Isn’t that the best evidence that we’re not in Iraq for oil? Greenspan wasn’t in the Cabinet. He headed an independent monetary agency. He’s not a foreign policy nor military expert, and he wasn’t part of the administration that went to war. He’s just a once-highly-placed powerful guy who’s well-connected and has opinions about events outside his domain. Who cares whether he thinks the Iraq war was fought for oil?

Surely the middle east would be geopolitically less important to us if it didn’t have oil, but the Iraq war wasn’t fought for oil, nor because of the dubious public argument regarding WMDs. The US went to Iraq after 9/11 as a key step in re-vamping a regional policy that after 30 years of escalating terrorism was clearly not working. We had tried benign neglect, episodic engagement, bribery, massive response to an emergency (Kuwait), shuttle diplomacy, more bribery, regime support, regime change. Afghanistan was the ER operation. Iraq began intended corrective therapy. Now, while the execution of the war was outstanding, the occupation was both afterthought and disaster because the war’s planners only planned for the war to take out Hussein’s state military. Rumsfeld et al didn’t plan for taking custody of the country after winning.

A victory began to unravel the moment we declined to put enough boots on the ground for occupation, and the unraveling accelerated the moment we stood aside while Iraqis looted their own country. Firing the army only further diminished prospects for timely success. Keeping the occupation force sparse in a misguided effort to limit the war’s drain on resources and impact on taxpayers and the electorate has been faulty policy from day one. But the unspoken reason we went to Iraq was to put the American military squarely between Iran and Israel, and to engineer a democratic project in an authoritarian neighborhood. Would oil politics benefit if we were successful? Perhaps. But we didn’t plan to nor move to seize control of Iraqi oil, and we accepted risk that other states might turn off the taps in protest.

There are myriad initiatives the funds spent on Iraq could have been allocated to. But using money destined for the war and occupation instead for pulling unconventional oils out of the ground isn’t one of them. The government has never been able to bring uneconomic energy to market before the market price supported the proposition. It’s going to take roughly $200 oil to make shale oil viable for extraction. The Feds aren’t going to meaningfully develop that resource with the market price more than 40% below that threshold. The electric car + massive solar and nuclear power comprise a dream combination but government money isn’t making that happen sooner than battery and photovoltaic chemistry and economics demand either.

Phil

There’s nothing magical about this, we are now producing half the amount of oil we were producing in 1970. The facts are undeniable.

Not if you make up new facts, such as 33 billion barrels found off Brazil – when the drill hasn’t even breached the salt layer above the suspected reservoir.
Or when you keep pointing to Canada and tar sands.
Or when you show to oil inside the US, which is there for the taking. Why spend hundreds of billions on Iraq (which Greenspan in his memoir’s first edition clearly stated was/is “fought for oil”), when you could use that money to extract all the oil that’s there, ready for the taking, inside the US? :-)

These are straw man arguments, and quite clearly delusional. Events will reveal the unavoidable truth: we’re facing a serious challenge, and it’s going to be interesting to see how we tackle it.

(And spare yourselves the bother. Greenspan did say that. It was removed from subsequent editions. Here’s the tale of the tape:
http://www.timesonline.co.uk/tol/news/world/article2461214.ece)

For instance: Canadian oil sands reserves are huge, but production from those are increasing so slowly that they barely make a blimp in the big picture.

Reserves ARE supply, just with a different availability horizon.

Whose definition do you want to use? Some stipulate *production.* The Oil Drum defines it as: “”…the term used to describe the situation when the amount of oil that can be extracted from the earth in a given year begins to decline, because geological limitations are reached.” Notice that can be extracted is not limited to what is produced. Oil that is extractable but not extracted, by your definition, does not factor in Peak Oil. But Peak Oil is nonsense if extractable oil isn’t the realm. “…Because geological limitations are reached.” A possible two+ trillion barrels stash of shale oil unexploited in the US is not fallow because of a geological limitation. It’s untapped because the price of oil hasn’t risen enough yet to make extraction economically worthwhile.

If the world holds back extractable oil from actual production, for environmental, aesthetic, economic or climate change purposes, then production would be artificially restricted and an artificial Peak Oil could be experienced if demand could not be constricted accordingly. If oil held back had a lead time of more than a year to bring to market, then the Peak Oil problem would be quite temporary. Peak Oil as a dire phenomenon has to be a holistic concept defined by the impossibility of expanding supply to meet intrinsic demand. Otherwise the fear of permanent price escalation driven by uninfluenceable scarcity would be either misplaced or an artifice.

Canadian oil sands production is too slow to affect current estimate of Peak Oil because the price doesn’t yet make scaled production economic or urgent. Shale oil is almost completely left in the ground today. But at the point prices support exploitation of both, any notion of Peak Oil being a present or past condition disappears and its imminence is shoved forward perhaps by decades or more.

Peak Oil alarmists use the production definition as defense of the legitimacy of their fear, but they point to Peak Oil as proof we’re running out of petroleum. You can’t have it both ways. If you relate Peak Oil to imminently finite supply, then ignoring known reserves makes Peak Oil patently false. If you include known reserves in definition of Peak Oil, then you have to conclude you don’t know enough to pinpoint Peak as an imminent or extant condition. You can’t even fix any notion of what constitutes “affordable” oil. The world has shown remarkable resilience to wide price swings that are fundamentally unrelated to actual feasible supply. Just because we haven’t pumped more doesn’t mean the oil isn’t there. Price changes everything, and price gets us closer to diversifying energy reliance even if plenty of oil remains available. Peak Oil at at $10? Sure. But at $200, peak is a different place on the calendar because supply expands. True Peak is reached when supply ceases to expand regardless of how high the price goes, due to geological limits, while demand outruns it.

Phil

What is the definition of peak oil?
It’s: the increase in demand exceeds the increase in supply (such that OPEC will dominate the oil market even more than it already does).

Note: oil reserves don’t appear in that sentence.
Oil reserves don’t matter if you can’t extract them quickly.

For instance: Canadian oil sands reserves are huge, but production from those are increasing so slowly that they barely make a blimp in the big picture.

Simple. In large part, prices haven’t been high enough. High recent prices have made it economic to apply new technologies to revive formerly dormant wells in California, Oklahoma and Texas. Deep water oil deposits in the Gulf of Mexico are now economic to extract. Our Atlantic and Pacific coasts still hold untapped reserves. And shale oil lies completely untapped at current prices.

Shale oil reserves in a relatively compact area in the Rocky Mountains zone are estimated to be as much as 12X all of Saudi crude reserves. That shale oil will be difficult to extract, but at the right price its exploitation could easily allow American oil production to exceed pre-1970 levels. However, since 1970 to date, it’s generally been cheaper to go elsewhere for new wells.

There’s nothing magical about this, we are now producing half the amount of oil we were producing in 1970. The facts are undeniable.

Yup. Which has little to do with how much oil we have in the ground for recovery at economically viable pricing. $200 oil — still quite manageable to the American economy especially if we’re buying it from ourselves — changes things dramatically.

Phil

Production is unrelated to Peak Oil. Known reserves are relevant. Production only tells you about “peak oil” in your working or tapped wells.

The US has kept known oil reserves out of exploitation for a variety of environmental and aesthetic reasons. But further, Peak Oil as a circa 1970 idea doesn’t include vast reserves of unconventional oils like shale that require further energy price increases to become economic to extract, thus changing the supply side once again. The facts as you present them are fully disputable if you’re interested in a holistic view of energy.

In theory there is a lot of oil in the ground. But to produce it at low cost and sell it for a low price is a different story. The gigantic resources needed to produce ‘difficult’ oil are overstretched and tapped out.

We have no special right to low price. $200 oil would yield gasoline in the US priced cheaper than it is in Europe today, and open up ample new supplies. Oil is not yet expensive. Just more expensive than we got accustomed to.

All of this means there is only one sensible thing we can do: try to use less of it.
Therefore: lighter cars, better engines, hybrids, plug-ins, electric cars, biofuels, GTL and CNG.

Despite all the useless hand-wringing over oil that I don’t endorse, I do agree with this for other reasons. Especially the notion of *lighter cars!*

Phil

Nonsense back at you. Perhaps you want to come by my house in a few weeks and meet my sources? We are having a party, and there should be plenty of engineers and geologists in attendance.

Your peak oil argument is a straw man unless you have data which disagrees with the leaders in the oil industry who would all love nothing better than to prove we have passed, or are near passing, peak oil. How much do you think Exxon stock would shoot up if their reserves were suddenly believed the last ones anyone would ever find?

My house would be worth a mint tomorrow. We couldn’t spend the windfall in this town.

The Peak Oil debate has been around for a long time. So, what are the facts?
1. Despite high prices, oil production has trouble staying ahead of demand.
2. Looking ahead 5 years at new projects coming on line, the narrow gap between supply and demand probably will stay about the same.
3. In theory there is a lot of oil in the ground. But to produce it at low cost and sell it for a low price is a different story. The gigantic resources needed to produce ‘difficult’ oil are overstretched and tapped out.
4. Any calamity such as war, weather or sabotage can disrupt production enough to cause a big problem.
5. The oil market is not free, but highly manipulated by various governments. Ultimately, the price of oil is set by OPEC. They set it as high as they can get away with.
6. Speculators are increasingly involved in the oil market, possibly reinforcing price movements (that’s bad), but also forcing us to deal with the oil problem with urgency (that’s good).
7. The falling dollar exchange rate contributes to the rising oil price (in Euros the oil price is not rising so much).

All of this means there is only one sensible thing we can do: try to use less of it.
Therefore: lighter cars, better engines, hybrids, plug-ins, electric cars, biofuels, GTL and CNG.

Note that an economic recession can temporarily depress oil prices to give us a bit more time to work on these solutions.

It’s not at all hard to be a carnut and a lib. It may be tough to be a conservationist, but that has nothing to do with being a liberal, really. The alliance between the socialists and the conservationists is one of convenience only. The common cause is found among the economic and conservationist left who distrust markets and want greater regulation in hope of getting more dependable outcomes in the world. The problem to us small government types on the right is that we know that the only dependable outcome of more regulation is less progress on every front in almost every case.

As for your noncontroversial statements:

-infinite supply, not controversial
-peak oil past, not even correct. Saudi Arabia is no longer such a large part of the global reserves. Production and Peak Oil are not all that well linked. Peak Oil is a matter of reserves, not production.
-infrastructure advantage, not really controversial, but not necessarily true either.
-alternatives, not controversial to me, but a lot of folks on the left actually don’t believe it. They are a minority.
-Golden Age, not true at all. If you mean the golden age for insane hp from internal combustion then yes. If you mean for the common man to have a car, then not yet there. If you allow for cars that run on alternative energy sources, then absolutely wrong.
-

Phil
If the US is not past peak oil than why has oil production not been higher than 1970s levels even with these high prices? Technology can only do so much to recover oil. Until US production hits 1970s levels again, which it won’t, its accurate to say that the US production of oil is past its peak.

http://tonto.eia.doe.gov/dnav/pet/hist/mcrfpus1a.htm

There’s nothing magical about this, we are now producing half the amount of oil we were producing in 1970. The facts are undeniable.

This has been going on in the U.S. since 1970. Now the North Sea has peaked. So has Mexico and Venezuela. The list of countries past peak continues to grow.

Well, I’ve been following Peak Oil postulates since public coverage around 1970. The trouble with US Peak is that the alleged 1970 peak only accounted for then-known deposits and technologies for recovering oil from them. Even today, many then-known deposits have been held back from development. Moreover, recovery techniques have revived some old wells once-thought tapped out, both in Texas and here in California. The deep deposits now known in the Gulf of Mexico were not factored in. Nor the full extent of fields now known off both our coasts in the US. And shale oil reserves recoverable at $200 oil prices were not factored in either. Peak Oil fails to account for most unconventional oils known today. Mexico is somewhat limited by its state oil company, and Venezuela is known to have very large unexploited reserves that are more difficult to reach than current wells there.

Higher oil prices will make it economically viable to unlock large US reserves that are completely unexploited today. Peak Oil is arguably well ahead of us, with plenty of time for transition, if we don’t panic or do something foolish like ignore what’s in our grasp.

Phil

Anyone interested in cars who doesn’t understand what is going on with the oil supply is living in a fantasy land. Oil production per capita in the world has been declining since about 1971. Peak Oil theory postulates that at some point soon world oil production will begin to slowly decline because oil is a finite resource.

This has been going on in the U.S. since 1970. Now the North Sea has peaked. So has Mexico and Venezuela. The list of countries past peak continues to grow.

More disturbing is the Export Land Model which postulates that exporting countries, who because of oil wealth are fast growing, will satisfy their needs first and export only the remainder. This is scary stuff.

Since most U.S. oil is now imported, the country faces declining supplies and ever higher prices as importing countries bid against each other for ever smaller quantities of oil available from oil exporters.

Bush isn’t evil. Neither are Liberals. We need to stop thinking like donkeys and elephants.

Sadly, so much of government has been corrupted by corporate interests that it will be extremely difficult to start seriously integrating new energy sources. We need a Harry Truman type who is unlikely to get corrupted. None of the 3 running for President appear to be that type of leader.

The 33 billion figure was an intuitive guess, which is a common and surprisingly rational human behavior. It might not be wrong. I might even prove to be conservative. Or not. But energy fields are commonly guesstimated before the first unit is sold. Petrobras’ caution against the uttered estimate was directly driven by a need to warn against undue stock speculation, and need to align with Brazil’s SEC rules. They haven’t gone public with what they really think they have on their hands.

Seems like peak oil is common sense. The only way to argue that a peak won’t happen is to argue that there’s an infinite amount of oil. And that would be a short argument.

Yup, oil may be finite in practical terms but that doesn’t mean the planet isn’t making anymore. It just doesn’t convert other matter into oil on the time horizon that matters to us. So for practical consideration, there’s an oil peak ahead of us, sometime. Maybe this century, maybe not. The current discussion that is bending perceptions is whether we’re past peak, at peak or near peak, as though this is something knowable in real time and should affect policy. It’s not knowable in-the-moment. But if you allow for rising expense due to difficulty of extraction, and our economic ability to absorb higher energy cost than we incur today, then any notion of peak oil having passed or being present is alarmist and counterproductive to rational, calm and sustainable adjustment.

There is still whale oil to be had, but we’ve moved on. England reached “peak wood” in the 16th century and then moved to coal, but there is still wood to be had in the UK. More, actually. Peak Oil will not be the end nor even the beginning of the end for oil’s utility to man. Rather it will be impetus for migration to other sources and better-managed energy consumption. It will probably be the most difficult energy source migration man has managed to date, but it’s far from a present-day emergency, and its difficulty can be deeply mitigated by implementing a long arc of diversified alternatives until one of them emerges as a mainstream convenience.

Phil

And you’re right about deep water. If I remember correctly we’re talking thousands of meters – not quite the conditions enjoyed in the Gulfs of Mexico or Persia.

The Brazilian Securities and Exchange Commission is investigating the unauthorized announcement:

RIO DE JANEIRO, April 14 (Xinhua) — Brazil’s state-owned oil company Petrobras denied Monday an earlier announcement of the discovery of a gigantic oil and gas field in southeastern Brazil.

The release of relevant information made by “outsiders” is “harmful” to the market’s operation, the commission said.

These guys were all engineers and geologists who had a fatal flaw – they always wanted to find and produce more oil. No problem could not be solved by finding and producing more oil. They would produce at a loss if people let them.

Nonsense. Oil companies find and cap wells all the time. Then bring them into production as needed, cheapest first. An oil company which didn’t look for oil wouldn’t last long (unless they have massive amounts, like the Middle East).

Seems like peak oil is common sense. The only way to argue that a peak won’t happen is to argue that there’s an infinite amount of oil. And that would be a short argument.

The peak might be barely noticed’ or a catastrophe, just depends when it happens and how far we have moved onto other energy sources. But it will happen; just like peak whale-oil happened.

Most of the arguments against peak oil that I’ve read seem to be either “but we keep finding more oil..” or “but previous peak predictions have been wrong..”. The first one doesn’t address the question and the second one is like saying meteorology is nonsense because they can’t say exactly when it’ll rain.

Interesting discussion.

cheers

Malcolm

More like it’s interesting how citation of an oil find is plucked from a series of citations as though it appeared alone. What I actually wrote was:

“Nevermind that Brazil recently announced discovery of a new offshore oil field that may hold as much as 33 billion barrels.”

Nevermind…as in meaning that the huge new Brazilian field — whatever its size — is still merely incidental to the wide array of supply solutions available. Incidentally, the 33 billion barrel figure was reported as recently as last week and while its size is not certain — and no kidding “further exploration has to be undertaken” — the field will be by any measure significant.

You’re going to see very large new fields discovered and announced for decades. They’ll be deeper and more difficult, or under deeper water, but there’s more to be found. We won’t use it all before moving on to alternatives that become mainstream.

Phil

I will let one of my favorite economists debate you:
http://www.realclearpolitics.com/articles/2007/08/subprime_politicians.html

My point is not that environmental regulations were the sole cause of the collapse, nor that they are an inherently bad idea. My point is that government is partially to blame for the ‘crisis’, and that therefore probably not the best bet to fix the problem.

http://www.marketwatch.com/news/story/petrobras-cautions-more-data-needed/story.aspx?guid=%7B0A970D6A-CD5B-44DD-A438-963E16EDE3BB%7D&dist=MostReadHome

LONDON (MarketWatch) — Brazilian state-run oil company Petrobras cautioned late Monday that further exploration is needed to assess the size of its Carioca field after comments from a state official sent the company’s shares sharply higher.

It turns out that a “rogue” spokesman had a top of his head estimate as to the size of the field. That the field itself was announced to the world in September of last year, and that they have so far only sunk one well into the area, and need to pursue a large exploration programme to assess potential.

Petrobras said in a statement late Monday that the consortium is still following its exploratory program in the region after it first announced the find in September.
“On that occasion, the market was informed that more investments are required to drill new wells, the assessment plan for which is in its final preparation phase and is expected to be submitted to the NPA in the upcoming days,” Petrobras said.
The company added it’s also drilling a second well in a smaller area nearby, but it isn’t yet deep enough to have struck oil.
“More conclusive data on the discovery’s potential will only be known after the other phases involved in the assessment process have been completed, and they will be announced to the market in a timely manner,” Petrobras added.
The National Petroleum Agency also downplayed Lima’s comments in a statement. The NPA said the figures Lima cited were unofficial and that estimates on the size of the field were already public knowledge.

So we have disruption and discomfort in multiple supply markets right now. As Krugman to his credit points out, we’ve been through this before. Now, oil is only just a bit above its previous real-dollars price of 1981, yet our ability to afford this peak is improved compared to that crisis time when inflation was running close to double digits, along with unemployment in the US, and roughly double our levels of both in Europe. Mortgages in the US were ~13.5% and new car loans were in the 15% – 18% range. Meanwhile, in the US we now drive a unit of economic growth on less than half the energy required to do same in 1973.

Nevermind that Cambridge Energy Associates projects there is around 3X (maybe more) recoverable oil in the ground than all that has been pumped to date. Nevermind that Brazil recently announced discovery of a new offshore oil field that may hold as much as 33 billion barrels. Nevermind that vast untapped deep water fields will come online from the US portion of the Gulf of Mexico and someday off the eastern seaboard and our Pacific coast. We’re not close to running out of oil, but extracting it from where it lies will be progressively more expensive. Economic and environmental factors will shift energy consumption elsewhere long before the planet’s oil is gone.

Then there’s shale oil reserves in the US, which if fully recovered are up to 12X the total oil reserves of Saudi Arabia. But it’s going to be expensive to get. Oil will have to rise to the neighborhood of $200/barrel for shale oil to be economically viable. But that’s OK. We can stand $200 oil. If nothing else changes, $200 oil derived from US land and refined in US facilities will yield gasoline that is cheaper than it is in most of Europe today.

And I haven’t even mentioned the potential for liquid coal from base material for which we’re also richly endowed, nor Canada’s oil sands.

Long before we have to burn all those combustibles, rising hydrocarbon energy source prices will move more energy funds into solar power exploitation. While battery chemistry progress comes slowly, the combination of electric vehicles (both pure and hybrid) and increasing solar exploitation + revived nuclear power will moderate our hydrocarbon demands and you will see the US halving again the energy inputs needed to drive a unit of economic growth.

I haven’t mentioned expanded natural gas reserves, (responsible) bio-fuels and that vexing hydrogen-as-battery equation.

Buildings alone are the number one energy consumer in the US. There’s a lot more leverage there in reducing energy needs than there is in the entire transportation fleet, for us. We’re not even remotely close to wringing obtainable improvements in energy efficiency from our buildings. The car is already on the mend and it’s a one-way street, even if the government doesn’t lift another finger to nudge progress along.

We’re also nowhere close to maximum agricultural efficiency globally. American farms are on the forefront of extreme productivity, currently too petrol-intensive but that will moderate both in machinery gains and bio-engineered pest control and improved genetic hardiness of crops. China’s agriculture can, should, will be progressively upgraded in productivity terms and they’ll find additional arable land to cultivate. The US is still holding back arable land from production. To the extent that climate change drives continued warming, Canada will gain growing season. Africa remains hugely underdeveloped with respect to agricultural efficiency. Russia and Latin America too. And worldwide human population is on track to peak at around 9 billion and then track downward on a long curve, if we keep the wealth distribution machine going.

Our limits aren’t planetary, they’re social, political, attitudinal inhibitors to creative execution against known phenomena.

We may not see $10 oil again, but so what? Oil and other commodities will moderate as the supply side inevitably corrects and lags demand side correction. Our energy dependencies will be diversified and if they’re not, it will be because oil proves plentiful and affordable enough to continue its role. The dollar will once again be worth more. We will manage Iraq down to a sustainable commitment. The US automotive fleet average fuel efficiency will begin climbing again. We’ll assemble several pillars of economic stability on which to build a new platform for sustained growth.

Certainly we are in a period of temporally restricted disruption with local variables, amplified by the insecurity tax put on oil by speculators who cannot quantify risk of spontaneous disruption to supply caused by multiple instabilities in the Middle East. The adjustment will be painful for some, even personally devastating for many. Look past that, focus on coping strategies, and we’re far from hosed.

Phil

While the potential Brazil find could add significant supplies to a global oil market many see as tight, it would likely take the better part of a decade before any of oil finds its way to market. The site will need to be studied further, and drilling platforms must be designed, built and transported before it can start producing oil.

However, it does cast new doubt on peak oil theory, which postulates that world oil demand will soon outpace supply.

It is impossible to say whether or not more 33-billion-barrel oil fields exist under the sea, Evans said.

“Nobody really has data on what’s out there in the middle of the ocean,” Evans said.
–

Well I think that sums it up nicely. Nobody knows for sure. Call me stupid, but here is an idea: We know we have oil in Alaska, we have oil (or the chance for oil) off the coast of FL and CA (the Chinese are already going after it). So lets get it. And while were at it lets shoot the speculators who keep pushing the price up. This is not a free market anymore.

TonyTiger:

“…Yet they push the idea that we should use FOOD as fuel, and look how quickly that has caused a problem with food supply”…

It’s not just liberal democrats pushing this. The president and other Republicans from farm states are all over it like flies on sh!t. I can almost excuse the local elected officials but I’m just dumbfounded that Bush is going along with this. I don’t think of him as a Republican anymore and now I’m starting to believe the Bilderberger/Illuminati/Free Masons/secret society du jour conspiracies.

While it may be true in itself, notwithstanding the usefulness of environmental regulations for our quality of life, isn’t the current problem that we have too many houses on the market, many having been built for speculative purposes? Neither population nor income increased fast enough to justify this excess supply of homes. Typical speculative market. So based on that, those environmental regulations probably did nothing to precipitate the crisis.

You neglect to mention the fact that much of that oil is locked up in complex shale formations and extremely expensive to access, even at today’s prices. The oil is absorbed inside of rock which is less porous than a dinner plate. Basically to get any of it out you have to drill horizontally into the formation and fracture the rock. After you do all this, you only get a small percentage of the oil present in the rock. We have been under a republican president for the past 8 years. If it were economically viable, we’d be all over it. All the cheap easy to access oil in the US is gone, its not a simple matter of drilling more wells. US oil production peaked in the 1970s and has not risen despite increasing prices, there’s a good reason for that, and its not because of OMG LIebruls!!!