The Oil Drum: Europe

Modelling Biofuel Production as an Infectious Growth on Food Production

Biofuel capacity or production as a fraction of food supply for three different cases, along with sigmoidal (ie logistic) projections, 1998-2018. Plum curves show US corn ethanol processing capacity in service or under construction as a fraction of ethanol potential of entire US corn crop. Brown curve shows actual production of US ethanol as a fraction of ethanol potential of US corn crop. Violet curve shows global biofuel production as a fraction of estimate of biofuel potential of entire global human food supply. Sigmoidal curves all have K = 1/3 (infection doubling time of three years), and cross the 50% line at 2008, 2010.8 and 2014.2 respectively. Sigmoids are scenarios, not forecasts. Actual biofuel production growth will depend heavily on oil prices and policy responses to increasing food prices. See text for sources and methods.

(Ed note: Stuart has been an important part of this team, but no, he is not "back." It has just been more than six months since he wrote this article, and it seemed like it might be a good time to revisit it.)

_{Annual rates of total drilling for and production of oil and gas in the US, 1949-2005 (R² of the two = 0.005; source: U.S. EIA and N. D. Gagnon). Since drilling and other exploration activities are energy intensive, other things being equal EROI is lower when drilling rates are high.}

As oil prices increase and the presidential campaigns heat up there is a lot of discussion about increased drilling for oil. In economic theory higher prices will give market signals to increase exploration and exploitation of resources and hence deliver more to society, although at a higher price. Will this in fact occur with oil for the United States? Of course we will not know until we do it, but we can look to the past for hints. The enclosed figure represents the history of drilling and production for oil and gas in the United States. The answer seems inescapable: the rate of drilling for oil in the United States has been unrelated to finding or producing oil and gas, which is determined principally by geology. Mother nature, not market theory, determines resource availability, at least in this case and probably many more. (Source: Hall, Powers and Schoenberg (in press))

It seems to me that there is likely to be a very short path from petroleum shortages to electricity shortages. There are a lot of issues involved, from the fact that the fuels used in electricity production are themselves dependent on petroleum for their extraction and transportation, to the current state of the US electricity infrastructure, to the impact of peak oil on debt financing. I have written about most of these issues before, but since the petroleum/electricity link is such an important one, I thought I would devote an article to putting the pieces together.

Fuels used for electricity generation

In the United States, the primary fuel used for electricity generation is coal, at 49% of electricity production. Natural gas follows at 22%; nuclear at 19%; hydroelectric at 6%, and petroleum at 1.6%. The newer renewables are all quite small: wood at 0.93%; wind at .77%; waste at .41%; and solar (for electricity generation) at 0.01%.

Figure 1. Distribution of fuel supplies used in US electricity generation, based on EIA data.

Predicting the future of Saudi Arabian oil production is a rather daunting endeavor, given the limited amount of information available upon which to base a prediction. Presented here is an appraisal for Saudi production through 2015 based on an informed analysis of past production data and a simple extrapolation into the future. It is found that the oil production trend from the early 1990s through the present is driven more by the addition of new producing areas than by "peak and decline" in the Hubbertian sense. This trend will likely continue for the next few years leading to a new "peak", although more rapid decline in mature areas of Ghawar will eventually overwhelm both mitigation efforts therein and added production elsewhere.

hit $126 before it hits $102

hit $102 before it hits $126

stay in a trading range between $102 and $126

it's still all geopolitics and other "above ground factors," so what does a price signal mean anyway?

haven't you heard? it's all about the declining dollar and specs-not growing demand and a stagnant supply.

M. King Hubbert made his views about peak oil known in 1956, at a meeting of the American Petroleum Institute. Many people don't know that only a year later, in 1957, Admiral Hyman Rickover started trying to publicize the fact that fossil fuels are finite, and were likely to peak in the first half of the 21st century. Many of the things he said then are words we wish people had listened to years ago:

Fossil fuels resemble capital in the bank. A prudent and responsible parent will use his capital sparingly in order to pass on to his children as much as possible of his inheritance. A selfish and irresponsible parent will squander it in riotous living and care not one whit how his offspring will fare.

Today the automobile is the most uneconomical user of energy. Its efficiency is 5% compared with 23% for the Diesel-electric railway. It is the most ravenous devourer of fossil fuels, accounting for over half of the total oil consumption in this country.

I suggest that this is a good time to think soberly about our responsibilities to our descendants--those who will ring out the Fossil Fuel Age.

Yesterday, August 6, the EIA published new International Petroleum Monthly data. The new data revised downward previously published estimates, all the way back to 2002, with the biggest revisions in 2007 and 2008. With the revisions, the latest month, May 2008, shows new record-high oil production. Other recent months which had previously set records are now 67,000 barrels per day to 417,000 barrels per day lower than reported just a month ago. In this post, I offer a few thoughts on what the new data suggests.

Figure 1. World crude and condensate production, based on August 2008 EIA International Petroleum Monthly

This is a guest post from Tim Jones of the Sustainable Energy Forum New Zealand.

About 70 people attended the joint Engineers for Social Responsibility/Sustainable Energy Forum conference on "Responding to Oil Depletion and Climate Change" in Auckland on Saturday 26 July. Most of the conference presentations, plus the conference statement and report, are now available online at: http://www.sef.org.nz/conferences.html#2008

The conference was a resounding success. Those present accepted the urgent changes we need to be talking about, the mix of cold hard facts that we as a society find hard to face up to but also the hope for the future in the examples of local action in New Zealand communities on sustainable towns, and examples from abroad. Those present at the conference were deeply concerned at the lack of urgent action by the Government and most political parties on rising oil prices, peak oil, and climate change. The conference therefore agreed the following statement, in the hope of helping raise government and community awareness, and to help build a consensus for change.

Back in January, I made a financial forecast for 2008. In this post, I will update my analysis, looking both at what has happened thus far in 2008, and refining what is likely ahead.

Most forecasts are made with an overriding assumption of infinite growth, but the analysis made in January and updated now maintains an underlying assumption of resource limitations, such as will likely accompany the advent of peak oil. Under resource limitations, debtors are likely to find it difficult to pay back loans, as resources become more and more scarce. As a result, default rates are likely to continue to rise.

One of the issues I consider important in my forecast is systemic risk. This relates to the interconnectedness of the system, and predicts that if one part fails, other parts are also likely to fail. Many other articles mention this issue, but rarely address its full ramifications.

Figure 1. An example of a system with systemic risk (Photo from homebuyerphoenix.com)

Chris Nelder was on Yahoo's Tech Ticker with Aaron Task today. Chris is author of Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century (which was reviewed by Robert Rapier in this post). Chris will have another book (with Jeff Siegel) coming out soon, Investing in Renewable Energy: Making Money on Green Chip Stocks, but it doesn't come out until October.