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"Peak Oil" as a phrase always seemed like a way to stumble into some really simplistic conversations. I never really quite understood it. I've been in convers

"Peak Oil" as a phrase always seemed like a way to stumble into some really simplistic conversations. I never really quite understood it. I've been in conversations where people have described it as a peak "moment" where overnight our life will turn into one of those bad ABC tv shows that gets canceled mid-season. If you've got a steep price curve, such that a little bit of extra demand means that the cost goes way up (because of constrained supply), then it also means that the price curve is also steep on the way back down. What that means is that if a demand spike makes the price skyrocket, then all sorts of alternative fuels become economical when they weren't before. And then, as more people switch to them and the demand for oil relaxes even a little bit, the oil price can fall dramatically as well, until some of those alternative choices don't seem as economical. Even just a simple model like that can explain all sorts of brain-numbing conversational patterns. Like the certainty that big oil has had the knowledge of clean, cheap energy and that they keep it secret to make money on oil... or that they'll pump up oil prices to lure the alternative energy people to make business risks, and then purposely flood the market in order to put them out of business, etc.

onli 12y ago
Peak Oil as a model of disaster is not so unbelievable. When you have a steadily growing production, say 7%, of a finite ressource that uses a growing amount X of the finite ressource Y each tick, you can arrive at the point where in one tick you use up all that was remaining of Y. In reality, it's not so simpel because there are untapepd sources that become available with higher prices and technological advances, and governements like the USA have proven to be willing to trade ground water plus security against oil and gas. But the peak oil model could still hold true - we just don't seem to be able to predict the when. And the production is distributed, so the wells won't stop at the same time, so prices could indeed regulate the transition a bit. But that only works if that process is slow enough -> peak oil doubts that. Edit: hihi, downvotes. Guess I made many hidden attacks -.-
- ObviousScience 12y ago
  Your first paragraph gives a great demonstration why the GP post thinks that most conversations about peak old "disasters" are silly, and your second paragraph and third paragraphs admit as much, despite you leading off with it not being so unbelievable. Your comment basically reads "Peak oil isn't ridiculous if you believe the entire globe is so unaware of what they're individually doing that they're going to run out of oil without any warning their own wells are going dry, because the wells aren't operated collectively, so we require ALL the operators do this at the same time in the same manner. Also, there isn't going to be a decades long transition because all of these people are on exactly the same schedule because... er.... Also! No one will switch to other power to lower the demand on in-the-ground oil because as I just said, it'll all happen at the same time incredibly fast." I mean, I guess you're welcome to believe it, but it relies on several facts that just aren't true, and is too simple of a model to fit if those facts are included.
  - sliverstorm 12y ago
    The key fact you have to believe is only that people are short-sighted and selfish actors. Which is easy for me to believe.
    - ObviousScience 12y ago
      No, you require that /everyone/ be short sighted and at the same time, not actually looking after their own interests. While I do agree that people are generally selfish, my experience with various executives across industries is that they're hardly stupid, and that there are many smart people working on the world's problems, even if only to make a buck off it. More to the point, I only need to think that a one-in-a-million person cares to do anything about the "peak oil problem", is intelligent, and is in a position to do so in order to believe that there are 7,000 people working actively on it. There are only a few hundred major oil companies globally, meaning that each one will like have a dozen (or more, for larger ones) people who are intelligent, highly motivated one-in-a-million people working on it. I think you greatly underestimate the number of people and the scale at which humans currently operate. It would be borderline impossible for them to all be short-sighted in the same way, at the same time, given the sheer number of people who are working on the problem, particularly given that there's a strong economic incentive to not make that mistake. tl;dr: No, your belief requires that literally everyone in the oil industry thought process (tens or hundreds of thousands of people) not be looking after their own self-interests if they're driving the bus off a cliff, and that they will all do so in the same manner and at the same time.
- Retric 12y ago
  In theory future's markets can help regulate prices to avoid harmful price trashing. However, evidence suggests even without peak oil markets create 'false' price spikes. Which is where futures market's are useful. If your farm/factory can setup a futures contract with an airline then you can remain profitable for a while even if the price falls.
tjradcliffe 12y ago
Peak oil--in the sense of Hubert's peak--is a perfectly good robust estimator of conventional oil reserves. Anyone who does robust [] estimation for a living (me, say) looked at it and said, "Yeah, that makes sense." A lot of people who have never produced an accurate estimate of anything said, "That proves we're all doomed!" and "That's clearly wrong!" both of which are wildly inaccurate. You point out the steep price curve of liquid petroleum as if that made things OK, but in economic terms, ten years ago, it was the cause for concern: when conventional oil started to get scarce, prices would go up. We knew that. But the new equilibrium price of fuel would depend on what alternatives were technologically* practical, and it wasn't clear that unconventional oil was going to live up to its hype. If it had stuck us with $250/bbl oil due to technological limitations, the economic hit would have been considerable, even if over a decade or two the price came down due to technological improvements. I'm emphasizing technology here because anyone reading this should realize that it can take rather a long time to go from "yeah this is basically feasible" to production at scale. With hindsight we now know we are OK, but again: ten years ago unconventional oil was not ready for prime time, and it wasn't obvious it ever would be. Boosters within the industry were claiming that it would be ready to go Real Soon Now, but there were skeptics in industry as well, and therefore it behooved those of us on the sidelines to be a little bit concerned. [*] Robust estimates are not the most accurate, but the least influenced by extraneous factors, special assumptions, etc. They are by far the best way to go when estimating highly uncertain things (like software delivery schedules) because they are the most difficult to game.
beefman 12y ago
No. In the case of oil, there's low elasticity of substitution. Trillions of dollars of infrastructure run on oil, not alternative fuels. That's why spikes in the oil price cause recessions.[1] The price of energy matters too, not just its derivative. We can make synthetic fuels that existing infrastructure can use but they're too expensive to support our civilization.[2] Imagine your robot vacuum can run an hour on a charge and takes 15min to make a roundtrip to its charging station. If you move the charging station so the roundtrip takes 30min, you'll get dirty floors, and they'll still be dirty a year later. The robot's EROI has gone from 4 to 2 and it can only handle a smaller house, or one that sees less activity. The EROI of a commodity like oil is approximately inversely proportional to its price. For commodities, competition brings price to the marginal cost of production, which is the cost of the embodied energy (so for fuels, this cost is unitless). The synthetic fuels are expensive because their synthesis is energy-intensive. It's something policy makers should understand when they advertise energy projects as creating jobs. Manifestly, the more jobs an energy source requires, the worse it is. Energy is a means to an end not an end in itself. [1] http://econweb.ucsd.edu/~jhamilto/oil_history.pdf http://econweb.ucsd.edu/~jhamilto/oil_history.pdf [2] http://www.inscc.utah.edu/~tgarrett/Economics/ http://www.inscc.utah.edu/~tgarrett/Economics/
- AlexDanger 12y ago
  >No. In the case of oil, there's low elasticity of substitution. Trillions of dollars of infrastructure run on oil, not alternative fuels. Is this elasticity of substitution quantified? I'd like to read more about it if you have a link. My gut feeling is that this elasticity is improving (despite increasing oil consumption) due to general technological advancement and a high-speed globalised economy. How well can we respond to a price spike now versus 30 years ago? Can we mitigate the economic impact of a price spike faster than we could 30 years ago? These are the trends I am interested in investigating.
  - waps 12y ago
    The IMF, in 2011, claimed : “a 10 percent permanent increase in oil prices reduces oil demand by about 0.7 percent after 20 years.” [1] So to put things simpler : there is no elasticity in the price oil to speak of. It is almost like this : for all intents and purposes, people will die, rather than stop buying oil (in most of Northern Europe, of course, people will die without oil, ditto for most of Canada, Alaska, Russia, ...) (another way to say this would be : look at why the US/"West" went to war at any point after Vietnam. Decide for yourself why those wars happened, what would be the cause ? Oil price. Even ISIS and Sudan, to a significant extent, are oil wars. Well, it's muslim lunatics, but they wouldn't be a threat to anyone without oil) As for peak oil, it's happening. Oil production has plateau'd since 2005. Conventional oil peaked in 1998, but horizontal drilling got it to go back up. In 2007 we really started to see a drop of 1-2%, but then the shale revolution happened (massive production spike, supposedly short-lived, in America matching declines in pretty much everywhere else in the world). Of course, the shale revolution skipped Europe. This is distorting the picture in America. In America it really looks like oil production has gone up, but that is not true globally. Recently, (massive) consumption slowdowns in China have masked a small decline, but that's probably noise. To be honest, it is extremely scary that this has not lead to a significant price decline (talking 5-10% here, we've seen 1-2% at most). I would also argue that while small declines are indeed noise, there's 2 factors that I feel still deserve some attention. 1) Since 2005, oil has been on a very small, but very (very) steady decline. The amounts are less than the noise, but it's hard looking at the graph and not see a decline. 2) Production has remained somewhat steady, but consumption has definitely shifted. Firstly internally : middle eastern countries' oil consumption has grown on the exponential curve. The same goes for pretty much all significant oil production countries. Since the internal market is subsidized in nearly all cases, this means that effective oil available on the international market (where e.g. Europe has to buy it) has gone down 5-8%. 3) The fact that the US did not have a way to export it's oil is masking fuel prices within the United States. It's one more factor that's making oil prices lower in the US than you'd expect given the rest of the world. [1] http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf
hyp0 12y ago
The increased price also makes it economical to exploit alternative sources of oil (e.g. lower quality resources, less accessible, etc), and to invest in R&D to make it more economical.

onli 12y ago

Peak Oil as a model of disaster is not so unbelievable. When you have a steadily growing production, say 7%, of a finite ressource that uses a growing amount X of the finite ressource Y each tick, you can arrive at the point where in one tick you use up all that was remaining of Y. In reality, it's not so simpel because there are untapepd sources that become available with higher prices and technological advances, and governements like the USA have proven to be willing to trade ground water plus security against oil and gas. But the peak oil model could still hold true - we just don't seem to be able to predict the when. And the production is distributed, so the wells won't stop at the same time, so prices could indeed regulate the transition a bit. But that only works if that process is slow enough -> peak oil doubts that. Edit: hihi, downvotes. Guess I made many hidden attacks -.-

ObviousScience 12y ago
Your first paragraph gives a great demonstration why the GP post thinks that most conversations about peak old "disasters" are silly, and your second paragraph and third paragraphs admit as much, despite you leading off with it not being so unbelievable. Your comment basically reads "Peak oil isn't ridiculous if you believe the entire globe is so unaware of what they're individually doing that they're going to run out of oil without any warning their own wells are going dry, because the wells aren't operated collectively, so we require ALL the operators do this at the same time in the same manner. Also, there isn't going to be a decades long transition because all of these people are on exactly the same schedule because... er.... Also! No one will switch to other power to lower the demand on in-the-ground oil because as I just said, it'll all happen at the same time incredibly fast." I mean, I guess you're welcome to believe it, but it relies on several facts that just aren't true, and is too simple of a model to fit if those facts are included.
- sliverstorm 12y ago
  The key fact you have to believe is only that people are short-sighted and selfish actors. Which is easy for me to believe.
  - ObviousScience 12y ago
    No, you require that /everyone/ be short sighted and at the same time, not actually looking after their own interests. While I do agree that people are generally selfish, my experience with various executives across industries is that they're hardly stupid, and that there are many smart people working on the world's problems, even if only to make a buck off it. More to the point, I only need to think that a one-in-a-million person cares to do anything about the "peak oil problem", is intelligent, and is in a position to do so in order to believe that there are 7,000 people working actively on it. There are only a few hundred major oil companies globally, meaning that each one will like have a dozen (or more, for larger ones) people who are intelligent, highly motivated one-in-a-million people working on it. I think you greatly underestimate the number of people and the scale at which humans currently operate. It would be borderline impossible for them to all be short-sighted in the same way, at the same time, given the sheer number of people who are working on the problem, particularly given that there's a strong economic incentive to not make that mistake. tl;dr: No, your belief requires that literally everyone in the oil industry thought process (tens or hundreds of thousands of people) not be looking after their own self-interests if they're driving the bus off a cliff, and that they will all do so in the same manner and at the same time.
Retric 12y ago
In theory future's markets can help regulate prices to avoid harmful price trashing. However, evidence suggests even without peak oil markets create 'false' price spikes. Which is where futures market's are useful. If your farm/factory can setup a futures contract with an airline then you can remain profitable for a while even if the price falls.

tjradcliffe 12y ago

Peak oil--in the sense of Hubert's peak--is a perfectly good robust estimator of conventional oil reserves. Anyone who does robust [] estimation for a living (me, say) looked at it and said, "Yeah, that makes sense." A lot of people who have never produced an accurate estimate of anything said, "That proves we're all doomed!" and "That's clearly wrong!" both of which are wildly inaccurate. You point out the steep price curve of liquid petroleum as if that made things OK, but in economic terms, ten years ago, it was the cause for concern: when conventional oil started to get scarce, prices would go up. We knew that. But the new equilibrium price of fuel would depend on what alternatives were technologically* practical, and it wasn't clear that unconventional oil was going to live up to its hype. If it had stuck us with $250/bbl oil due to technological limitations, the economic hit would have been considerable, even if over a decade or two the price came down due to technological improvements. I'm emphasizing technology here because anyone reading this should realize that it can take rather a long time to go from "yeah this is basically feasible" to production at scale. With hindsight we now know we are OK, but again: ten years ago unconventional oil was not ready for prime time, and it wasn't obvious it ever would be. Boosters within the industry were claiming that it would be ready to go Real Soon Now, but there were skeptics in industry as well, and therefore it behooved those of us on the sidelines to be a little bit concerned. [*] Robust estimates are not the most accurate, but the least influenced by extraneous factors, special assumptions, etc. They are by far the best way to go when estimating highly uncertain things (like software delivery schedules) because they are the most difficult to game.

beefman 12y ago

No. In the case of oil, there's low elasticity of substitution. Trillions of dollars of infrastructure run on oil, not alternative fuels. That's why spikes in the oil price cause recessions.[1] The price of energy matters too, not just its derivative. We can make synthetic fuels that existing infrastructure can use but they're too expensive to support our civilization.[2] Imagine your robot vacuum can run an hour on a charge and takes 15min to make a roundtrip to its charging station. If you move the charging station so the roundtrip takes 30min, you'll get dirty floors, and they'll still be dirty a year later. The robot's EROI has gone from 4 to 2 and it can only handle a smaller house, or one that sees less activity. The EROI of a commodity like oil is approximately inversely proportional to its price. For commodities, competition brings price to the marginal cost of production, which is the cost of the embodied energy (so for fuels, this cost is unitless). The synthetic fuels are expensive because their synthesis is energy-intensive. It's something policy makers should understand when they advertise energy projects as creating jobs. Manifestly, the more jobs an energy source requires, the worse it is. Energy is a means to an end not an end in itself. [1] http://econweb.ucsd.edu/~jhamilto/oil_history.pdf http://econweb.ucsd.edu/~jhamilto/oil_history.pdf [2] http://www.inscc.utah.edu/~tgarrett/Economics/ http://www.inscc.utah.edu/~tgarrett/Economics/

AlexDanger 12y ago
>No. In the case of oil, there's low elasticity of substitution. Trillions of dollars of infrastructure run on oil, not alternative fuels. Is this elasticity of substitution quantified? I'd like to read more about it if you have a link. My gut feeling is that this elasticity is improving (despite increasing oil consumption) due to general technological advancement and a high-speed globalised economy. How well can we respond to a price spike now versus 30 years ago? Can we mitigate the economic impact of a price spike faster than we could 30 years ago? These are the trends I am interested in investigating.
- waps 12y ago
  The IMF, in 2011, claimed : “a 10 percent permanent increase in oil prices reduces oil demand by about 0.7 percent after 20 years.” [1] So to put things simpler : there is no elasticity in the price oil to speak of. It is almost like this : for all intents and purposes, people will die, rather than stop buying oil (in most of Northern Europe, of course, people will die without oil, ditto for most of Canada, Alaska, Russia, ...) (another way to say this would be : look at why the US/"West" went to war at any point after Vietnam. Decide for yourself why those wars happened, what would be the cause ? Oil price. Even ISIS and Sudan, to a significant extent, are oil wars. Well, it's muslim lunatics, but they wouldn't be a threat to anyone without oil) As for peak oil, it's happening. Oil production has plateau'd since 2005. Conventional oil peaked in 1998, but horizontal drilling got it to go back up. In 2007 we really started to see a drop of 1-2%, but then the shale revolution happened (massive production spike, supposedly short-lived, in America matching declines in pretty much everywhere else in the world). Of course, the shale revolution skipped Europe. This is distorting the picture in America. In America it really looks like oil production has gone up, but that is not true globally. Recently, (massive) consumption slowdowns in China have masked a small decline, but that's probably noise. To be honest, it is extremely scary that this has not lead to a significant price decline (talking 5-10% here, we've seen 1-2% at most). I would also argue that while small declines are indeed noise, there's 2 factors that I feel still deserve some attention. 1) Since 2005, oil has been on a very small, but very (very) steady decline. The amounts are less than the noise, but it's hard looking at the graph and not see a decline. 2) Production has remained somewhat steady, but consumption has definitely shifted. Firstly internally : middle eastern countries' oil consumption has grown on the exponential curve. The same goes for pretty much all significant oil production countries. Since the internal market is subsidized in nearly all cases, this means that effective oil available on the international market (where e.g. Europe has to buy it) has gone down 5-8%. 3) The fact that the US did not have a way to export it's oil is masking fuel prices within the United States. It's one more factor that's making oil prices lower in the US than you'd expect given the rest of the world. [1] http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf

hyp0 12y ago

The increased price also makes it economical to exploit alternative sources of oil (e.g. lower quality resources, less accessible, etc), and to invest in R&D to make it more economical.