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Good report on Peak Oil

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Peak Oil refers to Hubbert’s Peak: the point at which oil production reaches its maximum and then begins an inexorable decline as oil reserves become diminished and oil more difficult to extract. Hubbert predicted in 1956 that US oil production would reach its peak in 1965-70. He was right, as it turned out (the actual peak was in 1970), though heartily mocked at the time.

Hubbert’s Peak generalizes to any non-renewable resource—e.g., mined metals. If the resource is not renewable, it is finite and unless the reserves are very large in comparison to demand, production will gradually peak and then decline as the resource becomes more difficult to find and to extract.

The Association for the Study of Peak Oil & Gas—USA has issued its most recent report. From the report:

In its narrow sense, the phrase “peak oil” refers to the zenith of global oil production, but the term now often refers to more general resource constraints on “business as usual” going forward. There are issues about coal, natural gas and other commodities. The connection between anthropogenic climate change and future resource availability is now being explored in greater depth as new data-driven analysis comes to light.

Pessimism was in the air concerning future oil production. Writing for Platts, John Kingston was accurate in his conclusion that “all in all, [it was] a terrific conference. But don’t attend unless you’ve taken your Prozac.” Most speakers, including industry veterans like Henry Groppe, believe that the peak is upon us now, or at best only a few years away. Richard Nehring, an “optimist” who participated in the conference’s peak oil dialogue panel, told Steve Andrews that “I have a hard time seeing us get to 90 million barrels a day by 2020” (ASPO-USA interview, October 8th). With the world in a plateau of about 85 million barrels per day in 2007, it’s not much of a stretch to say the world’s in trouble. Downcast views are not unexpected at a peak oil conference, but are now strengthened because uncertainties that existed only a few years ago are more and more being resolved in favor of detrimental outcomes. Mexico is a good case in point.

Cantarell Oil Production (click to view)

At the first ASPO-USA conference in Denver in October of 2005, PEMEX was struggling to maintain production at Cantarell but the giant field had not tipped over into rapid exponential decline yet (graph left, from Mexico Tries to Save a Big, Fading Oil Field). George Baker confirmed the bad news about the giant offshore field, further stating that policies which preclude opening up Mexico’s deepwater areas in the Gulf effectively seal the country’s fate. Even if the undiscovered resource turns out to be very large and were opened up to outside investment, it would still take “8 to 10 years” for Mexico to see the fruits of that labor (personal communication). In the meantime, production at Ku-Maloob-Zapp or Chicontepec will not stem Mexico’s decline. Watching the tragedy unfold is depressing for peak oil observers, many of whom hold private views that are even more pessimistic than their public statements. They know that time is running out.

On the broader question of future natural resource abundance, it seems like the bad news keeps pouring in. In the context of soaring Asian demand, Colorado state geologist Vince Matthews presented slide after slide showing rising spot prices for base metals and other commodities, an indicator of increasing scarcity. Consider Soaring metal prices hurting tech firms, where we learn that—

… soaring prices of metals are threatening the profits of electronics manufacturers.

The metals suffering from high prices are nickel (Ni), cobalt (Co) and indium (In), the [nikkei.net] report said.

These metals are important because they are used in lithium-ion batteries, although some manufacturers are now experimenting with using manganese (Mn) instead.

The Prius hybrid currently uses nickel-metal hydride batteries. Toyota’s next generation of plug-in hybrid vehicles (PHEV) is supposed to use lithium cobalt oxide technology, but implementation has been delayed. (See also Toyota denies battery woes delay next prius from MSNBC, September 28, 2007.) The battery issues are complex, but it is fair to say that skyrocketing prices for metals used to power electric vehicles will not make these cars more available and affordable as substitutes for standard internal-combustion engines in the future. Comprehensive resource scarcity issues affect all aspects of the peak oil problem. Toyota’s Justin Ward gave ASPO-USA’s conference an update on PHEV technology.

More at the link.

Written by Leisureguy

25 October 2007 at 11:18 am

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