Douglas Milewski (dacuteturtle) wrote,
Douglas Milewski

Peak Oil

I've been reading about peak oil. Some give doomsday scenarios. Some say, "This again? We were supposed to run out of oil 10, 20, 30, and 40 years ago. Hasn't happened yet." This is party in response to "Power Down" and book that Jen and I have been reading. (The book is full of sloppy thinking, so I can't recommend it. You will get a far better perspective by reading both views for yourself.)

(Hey Madwriter, consider writing a book about a world where energy production has gone flat or declines. The timelines of the topic might grab some attention.)

So, I'm going to chat about resource limitations, rather than oil, then talk about limitations to oil.

Resources are limited by three things:

- How much there is = inheritance
- How quickly it renews = renewability
- How well it is allocated = logistics

(The academics may name these things differently.)

I'll talk about these as absolute categories, though in real life the categories aren't so neat and unmingled.

Inheritance is what you get because that's what you go. It's a fixed amount. It's your starting money in Monopoly. In the case of oil, it's just how much oil nature has made. Sooner or later, anything gained by inheritance will be exhausted. It may be spent quickly or slowly, or used any number of ways, but the simple reality is that that finite is finite.

Renewability is how quickly a resource is generated. In the case of oil, it's renewability is zero. In the case of solar power, it's renewability is infinite. In the case of food, it's all about renewability.

Logistics represent how well a resource is distributed. For example, the world produces enough food, but we still get famines. Allocation is irregular in a sufficiently complex system.

These features are relative in the Einsteinian sense. How they appear as resources depends on your perspective. To the average user, electricity is nearly infinite (as long as you don't blow the breakers). However, to the power companies who have to supply this electricity, electricity is renewable at finite rates. They have a fixed number of generators. They are painfully aware of their generation capacity.

Relativity is important, as behavior follows belief. Those who see gas as unlimited will act as if it is unlimited, and will make decisions based on this idea. Thus, you can get behavior that is nonsensical when held against the facts. Fortunately, the free market does have a way to check infinite usage: money. When properly priced, demand is regulated through cost. The infinite resource (electricity) is linked to a finite resource (money). However, this isn't perfect. This arrangement can get out of whack. When an unrenewable resource is produced too quickly, it's price will drop. Useage will then increase, as its price is not accurately reflective of its scarcity. In time, the market will right itself, but not without causing problems in the system.

If you take any of these problems and push them, they can mimic each other. Renewability becomes finite on a billion year scale. Solar power ends when the sun goes out. Inheritance can also be renewable. "You find $500 stuffed in a mattress." You can have more than you thought that you had. You can also have less.

Now, let's get back to "Peak oil." There are assertions that oil is running out. That makes it look like an inheritance problem. That is wrong. The "peak oil" problem is not an inheritance problem but a logistical problem changing into a renewability problem. "Peak oil" is the problem that projected oil pumped from wells will not meet projected demand for oil. When that happens, the logistic issue of "how to pump more" will change into the renewabililty limitation "this is our max capacity."

To complicate matters, energy production is not a monolithic entity. Oil comes from many wells, so even some oil fields decline, others start producing. The system can be understood as always growing and always shrinking at the same time. So far, the net between growth and shrinkage has generally been upward. Economists are worried because new oil wells and discoveries are known years before their production. It's a matter of math to add up the expected production for upcoming years while subtracting expected declines. This is the math that predicts "peak oil", and is only right if predictions are correct.

There are two disturbing trends to new producton: there are fewer and fewer discoveries every year, and these discoveries are either more expensive to tap or contain far less oil than needed. In one recent year (2003?), no discoveries were reported for the first time. Without discoveries, there will be no new capacity to replce the old capacity. Of the discoveries made, their small size means that they will not produce the huge amount of oil needed to replace the declining great fields.

Not everyone is a nay sayer. Many educated observers think that we'll get through this. New technologies will get more from existing wells. New technology will allow us to get at new deposits. Combine this with a pattern of "cry wolf", where wrong predictions about oil decline come every decade, they justifiably believe that this is another "wolf" sighting, and they just aren't worried. New technology may just push that peak into the far future. They state, "We aren't running out of oil, it will just become more valuable." As scarcity and demand determines value, even the critics agree that we'll have less oil avialable. Either demand will outstrip supply (making it scarcer) or there will be less oil pumped (making it scarcer). Both directions take us to the "peak oil" scenario.

The goods news is that we're not running out of oil. There are many reasons why there isn't an end to oil. There are many wells that aren't economically viable to open. It won't be pumped until price per barrel rises far enough for the pumplers to make a profit. There are also tar sands, which take more money and energy to refine than oil, but given high enough prices, will serve. (And one day, if the technology ever gets efficient enough, could produce vast quantities of power). Likewise, synthetic oils and bio-oils can be made. So when it comes to oil, we're fine. We got plenty. When it comes to easy to get and and pump oil, well... that's where the trouble starts.

I'm don't want to be a doom-sayer here. I'm simply chunking through the basic facts as I understand them, and trying to make sense of them. I'll think about solutions later on. I'll think about what will happen, and what people will do, later on.

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