While oil production may peak and decline, there is plenty of energy out there, it’s an infrastructure problem more than anything.

Very low consumption petrol engines are now being introduced too and petrol / electric hybrids are coming down in price. Strangely this is happening despite the recent fall in fuel prices. I think many of us were seriously shocked by the jump in prices in 2007/8 and those of us with “gas guzzlers” were caught out big time, and don’t want to be caught out again. The sales of expensive SUVs, luxury sedans and sports cars have slumped.

Before we bought the Touran our previous car was a turbo-charged petrol engined “sports” station wagon which averaged about 27mpg – compared to the VW which averages about 45mpg overall. We do over 20,000 miles a year, so with petrol at £4.80 a gallon ($7.80) our fuel bill is down from around £3,600 ( $5,760) a year to £2,200 ($3,520), a saving of £1,400 ($2,240). That is enough to cover my annual heating bill! The VW is a nicer car too, and what is more it was cheaper.

I think the thing that will end the “oil age” is volatility in its price rather than the absolute level. People will want stable energy prices and may be prepared to pay a bit more up front for some certainty (a bit like buying futures). Any ideas how that could be achieved? I see a blog article from somebody there.

BTW, excellent informative second item on the shale gas situation. I like the high frequency of the articles, the very high information content and lack of biased comment. “Just the facts ma’am…”

Sorry, I don’t mean to clog up your blog with this trivia. I will shut up now…

There are two problems with diesel versus gasoline:

1) The soot emissions from diesel are carcinogenic, though this problem has been greatly reduced with the very newest diesels that have full particulate filters,

2) The soot (black carbon) from diesels is potentially a strong global warming agent; it could even be argued that (prior to the latest models with the full particulate filters) diesels were no better than gasoline vehicles from a global warming standpoint. That is, it could be argued that, prior to the latest particulate filters, the black carbon emissions from diesels almost completely negated their lower CO2 emissions.

http://www.germancarblog.com/2005/11/vw-touran-19-tdi-now-with-diesel.html

http://www.policyinnovations.org/ideas/innovations/data/000084

About the only rational way they can get involved is through moderate differential taxation. If they are really worried about the use of coal or oil, just gently tweak taxation in favour of gas and renewables over time and let the free market do the rest. In the UK we have taxed vehicle fuel increasingly over many years – but a gradual lift, nothing sudden. This has given the free market enough time to deliver cars like my VW Touran Diesel, which averages 40mpg around town and 55mpg on the open road. Even better if I am light on the gas pedal. As far as I can tell it has not disadvantaged us in any way. I have read that European and US car drivers spend approximately the same on fuel per mile, it is just that in Europe we buy less fuel for more money. What is more, because most of the price is tax, the price is much less volatile.

I look forward to reading future contributions.

TheLastMan, regarding a presentation by Matthew Simmons, writes, “Less optimistic about shale gas, and confirms my friend’s view that we are already past peak oil production. I am thinking about buying some oil futures!”

If your decision to purchase is based on the predictions of Matthew Simmons, you should be aware that he is about to (barring something like nuclear war in the Middle East) lose spectacularly in a bet with John Tierney and Rita Simon (Julian ?Simon’s widow):

http://en.wikipedia.org/wiki/Simmons-Tierney_bet

Of course, one (spectacularly) wrong prediction shouldn’t invalidate a person’s future predictions. But still…oil is going to average nowhere near $200 a barrel in 2010. (Again, barring something like nuclear war in the Middle East.)

In the case of shale gas it is probably not the case that this one resource is the end-all of future fuel use, no one hydrocarbon resource (or any other energy resource, for that matter) is. The point, rather, is that allowing resource investments to operate in a market setting will permit cost-effective production of the gas, restraining the baser motives of some major gas producers.

What we seek to avoid is a premature declaration of defeat, one that could (and already has in some countries) justify all manner of resource-devouring crash energy technology schemes. These schemes consume investment that could have gone into more cost effective evolutionary production technologies along the hydrocarbon resource continuum.

If the power plant can use gas and the planes get their kerosine, then does it matter whether the source is Qatari LNG or tight sands gas? Do we really need only Bonny Light to produce jet fuel?

As to your petroleum engineer friend, by all means encourage him to comment at our blog, that is how most new contributors have been identified.

However I talk regularly with a oil engineer friend who’s job it is to trouble-shoot oil production and exploration problems all round the world. Recently he has spent most time in places such as Algeria, Norway and the Gulf.

He has commented that in his opinion ‘peak oil’ production was 2005. He says the problem is not just one of cost, but of a degradation in the quality of the wells and fields currently in production, and the huge engineering problems of extracting oil from the difficult and/or sensitive environments it is now being found in. He also says that countries such as Saudi Arabia and Venezuela just plain lie about their remaining reserves.

He says that, regardless of the price of oil, the rate at which new reserves can be brought into production is constrained by the time needed to solve the engineering issues rather than the extra cost. It is simply not that quick and easy to locate a wellhead at the bottom of 500m of water. All of the offshore production facilities he deals with are now not on rigs but sitting on the sea floor.

The main problem with existing wells is the increasing amounts of water coming up with the oil slowing down production and reducing yields.

In his scenario the down-slope from peak oil will probably be more gradual than the worst scenarios predict – but that new oil supplies will not come on stream quickly enough to meet the increasing demand for energy, particularly in places like China and India. As a result oil prices will be driven higher to the extent that alternative energy sources (including unconventional gas) will become more economic and oil will be relegated to use in materials production (plastics etc) and will simply be too expensive to burn in the quantities it is now.

Maybe I should get him to write a piece for the blog. He is not an academic, but his experiences make for entertaining conversation!

Steve, there are not yet any definitive studies about local geological impacts, production has not been going on for long enough, though there is no strong evidence that problems have arisen as a result of fraccing technology.

TLM, wish I could share your pessimism, but I think that if you look at the real (2009) costs of finding and developing oil in the 1920s and 1930s, you will find that the cost of adding 1 mmbtu of liquid fuel to the US economy was about the same then as it is now, probably more, owing to improved current efficiency of use. Until that figure changes, and there is no sign that it will soon, liquid fuels are not becoming more scarce than previously. Just as an aside, estimates of total unconventional gas resources for North America (cited in the second post) run north of 3.8 x 10^15 cu ft, many centuries of gas use at even higher levels than today’s.