Friday, August 29, 2008

How Much Oil Is There?

David Zondy is taking a look at resources and the ginned up fear of not enough.

As an Englishman living in America, where Marmite is hard to come by, I'm all too familiar with the concept of scarcity, but a lack of resource in a local or a particular instance is a very different kettle of fish from absolute scarcity. The Malthusian idea of overpopulation leading to the gobbling up of finite resources has been around for a couple of centuries now and what is remarkable about it is how it has proven so consistently wrong–especially when it tries to lay the blame on the doorstep of civilised, industrial nations. I'll grant you that the image of some future New York where a hundred million people live cheek by jowl in polluted squalor until the oil runs out and then they fall on one another like starving rats as nations go to war over what scraps are left does have a certain dramatic appeal in a Mad Max sort of way, but the real world doesn't and never has worked like that.

Overpopulation is a problem, but only locally in certain, to be blunt, backward parts of the world and even there the problem isn't too many people, but too many tyrants robbing them blind. They don't suffer so much from overpopulation as poverty. A village of a hundred people ruled by a dictator with only enough food for fifty and no way to buy more is "overpopulated". A city of a free ten million that can import more than it needs is not.
Which brings up the question of oil. Is there enough or has oil output peaked and the inevitable decline begun?

In a word - no. There is plenty of oil in the ground at current prices. Is that true? Well lets do an inventory to check that assertion.

...the world oil shortage is political, not geological. In the U.S., the government makes it virtually impossible to drill in new areas offshore. In Nigeria, civil strife has shut down major production. In Libya and Iran, Washington effectively blockaded and isolated the nations for years to inhibit new production. In Iraq, of course, the U.S. destroyed much of the infrastructure since the first Gulf war in 1991 and then blockaded reconstruction. In nations such as Russia and Mexico nationalism and corruption curtail increased production.

Outside of developed Western countries, the single largest reason for oil "shortages" is government incompetence and ownership of the subsoil rights so that landowners don't benefit from oil discoveries. In Patagonia, Argentina (a nation with abundant oil), I was told how it was common for landowners to try to hide any evidence of oil seepages from underground, lest the government oil company come in and ruin their lands with no benefit to themselves. Private mineral rights ownership is the reason some 90 percent of all oil wells drilled have been in the U.S. Scientific advances and innovative engineers keep coming up with ways to both discover new fields and keep old ones in production almost indefinitely.
That is pretty amazing, but there is more.

ANWR could become the fastest way to generate hundreds of billions of dollars of new oil. But laws need to be changed to fast track the leasing (there are 11 litigation choke points) and to create special courts to expedite environmental issues, as recently proposed by Rep. Michele Bachman (R-Minn.). Under current laws, it could indeed take 10 years to produce oil, compared to two or three years for the actual drilling and pumping. Additionally, leasing is done slowly, thanks to laws written when oil was plentiful. Such laws were designed to gain maximum upfront money for the government, not for speed. For example, BP recently paid $1.2 billion for a new offshore lease, some 400 miles east of Alaska's Prudhoe Bay. The cost and distance gives some idea of industry expectations as to the extent of oil reserves.
Well what do you know. Politics is causing higher oil prices in America. And who are the politicians against more American oil? The Democrats.
Washington has become paralyzed by dysfunctional government. France and China can build nuclear electric plants in just years; in the U.S. it takes a decade. Brazil will bring offshore oil online in 24 months, while for U.S. companies it takes 10 years. New refineries are virtually illegal to build. New electricity-generating plants using coal are now unable to obtain financing because of environment constraints.

This is destroying the value of the dollar and wrecking our balance of trade, making oil prohibitively expensive, and sending hundreds of billions of dollars to foreign lands—many of whom are no friends of America. No wonder 80 percent of Americans think their nation is on the wrong track. Washington needs to declare a national emergency program to produce energy. The reasons we don't are political, not technical. Indeed, new natural gas discoveries have knocked U.S. prices down by about 30 percent.
What do American resources of natural gas look like? About 150 trillion cubic feet of gas can be obtained by drilling and 590 trillion cubic feet are in gas hydrates. More than enough to last until we have other sources of power in sufficient quantities.

Are we done yet? Not by a long shot.
WASHINGTON -- House Speaker Nancy Pelosi opposes lifting the moratorium on drilling in the Arctic National Wildlife Refuge and on the Outer Continental Shelf. She won't even allow it to come to a vote. With $4 gas having massively shifted public opinion in favor of domestic production, she wants to protect her Democratic members from having to cast an anti-drilling election-year vote. Moreover, given the public mood, she might even lose. This cannot be permitted. Why? Because as she explained to Politico: "I'm trying to save the planet; I'm trying to save the planet."
She may lose her job over that one. In fact I hope so.

Here in the U.S., one out of every three ears of corn is stuffed into a gas tank (by way of ethanol), causing not just food shortages abroad and high prices at home, but intensive increases in farming with all of the attendant environmental problems (soil erosion, insecticide pollution, water consumption, etc.).

This to prevent drilling on an area in the Arctic one-sixth the size of Dulles Airport that leaves untouched a refuge one-third the size of Britain.

There are a dizzying number of economic and national security arguments for drilling at home: a $700 billion oil balance-of-payment deficit, a gas tax (equivalent) levied on the paychecks of American workers and poured into the treasuries of enemy and terror-supporting regimes, growing dependence on unstable states of the Persian Gulf and Caspian basin. Pelosi and the Democrats stand athwart shouting: We don't care. We come to save the planet!

They seem blissfully unaware that the argument for their drill-there-not-here policy collapses on its own environmental terms.
And that does not even count the cost of financing our adversaries Russia, Iran, and our "best friend" Saudi Arabia.

Did I mention that there are about 2 trillion barrels of oil shale in America and about 3 trillion barrels of tar sands in Canada where exploitation has only started? And don't tell me it costs too much. The Canadians are getting the oil from tar sands at about $15 to $20 a bbl. Oil shale, with water recycling to preserve precious water resources, might run $30 a bbl. We really don't know because the oil companies are not allowed to try. So what is the Republican answer? Watch this video to find out.

We don't have to pay high prices at the pump and send our money to people who don't like us if government would get out of the way. Republicans are on board. How about you Democrats?

Cross Posted at Classical Values


tomcpp said...

This graph nicely illustrates the problem with the tar sands :

Obviously we cannot make oil fields last forever (which you claim). I mean come on. That's not a reasonable assumption. Even if peak oil is not today, the question is, and remains "then when".

Unfortunately the answer is, "even if not today, it's not going to last very long at all". You might be right, that we can currently save our asses by drilling, I don't deny that, but as can be seen on the graphs oil shale is one of the very last supplies we have, and one of the worst.

Now first and foremost I am 100% in favor of saving our current asses, for if we don't do that, obviously we won't even get the chance to develop newer energy sources (which the environuts are going to attack just as much as oil before 10 years pass, especially fusion power will be attacked like mad).

But, first of those 10 trillion oil shale barrels barrels, today (without any depletion) we only have 3:1 energy gain. That means we're losing AT LEAST 3 trillion barrels, pumping up those 10 trillion, and that will in any reasonable estimate go up to 5 trillion barrels or even higher. Ie. 50% of extracted energy can actually be used and exported. Obviously oil used in the exploitation of oil shale is shown (by the UN) on the graphs as produced and used oil, so even of today's oil shale production you need to multiply by some factor between 1/2 and 2/3.

Furthermore, in an oil field extraction is limited. You can maybe get 50% of oil out of an optimum reservoir (for then it stops flowing, and you can't get it out anymore). Oil shale is worse. We probably can't get to 50% for oil shale. Also this factor gets worse the faster you pump. So let's assume 40% recovery.

Therefore we're at best going to extract, over the full lifetime of the fields 4 trillion barrels, of which we're going to need 2 to get the oil out of the ground.

That's already seriously less, but since oil shale needs to be pumped very slowly, they're going to (at best) add 3 million bbl/day to the flow, which means they're at their top about 4% of the total oil availabe at the pump.

That gas field off the coast of brazil, the largest find in over 10 years, is going to add about 200k bbl/day to a supply of about 85 million bbl/day. Needless to say, it won't matter that much in the price.

While "many small make 1 big", it's trivial to see that to make the prices drop to the previos level we'd need about 3500 brazil oil fields. And while we might get extremely lucky and find 10 or even 20, that's it.

Oil is running out, and yes we can get a delay. But that's all it is, a delay. And not a very long one.

Obviously we need to drill, you're entirely right about that, because without drilling, recession, and we all know just how research is done in a recession. Therefore we need oil flowing for as long as possible.

But we need (urgently) an alternative.

M. Simon said...

If we use nuclear power to generate steam the net energy might be a bit better than 3:1. Especially since we are converting it to liquid fuel.

The Canadians are moving in that direction.

Otherwise - yes, mostly.

LifeTrek said...

In the 1970's, as John O'Sullivan succinctly explains in his book, The President, The Pope and the Prime Minister, a myth sprung up that proclaimed, "the world was running out of raw materials and faced a future of inevitable shortages and falling standards of living." There was even a Davos-style group, The Club of Rome, that produced work statisticians called, "naive extrapolation,"claiming prices would rise until the world was plunged into a depression that could only be relieved by rationing. ...

...The reality is that throughout the 1970's the government had already introduced controls, in small steps at first, that hampered production of raw materials especially production of oil and gas. "Lo and behold -- the era of limits descended upon us."

The Greens have forced us to repeat history because they never gave up on their dream. Obama bought into this just as Carter did.
Obama, The Post -American Carter II

linearthinker said...

tomcpp: Obviously we cannot make oil fields last forever (which you claim).

Simon, you let him get away with this shit?

I failed to find where Simon has ever said we could make oil fields last forever.

As I've posted before, there's in excess of 200 years of domestic US supply available to begin extracting now, if we could overcome the environmental and leftist political obstacles. I stand behind that statement.

We don't need a 200 year supply, but we do need from 30 to 50 years to develop alternatives and shift infrastructure.

I'd like to keep the government completely out of it, but that's a pipe dream. What we can work toward is heading off governmental preferences that tilt the playing field toward a favored mix of some alternatives at the expense of others, ala T. Boone Pickens and his windfarm make-T-bone-richer subsidy scheme.

tomcpp said...

First : Simon, if I've offended you with that comment, I am sorry. I just think that your article strongly implies the belief that oil will last forever. It would be good to consider, imho, to add a careful estimate of how long oil will last. I doubt a daily supply of 80 million barrels/day will last to the end of this year, but I do realize that could easily be overly pessimistic thinking. But it's certainly not going to last 5 years.

@linearthinker : Unfortunately you don't have a 200-year supply. But let's assume that you're right and that oil is there, and can actually be extracted (generally about 40% is feasible to extract, 50% for extremely optimal reservoirs under extreme geological stresses, and it's going to be less for oil shale, in other words, for oil shale it's not going to get anywhere near 30%)

Suppose that you're right and you have indeed a 200-year supply of american oil. Let's not forget that this oil is for the world, in an open market, not just for us. That means the US gets about 1/3rd of that oil.

Boom. That's not 200 years, that's 70 years.

Then America grows 0.883% per year. Therefore you only have a constant per-capita supply for as long as the supply grows by at least that amunt per year.

This means that, even if that base supply were correct, it will only last a growing America for 55 years, not 70.

Suppose America did indeed have 200 years of supply available, that supply would last it 115 years, not 200.

And suppose only 40% could be extracted of that oil, which is a generous assumption, that oil will last a bit over 24 years.

The amount of years oil lasts scales with the logarithm of the quantity of oil you have, not linear, given economic and/or population growth.

Add to this the fact that it's a LOT harder to extract oil once the 40% (of the 30% that you're going to be able to extract) depletion rate hits, and you have to slow down, you have good news ... and bad news.

The good news is that there will be "some" oil (but not much) for a lot longer than the doomsayers predict.

The bad news is that long before 55 years pass the daily supply is going to lessen significantly. VERY significantly. Before 30 years pass the daily supply will have been reduced to less than half of what is was before, EVEN IF America does indeed find 200 years supply of oil.

I agree that leftists are using this point to get their appetite for destruction and revenge satisfied. But they do have (a bit of) a point. The oil economy will not last your (or my) lifetime. That's a certainty.

Which I find very good news, given that it means the saudi's will be ruined before I die. Even if their ridiculous estimates of remaining oil were true. Guess I also have a bit of an appetite for revenge.

linearthinker said...

Tom: Which I find very good news, given that it means the saudi's will be ruined before I die. Even if their ridiculous estimates of remaining oil were true. Guess I also have a bit of an appetite for revenge.

We agree.

Furthermore, we're arguing apples and oranges. I just reread your last post. You're talking oil. I'm including coal and natural gas as well as oil.

I deleted a long winded rebuttal when I saw this fundamental.

My point is just that we have abundant energy resources available that we're artificially being denied access to. What the appropriate blend of those assets is will change over time as depletion of the easy oil economy shrinks, and I pray that mix will be determined by market forces and not the guiding hand of a government bureaucracy. It's late and I'm too tired to fight. Pax.

M. Simon said...

If some one wants to be stupid I'm OK with it.

As to T Boone - I have some material on him. However, he is running Republican commercials disguised as a business proposition. I'm going to wait til after the election to deal with him.

In any case better him than the Saudis. There are times when you have to pick your poison.