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
DD5:
<<< What problems will we have with an hypothetical peak oil production? >>>
That is the same question as asking what problem you have when hypothetically your house going to burn to ashes.
Popthech says:
<<< 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. >>>
That's not true, since we can make statistical estimates about that total quantity.
Is your expectation that this unknown quantity might be any figure and that all estimates are same probable as others?
Same as with a haysteck which contains an unknown amount of hidden items. It might be there is theoretically an enmormous amount of those items left in the part of the haysteck you have not searched through, but then the probability of that being the case might be substantially low, because you have info on what number of items you found in the haysteck you already searched through.
If the data shows you that the more you research the less you find new items, does that indicate something about the probability of there being enormous quantities left in the part you have not searched through, yes or no?
Rob:We do of course not know exactly what amount in total,
Ok then your whole argument is self refuted.
Also has anyone one read up on abiogenic oil?
filc wrote:
<<< Ok then your whole argument is self refuted. >>>
Have you read my whole post?
Do you hold on to the idea that oil is in some way unlimited??? If not, then you must admit peak oil.
<<< Also has anyone one read up on abiogenic oil? >>>
Oh, come on. That is too ridiculous for words!!!!
No it is not because new production techniques allow increased production from existing wells.
Oil Innovations Pump New Life Into Old Wells (The New York Times)
No kidding I already said this and the free-market takes care of this without government.
Subsidizing something does not make something economically viable, are you sure you are on the right website?
Rob Heusdens: DD5: <<< What problems will we have with an hypothetical peak oil production? >>> That is the same question as asking what problem you have when hypothetically your house going to burn to ashes.
here's a product that had reached its peak production over 25 years ago.
Oh no, my house is burning down!
Poptech wrote:
<<< No it is not because new production techniques allow increased production from existing wells. >>>
Yes, so? And therefore the peak oil theory is false?
It is already incorporated within the peak oil theory that due to technological and economical reasons a bigger fraction of the natural existing sources of oil can be exploited, yet this does not in any way deny peak oil.
And one other thing, how do you imagine that oil is gonna decline, what will the production curve look like, it will increase until the very last drop of oil and then all oil wells at the exact same moment stop producing, or what?
Either you admit that this unlikely scenario becomes true (oil production keeps increasing and then all of a sudden drops to zero), or you admit that we will face the peak oil scenario in which after a peak the production keeps declining.
Either of these two must be true, and the probability that peak oil is true is far greater then all oil production stops at the same time.
<<< No kidding I already said this and the free-market takes care of this without government. >>>
Yeah, yeah. The "invisible hand" will take care of everyhting, people don't worry....
<<< Subsidizing something does not make something economically viable, are you sure you are on the right website? >>>
Why not? It is the same as doing an investment on a longer time scale. All capitalist do the same, yet on far shorter time scales.
So, the capitalist may invest and have a return on investment, but the government may not do that?
That is nonsensical.
@Poptech:
If peak oil theory is so untrue, and there are so many barrels of oil below the US surface, then please explain me why the US is importing increasingly (both in absolute as relative fashion) more oil?
Oh, yeah. Peak oil happened to US production since the 70-ies and since then declines......
Also you forgot to mention: for tar sands you need 1 or 2 units of oil to produce three. So those quantities are not really that big.
Also explain me, at what price is that oil going to be economically viable?
Rob Heusdens:Yeah, yeah. The "invisible hand" will take care of everyhting, people don't worry....
Rob Heusdens:Why not? It is the same as doing an investment on a longer time scale. All capitalist do the same, yet on far shorter time scales.
Rob Heusdens:So, the capitalist may invest and have a return on investment, but the government may not do that?
I am back!
Any ways - the Alberta tar sands have 3 billion barrels of oil in them - Venezuela has 1.2 - 150 years at current usage rates.
Existing tar sands are profitable at $30 a barrel - new ones are profitable at $80.
Extraction technology will almost certainly improve, leading to reduced costs.
If every oil company made extracting tar sands oil their top priority, production could essentially climb as high as they would like it to.
The best geology off the coast of Alaska is currently barred from exploration and drilling.
Drilling and exploitation has been of reserves withing the Continental USA have had restrictions for 30+ years.
There has been almost no drilling/exploration in the Arctic.
Production coulds easily increase - and in any case, the "peak" does exist, but it will not be a shock, like all of the catastrophists claim it will be, unless Governments spend too much time interveneing with quotas and price controls.
And in terms of that "haystack"?
We haven't sifted through 1% of it yet.
And in any case we have 1000 years of proven coal...
Sieben wrote:
<<< So if oil becomes scarce, its price gets bid up and that makes more expensive and/or long term projects profitable. Current oil futures reflect speculator's best guess of the real scarcity of oil. They are putting their money where their mouth is. >>>
And the markets never fail, expect when they do, but then it is prob. the govt. to blame for it, isn't it?
<<< Oh please cite evidence for this. Big oil corporations expect to be around for the next 50 years. If you ask me, that's too long. Some major technological advancements with very high impact could absolutely destroy plans longer than 10 years. >>>
It is. Maybe CSP or maybe nuclear fission. Both govt. funded research projects.
<<< The government doesn't have real inputs.>>>
Wrong. It is called taxation.
<<< It does not sell a service. >>>
Wrong again. Public services, education, healthcare, infrastructure, social benefits, military, police, etc.
<<< Its "investments" do not reflect consumer demand. >>>
So, because govt. funds education, that means, there is no real demand for education?
Similar for infrastructure, social benefits, etc.
You are wrong again.
Even the military occupation of Iraq, funded by the US state, is a large scale investment for the recovery of a trillion dollar worth oil resource.
Just that not everybody agrees on that a govt. should do that, since it was illegal by all means, since there was no UN resolution on that.
<<< Its agents also cannot go bankrupt or lose money. There is no market check on government investment. >>>
That's good.
I propose we also nationalize the banks, that is better then bail them out if and since they went broke.
Rob, so far you have failed to scientifically demonstrate how much oil the planet contains and have repeated numerous peak oil theorist talking points - all meaningless. It is not surprise that the peak oil fanatics are pushing their flawed theory in the wake of their evagelist passing,
Without Matt Simmons: Has Peak Oil, Well, Peaked? (The Wall Street Journal)
Who has been shown to not know what he is talking about,
Crop Circles in the Desert: The Strange Controversy Over Saudi Oil Production (PDF) (Michael C. Lynch, President of Strategic Energy and Economic Research)
Tar Sands production is not measured in units of oil but in the cost of the energy to extract it vs the cost of the extracted oil in the market,
Thermodynamics and Money (Peter Huber, Ph.D. Mechanical Engineering, MIT)
In the real world, however, investors don't care a fig whether they earn positive Eroei. What they care about is dollar return on dollar invested. And the two aren't the same--nowhere close--because different forms of energy command wildly different prices. Invest ten units of 10-cent energy to capture one unit of $10 energy and you lose energy but gain dollars, and Wall Street will fund you from here to Alberta. As it happens, the people extracting oil out of tar sands today use gas from the fields themselves to power their refineries. There's gas, too, under what has been called Alberta's "trillion- barrel tar pit," but it's cheap because there's no pipeline to deliver it to where it would be worth more. As an alternative to gas, Total S.A., the French oil giant, is thinking about building a nuclear power plant to supply heat to melt and crack the tar. But nuclear reactors extract only a minuscule fraction of the energy locked up in the nuclei of uranium atoms; all the rest gets discarded as "waste." On Eroei logic, uranium would never be used to generate either electricity or heat. But per unit of raw stored energy, uranium is a thousand times cheaper than oil. And every electric power plant, whatever it's fueled with, runs a huge Eroei deficit, transforming five units of cheap, raw heat into two units of electrical energy. But it all works out because the market values the energy in electricity at about 30 times the energy in coal. 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
And every electric power plant, whatever it's fueled with, runs a huge Eroei deficit, transforming five units of cheap, raw heat into two units of electrical energy. But it all works out because the market values the energy in electricity at about 30 times the energy in coal. 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
"I propose we also nationalize the banks, that is better then bail them out if and since they went broke."
Do me a favor and start a topic here with this sentence, you will get a quick education on how little you know about any of this.
Rob Heusdens:It is. Maybe CSP or maybe nuclear fission. Both govt. funded research projects.
And just an anecdote... while the wright brothers were working on the airplane, they had $1000 from the private sector. The government was also funding aviation and had invested $50,000. The wright brothers got it first. But what if they didn't? Would we have to endure pro-government arguments claiming that we'd all still be doing this by horsecarriage if it weren't for the wisdom and foresight of government officials?
Rob Heusdens:Wrong. It is called taxation.
Rob Heusdens:Wrong again. Public services, education, healthcare, infrastructure, social benefits, military, police, etc.
Rob Heusdens:So, because govt. funds education, that means, there is no real demand for education?
Rob Heusdens: That's good. I propose we also nationalize the banks, that is better then bail them out if and since they went broke.