Can Someone Simple 'Splain Oil Production & Sales To Me?

[SR71]

Items within the oil industry or markets related are sometimes good sources. The funny thing is the cleft between the perception they (or some of 'they') want to propagate through Heartland etc and their own practical perceptions they have to maintain in order to operate.

Here one, it relates to the importance of EROEI mentioned earlier itt. This one touches on an important reality - the decline of old giant oilfields, where the cheapest to produce oil has been coming from. There are probably very few of these giant fields left to find. Most of them are already being emptied.

Global Oil Production Peaking: What Happens Now? - Seeking Alpha

The other super giant fields around the world have already peaked, and are now well into decline. The North Sea and Mexico’s Cantarell field are both in irreversible decline as well as the US lower 48. Decline rates are usual in the proximity of 6-10% per year but can be as high as 20-30% as seen in Norway and Mexico. This can be misleading though. Cantarell’s decline rates are high on purpose because the field’s natural gas is being used to stimulate enhanced recovery with a neighboring field. This is why we haven’t seen as sharp of a decline rate from Mexico as a whole.

Overall global decline rates in a peaked world will most likely be in the proximity of 6-8%. Finding 6-8% of new capacity in the form of alternatives will be extremely difficult to do and most likely impossible. Even if we can find this 6-8% of lost oil production we will need more excess capacity to feed growth. Our growth based economy is entirely dependent upon cheap energy. This is where the true issue of peak oil comes into play. It isn’t about running out; it’s about exponentially increasing prices of energy.

Alternative energies are valued in a dollar figure when they should be valued in an energy figure. Energy returned on invested energy or EROIE, is a much better evaluation of an alternative’s viability. For the most part all of the alternatives that you read about in the news papers have terrible EROIE and thus are not viable as long term solutions to our energy needs.

[freemonkey]

Here's last night's Colbert interview with actor Mark Ruffalo on energy-related stuff, especially the dangers of hydro-fracking.

[SR71]

Cool! I did not know about the reduction of the natural gas estimate. Thanks for the tip! Here's an article on it. This is a good illustration of the earlier references to the term technically recoverable. I mean, it sounds pretty reassuring, right? In truth though, it is a guess based partly on present sure knowledge and partly on guesses based on geology. Oversimplified - I found salamanders under rocks in creeks before. This creek has lots of rocks, therefor there may be lots of salamanders. You don't really know how many salamanders until you start looking under more rocks. This is what has happened in the Marcellus. They are finding fewer salamanders than they thought might be out there.

I'm still on the fence somewhat about fracking and water contamination. I definitely want to get hysterical about it but so far the solid information at hand does not seem to warrant it. It definitely warrants concern and caution. Certainly it uses a lot of water and creates a waste disposal problem. There have been incidents of contamination, but I can't characterize them as wide spread or endemic. OTOH, the practice is still fairly new, and I'm guessing it may take years to see if the additives or fossil fuel deposits migrate much into water sources. Time will tell.

U.S. Cuts Estimate for Marcellus Shale Gas Reserves by 66% - Bloomberg

The U.S. Energy Department cut its estimate for natural gas reserves in the Marcellus shale formation by 66 percent, citing improved data on drilling and production.
About 141 trillion cubic feet of gas can be recovered from the Marcellus shale using current technology, down from the previous estimate of 410 trillion, the department said today in its Annual Energy Outlook. About 482 trillion cubic feet can be produced from shale basins across the U.S., down 42 percent from 827 trillion in last year’s outlook.
“Drilling in the Marcellus accelerated rapidly in 2010 and 2011, so that there is far more information available today than a year ago,” the department said. The estimates represent unproved technically recoverable gas. The daily rate of Marcellus production doubled during 2011.

[Dingfod]

Originally Posted by Crumb

Is global production going down?

Not yet. Unfortunately, demand is growing faster than supply. A slowing of the booming Chinese economy should ease that somewhat.

[davidm]

Originally Posted by JEROLL DA TROLL

Strange how evidence backfires. Just at the time when global oil production is going down, we are supposed to believe that CO2 emissions are increasing and heating up the planet?

CO2 from petroleum is increasing, while actual extraction of petroleum is decreasing?

How does *that* work, pray tell?

I know this is Da Troll, not Da Numb, but it's exactly the dumb "point" he would try to make, so a few things are worth pointing out:

Again, global oil productions does seem to have roughly "peaked," or perhaps the better term is "plateaued" around 2006. Of course, the real "peak oil" is demand outrunning supply. Even if production increases somewhat but can't keep up with demand, you get higher oil prices.

None of this means a hill of beans as far as global warming is concerned, because a lot of the co2 is "in the pipeline" so to speak, its effects only to show up years from now. But the larger point, of course (does this really need to be pointed out?) is that crude oil burning is not the ONLY source of co2. Everybody, now: Can you say

COAL?

EROEI is really important. It's why the liberal dream of an alternative-energy infrastructure is a pipe dream. We're not going to power industrial civilization on switch grass, hydroelectric, solar, wind or nuclear. All of their EROEI relative to fossil fuels is minuscule. More: All of these things depend on a fossil-fuel infrastructure to exist at all. Try to imagine using nuclear plants to make more nuclear plants.

It's probably too late to stop runaway global warming in any case. And because humans keep breeding like brainless rabbits, the growth of population will ensure ever more craving of ever more diminishing resources. All of this, coupled with unstoppable global warming, promises a very bleak century.

Here’s what happens next: Natural climate feedbacks will take over and, on top of our prodigious human-caused carbon emissions, send us over an irreversible tipping point. By 2100, the planet will be hotter than it’s been since the time of the dinosaurs, and everyone who lives in red states will pretty much get the apocalypse they’ve been hoping for. The subtropics will expand northward, the bottom half of the U.S. will turn into an inhospitable desert, and everyone who lives there will be drinking recycled pee and struggling to salvage something from an economy wrecked by the destruction of agriculture, industry, and electrical power production.

At least the Babble-thumpers will get their yearned-for apocalypse, so the news isn't all bad.

[SR71]

Hope springs eternal for the starry eyed green energy hippy. The funny thing about coal, from a layman's point of view, is that EROEI is all over the place, figures from as much as 90:1 to as low as 5:1 can be found, depending on who one listens to. Coal is certainly more abundant, but it faces some similar obstacles to oil, and a few that are peculiar to coal. Here is some Greenie porn -

EROEI of electricity generation | Energy Bulletin

"In addition this study has found a suggestion of increasing EROEI for wind turbines and nuclear power, and a falling EROEI for coal, gas and solar power. Of these, the most significant is the reduction in EROEI of coal. The study examines the reasons for these relationships with the greatest reductions expected to come from carbon capture and storage and the greatest increases expected from increased size of wind turbines and lower energy inputs to nuclear fuel enrichment.

Look at this chart -



Eww, my pants are gettin' tight.

[But]

Originally Posted by davidm

EROEI is really important. It's why the liberal dream of an alternative-energy infrastructure is a pipe dream. We're not going to power industrial civilization on switch grass, hydroelectric, solar, wind or nuclear.

Oooh, please give me that magic 8-ball.

All of their EROEI relative to fossil fuels is minuscule.

OK, at least it isn't negative anymore, according to your logic. That's an improvement, mostly because that didn't make any sense at all.

More: All of these things depend on a fossil-fuel infrastructure to exist at all.

In principle? Please tell me how that works.

Try to imagine using nuclear plants to make more nuclear plants.

OK.

It's probably too late to stop runaway global warming in any case. And because humans keep breeding like brainless rabbits, the growth of population will ensure ever more craving of ever more diminishing resources. All of this, coupled with unstoppable global warming, promises a very bleak century.

A century is a pretty long time.

Oh cool, an opinion from someone!

[davidm]

People make predictions all that time based on the best available evidence. If you don't like these predictions, go make some of your own.

We have a lot of data and evidence about current energy conditions and about the scalability of various alternative energy resources and their EROEI. Before dropping snarky one-liners into an Internet message board (as if that makes any difference anyway) maybe you should go do some of your own research. I have.

The facts are we have a rising population that is ever more clamorous for fossil-fuel resources that are demonstrably limited and are not recyclable except over geologic vistas of time. We may already be at peak oil, which just means the global peak of production followed by a long jagged decline. This will inevitably mean higher prices for scarcer fuel.

As for alternative energy, again, go do your own research. Alternative energy is good for small-scale stuff. It ain't gonna power global industrialization and provide for the ravenous needs of new industrial behemoths like China and India. If you think it can, explain how.

Finally throw global warming into the mix, which is demonstrably happening, and go figure out for yourself what the likely scenarios for the future are. This does not mean that a bunch of bad stuff MUST happen. It just means that it probably will.

[davidm]

Throw this into the mix, too: Capitalism, in order to function, depends on annual growth rate of about 3.5 percent. What all the hullabaloo was about, over the last four years, was negative growth rates. That has what has caused so much unemployment, foreclosures and associated human suffering.

But as James Howard Kunstler pointed out years ago in his book The Long Emergency (in which he predicts the collapse of industrial civilization in the near future) if we grew at 3.5 percent for the next hundred years, we would not have a buildable lot left anywhere on the planet.

Of course long before then we will have exhausted affordable energy sources, so we don't have to worry about that. Eventually capitalism will have to close up shop because we simply can't grow forever. The earth is finite. Is that so hard to understand?

And no, we're not going colonize the bottom of the ocean or outer space. We don't even have a manned space program anymore and even if we did, colonization of inhospitable worlds is economically unfeasible.

We are also out of money and running on fumes, thanks largely to the last ten years of two pointless and unbelievably expensive wars, coupled with a deliberate policy of transferring wealth from the 99 percent to the 1 percent.

It's also worth pointing out that even if so-called "alternative energy" could be scaled to replace fossil fuels, the raw materials associated with those "alternative energy" sources are also finite and will go into depletion. Someday we're not going to be able to build high-tech windmills or solar panels anymore, but if we're lucky we'll still remember how to light a fire with a couple of sticks.

[Vivisectus]

Ah. So I was not supposed to start drinking my own pee yet? Damn you guys!

[seebs]

I am totally unable to comprehend how PV could have a falling EROEI. Are we expecting the amount of sunlight to decline significantly?

[davidm]

See here for PV discussion and others sources as well. You will have to scroll down to photovoltaics because there are no links to the sub sections.

[seebs]

Ahh, so they're arguing not that the technology will be less efficient, but that if we do more of it we'll run out of scarce materials.

I am skeptical of this; it seems to me that major increases in efficiency and/or alternative material selections are not implausible.

[But]

Originally Posted by davidm

People make predictions all that time based on the best available evidence.

People make predictions all the time, full stop.

[chunksmediocrites]

Originally Posted by freemonkey

So, for one, I have some questions regarding the U.S. government's involvement in the production and sales of crude oil and/or gasoline.

The big push by the Right is the idea that if the US only drills more wells and pumps more oil, that we can reduce the price of gasoline at US pumps. The mistake is that US oil prices are dictated more by the world market supply and demand, and refining capacity, as well as to a lesser but real degree oil market speculation, and not by how much oil the US is producing.
"U.S. production and demand have little to do with the price of gasoline in the U.S"

The late 1980s and 1990s show exactly how domestic drilling is not related to gas prices.

Seasonally adjusted U.S. oil production dropped steadily from February 1986 until three years ago. But starting in March 1986, inflation-adjusted gas prices fell below the $2-a-gallon mark and stayed there for most of the rest of the 1980s and 1990s. Production between 1986 and 1999 dropped by nearly one-third. If the drill-now theory were correct, prices should have soared. Instead they went down by nearly a dollar.

The AP analysis used Energy Department figures for regular unleaded gas prices adjusted for inflation to 2012 dollars, oil production and oil demand. The figures go back to January 1976, the earliest the Energy Department keeps figures on unleaded gas prices. Phil Hanser, an economist and statistician at the energy consulting firm The Brattle Group; University of South Carolina statistics professor John Grego; New York University statistics professor Edward Melnick and David Peterson, a retired Duke University statistics professor, looked at the analysis, ran their own calculations, including several complicated formulas, and came to the same conclusion.

When U.S. production goes up, the price of gas "is certainly not going down," Melnick said. "The data does not suggest that whatsoever."

The calculations "help make the point that U.S. production and demand have little to do with the price of gasoline in the U.S., and lend support to the notion that there is not a great deal we in the U.S., acting alone, can do to affect the price of gasoline," Peterson wrote in an email. He pointed out that Energy Department figures show that gas prices in the U.S. seem to rise and fall similarly to gas prices in Europe, showing that it has little to do with American drilling.

[Dingfod]

If exports of gasoline were halted*, the price of gasoline in the U.S. would come down markedly until the refiners shut down operations to line up supply with demand.

*not going to happen

[davidm]

Originally Posted by But

People make predictions all the time, full stop.

Lots of people make predictions all the time, full stop, and lot of other people make predictions all the time on the best available evidence, full stop.

And?

[But]

And I think that at the current exponential rate of technological progress, telling people in an authoritative manner what the world is going to look like in 100 or even 50 years is just plainly silly.

[SR71]

A screed -

So many ways for things to go wrong, so many ways to go right. Brilliant people are working on solutions, some more promising than others, but so very many advances all the same. Somewhere in this torrent of advanced physical understanding must exist the seeds of our future salvation from the consequences of our own appetites for survival and prosperity. I tend to have faith in technological solutions to technological problems, but there is no guarantee that we will navigate our course wisely. A well informed public is key if we are going to deal with the challenges of finding ways to lead good lives on a heavily populated planet. The agencies that intentionally cloud the issue and deflect public awareness away from existing challenges are a serious impediment to achieving a widely beneficial outcome.

[But]

Most of the problem is political in nature. If a minuscule fraction of the effort spent on destroying things and murdering people was redirected towards "alternative" energy technology, i.e. anything that does not revolve around burning shit that comes out of the ground for free, we'd have commercial nuclear fusion reactors ready by now.

See, I can make stuff up too.

[Watser?]

Why Romney is Lying about the Causes of high Prices at the Pump | Informed Comment

[freemonkey]

Aside from the fact that this company is intimately involved in oil industry investments, does someone want to have a go at the statements made here? http://traton.org/?p=1061

[SR71]

I myself would rather see the .gov close off Carribean tax escape hatches for oil producers and all other domestic companies than go after subsidies for oil specifically. Subsidies for domestic oil subsidies amount to something like 4 billion annually IIRC. Their effective tax rates are generally less than 20% IIRC. All in all not that different from other mega corps.

Still, I'm not cryin' in my cornflakes for these guys.

Exxon Mobil Dodges the Tax Man

Exxon Mobil registered an average 17.6 percent federal effective corporate tax rate on its annual earnings in the three years spanning 2008 to 2010. Its average domestic profits exceeded $6.8 billion. And as a 2011 Citizens for Tax Justice report points out:

Over the past two years, ExxonMobil reported $9,910 million in pretax U.S. profits. But it enjoyed so many tax subsidies that its federal income tax bill was only $39 million—a tax rate of only 0.4 percent.

Even when Exxon Mobil had a record profit of $40 billion in 2008 due to record oil prices it had only a 31 percent effective tax rate. That’s 13 percent lower than the maximum 35 percent despite being Exxon Mobil's fifth year as the top corporate earner in Fortune 500’s annual listing. The company paid no taxes at all to the U.S. federal government in 2009 on its domestic profits of nearly $2.6 billion. It appears that they avoided the tax man that year by legally funneling their profits through wholly owned subsidiaries in countries like the Cayman Islands, and reinvesting their earnings overseas.

There is a math error in there regarding effective rate paid and top rate. I don't know what to make of it. Whatever.

or how about Big Oil’s Banner Year

Instead of heavily investing in job creation or production, the big five used $38 billion, or 28 percent of annual net income, to repurchase their own stocks. This practice enriches shareholders but it doesn’t add to oil supplies or investments in alternative fuels or other new technologies.

These companies also cling to tax breaks while maintaining $58 billion in cash reserves. This is nearly 30 times more than the estimated $2 billion in annual special tax breaks that these companies receive.

Lots of interesting info in that second article.

Disclaimer - I have looked at this topic a lot and it mostly makes my head hurt without reaching a lot of satisfying conclusions. I'm a serious rank amateur in economics and especially tax policy.

[seebs]

.35 / .31 = 1.129. So .35 is 13% higher than .31, see?

[SR71]

Thanks seebs, now I see my mistake.

The thing that gets me in this whole debate is that the Galtists who supposedly hate subsidies suddenly go weak in the knees when it comes to oil companies. When pressed, they will jump back and forth between justifying the need for the subsidies and arguments that if we don't pay it the government will just spend the money on poor people or alternate energy. It gets pretty frustrating debating this topic.