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The Forum > Article Comments > Oil and the lucky country > Comments

Oil and the lucky country : Comments

By Cameron Leckie, published 30/4/2009

The magnitude of the changes required to adapt to a declining oil supply in Australia imply costs of billions of dollars and time measured in decades.

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I think Australia and the world generally have been lulled into complacency over oil depletion by the strange behaviour of fuel prices. We drive 10% less but the price of a barrel of crude oil goes down 70%. The price must increase as the supply crunch draws near but essential transport can't be cut eg delivery of groceries to supermarkets.

In Australia's case I think we should shift from liquid fuels to compressed natural gas CNG. Buses and trucks should be converted first. Instead of cash handouts to do their own thing domestic car makers should be encouraged to produce gas powered models. Note CNG is mainly methane but LPG is propane and butane. CNG may need more expensive fibreglass tanks to save weight. The problem is that the CPRS is likely to spur a rush to gas powered electrical generation. Dare I suggest nuclear power instead. Moreover nobody sees any problems with exporting huge amounts of gas in the form of LNG. We need a policy to conserve gas for high priority uses like transport, ammonia production and home use. Power generation and export are the lowest priority.

If in fact Australia has 250 tcf (~5,000 megatonnes) of natural gas and coal seam methane that should solve the oil replacement problem for half a century.
Posted by Taswegian, Thursday, 30 April 2009 9:52:04 AM
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Do the projections of future supply assume the price is the same as today? Because it makes all the difference. If and when the price rises, it makes economical, supplies that are not economical today.

Also, anyone who wants to go exploring and mining oil today would surely be a sucker for punishment? I mean finding it and digging it up should be hard enough. But can you imagine the nightmare of parasitic hoo-haa - regulations, royalties and so on - that any productive person would have to go through in order to provide the service of supplying fuel to the population?

I think the flaw in this article is the assumption that 'policy' can and should solve the problem of natural scarcity. There is no evidence that policy is able to. So far as the scarcity is a result of policy, then by all means abolish the policies that are causing the scarcity. But so far as the scarcity is a result of nature, public 'debate' and 'policy' can't fix or improve it. Only discovering alternative more economical supplies of energy can do that. Policies cannot create, but they can certainly destroy wealth!
Posted by Wing Ah Ling, Thursday, 30 April 2009 10:11:00 AM
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Wing Ah Ling is quite right but picks on just one of the complications affecting supply and demand in the oil industry. For example Australia has substantial supplies of oil - the trouble is its locked up in shale, mainly in Queensland, and so is expensive to get at. There has been talk about exploiting those reserves for decades but the price has been too low. If the prices changes, maybe shale will get another look in. Or we could do a Canada where a technological breakthrough recently, and quite unexpectedly, unlocked vast reserves in oil sands that were previously not economic. And yes, I do know about the enviornmental objections to exploiting shale oil - I don't regard them as relevent.
Then there is product substitution. LNG is not as good as a petrol but it will do as a substitute. Its also possible to substitute coal derivatives, although that's desperate stuff.
I liked all the author's pretty graphs, but I would be extraordinarily suprised if the compiling authors intended them to be taken literally beyond about 10 years or so. They are meant to illustrate - not seriously forecast. No one in their right mind seriously forecasts any aspect of the oil industry beyond five years.
Posted by Curmudgeon, Thursday, 30 April 2009 12:15:33 PM
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Wing Ah Ling: "If and when the price rises, it makes economical, supplies that are not economical today."

Quite right. Of course the converse also applies. If and when the prices rises, things we use oil for that we take granted today won't be economically viable. This like driving to work and producing fertiliser.

Wing Ah Ling: "Also, anyone who wants to go exploring and mining oil today would surely be a sucker for punishment?"

My, what suckers Shell, BP, Exxon, and their college's are then. They have doubled the amount they spend on oil exploration since 2002, growing at roughly 10%-15%/year. (Source: World Investment Report, 2007 http://books.google.com/books?id=Zze060Hn5FwC&pg=PA90&lpg=PA90&dq=world+oil+exploration+expenditure&source=bl&ots=9o1wyu5zGc&sig=b9MZeLR_6TEPPmssUZ7PpwDyntQ&hl=en&ei=ChH5SfTpKMWNkAXYtoziCg&sa=X&oi=book_result&ct=result&resnum=3 ) It will drop this year though as some of the little guys drop out. But the big guys are raising the expenditure even after the drop in oil prices. Maybe is something to do with the $6 billion of US government subsidies get they each year? That sort of government intervention must make it tough, as you say. http://www.citizen.org/cmep/energy_enviro_nuclear/electricity/energybill/2005/articles.cfm?ID=13980

Curmudgeon: "Then there is product substitution."

Ye Gods, Curmudgeon, what happened? You seem to be acknowledging we have/will hit peak petroleum. That is a turn about for the books. And you are right about product substitution. I presume it will happen, but requires huge capital expenditure. I can't see any evidence of it happening yet which is a bit of a worry.

But the point the "Energy is everything" was making seems lost on you. There is only so much fossil energy in the ground of any sort. Once it is gone, its gone - there is nothing to substitute. Countries like the US have already gone well past peak coal.

By the way, that most optimistic of petroleum surveys - the US Geological Survey, does take into account shale oil. It has us running out in 2040.
Posted by rstuart, Thursday, 30 April 2009 1:09:26 PM
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"Maybe is something to do with the $6 billion of US government subsidies get they each year?"

Just maybe. The subsidies didn't happen to go unequally to the biggest companies by any chance did they?

All such subsidies should be abolished. Why should government be subsidising the oil industry for gossake?

"That sort of government intervention must make it tough, as you say."

This is the same government that's spending up big on the other hand to subsidise alternative energies and impose carbon taxes and what-have-you on the ground that fossil fuels are the worst thing in the history of the world.

The welter of direct and indirect taxes and subsidies and compliance costs is so various and complex that I wonder if anyone knows what the net effect is. Certainly many are countervailing and must cancel each other, making everyone worse off.

All government can add to this is economic incoherence. If the net effect of their interventions is to make oil cheaper to consume, it just encourages people to use it and delays the development and use of alternatives; just as they have done for the last hundred years with centralised coal-fired power stations, thus prejudicing the development of alternative decentralised energy; which they now tell us was all a dreadful mistake.

But if the net effect is to make fuel more expensive, they similarly make everyone poorer than they would otherwise be, and divert resources into the greater wastage of natural resources.
Posted by Wing Ah Ling, Thursday, 30 April 2009 2:36:40 PM
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Wing Ah Ling,

You could knock me over with a feather. I think I agree with everything you said in your last post. That is another first.

However, you contradict what you said earlier:

Wing Ah Ling: "I think the flaw in this article is the assumption that 'policy' can and should solve the problem of natural scarcity."

These subsidies for oil are a policy. Granted they don't solve the problem, they make it worse. But nonetheless, they are an example of policy effecting how much damage natural scarcities will cause us. Equally, you could have policies that force things in the other direction. You could, for example, tax oil and then artificially lower the R&D cost of exploring the alternatives.

This is what the ETS, solar subsidies, renewable energy policies are meant to achieve. I presume you don't like these either. I half agree. It looks to me like the government is trying to pick winners and losers in the game of choosing a replacement for the diminishing fossil fuels. It is an impossible task, and they will be better off leaving it alone. Just taxing fossil fuels and subsiding non-fossil fuels (or non-carbon fuels) equally would be better, I think.

What you don't agree with is any forcing by the government. There we disagree. Left to the market we will get price spikes, like we saw with petrol but much worse. The market seems to be pretty thick in this regard. In fact As the GFC demonstrates, a market left to its own devices can do some pretty dumb things in general. By forcing the price up now, you hopefully start to move over to alternatives sooner. Yes, we pay more now as a consequence. But by making more energy available when the spike hits, you pay a lot less later.
Posted by rstuart, Thursday, 30 April 2009 3:13:46 PM
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rstuart - clarification required. Sorry to disappoint you but I'm not acknowledging peak oil at all.. or rather not in the way you think.. I wasn't trying to cover all bases in the first post, just to point out some of the problems with the thesis outlined in the article. I saw one estimate that any likely beginning of the end of easy-lift oil (oil from the big reservoirs, not oil in general) might be about 50 years or so away. Sounds just as good as any other estimate I've seen, particularly given current prices. And that was before Iran started claiming major new discoveries. In other words, expecting the end of the car age is like waiting for the second coming. Sing out when its about to happen, but until then maybe ther is not much point in forecasting it.
Posted by Curmudgeon, Thursday, 30 April 2009 5:15:37 PM
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rstuart
Since life and the world are constantly changing, so are prices, as they reflect the market data of scarcity, risk, innovation, wars, alternatives, and so on. Aren't you assuming that there is an underlying stability of prices that is normal and should be protected? Why?

The price is the result of the valuations now and in the future of everyone who buys or sells, or abstains from buying or selling. How can it be anything other than arbitrary to decide which changes are 'ordinary' and which are 'spikes' ie excessive in your opinion.

"In fact As the GFC demonstrates, a market left to its own devices can do some pretty dumb things in general."

So monetary policy, the control by government of the supply and price of money, has got nothing to do with the price and demand for money, is that what you're assuming?

"By forcing the price up now, you hopefully start to move over to alternatives sooner."

You do - uneconomical alternatives that use up more resources of input to achieve the same output -what's commonly known as 'wastage'.

"Yes, we pay more now as a consequence. But by making more energy available when the spike hits, you pay a lot less later."

What makes you think that your valuation of scarcity and risk is better than that of combined valuations of the billions of people whose valuations go to make up the price? Are you privy to all their subjective valuations, local knowledge, and time preferences are you? No.

You are assuming that you see society from a gods-eye perspective and if only people weren't so stupid, it wouldnt be necessary for you to use force to bully them into the configuration that *you* think would be better. But the point is this: if it were *possible* for you to do what you are thinking, then why would it not be possible for government to manage any and every given field of activity more economically than markets?
Posted by Jefferson, Thursday, 30 April 2009 8:27:21 PM
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I am the author of this post. I don't expect the future to unfold as neatly as the charts suggest. The trends are what are important (world oil discoveries in long term decline, most countries post peak, Australia's production declining, many exporters are in decline). Add these all together and it indicates that over the long term our oil supply is likely to decline. Unfortunately nearly all long term planning by Government, business and individuals is based on an assumption that growth will continue forever. Economic and population growth are tightly coupled with growth in oil production. It is likely therefore that when oil production declines, so to will growth.

This doesn't have to necessarily end badly, but by basically ignoring it as we currently are, we are likely to cause ourselves a lot of unneccessary pain. If we as a nation got serious about implementing mass public transport, rail (preferably electric from renewable sources) for interstate transport and local food production, we could maintain a good standard of living.

However, the longer we leave any transition plan, the less options we leave ourselves. For example, it would take over a decade to replace the current vehicle fleet with electric vehicles or hybrids if every single vehicle sold from now on was of these types. We are unfortunately a long way from that.

Cameron Leckie
Posted by leckos, Thursday, 30 April 2009 9:19:08 PM
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Sorry Cameron, but nothing I have seen justifies the immense expense you are suggesting - switching to electric cars, or extending public transport systems for example. At least not at the moment. The way this sort of forecasting is approached now is that planners put forward a number of scenarios then wait a time and scope the field to see which ways things are developing, and perhaps then react. No one tries to forecast many years ahead. Its a waste of time. Master plans have also been discovered, through bitter experience, to be a waste of time, mainly because the forecasts they are based on are always wrong. In any case, the economic thinking now is that the absense of a resource is a good thing, not a bad thing. Look at Finland! They've got no resources bar a bunch of lakes and forests and do very well. Nice thesis but it will be ignord.
Posted by curmudgeonathome, Friday, 1 May 2009 12:09:10 AM
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Ahoy mates across the ocean,

We are on the global economic and Peak Oil Titanic going ahead at full steam. We knew we would soon hit the iceberg in 1956 when we were warned about oil depletion by M. King Hubbert and U.S. Admiral Hyman G. Rickover. And then we had warnings from the Club of Rome in the 1970s and the U.S. National Academy of Sciences in 1980: http://books.nap.edu/catalog.php?record_id=11771

And few listened a few years back to The Forum's Chris Shaw (his articles are here): http://www.onlineopinion.com.au/view.asp?article=3837

There is little time and little capital to change much now.

Few listened then and few listen now, and there is only time to get yourself and family onto a lifeboat.

It is time to focus on Peak Oil preparation and surviving Peak Oil, here (no charge, no advertising, no scams):

http://survivingpeakoil.blogspot.com/

Cheers,

Cliff Wirth
Small town in tropical State of Veracruz, Mexico
Hey, come visit! clifford dot wirth at yahoo dot com
Posted by cjwirth, Friday, 1 May 2009 2:51:44 AM
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curmudgeonathome,
I agree with you that it will be ignored. The 2005 Hirsch Report stated that to avoid severe economic problems associated with the onset of peak oil would require 20 years of crash action mitigation programs (both supply and demand). I believe we are either at or just past peak oil, meaning that the GFC has the potential to last for a couple of decades. Sure there will be ups and downs, but the trend will be contraction. Hence my concern.
Posted by leckos, Friday, 1 May 2009 5:42:22 AM
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"Unfortunately nearly all long term planning by Government, business and individuals is based on an assumption that growth will continue forever."

How do you know? You've inquired with all individuals, businesses and governments have you?

What makes you think that you're the only person whose knowledge, valuations and time preferences are valid?

"This doesn't have to necessarily end badly, but by basically ignoring it as we currently are, we are likely to cause ourselves a lot of unneccessary pain."

This assumes that you have superior wisdom. You don't.

"If we as a nation got serious about implementing mass public transport, rail (preferably electric from renewable sources) for interstate transport and local food production, we could maintain a good standard of living."

Socialists have a love affair with choo-choo trains, don't they? http://www.lewrockwell.com/higgs/higgs114.html

This is just more of the anti-rational idiocy that says that if we waste more natural resources on producing less output, we'll all be better off.

But you can't just magically re-shape the world closer to your heart's desire by confiscating people's money en masse and spending it on things that would not otherwise be economical. It a) is unethical and b) doesn't work.
Posted by Wing Ah Ling, Friday, 1 May 2009 11:34:08 AM
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We may still be referred to by others as the lucky country, not as lucky as we are now, but still luckier than others. As others point out, Australia has vast per capita gas reserves; but also vast solar and wave energy possibilities.

Imagine an array of wave energy power stations dotted around our abundant coastline providing continuous energy for our coastal cities.

It's no less feasible than the handful of massive coal fired power generation sites and massive distribution network would have seemed to our forefathers on the First Fleet.

As for transport, first the motor cycle will rule, followed later by the push bike. Oil fired transport dissappears first, but without air travel our tourism industry dies. Get a job close to home in a low carbon and low energy industry.

Look out for the coming carbon tax, and a hike in petrol tax to discourage petrol use, but watch the govt spend the revenues on the wrong things.
Posted by Robb, Friday, 1 May 2009 1:07:15 PM
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Jefferson,

I to put your of worship of "all knowing, all seeing market" in the same basket as other religions. But that is probably unfair to the religions, as you can't disprove god.

I agree the current GFC was caused by governments. Their mistake was to believe that markets really are magic and self regulate, and so they removed all controls. And yes, you are right that natural market forces will fix this. The GFC is the fix. The only issue is, in human terms it a pretty unpleasant fix. I think most agree the US enforcing an open transparent market instead of the allowing a lassie-fair market to run free would have been a much better fix.

Curmudgeon: "Sing out when its about to happen, but until then maybe ther is not much point in forecasting it."

Eh? A lot of people have been singing, and for a while now. In hindsight I was personally amazed when Kenneth Deffeyes said easy lift oil production peaked at the start of 2006. At the time I thought a bold statement, to say the least. http://www.princeton.edu/hubbert/current-events-06-02.html In hindsight he nailed it. Looking at the graphs in the story, total oil production did indeed peak them. Indeed, I'd like to know you explain the drop in oil production during 2005..2008 given prices went from $50/bbl to $126/bbl in the same period. Given by the end of that period everybody knew it was a bubble you'd think suppliers would be falling over themselves to take advantage of the inflated price.

Wing Ah Ling: "This assumes that you have superior wisdom. You don't."

I gather from that statement that you, Wing Ah Ling, do have a superior wisdom which allows you arbitrate on the wisdom of others.

Wing Ah Ling: "But you can't just magically re-shape the world closer to your heart's desire by confiscating people's money en masse and spending it on things that would not otherwise be economical."

You can't? Someone should tell the Scandinavian countries. They have grown to be some of the richest on the planet by doing exactly that.
Posted by rstuart, Friday, 1 May 2009 1:12:31 PM
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Hi Cameron. Two points to some of the previous posts. Firstly, the assumption and expectation of everlasting growth is built into economic system, otherwise known as "Fractional Reserve Banking." For those not acquainted with that, I would strongly recommend Paul Grignon's animation, "Money as Debt," as well as the erudite explanation furnished by World famous economist, Richard Douthwaite, in "The Ecology of Money." Neither is rocket science, and a brief perusal of either resource will quickly illustrate that our global banking system is a Ponzi scheme, that either expands forever (which as we all know, is impossible), or crumbles. And further, here's a key quote from World famous oil geologist Dr. Colin Campbell:

"It is becoming evident that the financial and investment community begins to accept the reality of Peak Oil, which ends the First Half of the Age of Oil. They accept that banks created capital during this epoch by lending more than they had on deposit, being confident that Tomorrow’s Expansion, fuelled by cheap oil-based energy, was adequate collateral for Today’s Debt. The decline of oil, the principal driver of economic growth, undermines the validity of that collateral which in turn erodes the valuation of most entities quoted on Stock Exchanges."

http://www.energybulletin.net/node/5944

And here's his CV:

http://www.energycrisis.com/DE/cv.html

Secondly, it doesn't matter how much extracting an energy resource costs, the exercise is completely futile unless you extract more energy than you put in. We've become so blinded by economics, that we're (some of us at least), forgetting and/or ignoring the basic physical laws of our Universe, thermodynamics being the main one. It's called "Energy Return on Energy Invested," and a very good resource to explain this in more detail is Richard Heinberg's book, "The Party's Over." By the way Cameron, great article. Thanks.

www.kimspages.org
Posted by KimBax, Friday, 1 May 2009 1:34:44 PM
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Try Again, the server crashed.
Experts like Colin Campbell and Kenneth Deffreyes are telling us that
we have reached peak oil. These people as well as the two I have
mentioned are retired Oilfield engineers and geologists.
They have worked in the industry all their lives and held senior
positions in various oil companies, so when they tell us we have
arrived at this historical point I think it is reasonable to accept it. They will tell us if they get the timing wrong.

It seems that peak oil occurred around June last year.
My main worry is that the politicians refuse to acknowledge that it
is a problem that needs attention. They use euphemisms like,
"Energy Security" which could mean anything.
They need to call it for what it is, a really big problem.
The Hirsch report warned that we need 20 years to prepare to mitigate
the effects of peak oi and avoid the worse problems.

Our main problem now is how to get the politicians to tell the public
what it is that they are facing.
I agree that natural gas conversion of trucks and important transport
should be done now. That is if there is any left as we are selling it
to the Chinese on a 25 year contract for a very low price.
If the Chinese can look ahead why can't we or is that we have dopey
politicians ?
I would ban the export of natural gas, that might give us enough time
to make the necessary changes.

Railways need duplicating and electrified and branch lines rebuilt.
This will enable wheat farmers to continue in the country and we will
still be able to eat bread.
Make no mistake there will be food distribution & production problems.
Posted by Bazz, Friday, 1 May 2009 6:12:24 PM
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Hello Wing Ah Ling,

I acknowledge that my statement with regards to assumptions about growth is a generalisation. I am confident however, if I went and surveyed the assumptions people and organisations make about the future not very many would be planning on a future of long term economic contraction. If we look at government policy, they are all based upon, or aimed at continuing economic growth. As such I stand by my statement. Please provide examples if I am wrong.

In my humble view, our future oil supply situation is a cause for major concern. This is based on data from numerous sources and what I view as a reasonable extrapolation of current trends into the future. I also differentiate between what is possible and what is probable. For example, the IEAs World Energy Outlook 2008 foresees oil production increasing to 106 million barrels a day by 2030. Is this possible – probably! Is it probable – no! This is due to the assumptions upon which the forecast is made being unlikely to occur, such as the trend of declining oil discoveries since the 1960s being reversed (just one example). Those who think technology will save the day should pause and reflect on this.

I am confused about your point about trains. I am not a socialist. My view is simply that we have a problem and we need solutions. Rail and public transport are solutions that will give us the services we want whilst using significantly less oil and can be powered by renewable sources.

If you have other solutions, I would look forward to hearing them.
Posted by leckos, Friday, 1 May 2009 9:54:53 PM
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Lekos;
I think Wing's unspoken point about rail is that trucks use
up to eight times the fuel per ton KM.

It is long past time that government made some tax or regulation
changes to get interstate trucks off the road. It would be difficult
to do that without such projects as the third track between Newcastle
and Strathfield which is cheap at $800 Million as against $7 Billion
for the F3 <--> M2 link.

Growth; yes every economist and politician is talking about when the
economy recovers and growth resumes.
Do they really believe that ?
Now that oil has peaked and coal is not all that far from peaking
how can we possibly have growth ?
Without an increase in energy we cannot have growth.
From the title pages of Kenneth Deffreys book;

Anyone who believes that exponential growth can go on forever in a
finite world is either a madman or an economist !

There appears to be almost no economists that believe that growth is
to all intents and purposes over. Certainly politicians will reject
the proposition. It always comes back to the politicians unwillingness
to look the problem in the face and acknowledge the unacknowledable.
Posted by Bazz, Saturday, 2 May 2009 8:43:04 AM
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Bazz: "trucks use up to eight times the fuel per ton KM. ... the third track between Newcastle and Strathfield which is cheap at $800 Million as against $7 Billion for the F3 <--> M2 link."

Fascinating figures, Bazz. Thanks for posting them. Supplying the appropriate references (links) would be nice.
Posted by rstuart, Saturday, 2 May 2009 2:07:50 PM
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Canada has more oil than the total world usage to date, in the arctic, hence the polar bear campaign. It also has even more oil again, in tar, sand & shale deposits.

The US has more oil than Saudi Arabia ever had, just it has not been exploited, in an attempt to placate [impossible] greenies.
The US has just announced the discovery of enough gas to last 100 years, in 3 seperate deposits. I'm sure the greenies are horrified, but they will find some bull to try to stop its harvest.

We have probably as much oil as Canada, under the reef. If/when the sh1t hits the fan, if we don't harvest it someone else will, with us as forced labour, or worse.

Fairy stories are grate, but they belong in kids books.
Posted by Hasbeen, Saturday, 2 May 2009 2:56:04 PM
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Hasbeen: "Fairy stories are grate, but they belong in kids books."

Another aspect of fairy tales is they don't quote facts and figures with references so a sceptical person might check for themselves. A bit like your post, Hasbeen.
Posted by rstuart, Saturday, 2 May 2009 3:21:23 PM
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Just for you rstuart, & just one reserve.

A recent 10 month test of Electro Thermal Dynamic Stripping of Alberta's bitumen sands proved the production capacity of 600 billion barrels of oil from that one deposit.

This represents a little more than double the Saudi reserve.

If you want to look at something interesting, see if you can find the story of the closing of the Rundel oil sand projects at Gladstone. It seems strange that after spending 200 million, & proving economic production at less than $30 a barrel, the whole thing should disappear without a whimper.

A hidden strategic reserve, perhaps. It is on the edge of the large projected fields, under the reef.

There is more to oil reserves, than all the rubbish we get here.

Have fun
Posted by Hasbeen, Saturday, 2 May 2009 11:34:06 PM
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Hasbeen,
do you understand that bitumen sands are not oil! Of course they can be turned into a synthetic fuel but only with huge capital expense (requiring a high oil price), lots of natural gas and water.

The reserves are huge, yes, but reserves are not the problem. Flow rate is the problem. Tar sands and oil shale will never be able to be produced at the same rate as the light sweet crude that forms most of the oil that the world has produced to date. Prior to the GFC, Canada's tar sands were expected to produce around 3 - 4 million barrels (mb/d) a day by 2030. Buckley's chance of that now with all the project cancellations and delays. Yet the decline in conventional oil is likely to be around 2-3% (best case) or say 2mb/d per year. Do the math, tar sands are no solution.

And you talk about Saudi reserves. OPECs reserves are likely overstated by around 300 billion barrels (or a quarter of the worlds known reserves). If you don't believe me, go to BPs Statistical Review of World Energy and chart OPECs oil reserves. You will see a massive jump in the 1980s, this coincided with the OPEC 'quota wars.' Then try and find information on OPEC oil discoveries in the same time. I doubt you will find any because these are most likely 'political reserves.'
Posted by leckos, Sunday, 3 May 2009 7:12:45 AM
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Hasbeen, oil shales/sands do not flow, hence they require huge inputs of energy to get a usable product. And as you have read in a previous post, that flow rate cannot arbitarily be ramped up. Further, energy is required to mine the product, and to heat it during processing - not to mention the massive amounts of fresh water also used, and polluted, during refining (not exactly a plentiful and/or infinite resource). The energy for this heating comes from natural gas, and when you add up all the net energy inputs (and the mining itself is not inconsiderable), the net energy profit becomes very doubtful (and very marginal). In other words, why bother mining oil sands/shales for energy, when you might as well use all the energy inputs required directly? Here's an article about the natural gas that's needed, to illustrate my point:

http://www.planetark.com/dailynewsstory.cfm/newsid/36632/story.htm

. . . and here's an article about the fresh water problem:

http://www.worldwatch.org/node/4222

And here's a brief synopsis of Richard Heninberg's book, "The Party's Over," in which the overwhelming problems of tar sand extraction are neatly summarised (page 7):

http://www.postcarbon.org/files/EndOfOilBooklet_0.pd
Posted by KimBax, Sunday, 3 May 2009 8:11:42 AM
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Whoops, that link to Richard Heinberg's book didn't paste completely. Here it is again with the missing bit:

http://www.postcarbon.org/files/EndOfOilBooklet_0.pdf
Posted by KimBax, Sunday, 3 May 2009 8:19:41 AM
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KimBax, leckos, what did you not understand about my post.

This is a production technique, proven in a 10 month trial, to produce crude from tar, at well under $30 per barrel. This is fact, not a fairy storie.

Of course it is unlikely to be exploited for many years yet, as there is so much $12 oil, waiting to be pumped, but it is ready to go, whem required, so don't sell your SUV just yet.

As a horse man, & a sailor, I am not only uniquely quilified, for a return to an earlier era, but would enthuiastically welcome a return to such a time. I could drive your coach, or sail your engineless cargo ship. I would really enjoy such a change, although I draw the line at such "green" jobs as shovelling up the horse droppings, or loading wheat, suggar, & coal, by the bag onto your sailing ship.

About 8 years ago I stopped breading horses, & bought an old sports car. Unfortunately, as far as useful transport is concerned, I still think I made the right decision
Posted by Hasbeen, Sunday, 3 May 2009 4:37:07 PM
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Hasbeen,

I appreciate the effort, but by link I mean a URL. As it is, I can see no connection between the Alberta's bitumen sands and your assertion that "The US has more oil ... not been exploited, in an attempt to placate [impossible] greenies." No search on Alberta sands reveals a no successful attempt by greenies to stop anything. Finding such a successful attempt in the Bush era would be surprising.

As for "Electro Thermal Dynamic Stripping of Alberta's bitumen sands", McMillan-McGee will be very rich men if it actually works as described. Sounds like a fairytale. As it stands, without the fairytale, tar sands and shale oil might at best see us to 2050 before we hit the final peak.

Right now even that seems optimistic. The picture draw by the Hirsch report http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf on Canada's oil sands isn't good. pp 40 para 3 says they get only 1/5 of the available oil, and need lots of energy to do so. That energy came from natural gas, but they have hit peak gas, so now that are looking to coal or nuclear (pp 41, para 3). We really do near the fairytale to come true.
Posted by rstuart, Sunday, 3 May 2009 10:11:39 PM
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rstuart,
Third attempt to get something into this system.
The server keeps coming up with an error.
I am not going to retype everything again but
the rail option was given by Aus Rail CorpCEO on ABC National Press
club and $7 billion in local opposed organisations newsletter.
Posted by Bazz, Monday, 4 May 2009 7:31:02 AM
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Bazz, sorry. It is a hobby horse of mine. I know this is Online Opinion, but endless opinion not anchored with facts is about as enlightening as a high school cat fight. Insisting on links is just my way of trying to keep the debate at a level more interesting to me.

In your case, such insistence is purely for show. I didn't for an instant doubt your figures.
Posted by rstuart, Monday, 4 May 2009 11:38:27 PM
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I like to adopt a simple approach. My concern is about agriculture in its widest sense and its dependence on oil. Diesel to be more exact. Can we replace the present source of diesel with something more akin to the fuel of the inventor himself (Rudolf Diesel)? Yes in theory, but we face two issues, one the supplies of raw material and two the growth in demand.

Try then a simple scenario. Take a small country town like Dalwallinu in WA. (Get the map out if you don’t know where it is). It’s on the edge of the wheat belt. Its livelihood is agriculture and especially wheat. Without diesel, the town ceases to exist. Can that town begin the steps towards self sufficiency using solar energy and photosynthesis as its primary diesel supply process? Yes. It can develop ponding and reactor systems to grow the right kind of lipid rich algae. That can be processed by trans-esterification into a fuel ( R Diesel just used peanut oil). Thus the small beginning is to build plant that the town can power its vehicles with. As production costs reduce, bigger plants can be built. Farmers then can start to fuel their tractors and headers with this fuel.

I stress that this is LOCAL and under the control of the local shire, not Shell or Caltex. Yes, I can know all the usual objections and there are some hurdles, by proof of concept is a first step. The process is well underway in the Netherlands and a brewery in London has been capturing waste carbon dioxide to produce algae.

Can we use Canola? I doubt it. Can we use hardy trees like mallee to get at an oil source? Yes we can and we do at Narrogin.

The biggest hurdle? Investment in plant to do the work.
Posted by renew, Tuesday, 5 May 2009 11:26:11 AM
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No renew, the biggest hurdle is EROEI (Energy Returned on Energy Invested). Think of it like this, every living organism on the Planet has to make an "Energy Profit" in order to survive and reproduce. If you consume a 100 calories, but expend the same (or even one calorie more), in the process of getting that 100 calories, you will die. And this is also why there will always be some oil left in the ground, because when it takes the energy contained in one barrel to retrieve, refine and bring that barrel to market, the game's over. "Cost" doesn't come into it. Economics doesn't trump the physical laws of the Universe. The EROEI of all forms of bio-fuel are very marginal at best, and may even be negative (depending on whose figures you trust). A guy called Dr. David Pimentel has done a lot of work in this area. If you google his name, along with EROEI, I'm sure you'd find a lot of background. Further, to replace our current demand for fossil fuel with any kind of biofuel would cover more land than the Planet has available. That puts the energy density of petroleum, plus our current use of it (around 83 million barrel a day), in some kind of perspective, as does this quote from George Monbiot:

In 2003, the biologist Jeffrey Dukes calculated that the fossil fuels we burn in one year were made from organic matter “containing 44 x 10 to the 18 grams of carbon, which is more than 400 times the net primary productivity of the planet’s current biota.”(1) In plain English, this means that every year we use four centuries’ worth of plants and animals.

http://www.monbiot.com/archives/2005/12/06/worse-than-fossil-fuel/
Posted by KimBax, Tuesday, 5 May 2009 2:55:51 PM
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rstuart;
No worries, my problem is read a lot of the stuff on the
various web sites but don't usually remember where.

Renew;
In olden days farmers always had paddocks set aside to grow
fodder for their draft animals. I guess the same will apply in your
suggested scheme. The question is how much acreage would be needed for
bio-diesel production ? Would it make the farm uneconomical ?
Kim-Bax raises the related issue of ERoEI, and certainly it makes the
large scale production of bio-diesel very dodgy.
However on farm production might just be practical if the land can be
used for multiple purposes such as crop rotation.

Your next problem is how to get the produce to market ?
Unless the railway is electrified and the rail head is nearby then
you won't get the crop to market.
For a while I guess that food production will get a priority
allocation of diesel.

If you have to revert to horse power then you will need about 20 to
50 times the number of farm workers that now work on the land.
Problems, problems !
Posted by Bazz, Tuesday, 5 May 2009 3:13:56 PM
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Kim and rstuart, I am familiar with Pimentel - indeed his latest edition of "Food Energy and Society" is sitting here on my desk - and I am fully aware of EROEI. But. We either say goodbye totally to "Dalwallinu" as a town and all its people, their history and send the bricks and timber to the recycling yards or we attempt to try renewing old ways.

Now this is oil mallee:

"The establishment of the Narrogin integrated mallee biomass plant was originally designed as a short-term research and development project by Western Power, and is now under the control of Verve Energy, with four primary objectives. These objectives are, firstly, to produce renewable electricity; secondly, to produce eucalyptus oil; thirdly, to produce charcoal; and fourthly, to activate carbon from that charcoal. The energy input is from mallee eucalyptus trees."

That was Fran Logan in the WA parliament Hansard. And note please that the trees are not felled merely coppiced. A medieval process that still survives in the UK.

I quote that because it shows that multiple outputs can be derived from the one resource, all of which are useful.

And whilst this might be a tad heretical, why not use wheat locally and NOT transport it 1000s of kms by train/truck. i.e. use wind to grind it locally and use it locally.

We are going to face insurmountable problems if we persist in overlaying appropriate technologies on a system that is inherently untenable because it is based on fossil diesel.

Algae - I do not have the EROEI data to hand and I suspect it isn't worked out adequately yet. Apart from producing betacarotene from brine algae (I was in a business that did this)there are only the odd Spirulina Chlorella palnts operational.

If it is so that these concepts are fouling EROEI principles then we must re-think, but right now, we are even thinking!

Bill
Posted by renew, Tuesday, 5 May 2009 6:19:20 PM
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Dovetails nicely with "Energy is everything" from a few days ago. The fairly simple premise is unless you can expand (or maintain) your energy supply your economic can't grow (or be maintained at the same level). Given that most if not all oil producers are hitting their peak then we are going to have an energy crisis at some point. I don't think we'll wake up one morning and go "OMG, petrol is $3.99.9 a litre, how will I drive my v8/truck/tractor; hey, why are my wheatbix $7 a box... " it will be a series of increases and declines as demand is produced and then destroyed but costs will trend up. e.g. the cost of oil is down but my loaf of bread is still $3.20 at bakers delight. You'd expect price to fall when the cost of transportation does wouldn't you?

Unless we can start coming up with alternatives now. Which would require farsighted government policy. This seems to be lacking. I've not heard much from any of the parties on what they intend to do about Australia's energy future (other then the Howard governments mooted nuclear option)
Posted by Charger, Wednesday, 6 May 2009 12:34:19 PM
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I should have said NOT even thinking....... well, some of us are but not our three levels of government.
Bill
Posted by renew, Wednesday, 6 May 2009 1:13:19 PM
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Renew;
We might wake up one morning and notice long queues at the
petrol pumps. There will have been an announcement by the petrol
companies that they are experiencing delays in shipping deliveries.

Picture this, you are a screen jockey buying oil destined for
Australian refineries. The phone rings and it is your boss and he says
"Hold off buying until London, or New York, has placed their orders".
What are you going to do ?

Anyone who thinks that or something like it will not happen when the
demand strts touching the supply had better think again.
When that happens we will be running on a 40% supply.
Posted by Bazz, Wednesday, 6 May 2009 2:53:05 PM
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Charger, I agree with you that there will be a series of 'increases and declines' as you call it. I think that we have started on a cycle of oil price increases -> triggers recession -> falling demand for oil -> falling oil prices (and investment in oil/gas industry) -> economic recovery -> increased oil demand ( and stagnant or declining supply) -> higher prices.

The only way to break out of this cycle is to reduce our dependence on oil. Unfortunately this will be a long and drawn out process, made even more difficult by the wild swings in the price of oil. Volatilty essentialy makes any 'scarcity signal' very difficult to identify. And I guess that is why I have little confidence that 'the market' will fix this problem. Or let me re-phrase, the market will fix the problem, but the 'fix' won't be in our best interest.
Posted by leckos, Wednesday, 6 May 2009 10:51:02 PM
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Leckos; I agree with your dismal picture.
The cycles will go ahead in the world but may be reduced here if the
government could be made to admit that there is a problem and be ready
to introduce a rationing system set to a supply of say 40% of our
current consumption.
Any extra that they manage to scrounge from around the world could be
allocated to food production and similar uses.

However you have to first get politicians to be able to say "Peak Oil".
At present there would seem to be an embargo on those words as the
only ones that have used them are Barnaby Joyce, the previous
Sustainability minister in Queensland and the greens (some of them).

I don't think think they will acknowledge peak oil until we have
mile long petrol queues at service stations.
The last thing the government will do is use those words and rationing
before the next election.

There is Federal Legislation that comes into effect if there is a
shortage of fuel. The Minister takes control of all fuel supplies
and can delegate control to others.
From my reading of it would be unworkable as a permanent system.
The problem is it is intended to cope with short term shortages and
does not introduce a system to allocate some fuel to everybody.
It is basically a squeeky wheel (if you pardon the pun) arrangement.
Posted by Bazz, Thursday, 7 May 2009 8:34:13 AM
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Well, Hajnal Ban is my local councillor. She used to be on the old Beaudesertshire Council, and was then elected to represent Northern Beaudesertshire (Veresdale/Cedar Vale/Cedar Grove/Jimboomba environs), when we merged with Logan. Dave Cockburn was my local councillor before that. At that time, I managed to get Andrew McNamara to give a presentstion on Peak Oil to the old Beaudesert Shire Council (thanks Andrew, much appreciated), with the "Help" of Dave Cockburn (though procuring his "Help" was more like pulling teeth). Anyway, Hajnal was great. She borrowed my book "Powerdown" (Richard Heinberg), and my DVD, "Imposed by Nature." When she dropped them back round to my place, she discussed the material in great detail, and was suitabley blown away by it. She also has close political ties with Barnaby Joyce:

http://www.news.com.au/couriermail/story/0,23739,22732180-5013650,00.html

And of course, it was also Barnaby Joyce that questioned Dr. Samsam Bhakhtairi on peak oil in 2006:

http://www.energybulletin.net/node/18506
Posted by KimBax, Thursday, 7 May 2009 11:31:38 AM
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