While discussing the concept of 'Peak Oil' at work today, I offered that it made no sense to to invest in an expensive high mileage car (for example) in order to 'save oil'. Any oil you saved would just be used by someone else at today's low price and - in the meantime - you would put yourself at a competetive disadvantage by paying more for energy than you needed to.
The other person offered that this was an example of the "tragedy of the commons" since everyone was incentivized to use the oil and no one was incentivized to conserve it. Although I couldn't argue that it certainly looked the same, I always thought that the "commons" argument pointed to a problem with property rights - that common ownership was at the root of these sorts of problems. However, it doesn't look like oil supplies - in general - suffer from a common ownership problem.
So I'm confused with how to classify the whole situation, is it:
1) An example of the "commons" tragedy? But does that imply that "commons" is more than just property rights? or that oil supplies have ownership issues?
2) An example of something else with similar consequences? perhaps some sort of game theory?
3) A problem with the argument as a whole? (by assuming peak oil is true, am I putting some false constraint on the issue?)
Any help appreciated - even a link somewhere - I'm not sure if this is a "commons" issue or not.
This is not just a discussion for geology. Peak Oil is an interesting concept, but as with any resource, the key rationing device is the price. Conservation of oil can and will be dictated by the price alone. What seems very strange to me is that oil continues to be exclusively denominated by it's price relative to the US dollar. There are many countries throughout the world that have suggested oil be denominated relative to another currency.
What's also very interesting is that other forms of energy are denominated relative to a barrel of oil equivalent (BOE) and our friends at the IRS define BOE in terms of joules (J). But why does the IRS determine this and not a convention held by the market or at least the Department of Weights and Measures? The problem with defining oil in terms of joules is that it assumes the conversion rate of oil is constant and that there's no possibility for efficiency gains. Efficiency gains in the burn rate of oil would effectively increase the amount of oil by increasing the energy derived from converting it to another form of energy.
Peak Oil could be a construct of this thinking that the energy derived from oil is constant. But it is certainly not. So why does the government hold it constant?
Two theories:
(1) the government creates the Peak Oil myth to declare the supply of oil will run out in the short-run. Many DOE estimates over the past century have declared we will run out of oil, only to have to push the estimate back with new discoveries. Efficiency gains are like new oil finds. But the myth helps to drive the push for government interefernce in the energy markets: conservation efforts, taxes, and "investments" in back-end (consumer) efficiency technologies.
(2) the Peak Oil myth is a way of controlling the means of production. Declaring that if we running out of oil justifies the capture of land to prevent from being used for E&P operations. Preventing E&P limits the supply and increases the price of oil and the inputs costs to other production. Preventing input costs from falling prevents the efficency gains throughout the rest of the economy and the corresponding fall in wholesale prices (their dreaded deflationary event in Keynesianism).
Peak Oil is a Myth
Ask any proponent of the Peak Oil Theory what the exact amount of fossil fuels the earth contains. Without knowing this amount no rational claim of Peak Oil can be made and it is thus a Myth as currently proposed.
The only entity preventing further exploration and extraction of fossil fuels is the state and the only entity negatively effecting the actual cost of fossil fuels is the state through taxes and regulations. Only the state can cause shortages of resources and any energy "crisis". In a pure free energy market all land would be available for energy production at a free market price, thus availability would be limited by cost, technology and of course actual supply. Say a hypothetical obtainable limit to our demand was reached in actual supply, long before this was reached prices of fossil fuels would rise, once fossil fuel prices rose above what other competing free market energy sources were, these cheaper energy sources would be adopted on their own. All without government intervention. The government was not needed to switch away from horses to cars. But we have no such scenario since the state is artificially creating supply shortages by restricting land access through regulations. The state is also artificially increasing energy costs above free market rates with taxes and regulations. In essence the state is creating a Peak Oil scenario to benefit the green lobby. But no such thing exists even with known reserves:
Myth: The World is Running Out of Oil (5min)
Despite Popular Belief, The World is Not Running Out of Oil, Scientist Says (Science Daily)It’s a myth that the world’s oil is running out (The Times, UK)Myth: The World is Running Out of Oil (ABC News)No Evidence of Precipitous Fall on Horizon for World Oil Production (Cambridge Energy Research Associates)Oil: Never Cry Wolf—Why the Petroleum Age Is Far from over (Science)Oil, Oil Everywhere... (The Wall Street Journal)The World Has Plenty of Oil (The Wall Street Journal)
Reserves:- 1.3 Trillion barrels of 'proven' oil reserves exist worldwide (EIA)- 1.8 to 6 Trillion barrels of oil are estimated in the U.S. Oil-Shale Reserves (DOE)- 986 Billion barrels of oil are estimated using Coal-to-liquids (CTL) conversion of U.S. Coal Reserves (DOE)- 173 to 315 Billion (1.7-2.5 Trillion potential) barrels of oil are estimated in the Oil Sands of Alberta, Canada (Alberta Department of Energy)- 100 Billion barrels of heavy oil are estimated in the U.S. (DOE)- 90 Billion barrels of oil are estimated in the Arctic (USGS)- 89 Billion barrels of immobile oil are estimated recoverable using CO2 injection in the U.S. (DOE)- 86 Billion barrels of oil are estimated in the U.S. Outer Continental Shelf (MMS)- 60 to 80 Billion barrels of oil are estimated in U.S. Tar Sands (DOE)- 32 Billion barrels of oil are estimated in ANWR, NPRA and the Central North Slope in Alaska (USGS)- 31.4 Billion barrels of oil are estimated in the East Greenland Rift Basins Province (USGS)- 7.3 Billion barrels of oil are estimated in the West Greenland–East Canada Province (USGS)- 4.3 Billion (167 Billion potential) barrels of oil are estimated in the U.S. Bakken shale formation in North Dakota and Montana (USGS)- 3.65 Billion barrels of oil are estimated in the U.S. Devonian-Mississippian Bakken Formation (USGS)- 1.6 Billion barrels of oil are estimated in the U.S. Eastern Great Basin Province (USGS)- 1.3 Billion barrels of oil are estimated in the U.S. Permian Basin Province (USGS)- 1.1 Billion barrels of oil are estimated in the U.S. Powder River Basin Province (USGS)- 990 Million barrels of oil are estimated in the U.S. Portion of the Michigan Basin (USGS)- 393 Million barrels of oil are estimated in the U.S. San Joaquin Basin Province of California (USGS)- 214 Million barrels of oil are estimated in the U.S. Illinois Basin (USGS)- 172 Million barrels of oil are estimated in the U.S. Yukon Flats of East-Central Alaska (USGS)- 131 Million barrels of oil are estimated in the U.S. Southwestern Wyoming Province (USGS)- 109 Million barrels of oil are estimated in the U.S. Montana Thrust Belt Province (USGS)- 104 Million barrels of oil are estimated in the U.S. Denver Basin Province (USGS)- 98.5 Million barrels of oil are estimated in the U.S. Bend Arch-Fort Worth Basin Province (USGS)- 94 Million barrels of oil are estimated in the U.S. Hanna, Laramie, Shirley Basins Province (USGS)For Comparison:- 260 Billion barrels of oil are estimated in Saudi Arabia (EIA)- 80 Billion barrels of oil are estimated in Venezuela (EIA)
"Anarchism misunderstands the real nature of man. It would be practicable only in a world of angels and saints" - Ludwig von Mises
After reading through this thread it seems to me like many do not understand what exactly peak oil theory is based on....I think many would benefit with these videos linked earlier on in the thread but were obviously ignored:
http://www.chrismartenson.com/crashcourse/chapter-17a-peak-oil (17 min)
http://www.chrismartenson.com/crashcourse/chapter-17b-energy-budgeting (12 min)
Peak oil deals with the following FACTS:
1) Oil discoveries peaked in 1964...we have been finding increasingly less and less oil each decade
2) With individual oilfields the production profile (barrels produced in a year vs time) resembles a bell curve with production increasing each successive year until the half-way point whereby production decreases each year (this is a matter of physics and not economics)
3) Because individual fields peak, and our oil discoveries have peaked, the overall production profile will also follow the bell curve shape
4) Therefore we will peak in oil production at some point....most estimates range from already having peaked to as far as 30 years away
Again, I doubt the anti-peak oil theory people will watch the links above, but if you do, and still don't agree with peak oil then please quote this line and state your reasoning. Because after watching the two videos above I don't know how one could refute Peak Oil Theory....So if one is able to I'd like to learn the flaws in my logic. Thanks in advance.
Those are not facts they are assumptions. Over and over, I understand the "theory" very well, except it does not deal in reality. Please show me where I can find the source that gives me the exact amount of fossil fuels on the planet and exactly how they are formed. When you can do that, get back to me.
Peak Oil Theorists are like a Cult, just repeating and repeating the same thing over and over.
I don't see how you can have tragedy of the commons where everyone pays for what they consume and produce.
A tragedy of the commons comes when there are free riders who use a service or resources with no cost to themselves, and thus you have abuse.
My take on the alarmism, is that people can envision a future problem, and demand that the market react NOW. They want green energy NOW. They want electric cars NOW. They want oil prices to rise NOW, regardless of what market pricing tells us about supply and demand.
It doesn't occur to many of these soft-headed folks that we will probably have new solutions or wipe ourselves out with nuclear armageddon long before we use up all of the oil.
Poptech:Those are not facts they are assumptions. Over and over, I understand the "theory" very well, except it does not deal in reality. Please show me where I can find the source that gives me the exact amount of fossil fuels on the planet and exactly how they are formed. When you can do that, get back to me. Peak Oil Theorists are like a Cult, just repeating and repeating the same thing over and over.
I don't understand the logic in peak oil theory not being valid unless we know the exact amount of fossil fuels on the planet. I would love to hear that argument explained with rational. What we do know, is given CURRENT known levels of oil, we will be hitting peak production in the next 3 decades. We also know that if we were to discover vastly new quantities of oil that could prevent peak oil it would DRAMATICALLY buck the trend of the previous 5 decades of exploration....
http://liberaleye.files.wordpress.com/2008/08/world-oil-discoveries-by-decade.png?w=300&h=184
I also don't understand the logic in peak oil not being a valid theory because we DON'T know exactly how it is formed. In my opinion this is almost a greater case FOR peak oil as we are running out of something and we don't know how it is created.
What we do know is that there is a dramatic trend of discovering less and less oil each successive year. Therefore our current production will be cutting into our total known reserves. We also know that oil production profiles follow a bell shaped curve due to the physical manner in which they are extracted (pressure decreases and so flow rate decreases).
Much in the way that U.S. oil discoveries peaked in 1930's and then the production of U.S. oil peaked in the 1970's, peak oil theory asserts that because we have peaked our oil discoveries (1964) our production is now going to peak UNLESS we discover MASSIVE new oilfields....which the current trend of the past 5 decades does not appear likely.
Why is it that I'm sure you didn't watch those videos? I genuinely want to learn more about this but currently don't see how your arguments support the statement that peak oil theory is invalid.
Poptech: Those are not facts they are assumptions.
Those are not facts they are assumptions.
Which of the 4 facts I put above are you saying are assumptions? Is it just number 4? I could perhaps concede that that one is not a fact per se, but are you in anyway contesting facts 1-3?
If you hold facts 1-3 to be valid then it is a perfectly logical deduction to come to the conclusion that a peak in oil production will occur. So again, please specify which of those 3 facts you are calling an assumption.
DPatty:I don't understand the logic in peak oil theory not being valid unless we know the exact amount of fossil fuels on the planet.
You don't understand basic logic? How can you determine something is peaking when you do not know how much of it exists? It is a logical impossibility.
DPatty:I also don't understand the logic in peak oil not being a valid theory because we DON'T know exactly how it is formed.
If you don't know how fossil fuels are formed then other theories are just as valid:
Abiotic Theory:Fuel's Paradise (Wired)Gas and oil may exist in miles-deep wells (The Times, UK)Petroleum From Decay? Maybe Not, Study Says (The New York Times)
You keep repeating the same things over and over, I've seen the videos, I've over a dozen on Peak Oil, none answer my questions and all make wild assumptions. Two things make Peak Oil Theory irrelevant - 1. Free Market Economics and 2.Thermal Depolymerization:
Thermal Depolymerization:Thermal Depolymerization (Video) (7min)Anything Into Oil at $80 a Barrel (Discover Magazine)
DPatty:Why is it that I'm sure you didn't watch those videos?
Over and over and over and over. Peak Oil Cultists search the internet to repeat their hysteria and you are proof of this because you are claiming that no one watches your economically illiterate videos when they talk about the same damn thing I already went over - which you never read.
Thermodynamics and Money (Peter Huber, Ph.D. Mechanical Engineering, MIT)
"The economic value of energy just doesn't depend very strongly on raw energy content as conventionally measured in British thermal units. Instead it's determined mainly by the distance between the BTUs and where you need them, and how densely the BTUs are packed into pounds of stuff you've got to move, and by the quality of the technology at hand to move, concentrate, refine and burn those BTUs, and by how your neighbors feel about carbon, uranium and windmills. In this entropic universe we occupy, the production of one unit of high-grade energy always requires more than one unit of low-grade energy at the outset. There are no exceptions. Put another way, Eroei--a sophomoric form of thermodynamic accounting--is always negative and always irrelevant. "Matter-energy" constraints count for nothing. The "monetary culture" still rules. Thermodynamics And Money"
Sage:Peak oil doesn't really have anything to do with TotC. It's not like the oil is unowned, and everyone is consuming because there are no property rights.
I'm afraid that most oil resources which are today exploited, ARE INDEED UN-OWNED! I.e. they are managed by governments. And government is the greatest "tradgedy of the commons" which ever existed...
If oil is projected to get scarce and hence more expensive in the future, then why does king Fahd pump the hell out of his wells? I'd guess because he won't live forever. And he doesn't want to introduce the privete property rights and market economy necessary for being able to sell it for some fair present value. So short sighted over-exploitation is his best personal option, dumping oil prices for as long as he breaths. And maybe the US administration encourage him in that venture. It always wants to get reelected for another four years, and low oil prices tend to be helpful for that prospect.
It's not fascism when the government does it.
“We must spend now as an investment for the future.” - President Obama
Potech,
I really liked this link of yours:
http://www.opinionjournal.com/extra/?id=110006228 (Oil, Oil Everywhere)
But here's the catch: By simply opening up its spigots for a few years, Saudi Arabia could, in short order, force a complete write-off of the huge capital investments in Athabasca and Orinoco. Investing billions in tar-sand refineries is risky not because getting oil out of Alberta is especially difficult or expensive, but because getting oil out of Arabia is so easy and cheap. Oil prices gyrate and occasionally spike--both up and down--not because oil is scarce, but because it's so abundant in places where good government is scarce. Investing $5 billion over five years to build a new tar-sand refinery in Alberta is indeed risky when a second cousin of Osama bin Laden can knock $20 off the price of oil with an idle wave of his hand on any given day in Riyadh.
I always objected against "peak oil", that if peak oil is predicted, then why don't people lower their oil output today in order to sell it more expensively in the future? That would smooth out the transition from oil to alternative energy sources and eliminate the whole "problem". I've then thought that the political non-market dominance in the area of oil production could indeed justify a disastrous scarcity situation coming rather soon. But hey, maybe the simple answer is that most oil resources as a matter of fact ARE NOT EXTRACTED, but saved in expectation of increased prices! That's what I gathered from the paragraph I quoted above. Then, in good time before the Middel East dries out of oil, investments in new oil resources will be made and the transition to successively more expensive oil and successively more competitive alternatives, will indeed proceed smoothely. At least over a span ov several years. Political oil crises can always be created in the short term.
The oil drum boys arent quite as optimistic on Saudi Arabia's production capability: http://www.theoildrum.com/node/5154
nandnor:The oil drum boys arent quite as optimistic on Saudi Arabia's production capability
Yes, more Mathew Simmons hysterics. I already covered this:
Crop Circles in the Desert: The Strange Controversy Over Saudi Oil Production (PDF) (Michael C. Lynch, President of Strategic Energy and Economic Research)
Martenson says: "The exact peak of discovery? That was in 1964, 44 years ago, and that is another cold, hard, indisputable fact."
I think he's just stating facts just like I might say that the price of a stock reached a historical peak in 1967. Doesn't mean it couldn't go higher in the future.
Martenson seems to be putting out some interesting facts about how important oil is to us, and it's discovery, and production. He leaves it up to the viewer to do whatever they want with that information. Of course, the stated facts ought to be verified, but I don't think that is Poptech's objection, is it?
I just realized that Martenson says that demand will outstrip available supply within 30 years and he doesn't give any proof of that.
As Poptech said, you'd have to know the exact amount of fossil fuels the earth contains to for that claim to be valid.
As far as DPatty's "facts" -
1) Oil discoveries peaked in 1964...we have been finding increasingly less and less oil each decade.
Fine, but since it's not known how much oil is in the earth, we could see a new peak in the future.
Seams believable. I bet noone argues against that.
DPatty says, "...will follow ..." but first you'd have to know the exact amount of fossil fuels on the planet and exactly how they are formed. Until then, we can't know when or if we'll run out.
4) Therefore we will peak in oil production at some point....most estimates range from already having peaked to as far as 30 years away.
I am in agreement with Poptech that this is an assumption. Actually, I think it might be a non-sequitur too because yeah, for a given oil field or collection of oil fields that have been drilled for all they're worth, you get the bell shaped curve, but how does that mean "therefore" we will peak in oil production at some point?
Off Topic: Very cute avatar, Doug. :)
Back on topic: The answer has been provided by all the smart people on this board.
However, I'd like to add another point regarding the "Peak Oil" Bogosity that I haven't seen anyone touch on: Inflation. If I'm not mistaken, oil/gas prices In terms of gold and silver have stayed flat, and have actually fallen a bit late last year because of the drop in demand. If we were running out of oil (gas/oil becoming more scarce), we would see the price rising in terms of gold and other such commodities. This is because the scarcity would make them more valuable, and therefore raise their real prices, as opposed to their fiat/nominal prices.
Another thought I just remembered that compliments Poptech's points is the extraction efficiency.
I've heard that (can't remember my source) that if we got the rate to about 40% up from 35%, it would be the same as adding 6 Saudi Arabias to the Market in terms of oil.