Category — Peak oil (fixity/depletion)
“Georgia … Texas … Arizona…. One story is an anomaly; two, a coincidence; three, a trend. When a so-called conservative Republican talks green energy and sounds like he or she is hitting the right notes, be careful. It’s probably the wrong song.”
Creating jobs…. enlarging the tax base… access to markets … energy choices for consumers…. monopoly busting … resource conservation….
The words and terms are being used by two government dependent renewable energy industries to sucker citizens and legislators to retain, if not enlarge, their taxpayer subsidies and ratepayer cross-subsidies in the current energy debate.
Make no mistake: This is an organized attempt to hoodwink Republicans, conservatives, limited-government and free-market supporters, and even fiscally minded Democrats. Yet the means and ends of the deceivers are 180 degrees from what ordinary fiscally prudent citizens would support if they understood the gloss and what was underneath the hood.
If supporters of renewable energy, such as wind and solar, said it was heavily subsidized on both the state and federal level, had an artificial market created by government mandates, would help mitigate global warming, was the recipient of taxpayer dollars through Obama’s 2009 stimulus bill that funded projects like Solyndra, and was marred by cronyism, the right would run. [Read more →]
October 29, 2013 No Comments
“The truth is that, just as so many did in the 1970s, a commodity cycle has been confused with a ‘new paradigm’ and (neo)Malthusian biases have cherry-picked data and made vague pronouncement (“the easy oil is gone”) with little more than some curve-fitting to support their conclusions.”
“We now have an elephant in the room, and its name is peak oil,” states Kjell Aleklett in an interview with James Morgan in ScienceOmega (June 10, 2013). Interviewer James Morgan adds: “Of course, it is possible to argue over the exact point at which global peak oil will arrive, but at some time in the not too distant future, we are going to have deal with this problem.”
And so here we go again on the trial of exhaustion theory, one step removed from the scientism of central planning where decline rates are projected and a social cost of depletion is calculated for an extraction tax. But it is all bad science.
One reason that bad science persists is that too many non-experts trust scientists to produce valid, reliable work, and the article in ScienceOmega, an interview with Professor Aleklett, the director of the Association for the Study of Peak Oil, is an excellent example. [Read more →]
June 26, 2013 23 Comments
“The distinction between renewable and non-renewable resources is tenuous and perhaps in the last analysis untenable.”
- M. A. Adelman, The Economics of Petroleum Supply (Cambridge: The MIT Press, 1993), p. 66.
“The tradition in academic energy economics is to stress the ability to overcome depletion threats.”
- Richard Gordon, The Energy Journal, (Vol. 22: No. 2), 2001, p. 128.
The headline from the May 15th Time article reads: “The IEA Says Peak Oil Is Dead. That’s Bad News for Climate Policy.” Author Bryan Walsh begins:
No one … was really looking forward to a peak-oil world…. Think uncomfortable and violent. Oil is in nearly every modern product we use, and it’s still what gets us from point A to point B—especially if you need to get from A to B in a plane. If we were really to see the global oil supply peak and decline sharply, even as demand continued to go up, well, apocalyptic might not be too large a word.
Walsh then degenerates to the “upside” of the old view–”We’d lose oil but save the world”–to explain why climate-change policy is in (further) trouble. Well, good riddance to climate policy–and expect the collapsing case for climate alarmism to be recognized as good news. Justin Gillis’s recent New York Times piece begins this long-awaited revisionism:
What’s new is that several recent [peer reviewed] papers have offered best estimates for climate sensitivity that are below four degrees Fahrenheit, rather than the previous best estimate of just above five degrees, and they have also suggested that the highest estimates are pretty implausible.
Walsh in Time shares the new “mainstream” view: [Read more →]
May 20, 2013 No Comments
“We are on a collision course to a world without rocks. Only take as many rocks as you absolutely need.”
- Dr. Victoria Merrill, author, No Stone Unturned: Methods For Modern Rock Conservation
“Think about it. When was the last time you even saw a boulder?”
– Henry Kaiser (ge0logist and Onion expert)
The easy oil has been found. There are no more mega-fields. Costs up … prices up … economic stress … crises.
We have such certain knowledge from the smartest guys in many rooms: Paul Ehrlich, John Holdren, Colin Campbell, Jean Laherrère, Richard Heinberg, Chris Skrebowski, Matthew Simmons, …. and Kenneth Deffeyes.
Oil output peaked on December 16, 2005, in case you did not know it, according to geologist Kenneth Deffeyes in his 2010 book When Oil Peaked, available at Amazon in hardcover for one penny (yes, one penny!).
Two quotes from Princeton University-affiliated Deffeyes are highlighted at Wikipedia:
- “Crude oil is much too valuable to be burned as a fuel.”
- “The economists all think that if you show up at the cashier’s cage with enough currency, God will put more oil in ground.”
Onion Weighs In
Well, the Onion has taken Deffeyes logic to a new level. Yes, rock exhaustion is hard to imagine right now, but the fixity/depletion principle is indisputably at work. The article follows: [Read more →]
June 22, 2012 9 Comments
“If resources are not fixed but created, then the nature of the scarcity problem changes dramatically. For the technological means involved in the use of resources determines their creation and therefore the extent of their scarcity. The nature of the scarcity is not outside the process (that is natural), but a condition of it.”
- Tom DeGregori (1987). “Resources Are Not; They Become: An Institutional Theory.” Journal of Economic Issues, p. 1258.
The confounding of physics with economics has plagued a real-world understanding of mineral resource developments. The phenomenon of entropy and the laws of thermodynamics rule in their domain. But there is no economic law analogous to the physical conservation of matter. There is no law of conservation of value; value is continually, routinely created by the market process. And this value creation does not deplete–just the opposite.
This insight reorients the peak-oil debate from pessimism about hypothetical future physical resources to here-and-now concerns over incentives and institutions–or the ability of a free market to create a robust energy future.
Market Entrepreneurship … Mineral ‘Resourceship’
Israel Kirzner in the Austrian-School tradition has emphasized the open-endedness of market entrepreneurship. “Entrepreneurial alertness [is] in principle inexhaustible,” Kirzner has stated, (1) wholly rejecting the notion of a “potential stock of entrepreneurial alertness in a society as some quantity ‘available to be used by society’.” (2) In the vernacular of the oil industry, there are no reservoirs of proved, probable, or speculative quantities for entrepreneurship.
The institutionalist conception of knowledge as the ultimate resource powerfully complements an Austrian theory of resources. Thomas DeGregori has defined resources as “a set of capabilities” (3) and “finite but unbounded” (4). He restated and embellished the “resources are not, they become” thesis of his mentor Erich Zimmermann as follows: [Read more →]
June 30, 2011 3 Comments
[This is the third and final part in a series on peak-oil theorist/neo-Malthusian Matthew Simmons (1943–2010). Part I by Rob Bradley examined the Simmons's peculiar interpretation of the Club of Rome's 1972 Limits to Growth. Part II by Michael Lynch reviewed the false arguments behind Simmons's peak-oil views.]
Matt Simmons was confident past a fault about the coming decline of world oil output–and record oil prices in the face of growing demand. His 2005 book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, announced that production in Saudi Arabia had peaked or was about to. In his words:
Saudi Arabian oil production is at or very near its peak sustainable volume (if it did not, in fact peak almost 25 years ago), and is likely to go into decline in the very foreseeable future. There is only a small probability that Saudi Arabia will ever deliver the quantities of petroleum that are assigned to it in all the major forecasts of world oil production and consumption.
And more generally:
We’ve run out of good projects. This is not a money issue… If these oil companies had fantastic projects, they’d be out there [developing new fields].
And at the end of the book comes the call for government to conquer the reality of peak oil by engineering an energy transformation for us mortals. Market failure yes, government failure no.
Putting His Money Where His Mouth Is
With his book out, Simmons was in full peak-oil publicity mode. It was at this time when he was contacted by New York Times writer John Tierney, a disciple of the late Julian Simon (1932–1998). A wager emerged as told by Tierney:
Five years ago, Matthew R. Simmons and I bet $5,000. It was a wager about the future of energy supplies — a Malthusian pessimist versus a Cornucopian optimist — and now the day of reckoning is nigh: Jan. 1, 2011.
The bet was occasioned by a cover article in August 2005 in The New York Times Magazine titled “The Breaking Point.” It featured predictions of soaring oil prices from Mr. Simmons, who was a member of the Council on Foreign Relations, the head of a Houston investment bank specializing in the energy industry, and the author of “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.”
I called Mr. Simmons to discuss a bet. To his credit — and unlike some other Malthusians — he was eager to back his predictions with cash. He expected the price of oil, then about $65 a barrel, to more than triple in the next five years, even after adjusting for inflation. He offered to bet $5,000 that the average price of oil over the course of 2010 would be at least $200 a barrel in 2005 dollars. [Read more →]
February 14, 2011 8 Comments
[This is the second part of a series on peak-oil theorist and neo-Malthusian, the late Matthew Simmons (1943–2010). Yesterday, Robert Bradley examined the Simmons's peculiar interpretation of the Club of Rome's 1972 Limits to Growth.
Part III will look at Simmons's failed bet with different parties that the average price of oil in 2010 would be $200 per barrel or higher.]
The death last year of Matthew Simmons, author of Twilight in the Desert and a well-known peak oil advocate, offers an opportunity to review his work and draw a cautionary lesson.
The nature of punditry has changed in the modern age, and for the worst. The original pundits were geographical surveyors in India, mostly natives working for the British, mapping areas where few Europeans dared to go (and from which many failed to return). Their work was extremely useful, highly scientific and precise, and largely unsung, none of which applies to many modern pundits.
Now, it has become normal not only to be a self-proclaimed pundit but a self-proclaimed expert. A successful pundit is one who gains an audience, which can mean they provide insightful commentary, but more commonly they have a point of view which is popular in specific circles or, occasionally, are attractive and/or entertaining.
Of course, it helps pundits that few in the public are capable of judging their backgrounds—which are rarely investigated in any case—making it easy to pass themselves off as knowledgeable in subjects of which they are only moderately familiar. Thus, Joe Romm (one of our favorites!) posts extensively on peak oil, despite the fact that he has no expertise in the area. Having written books on energy, and served in the Department of Energy, he does however carry an aura of ‘expertiness’.
And especially as pundits are not writing for scholarly journals, but rather and books for lay audiences and, in the past few years, blogs, they are under little or no pressure to provide evidence to back up their opinions: citations, data or research that might be checked or validated. Instead, not only does opinion rule the day, it is all too often passed off as fact, and then gains immortality as those who want to believe repeat it endlessly, creating a circle of citations with no true beginning.
Making of an Alarmist
Matt Simmons, an investment banker sporting an MBA from Harvard, was quite successful in his chosen field of endeavor, lending to the oil and gas industry in the Gulf. But Simmons was hardly trained as a researcher, either in the hard or soft sciences. And Simmons certainly had no expertise in reservoir engineering or petroleum geology, although he often made technical arguments (frequently in error). [Read more →]
February 10, 2011 6 Comments
I am considered a leading critic of peak oil, the belief that oil production has peaked, is peaking, or will peak soon. I am a resource optimist in the Julian Simon tradition and believe that resourceship allows so-called depletable resources to expand, refuting the fixity/depletion mindset.
This said, I am empirically oriented. So let’s study and debate the facts, while remembering the record of peak-oil forecasts from the beginning to the present.
For my optimist/resourceship/expansionist position, I get slammed a good bit, such as by Joe Romm and by Gabriel Rotello at the Huffington Post (but also supported there by Raymond Learsay). I mostly take the fuss, which is two parts emotionalism to one part intellectual argument.
But when David Hughes of the Post Carbon Institute published a piece calling a New York Times story “inaccurate, misleading and unhelpful ‘journalism’” I thought to add a comment. However, the post was not approved for some reason. While I don’t have the precise wording (it’s lost on the Internet), I will reproduce the comments here as best I’m able in the next several paragraphs.
Hughes remarks that Chinese demand is growing, without explaining why that is different from the demand growth experienced throughout the past century and a half. He also criticized the citations to what he called the “uber-optimist” CERA and a failure to mention other “credible” reports that are more pessimistic (one added comment cited the Hirsch report), but doesn’t note that the National Petroleum Council, the definitive industry voice (though hardly infallible) in its report “The Hard Truth,” examined the peak oil arguments and found them without merit.
The IEA has certainly lowered its long-term oil production forecast, but could this be evidence for a demand response to high prices (which they also predict), rather than an indication that they are more concerned than before about supply? There is also a political element on what oil exploration will be permitted by government.
Finally, Hughes attacks the article’s optimism about shale gas, citing a variety of problems facing the industry, without acknowledging that production is booming, which seems pretty clear evidence that these problems are being overcome.
Other criticisms could have been made, but for a comment on a website, brevity seemed of value. [Read more →]
December 16, 2010 33 Comments
The peak oil movement, now trying to turn itself into a pro-government-intervention political movement, draws the wrong conclusion by logically progressing from the wrong assumption.
This post revisits this wrong assumption: fixity. From mineral fixity, it is concluded that every act of production and consumption leaves less supply. In this Harold Hotelling world, costs must go up and prices must go up….
But going from the natural science, perfect knowledge, hypothetical world to the real world, just the opposite is true. There is not a fixed supply, known or unknown, from which extractions leave less supply for the future. Costs do not have to go up, and neither do prices.
Try answering this question to see how the peak oilers have it wrong for the business/economic real world. Do we have more or less oil today than when the nation was founded in 1776? Does the world have more or less oil in 2010 than in 1910?
The natural-science answer is that in a physical sense, there is less oil today that then by the amount of extraction. But in a social science sense, we have much more oil today than in 1776 or in 1910 because today’s supply is inventoried and produced from known reservoirs. The same promises to hold true in the future in a consumer-driven, entrepreneur friendly world. [Read more →]
October 22, 2010 41 Comments
In a post on his blog and then again on the Huffington Post, Joe Romm challenged me to a wager on oil prices, claiming prescience concerning the price rise in the past decade compared to my 1996 forecast of low prices for two decades. He seems to be implying that that I have refused to wager him, having closed the webpage to any further comments.
I find myself taken aback, as my experience with the blogosphere is somewhat limited. My experience is primarily as an academic, writing articles for refereed journals and books, as well as working papers, with an intention to make them carefully sourced and referenced. A blog can consist of nothing more than a rant, and the comments appended to them often worse (and usually anonymous). I will not however yield to the temptation to follow suit (even if our illustrious moderator would permit it, which he won’t).
Having put up approximately 20 posts on the subject of peak oil, it might be thought that Romm is an expert on the subject. But so far as I know, he has a grand total of one article on oil, his famed, “Mideast Oil Forever” Atlantic Monthly piece (co-authored with Charles Curtis), which is the source of his pride on the subject.
A careful reading of “Mideast Oil Forever” shows that his argument was not so much that prices would soar, but that global dependence on Middle East oil would soar, which has not happened. My argument was that the forecast of rising Middle East market share was likely to be incorrect, and it was (see Figure), so that economic fundamentals would not imply ever rising prices.
Forecasts of OPEC Market Share from 1996/97
Which is a far cry from saying my forecast was wrong and Joe’s correct. In my testimony, I specifically stated,
“The reality is that prices may go up in the future. And Persian Gulf oil production and exports will rise. However, the most likely scenario, given what we know about oil supply and demand and what we have learned about forecasting in the last 10 to 15 years, is that OPEC is going to be under continued pressure for at least the next 10 years, possibly for much longer, that they will be fighting with each other for market share. And, it’s going to require some very substantial changes in the world to see prices rising.” (See my opening statement on pp. 127-128.)
Arguably, the price collapse leading to the rise of Hugo Chavez, the September 11 terrorist attacks and the Bush Administration’s decision to invade Iraq, are those ‘substantial changes’. Certainly, not the soaring Middle East market share predicted by Romm. (Since he downloaded the transcript of the hearing, it’s not clear how he missed this.) [Read more →]
March 5, 2010 1 Comment