The End of Oil

[Fade the Butcher]

This article made the NYTimes the other day. I must have missed it. Has anyone else noticed that Malthusianism, Protectionism, Darwinism, Nationalism, Anti-Liberalism, and Racialism have all begun something of a resurgence in recent years?

Energy Bulletin (http://www.energybulletin.net/13368.html)

NY Times (http://select.nytimes.com/gst/tsc.html?URI=http://select.nytimes.com/2006/03/01/opinion/01talkingpoints.html&OQ=_rQ3D1Q26pagewantedQ3Dall&OP=65dfb2d8Q2F)GQ24E)DQ5CHooD)Q22rrI)ri)rK)oLQ2AQ7EQ2AoQ7E)rKDQ26.Q7BQ2AQ7EgLoQ2AQ7EDQ5CxkD2.)

When President Bush (http://www.whitehouse.gov/president/gwbbio.html) declared in his 2006 State of the Union address (http://www.whitehouse.gov/stateoftheunion/2006) that America must cure its "addiction to oil," he framed his case largely in terms of national security — the need to liberate the country from of its dependence on volatile and in some cases hostile nations for much of its energy. He failed to mention two other good reasons to sober up. Both are at least as pressing as national security.

One is global warming. This is not an issue Mr. Bush cares much about. Yet there is no longer any doubt among mainstream scientists that the earth is warming up, that increasing atmospheric temperatures have already damaged fragile ecosystems and that our only real defense against even graver consequences is to burn less fossil fuel — which means, among other things, using less oil.

The second reason is just as unsettling, and is only starting to get the attention it deserves. The Age of Oil (http://www.economist.com/printedition/displaystory.cfm?Story_ID=2155717) — 100-plus years of astonishing economic growth made possible by cheap, abundant oil — could be ending without our really being aware of it. Oil is a finite commodity. At some point even the vast reservoirs of Saudi Arabia (http://www.cia.gov/cia/publications/factbook/geos/sa.html) will run dry. But before that happens there will come a day when oil production "peaks," when demand overtakes supply (and never looks back), resulting in large and possibly catastrophic price increases that could make today's $60-a-barrel oil look like chump change. Unless, of course, we begin to develop substitutes for oil. Or begin to live more abstemiously. Or both. The concept of peak oil has not been widely written about. But people are talking about it now. It deserves a careful look — largely because it is almost certainly correct. . .

[Thinker]

http://economics.about.com/cs/macroeconomics/a/run_out_of_oil.htm

We Will Never Run Out of Oil
From Mike Moffatt, Your Guide to Economics.

The Oil Supply - The Doomsday Scenarios are Flawed

For as long as I can remember, I've been hearing that the world oil supply will run out in a few decades. I remember quite vividly growing up in the early 1980's hearing that there wouldn't be any oil left by the time I learned how to drive. Fortunately these predictions never came true, but the idea that we will exhaust all the oil under the surface of the earth is a persistent one.

Predictions that we will run out of oil after a certain period of time are based on an ignorance of the economic way of thinking. The typical way to estimate the number of years it will take us to run out of oil is to consider the following factors:

1. The number of barrels we can extract with existing technology.
2. The number of barrels used worldwide in a year.

The most naive way to make a prediction is to simply do the following calculation:

Yrs. of oil left = # of barrels available / # of barrels used in a year.

So if there are 150 million barrels of oil in the ground and we use 10 million a year, this type of thinking would suggest that the oil supply will run out in 15 years. If the predictor realizes that with new drilling technology we can gain access to more oil, he will incorporate this into his estimate of #1 making a more optimistic prediction of when the oil will run out. If the predictor incorporates population growth and the fact that demand for oil per person often rises he will incorporate this into his estimate for #2 making a more pessimistic prediction. These predictions, however, are inherently flawed because they violate basic economic principles. By using economic principles, we will see that:

WE WILL NEVER RUN OUT OF OIL

At least not in a physical sense. There will still be oil in the ground 10 years from now, and 50 years from now and 500 years from now. This will hold true no matter if you take a pessimistic or optimistic view about the amount of oil still available to be extracted. Let's suppose that the supply really is quite limited. What will happen as the supply starts to diminish? First we would expect to see some wells run dry and either be replaced with new wells that have higher associated costs or not be replaced at all. Either of these would cause the price at the pump to rise. When the price of gasoline rises, people naturally buy less of it; the amount of this reduction being determined by the amount of the price increase and the consumer's elasticity of demand for gasoline. This does not necessarily mean that people will drive less (though it is likely), it may mean that consumers trade in their SUVs for smaller cars, hybrid vehicles, or cars that run on alternative fuels. Each consumer will react to the price change differently, so we would expect to see everything from more people bicycling to work to used car lots full of Lincoln Navigators.

If we go back to Economics 101, this effect is clearly visible. The continual reduction of the supply of oil is represented by a series of small shifts of the supply curve to the left and an associated move along the demand curve. Since gasoline is a normal good, Economics 101 tells us that we will have a series of price increases and a series of reductions in the total amount of gasoline consumed. Eventually the price will reach a point where gasoline will become a niche good purchased by very few consumers, while other consumers will have found alternatives to gas. When this happens there will still be plenty of oil in the ground, but consumers will have found alternatives that make more economic sense to them, so there will be little, if any, demand for gasoline.

SO DOES THIS MEAN THE GOVERNMENT SHOULD BE SPENDING MORE MONEY ON FUEL CELL RESEARCH?

Not necessarily. There already exists plenty of alternatives to the standard internal combustion engine. With gasoline less than $2.00 a gallon in most areas of the United States, electric cars are not very popular. If the price were significantly higher, say $4.00 or $6.00, I'd expect to see quite a few electric cars on the road. Hybrid cars, while not a strict alternative to the internal combustion engine, would reduce the demand for gasoline as these vehicles can get twice the mileage of many comparable cars. Advances in these technologies, making electric and hybrid cars cheaper to produce and more useful, may make fuel cell technology unnecessary. Keep in mind that as the price of gasoline rises, the car manufacturers will have an incentive to develop cars which run on less expensive alternative fuels in order to win the business of consumers fed up with high gas prices.

An expensive government program in alternative fuels and fuel cells seems unnecessary.

WON'T THERE BE A COST TO THE ECONOMY? WON'T WE SEE A RETURN TO THE PROBLEMS OF THE 1970'S?

When a useful commodity, such as gasoline, becomes scarce, there is always a cost to the economy, just as there would be a benefit to the economy if we discovered a limitless form of energy. This is because the value of the economy is roughly measured by the value of the goods and services it produces. Remember that barring any unforeseen tragedy or deliberate measure to limit the supply of oil, the supply will not drop suddenly, meaning that the price will not rise suddenly.

The 1970's were much different because we saw a sudden and significant drop in the amount of oil on the world market due to a cartel of oil producing nations deliberately cutting back on production in order to raise the world price. This is quite a bit different than a slow natural decline in the supply of oil due to depletion. So unlike the 1970's, we should not expect to see large lines at the pump and large overnight price increases. This is assuming that the government does not try to "fix" the problem of a declining oil supply by rationing. Given what the 1970's taught us, this would be very unlikely.

In conclusion, if markets are allowed to function freely the supply of oil will never run out, in a physical sense, though it's quite likely that in the future gasoline will become a niche commodity. Changes in consumer patterns and the emergence of new technology driven by increases in the price of oil will prevent the oil supply from ever physically running out. While predicting doomsday scenarios may be a good way to get people to know your name, they are a very poor predictor of what is likely to happen in the future.

[Gorilla]

100-plus years of astonishing economic growth made possible by cheap, abundant oil — could be ending without our really being aware of it. Oil is a finite commodity. At some point even the vast reservoirs of Saudi Arabia (http://www.cia.gov/cia/publications/factbook/geos/sa.html) will run dry.

I've read that apparently there is so much oil that we could make the earth uninhabitable via a greenhouse effect, with crushed lungs due to the atmospheric pressure by a factor of over three times, or thereabouts.

[Fade the Butcher]

Hmm. Let's see. Which discipline has more credibility: economics or geology? Ever have fun historicizing the forecasts of free traitor economists? This one is my personal favorite, as Glassman is a harsh critic of Lou Dobbs

http://images.amazon.com/images/P/0609806998.01._BO2,204,203,200_PIsitb-dp-500-arrow,TopRight,45,-64_AA240_SH20_SCLZZZZZZZ_.jpg

http://www.amazon.com/gp/product/0609806998/102-3838095-2828114?v=glance&n=283155

Order your copy today!

[Thinker]

Hmm. Let's see. Which discipline has more credibility: economics or geology? Ever have fun historicizing the forecasts of free traitor economists? This one is my personal favorite, as Glassman is a harsh critic of Lou Dobbs

http://images.amazon.com/images/P/0609806998.01._BO2,204,203,200_PIsitb-dp-500-arrow,TopRight,45,-64_AA240_SH20_SCLZZZZZZZ_.jpg

http://www.amazon.com/gp/product/0609806998/102-3838095-2828114?v=glance&n=283155

Order your copy today!
It appears you didn't read the essay.

His conclusion holds true even if the supply of oil in the ground is really quite limited.

[Fade the Butcher]

It appears you didn't read the essay. His conclusion holds true even if the supply of oil in the ground is really quite limited.

Why should I read the essay?

[Thinker]

Why should I read the essay?
Are you afraid to do so?

[Ahknaton]

Either of these would cause the price at the pump to rise. When the price of gasoline rises, people naturally buy less of it; the amount of this reduction being determined by the amount of the price increase and the consumer's elasticity of demand for gasoline. This does not necessarily mean that people will drive less (though it is likely), it may mean that consumers trade in their SUVs for smaller cars, hybrid vehicles, or cars that run on alternative fuels. Each consumer will react to the price change differently, so we would expect to see everything from more people bicycling to work to used car lots full of Lincoln Navigators.

If we go back to Economics 101, this effect is clearly visible. The continual reduction of the supply of oil is represented by a series of small shifts of the supply curve to the left and an associated move along the demand curve. Since gasoline is a normal good, Economics 101 tells us that we will have a series of price increases and a series of reductions in the total amount of gasoline consumed. Eventually the price will reach a point where gasoline will become a niche good purchased by very few consumers, while other consumers will have found alternatives to gas. When this happens there will still be plenty of oil in the ground, but consumers will have found alternatives that make more economic sense to them, so there will be little, if any, demand for gasoline.
Petrol has a very inelastic demand curve - consumers tend to just swallow any price increase without reducing the number of kilometres travelled. Another reason for the inelasticity of petrol consumption is the lack of readily available alternatives. Bicycles or public transport would not be desirable alternatives to cars for many people and vehicles running on alternative fuels (or hybrids) haven't taken off in a major way yet. Of course this would obviously change in the extreme case, say, if the price were to increase by 500%.

The price inelasticity of petrol is one of the reasons that some governments are so fond of taxing it (same goes for cigarettes and alcohol). Governments like to tax inelastic goods because they can increase tax rates on them without the tax hike leading to lower consumption (and therefore cancelling out the next gain in tax revenues).

Moffatt's analysis seems to be assuming an elastic demand curve, which is not the case for petrol.

[Thinker]

Petrol has a very inelastic demand curve - consumers tend to just swallow any price increase without reducing the number of kilometres travelled. Of course this would obviously change in the extreme case, say, if the price were to increase by 500%.

The price inelasticity of petrol is one of the reasons that some governments are sp fond of taxing it (same goes for cigarettes and alcohol). Governments like to tax inelastic goods because they can increase tax rates on them without the tax hike leading to lower consumption (and therefore cancelling out the next gain in tax revenues).
If you are correct, then as consumers continue to ignore the price of oil and continue to pay whatever they need to get their gasoline, then this will start to deplete supplies quite rapidly.

But, if supplies start to deplete quite rapidly, and if they truely are quite limited, then at some point the price will increase to something extreme such as 500%, at which point consumers will start to decrease their consumption and look at alternatives.

[Fade the Butcher]

Are you afraid to do so?

I think astrology is interesting (unlike neoclassical economics), but I don't spend much of my limited time pursuing the subject.

[Dan Dare]

There will still be oil in the ground 10 years from now, and 50 years from now and 500 years from now.

This is almost certainly true.

But what is also absolutely true is that even less that 50 years from now there will not be sufficient oil produced to fuel the 150 million or so motor vehicles that North Americans would wish to use, let alone the 400 to 500 million vehicles that the Chinese and Indians aspire to own.

[Fade the Butcher]

This is almost certainly true.

Moffat is attacking a straw man. The Peak Oil argument has nothing to do with the planet running out of oil.

[Thinker]

Moffat is attacking a straw man. The Peak Oil argument has nothing to do with the planet running out of oil.
Moffat did not mention the Peak Oil concept at all. As far as I know, he might even have written that essay before the "Peak Oil" concept came into vogue.

Rather, he was simply addressing the general concept of "running out of oil."

[Thinker]

This is almost certainly true.

But what is also absolutely true is that even less that 50 years from now there will not be sufficient oil produced to fuel the 150 million or so motor vehicles that North Americans would wish to use, let alone the 400 to 500 million vehicles that the Chinese and Indians aspire to own.
The point of his essay being, if there is not a sufficient amount of oil to fuel all those cars, the price of oil will go sky-high and people will have to find some other way of powering their vehicles.

[Dan Dare]

Thinker you keep producing this same old red herring out of your hat.

There is no more chance of the world 'running out' of oil than it it has of running out of sand, but the difference is that the marginal cost of producing the next barrel of oil is going to continue to increase exponentially within our lifetimes.

We have to face the fact that the Petroleum Age is drawing to a close just as the Age of Charcoal did before it.

Even the oil majors are acknowledging this fact of life; BP has receently changed its corporate tag line from British Petroleum to Beyond Petroleum.

[Thinker]

There is no more chance of the world 'running out' of oil than it it has of running out of sand . . .

We have to face the fact that the Petroleum Age is drawing to a close just as the Age of Charcoal did before it.

Dan, you're contradicting yourself. Re-read those two quotes of yours above.

Even if the cost of producing oil is going to increase . . . so what??? This will make oil more expensive . . . which means that we'll use it more frugally.

Do you have some objection to using oil more frugally? I thought that would be something you would welcome.

[Dan Dare]

No - of course I don't have any objection to using oil more frugally. It's obviously going to be necessary to do so over the next twenty years or so.

But the point remains that even if if the average vehicle were somehow to quintuple its efficiency to over 100 mpg there will still not be sufficient petroleum available in the middle of this century to power the 150 million vehicles in North America and the 100 million or so in Europe, let alone the hundreds of millions that the Asians are aspiring as they respond to our marketing messages.

Anyone who claims otherwise is an irresponsible charlatan.

[Thinker]

No - of course I don't have any objection to using oil more frugally. It's obviously going to be necessary to do so over the next twenty years or so.

But the point remains that even if if the average vehicle were somehow to quintuple its efficiency to over 100 mpg there will still not be sufficient petroleum available in the middle of this century to power the 150 million vehicles in North America and the 100 million or so in Europe, let alone the hundreds of millions that the Asians are aspiring as they respond to our marketing messages.

Anyone who claims otherwise is an irresponsible charlatan.
I don't think anyone is claiming otherwise.

But the faster the folks in Asia in addition to the ones in North America and Europe begin to use it up, the sooner its price will go way up, and the sooner we all will have to start using it frugally.

[Dan Dare]

Oh OK I think I'm starting to get the strategy now.

We should encourage the Asians to develop Western style patterns of consumption so that the available resources will expire that much sooner which is naturally going to stimulate the development of alternative energy resources much sooner rather than later.

You don't think there's any risk of us in the West being reduced to travel by donkey-cart in the unlikely event of there being a gap between the end of affordable petroleum and whatever it is that comes along to take its place, do you?

[Fade the Butcher]

Moffat did not mention the Peak Oil concept at all. As far as I know, he might even have written that essay before the "Peak Oil" concept came into vogue. Rather, he was simply addressing the general concept of "running out of oil."

He was attacking a straw man argument.

[Thinker]

Oh OK I think I'm starting to get the strategy now.

We should encourage the Asians to develop Western style patterns of consumption so that the available resources will expire that much sooner which is naturally going to stimulate the development of alternative energy resources much sooner rather than later.

You don't think there's any risk of us in the West being reduced to travel by donkey-cart in the unlikely event of there being a gap between the end of affordable petroleum and whatever it is that comes along to take its place, do you?
I knew you were gonna say something like this. :)

If Asians didn't develop Western-style patterns of consumption, then the price of oil would not go so high, so soon.

If the price of oil did not go so high so soon, then its inexpensive price would merely encourage Westerners to use it willy-nilly and wastefully, as they've been doing for a century.

If Westerners were encouraged to use it willy-nilly and wastefully due to its inexpensive price, then it would still run out quickly anyway!!

In either scenario, the resource will be used up at about the same rate. Either you have Westerners alone using it willy-nilly and wastefully, or you have Westerners and Asians together using it frugally.

[Dan Dare]

I knew you were gonna say something like this. :)



Then I'm surprised you didn't have more a coherent response ready to hand.

Why should the West encourage the third world to develop western styles of consumption and run the risk of having to trade our SUVs for donkey-carts when the inevitable resource gap appears?

Just so we can feel good about ourselves? It's fairer, right?

And there is a third scenario.

[Ambrosio Spinola]

I must confess my total ignorance on this matter Dan, you seem to know good. Why is there no chance of running out of pretroleum in the next 500 years as you so say? You know there are enough oil fields worldwide to eventually power the planetary consumption we are doing of this resource?

I would have thought that the petrol revolution over charcole happened because petroleum proved to be a more efficient engine with very cheap oil prices. Easier to haul the fuel (no bulcky coal). But what exactly is now this more optimal engine/powrsource? Gas engines as electrical engines still majorly suck when you take into account your average power request on your vehicle. I mean..I alone must travel on car about three hours of my day. How many power stations would we need every few miles to makes this worthwhile. The engines and the power request is just not ready. We do not gain anything right now by switching, like petroleum users got when they switched from charcoal. Right now all this switching thing is just pure "eco fashion", not really a "get ready for the change". So, if Dan confirms we will still swim in 500 years in billions of oil barrels then I see no reason we or the more primitive engined emerging third worlders would like to switch to eco-gas driven Golf Carts.

[Kodos]

We Will Never Run Out of Oil

Why did US production peak in the 70's, while I'm skeptical of an imminent peak no way supply keeps up with rising Chinese and Indian demand.

[Kodos]

I must confess my total ignorance on this matter Dan, you seem to know good. Why is there no chance of running out of pretroleum in the next 500 years as you so say? You know there are enough oil fields worldwide to eventually power the planetary consumption we are doing of this resource?

Nuclear is the only thing we have now that could keep things going with excess power left over to produce fuel.

[Ambrosio Spinola]

Damn Chernobyl paranoia. Natural energy sources like wind are cool but I´m not sure its enough for our needs. Cold fission is ever be made possible would be it. We should pour much more cash on R&D as we do. Think about the amounts that got spend during the WW2. In a few years we jumped whole decades in reasearch and development of new technologies. We need more space progam too.

[Kodos]

Damn Chernobyl paranoia. Natural energy sources like wind are cool but I´m not sure its enough for our needs.

Wind could help a little but not nearly enough, solar needs a more efficient panel.

Cold fission is ever be made possible would be it. We should pour much more cash on R&D as we do. Think about the amounts that got spend during the WW2. In a few years we jumped whole decades in reasearch and development of new technologies. We need more space progam too.

Are you asking "could fission" or about "cold fusion", cold fusion seems absurd on its face to me. Fusion by nature produces massive amounts of heat. Controlled fusion itself is an extremely difficult problem... outside of the massive gravity and pressure present at the core of stars any large fusion reaction produces the H bomb...

[Dan Dare]

I must confess my total ignorance on this matter Dan, you seem to know good. Why is there no chance of running out of pretroleum in the next 500 years as you so say? You know there are enough oil fields worldwide to eventually power the planetary consumption we are doing of this resource?...

Ebus, I think you may have misunderstood my comments, which is my fault for not being clear enough if that is the case.

When I say the world will not run out of oil, what I mean is that, at some point in the probably not too distant future, petroleum will become a much too precious resource to use for transportation or to burn in boilers. As someone mentioned above, it has a number of presently irreplaceable applications as a feedstock for certain other high-value products such as pharmaceuticals. At that point the oil majors, having extracted the last available dollar from our grasp, will turn their attention towards other revenue sources.

This is actually a point made over 30 years ago by the Shah of Iran during the first Arab oil crisis when he counselled the West to start to contemplate investing in alternative energy sources. He was just a bit before his time.

So the question is, do we go hell for leather as Thinker recommends and use up all the available resources at the maximum possible rate in concert with our Asian friends who are just developing a taste for a Western lifestyle, and hope that the oil majors and others will pull a rabbit out of the hat just-in-time, as it were?

Or do we proceed more cautiously, husbanding the available resources, keeping them to ourselves (by discouraging Chinese auto production for example) so as to ease the transition to a post-petroleum future?

[Kodos]

The way to prepare for it is to break ground on 500 nuclear power plants...

[Ambrosio Spinola]

Ok...got ya there. Problem is how can you stop the Chinese from reaching out for new needs? They have hard cash just the same now. We just can not stop anything of the sorts in this system.

[Dan Dare]

Another way is for every new home in America to be fitted with a 5 kW photovoltaic array.

[Dan Dare]

Ok...got ya there. Problem is how can you stop the Chinese from reaching out for new needs? They have hard cash just the same now. We just can not stop anything of the sorts in this system.

These are hard strategic choices that are probably better not left for the market to decide.

[Ambrosio Spinola]

The problem there are just not good enough gas or electric engines out there at this time. Much more R&D funds should go that way and are not. The Oil giants I bet have every intention of draining the last buck out of us before we have to crash course towards new sources.

[Kodos]

Another way is for every new home in America to be fitted with a 5 kW photovoltaic array.

Only semi feasible in the Southern US. Oil isn't really used for electricity that much anymore, what you would have to do to cut down on oil consumption is use the excess power for electrolysis and then build a huge hydrogen transportation infrastructure.

Hence why you need a massive surplus of nuclear power... all this even if centrally planned efficiently( which central planning tends not to be though I think in this circumstance its a regretable necessity) would take at least 8 years to become fully operational.

In the interim we should use the coal liquefication process developed by the Germans during WWII( its actually economical at current oil prices).

[Dan Dare]

The problem there are just not good enough gas or electric engines out there at this time. Much more R&D funds should go that way and are not. The Oil giants I bet have every intention of draining the last buck out of us before we have to crash course towards new sources.

I believe this is true. It's why I say it is too important an issue to be left to the vagaries of the market.

Whatever the answer, we should certainly be contemplating some radical changes in our lifestyle. Probably more so in North America than elsewhere.

[Kodos]

I believe this is true. It's why I say it is too important an issue to be left to the vagaries of the market.

While hippie conspiracy theories of "the big 3" and the oil companies supressing "an engine that runs on water" are absurd there is a lot of truth that the big 3 have held up a lot of new engine designs...

[Dan Dare]

Only semi feasible in the Southern US.

Actually not, here's a solar-powered zero-net energy house on the grey and cloudy coast of Oregon.

http://www.solaror.org/ftp/SolarOrSpr05.pdf

http://www.taunton.com/finehomebuilding/pages/fh_177_102.asp#

[Kodos]

Nuclear is far more economical, in high school I once had the idea of buying lots of vacant desert land in Arizona Nevada or New Mexico and turning it into a big solar farm... then I did some research and some basic math on the cost. ROI to break even( rough estimate) was about 30 years( assuming no maintence had to be done).

[Fade the Butcher]

We Will Never Run Out of Oil

Why did US production peak in the 70's, while I'm skeptical of an imminent peak no way supply keeps up with rising Chinese and Indian demand.

Here is a better question. Why do we bother drilling for oil in the artic or offshore in the deep sea if oil is so accessible and abundant?

[Professor John Frink]

1. The number of barrels we can extract with existing technology.



Yep, there's plenty of oil that can be extracted using future technologies, as confirmed by experts.

[Thinker]

Then I'm surprised you didn't have more a coherent response ready to hand.
I'll repeat, with minor changes:

If Asians didn't develop Western-style patterns of consumption, then the price of oil would not get very high, because there would be less demand for it. That is, the price of oil would stay relatively low.

If the price of oil remained low, this would merely encourage Westerners to use it willy-nilly and wastefully.

If Westerners used it willy-nilly and wastefully, then it would still run out quickly anyway!!

In either scenario, the resource will be used up at about the same rate. Either you have Westerners alone using it willy-nilly and wastefully because of its cheap price, or you have Westerners and Asians each using it frugally because of its high price.

Now, of course if Asians didn't aspire to Western consumer lifestyles and didn't start using so much oil, with only Westerners using much of it, then the low price of oil wouldn't stay low for long if Westerners started using it willy-nilly - that is, increased demand by Westerners would have the same effect as if you added consumptive Asians into the picture (demand would increase, as would the price, which in turn would squelch demand). In other words, in the long run you'd get the same price/consumption effect with or without Asians in the picture.


Why should the West encourage the third world to develop western styles of consumption and run the risk of having to trade our SUVs for donkey-carts when the inevitable resource gap appears?

Just so we can feel good about ourselves? It's fairer, right?

Dan, I can't believe you said that.

You sound like you want us to keep our SUV's rather than trade them in for Toyota Prius'. Sometimes I think that, even though you keep complaining about Westerners doing all sorts of environmentally wasteful things, deep down you enjoy it.

[Thinker]

Ebus, I think you may have misunderstood my comments, which is my fault for not being clear enough if that is the case.

When I say the world will not run out of oil, what I mean is that, at some point in the probably not too distant future, petroleum will become a much too precious resource to use for transportation or to burn in boilers. As someone mentioned above, it has a number of presently irreplaceable applications as a feedstock for certain other high-value products such as pharmaceuticals. At that point the oil majors, having extracted the last available dollar from our grasp, will turn their attention towards other revenue sources.

This is actually a point made over 30 years ago by the Shah of Iran during the first Arab oil crisis when he counselled the West to start to contemplate investing in alternative energy sources. He was just a bit before his time.

So the question is, do we go hell for leather as Thinker recommends and use up all the available resources at the maximum possible rate in concert with our Asian friends who are just developing a taste for a Western lifestyle, and hope that the oil majors and others will pull a rabbit out of the hat just-in-time, as it were?

Or do we proceed more cautiously, husbanding the available resources, keeping them to ourselves (by discouraging Chinese auto production for example) so as to ease the transition to a post-petroleum future?
Dan, since most of this resource (oil) is not in our hands, it is not "ours" to keep for ourselves.

I am not advocating that we go and use it up at the maximum possible rate. Rather, I'm pointing out that if we did decide to use it up at the maximum possible rate, the price would quickly shoot up, which would then make us decide to not use it at the maximum possible rate. Essentially, it's a self-regulating process.

[Anarch]

This article made the NYTimes the other day. I must have missed it. Has anyone else noticed that Malthusianism, Protectionism, Darwinism, Nationalism, Anti-Liberalism, and Racialism have all begun something of a resurgence in recent years?

Actually it was Austrian economics and Darwinism that converted me over to protectionism. Ethnonationalism cannot be argued against from a sociobiological POV. Liberalism is gay. Literally, partially.

[Dan Dare]

Thinker, there is a third option, as we have discussed before.

The West could both opt for frugality as an oil depletion strategy, thereby extending the life of the available resources pending availability of viable alternatives, and also refrain from aiding and abetting several billion third worlders in their aspirations to attain a lifestyle based on western resource consumption patterns.

[Crunch_Hardtack]

The Government knows all about Peak Oil and is scared out of it's gord. It's only a few crackpot economists that continue to deny it.

Read what the US army says:

http://www.energybulletin.net/13737.html

[Sinclair]

The Western lifestyle is insane when it comes to nonrenewable resources. Perhaps emblematic is somebody, alone, in an SUV, driving a few blocks.

[Thinker]

Thinker, there is a third option, as we have discussed before.

The West could both opt for frugality as an oil depletion strategy, thereby extending the life of the available resources pending availability of viable alternatives, and also refrain from aiding and abetting several billion third worlders in their aspirations to attain a lifestyle based on western resource consumption patterns.
Sounds nice, but it won't really work. Why?

If the West opted for frugality, oil consumption would go down. If oil consumption went down, so would the worldwide price. If the price went down, this would merely encourage someone to use more of it. Even if the West enacted policies to not use more even as the price went down, then the Japanese and other Asians, Latin Americans and other 3rd Worlders would increase their oil consumption.

And there's already too much money floating around the non-West to do anything about stopping the India's and the China's of the world from developing. As I pointed out in some other thread somewhere, already the Japanese, South Koreans and Taiwanese are some of the largest investors in China.

[Thinker]

Oh yeah - and here's a bit of "bad" news for you oil frugality folks, hot off the presses today - if the initial speculation turns out to be true:

http://www.bloomberg.com/apps/news?pid=10000086&sid=aIBxl_BqGlFU&refer=latin_america
^
"Petroleos Mexicanos, Mexico's state- owned oil company, is drilling a deep-water exploratory well that may lead to discovery of as much as 10 billion barrels of petroleum, Chief Executive Officer Luis Ramirez said."

[Dan Dare]

You've got excited about these bonanzas before; at current consumption levels 10 billion barrels represents about 130 days supply.

[Dan Dare]

Sounds nice, but it won't really work. Why?

If the West opted for frugality, oil consumption would go down. If oil consumption went down, so would the worldwide price. If the price went down, this would merely encourage someone to use more of it. Even if the West enacted policies to not use more even as the price went down, then the Japanese and other Asians, Latin Americans and other 3rd Worlders would increase their oil consumption.

And there's already too much money floating around the non-West to do anything about stopping the India's and the China's of the world from developing. As I pointed out in some other thread somewhere, already the Japanese, South Koreans and Taiwanese are some of the largest investors in China.

Over 80% of the world's petroleum resrves fall within the West's 'sphere of influence'. It would be a relatively simple matter logistically and militarily to direct the supply from those regions towards western markets and to constrain petroleum shipments to other regions.

[Thinker]

You've got excited about these bonanzas before; at current consumption levels 10 billion barrels represents about 130 days supply.
Except, of course, that the world wouldn't use oil exclusively from this one source for 130 days.

[Thinker]

Over 80% of the world's petroleum resrves fall within the West's 'sphere of influence'.
???

The folks in Saudi Arabia can sell their oil to anyone they want.


It would be a relatively simple matter logistically and militarily to direct the supply from those regions towards western markets and to constrain petroleum shipments to other regions.
Dan, you're beginning to sound like a regular neocon. ;)

[Dan Dare]

???

The folks in Saudi Arabia can sell their oil to anyone they want.

Three divisions of Marines could put a stop to that. And without western equipment and techincal support Aramco would grind to a halt in 60 days or maybe less.


Dan, you're beginning to sound like a regular neocon. ;)

It's called Realpolitik, innit. Welcome to the upcoming 21C Resource Conflicts.

[Dan Dare]

Except, of course, that the world wouldn't use oil exclusively from this one source for 130 days.

OK, 17 months if it all goes to to the US market.

[Felix the Cat]

US military eyes coal as fuel source (http://english.aljazeera.net/NR/exeres/6224A66B-D4A9-4CB6-B02B-B9443B7FEA7E.htm)

The Pentagon is trying to persuade investors and the energy industry to embrace an 80-year-old technology to turn coal into liquid fuel to power planes, tanks and other battlefield vehicles.

Officials have been crisscrossing the country, meeting energy companies and state government officials to sell them the idea. At the same time, military researchers have been testing fuel produced by the process to make sure it is suitable for military vehicles, especially older ones.

The military is worried that political pressure or terrorist acts could cut the flow of oil from the Middle East or hurricanes or terrorists could destroy US refineries.

William Harrison, the senior adviser for the Pentagon's Assured Fuels Initiative, said: "We know what the technical challenges are, but we don't see any show-stoppers. There is still a level of uncertainty, but it looks like the technology is mature enough."

Building coal-to-fuel plants is expensive - possibly up to $5 billion. Investors worry that their money could go up in smoke if the global price of oil drops, budding government subsidies dry up, or tougher environmental rules are put into place, said Kevin Book, a senior analyst for Friedman, Billings, Ramsey & Co Inc.

But then there is coal - lots of it.

The Middle East has about 685 billion barrels of oil compared with 22 billion barrels in the United States. However, there is enough coal in the United States to produce 964 billion barrels of fuel, according to the Pentagon.

Montana, with enough coal to produce 240 billion barrels of fuel, leads the pack, followed by Illinois, Wyoming, West Virginia, Kentucky, Pennsylvania and Ohio.


Mike Carey, the president of the Ohio Coal Association, said: "We have probably 250 years' worth of coal. It would have a tremendous impact on the coal industry."

The industry is already on the rise.

Demand for US coal is expected to be a record 1.2 billion tons this year, up from 1.18 billion in 2005, according to the National Mining Association. Production is forecast to be 1.16 billion tons, a 3.2% increase over 2005.

Coal is used mainly to generate electricity and in steel-making. Although experts say the coal-to-fuel process works, it is being done in just a few small demonstration projects.

The Pentagon began looking at coal in 2001 when Congress earmarked $13 million to investigate the Fischer-Tropsch process in which coal is gasified and then liquefied into fuel. The technology was developed by Germany in the 1920s and used by South Africa beginning in the 1950s.

The military accounts for about 4% of US fuel consumption.

Cleaner fuel

The process promises to produce a cleaner fuel that gives off more energy per pound and is less subject to freezing. It would reduce transportation costs and ease logistical headaches by enabling the military to use one fuel for all of its aircraft and vehicles instead of the more than half dozen different fuels now used.

"See how beautifully clean that fuel is," Harrison said, pointing to a dancing flame inside a large glass tube at a Wright-Patterson Air Force Base lab. The flame turned from orange to blue as the soot was reduced when the fire began to burn fuel similar to what would be produced from coal.

Harrison, chief of the Air Force's fuels lab at the base, has been trying to light a fire in the private sector. He has spoken to state and industry officials in Ohio, West Virginia, Pennsylvania, Illinois, Montana and North Dakota.

Some energy companies are eager to have the military for a customer.

DKRW Energy in Texas hopes to begin producing coal-based diesel fuel in 2010. The company needs to complete the permitting process and obtain financing for a $1 billion plant that would produce 11,000 barrels of fuel a day in Wyoming.

Oklahoma-based Syntroleum converts natural gas into liquid fuels and is currently involved in several coal-to-fuel projects.

President Jack Holmes said increasing demand for oil should keep the price high and coal-based fuel attractive.

"We think that now's the time," Holmes said. "If we can get these first few plants built and running and get the acceptability in the government and industry, there's a big market to do this."

Others point out that similar talk in previous years evaporated when Middle East producers cut the price of oil.

[Dan Dare]

The 250 years supply of coal in the US assumes no future growth in consumption. See the attached table for reserve life as well as the projected date for "Peak Coal" for different depletion rates.

http://img480.imageshack.us/img480/9114/uscoal1ra.th.jpg (http://img480.imageshack.us/my.php?image=uscoal1ra.jpg)

[cyborg]

Here's a pretty good summary released today.

1. Oil must be found before it can be produced.

No commodity can be exploited if its existence is unknown. No oil can enter production if it is undiscovered. An absence of discovery therefore yields a future absence of production.

2. Oil must be produced before it can be used.

No commodity is useful if it is not brought to a useful state. Oil reserves are useless if they are not transformed into a usable product. Oil reserves are therefore of no use until they are brought to the surface, refined, and moved to the point of desired use.

3. On the scale of the lifetime of our current civilization, oil is a finite resource.

Any energy source is finite given the appropriate amount of time. The sun will eventually exhaust its nuclear fuel, but over the course of a human lifetime (or even the human species’ lifetime) solar energy will not be depleted. Oil production will peak within the lifetime of our current civilization. There is no position in the debate (including abiotic oil proponents) which disagrees with this point. Oil is renewable on the scale of the Earth’s lifetime, but our species would likely be extinct before oil reserves can be replenished.

4. If demand for oil is higher than the available supply of oil, not everyone who desires to use oil will have the option.

A fundamental economic principle: when demand exceeds supply, a shortage exists. Some who want to use oil will not have the option. The usual moderator for this situation is an increase in price.

5. Petroleum products have the highest energy density of any portable energy storage medium.

There are no known alternatives that match the energy density of products derived from fossil fuels.

6. The current economy would suffer if the cost of energy increased by a large percentage.

There are no suggestions that increases in energy costs improve the quality of the economy. There are major disagreements on the effects of high energy costs on the economy.

7. In a closed system, growth of any kind must eventually stop.

This is a founding principle of any scientific study, be it physics, chemistry, biology, or economics. If we take the earth as a closed system, then all growth must, at the very least, reach a maximum at some point: oil production, wealth, population, and so forth. Our choices determine when and how growth stops.

8. All known alternative energy sources currently have higher initial investment requirements than does oil.

Solar energy, wind energy, nuclear energy, coal-to-liquids, and others present a high cost-per-Watt than oil energy. This does not take into account the total life cycle costs, in which alternatives like solar and wind become among the most cost-effective energy sources.

9. Replacing the current oil-based infrastructure requires time.

Another fundamental principle of all science: going from point A to point B requires a finite amount of time. There is argument over how much time is required to replace our existing infrastructure.

10. Replacing the current oil-based infrastructure requires money.

A key to economic theory: a desired action can not be realized without applying an amount of currency. The amount and sources of funding are up for debate.

11. Replacing the current oil-based infrastructure requires energy.

In order to restructure our energy system, we must expend energy to manufacture replacement technology. This further reduces the amount of energy available after an infrastructure replacement.


http://www.energybulletin.net/30012.html

[Wodan]

I think the main problem with the Oil industry today, is the refining capacity.

[Thinker]

7. In a closed system, growth of any kind must eventually stop.

This is a founding principle of any scientific study, be it physics, chemistry, biology, or economics. If we take the earth as a closed system, then all growth must, at the very least, reach a maximum at some point: oil production, wealth, population, and so forth. Our choices determine when and how growth stops.
LOL, earth isn't a closed system - we ultimately get all our energy from an outside source: The sun.