza that was the Monterey Shale Formation in California, the next Big Thing and savior, recently had its reserve totals adjusted downwards by about 90% as a result of ... facts (duly noted months before by J. David Hughes among others). I don't pretend much math knowledge, but I'm pretty sure that's not a good thing if oil supply is still important.

 Were it not for the fact that civilization has this crazy desire for progress, growth, and an enhanced quality of life for citizens, we could make do with what we've got since we're America and thus entitled to whatever we want just because.

 None of this very small sampling of facts means we're running out of oil next Tuesday, or next month, next year, or years from now. "Running out" is not what Peak oil is all about. Peak oil is about the rates of oil production, and declining rates mean declining supplies at a time when demand is and will be increasing significantly in many parts of the world.

 It's important that we understand what this means, and how it will affect each and every one of us in our daily lives. Changes are in the offing. Knowing the facts--all of them--the Happy Talk ones from industry cheerleaders and the not nearly as pleasant ones, is a good place to start.

It will be a crisis only if we let it be, and that will happen because we all decide to wait until some undetermined "later" to start doing something/anything.

We'll never be able to restructure our petroleum-based economies overnight, and without some planning now, attempting that might be precisely what we'll be faced with.

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