SciAm on Energy Return on Energy Invested

The April 2013 issue of Scientific American had a decent interview with and overview of Charles A.S. Hall and his notion of Energy Return on Energy Invested (EROI).

True Cost of Fossil Fuels (Scientific American, April 2013) 

A starter is to study and understand these two images:

And:

The latter is from recent presentation on Energy Capital Cost Requirements by Michael Dale from ASPO conference 2013.

Bentley & Zittel on Limits to Global Energy Flows

At the recent ASPO 2013 conference, Roger Bentley and Werner Zittel gave a joint presentation on the limits to global energy flows mainly from oil, gas and coal.

Their findings are nothing new to those who have followed the PO debate for the past years, but bare repeating:

• Global conventional oil peak is now (will continue for some years)
• Global natural gas peak in c. 10-15 years
• Global (hard) coal peak perhaps within a few years
• Alternatives have much lower energy densities and returns
• Prices will keep going up, may go down in the short term (due to economic hiccups)
• Move to alternatives will put a stress in form of a  growth slowdown to the economy
• Official & Industry sources (IEA, EIA, BP, OPEC) have been systematically wrong in their oil production estimates
• We have plenty of reserves under ground, but we can't get to them fast
• If we consume everything, we will create a lot of environmental risks & damage

And oh yes, official policy is still mostly in denial about all this in most countries. Apparently people believed the fracking fairy tales and the future of 1:1 substitution of oil with natural gas (over night). 

Ah well.

The Economist admits it - We are at Peak

Yes, we are at conventional oil peak. Even the venerable The Economist admits in its August 2013 issue.

Yesterday's Fuel - Why Demand for Oil Will Fall (Economist, August 3rd-9th, 2013)

Of course, they can't do mea culpa, so they hide it as "peak demand", not peak production flows.

However, demand follows pricing, economic growth and policy decisions - and those are driven by basic oil field geology, not technology, not fanciful thinking or fairy tales about magical substitution.

At the time of writing this oil price (WTI) is at $106, at the time when the whole world economy is grinding to a halt again. Basic law of supply and demand -- if one believes in plentiful shale oil silliness -- would dictate a rapidly falling oil price. But this is not happening. The supply/demand margin is too tight. Supply is constrained, flow is at near peak - on an undulating plateau of maximum production. Unconventional liquids can only help this very modestly.

So, here we are - in 2013 and conventional oil production peak is starting to show it's effect. It will only get gradually more tight from here forward, with slight swings to the better and worse in the short term. The overall trend will be:

 - aggregate conventional production going down
 - prices going up
 - more swings in short term prices
 - more complaints about effects to world economy
 - more frantic investment in shale oil and tight gas (with mostly slow gains that fizzle out fast)
 - more instability in the Middle-East, more coups, more uprisings, more changes in power
 - more tensions between USA, Russia and China - all of which are gunning to get to the alpha dog position in the control of remaining conventional oil reserves (mostly in Middle East and in Africa)
 - more investment in natural gas and coal

Of course, this could all be wrong. We could just wake up, decide on a crash course to set things right, embark on worldwide coordinated conservations efforts and a plan to move off conventional oil dependency over the next 15-25 years or so. At the moment, the prospects for this kind of mass migration do not look good, but who knows - the future has a way of surprising us.

Here's to now. The only moment that matters. Use it wisely.

What came/comes out of the Shale/Tight gas/oil Miracle/Mirage?

A lot of hot air has been blown into the bubble called shale oil (often actually tight oil) miracle. The basic argument has been that soon the US will surpass that of Saudi Arabia as oil produces (and perhaps even exporter) due to non-conventional oil reserves and "advances in oil recovery technology".
Well, most of that is of course pure poppycock. Bakken and other US tight oil / shale formations are estimated to peak at around 2017:

The fracking miracle whis has greated the natural gas boom in United States is real, but with devastating environmental costs and unsustainable resource base. That is, it destroys groundwater resources, pollutes land and uses up more land these days in the active states than is used for wheat or corn production.

Further, unconventional resources always peak faster and once peaked, will decline extremely rapidly year-by-year, much faster than the old conventional resource bases that we got used to. This will create a frantic and increasing rate of drilling - a marathon to the death in order to just basically stand still (i.e. to stay even at the current level of production, not to say meet growing demand). That is not a miracle nor is it a future anybody in the fossil fuel industry hopes for. It's a race to the bottom.

Good resources on this issue is a fairly recent write up by Randy Udall titled 'The shale phenomenon: fabulous miracle with a fatal flaw' (2013), the Tullett Prebon report 'The Perfect Storm' (2012) and Chris Nelder's recent post on Smart Planet blog (2013).

Robert Hirsch - Nexus of Energy & Risk in the 21st Century

Presentation by Dr. Robert Hirsch on Peak oil and likely consequences from November 2012.

Some teasers:

There you have it. Nothing's changed. We are still on plateau. Price is still on an oscillating at-least-linear (more likely exponential) tendlike rise, which is triggering increasing recession-central bank intervention periods.

Reminder: The New Energy-Economic-EROEI Reality

The brilliant ecologist Charles A.S. Hall gave an ASPO-Webinar recently about 'Peak Oil, Declining EROI and the New Energy-Economic Reaility'. The simplified version of Hall's argument should be easy to understand:

Wealth creation (and it's proxy GDP) is based on energy resources

The growth rate of even wealthiest nations is declining:

Oil is becoming thin on the ground:

Due to increased drilling the EROI of oil production is going down:

This also increases oil prices:

Thus a larger chunk of money AND energy is going into energy production:

....leaving less money & energy for the rest of the economy:

This creates a new world, where the old economic models and policies do not work:

That's it. What else do you need to know? How will you react. This is an ongoing process. You are in it. You can make a choice as to how you will adapt to the new world. It starts with an attitude and education.

If you want to see the whole presentation along with Hall's voice, you can watch the Webinar on Vimeo or if you want the analytical version, you should read Hall's book 'Energy and the Wealth of Nations'.

Kyle Bass on European Debt Restructuring

The most important point of this video comes between 5:15 and 6:00.





The more important point from the point of energy is this:


There is NO way that oil production can grow at the speed required by the world credit market interest rate payments to be covered by real (non-financial) economic growth.

As Jim Puplava put it: Brent oil barrel price is the new global and automatically rising federal funds rate. It will cut off all economic growth every time it goes above $120-$140 / barrel (in c. 2008 dollars, as you have to keep  inflation in mind).

The world economy is toast. There is no way around it.

No amount of extra credit can solve this.

Only debt restructuring (i.e. default) will solve the economic issue.

The limited flow rate of energy guarantees that no other options is available.

And the more this issue is pushed into the future with temporary emergency measures, the bigger the debt that has to be written down will be and the faster the oil flow rate decline will be (it's increasing day by day).

And thus, harder the landing.

Brace yourself for impact in this slow-motion train wreck and try to position yourself to the last cart on the train.

Peak Oil, ERoEI, Maximum Power Principle & Markets

Excellent 13 minute Q&A with Nate Hagens, who understands the way we use oil, the coming supply crunch and how financial markets work.



For a more detailed discussion of some of the concepts discussed, check the the presentation A Framework for Supply and Demand on a Full Planet (35 mins).

Nate Hagens on Oil, Bond Market, Stocks and Economy on going forward

Conventional oil peaked in 2005. All liquids from ground are on a +/-5% plateau. Each extra barrel required for economic real growth costs more. This squeezes the real world economy. This is the lesson of net energy return falling.



Solution?

Globally -- long and slow crash, via economic turmoil.

Communally : know your family, your neighbours and the locals. Pull together.

Personally: scale down, get better psychologically, physically, financially and spiritually.

Increase your resilience to shocks and outages.

Stay safe.

Why Economics is Wrong

An excellent 20 minute talk from William Rees at the Institute of New Economic Thinking conference on how Economics is completely wrong modelling human ecological production.



If you don't understand it, watch it twice. It's really that important.

And if you're an economist and refuse to believe it, pick up some of the following for your reading list.

A Safe Operating Space for Humanity (Nature, 2009)
Towards a Green Economy: Pathways to Sustainable Development (UNEP, 2011)

Oh, why is this on an energy blog? Because economy drives energy usage and energy resources are a crucial part of our ecology. It's all connected. Thinking within the constraints of old academic domains will not lead to one really understanding the big picture.