poor oil companies

One Vijay Vaitheeswaran speaks to public radio's Marketplace about ExxonMobil. He asserts that ExxonMobil has 3 problems:

1. resource replacement
2. unfriendly governments
3. climate warming

Regarding the first, there's a lack of recognition that it's a global problem affecting producer and consumer (i.e. everyone) alike. Vijay is the author of:Power to the People : How the Coming Energy Revolution Will Transform an Industry, Change Our Lives, and Maybe Even Save the Planet. If the book is serious, the title obviously is not.

Here's an in-depth Bloomberg piece about the current state of the oil industry. It begins with an example of how difficult oil production has become and includes:

ConocoPhillips CEO James Mulva says his company is spending as much as it can on searching for oil and developing new wells. Mulva, 58, says investment is being constrained after 147 years of exploration as companies struggle to find deposits large enough to produce sufficient profits. In the past four years, the average discovery outside of North America was the equivalent of 38.6 million barrels. That's less than half the amount of oil burned every day around the world and the lowest average for a four-year period since 1901, Chew says.

All the signs point to a depleted finite resource, yet again and again the analysts presume that if only the oil companies would invest more in exploration and production, there would be enough supply to meet demand.

There are two ways to get new reserves,'' says Robert Kaufmann, director of graduate studies at Boston University's Center for Energy and Environmental Studies. ``Go out and drill for them or buy someone else's. They are increasingly doing the latter, and the problem with that approach is it doesn't add any new barrels of oil. It's just a reshuffling of the cards in the deck.

What do they say about shuffling deck chairs on the Titanic?

I see the scenario playing out over and over:

1. oil gets scarcer
2. market prices rise to reduce demand (government controls are anathema)
   
3. oil companies and traders make tons of money
4. consumers fume
5. Congress hems and haws (raising taxes is anathema)
   

But somehow I doubt that we'll call a spade a spade. Introspection is not our strong suit.

The people who explore for and produce the oil we consume deserve our appreciation for their talent and effort; they have been doing our bidding after all.

a tale of two Drakes

Great as Sir Francis was to have circumnavigated the earth and defended England against the Spanish Armada, he is not one of the Drakes of whom I speak.

First is Edwin Drake, the "crazy man" whose determination founded the oil industry.

Then there's Frank Drake who devised the Drake equation 'in the 1960s in an attempt to estimate the number of extraterrestrial civilizations in our galaxy with which we might come in contact.' The conditions for a temperate world conducive to life are rare. One recently recognized condition that has come to light of late is the fortuitous presence of our moon. But of greatest concern to us is the last factor in his equation, L, which is the expected lifetime of intelligent communicative civilization. Drake himself conservatively estimated L as 10 years, a minimum. We can today safely raise that value to around 50 years. Carl Sagan in the 12th episode of his TV series Cosmos, Encyclopedia Gallactica, speculates that we have only a 1 in 100 chance of surviving past 100 years. Sagan's main fear was of nuclear war, but he lists the other dangers, such as resource depletion.

Human-like life is very rare in the Universe; let us not waste it.  I think a fitting analogy for our place in the Universe, taken from Buddhist scripture, is that of a blind turtle surfacing on the ocean once every one hundred years and poking its head through a floating ring!

Here's a site that predicts the worst and soon, even as evidenced in its name, Dieoff.

Syriana

Syriana opened December 9, after private screenings with the director in Washington D.C. Some in the audience walked out during those early screenings; one wonders why. And one wonders: is this how the oil business and government intrigue work? For example, here's part of a quote that might have struck close to home:

Corruption. Corruption is our protection, corruption keeps us safe and warm, corruption is why we win.

Another quote has an energy analyst in the film preaching to the Emir's son:

You want to know what the business world thinks of you? We think a hundred years ago you were living out here in tents in the desert chopping each others head's off, and that's exactly where you're gonna be in another hundred. So yes, on behalf of my firm, I accept your money.

This is a perversion of an extant Arab saying about camels before and camels after (the age of oil). But furthermore, this condescending statement reflects a lack of understanding on the part of the writers about our own fate as separate from that of the oil producers. Even the enlightened Oxford-educated son can only look at the short term future.

For an example of them is us, look at this project in one the more progressive Gulf Emirates.

Syriana is rightfully being talked about in various circles, including critics and politicos. Here are two conservative views. One says:

Syriana makes no attempt to grapple with the distressing fact that every time we fill our cars we fund those plotting to murder us.

He somewhat misses the point. It's not that others are trying to kill us; it's more like we're killing ouselves through our indulgence and dependence. Another critic says about the film:

[There's] no hint that petroleum fuels civilization.

I dispute that; there is a very small hint. The critic also writes:

And who are the really greedy? Do the simple arithmetic of pumping petroleum in the desert: After expenses of typically under $5 a barrel, rigged cartels in the Middle East -- run by Iranian mullahs, Persian Gulf royals or Libyan autocrats -- sell it on the world market for between $50 to $60.

First, it's their oil, unfortunately. Second, is it really that cheap to produce? What happens when it starts to run out? Third, should they (whomever) keep the price low, so that we use it up all the faster?

See also James Howard Kunstler's crtiique.

Does this sound credible?

MSNBC reports on a preliminary EIA report.

The analysis reflected a sharp change from the department's projections a year ago when it predicted oil prices in constant dollars _ not counting normal inflation _ would decline to $31 a barrel by 2025.

The report, issued Monday by the department's Energy Information Administration, now projects oil will cost an average $54 a barrel in 2025 and $57 a barrel in 2030 before inflation. Currently, crude oil prices have been hovering around $60 a barrel, briefly soaring as high as $70 earlier this year.

and

In the reference case—one of several cases included in AEO2006—the average world crude oil price continues to rise through 2006 and then declines to $46.90 per barrel in 2014 (2004 dollars) as new supplies enter the market. It then rises slowly to $54.08 per barrel in 2025.

and

In the AEO2006 reference case, world petroleum demand is projected to increase from about 82 million barrels per day in 2004 to 111 million barrels per day in 2025. The additional demand is expected to be met by increased oil production from both OPEC and non-OPEC nations.

What's changed in one year? Does EIA think its reference case is the most likely? Where will the additional supply come from exactly to satisfy continued current levels of use nevermind the projected future ones? What alternate cases will be discussed later, presumably in February? What kind of worst case scenario and what assumptions? See also Where on the Risk Continuum?

Republican Representative Roscoe Bartlett gave a one-hour special order speech on the floor of the House in which at one point he rejected the EIA numbers. Truly, it's laughable if it weren't so sad.

clear as bull pucky

Here's a transcript of a recent BP tv commercial.

bp: What would you ask an oil company?
2w (2 women in front of a flower shop): Do you think that oil will never run out, or is it a resource that will be depleted? What's next? What will our kids be driving then?
bp: BP is the biggest investor in new U.S. energy development. We're investing $15 billion over a decade to find and produce new energy supplies in the Gulf of Mexico. It's a start.

At least the 2 women got the question right. Further questions: how much is there left to be found in the Gulf? Would it make a dent in our consumption, even if instantly available? If it's just a start, what then? Why the ads, to soften current and future windfall profits?


On BP's web site and another more recent tv ad, BP focuses on reducing carbon dioxide emissions through alternative energy. Like the recent Montreal climate conference, this is a distraction to the much more pressing problem of oil depletion.

This is how bp defines sustainability:

Sustainability for BP means the capacity to endure as a group, by renewing assets, creating and delivering better products and services that meet the evolving needs of society, delivering returns to our shareholders, attracting successive generations of employees, contributing to a flourishing environment and retaining the trust and support of our customers and the communities in which we operate. Sustainability, therefore, is a journey. We are committed to being open and transparent in our dealings with the outside world as we move in this direction.

But oil is finite and non-renewable, keenly so given our rate of extraction. What then is 'beyond petroleum'?

Here is Caltech physicist David Goodstein's concise analysis of the problem. At a 2004 conference, here's what Prof. Goodstein had to say:

We have created a trap for ourselves.
The United States has so far avoided serious consequences from the trap by relying on imports. The country uses about 7 billion of the 30 billion barrels of oil produced annually around the globe. And it makes us rich. Oil consumption equals standard of living,

A fellow physicist and former Caltech provost Steve Koonin, took a leave of absence from Caltech to become chief scientist at BP, for what that's worth.

local efforts

where I live

First, a hydrogen bus

It [the plant] produces hydrogen by reforming natural gas and converting solar and wind energy through electrolysis.

Then, an agreement between a California desert city and California utilities doing their part by sending their esteemed officials to the Baltic in August, when back home the temperatures got to 120 DegF.

August 2005: Palm Desert Mayor Buford Crites and City Councilman Jim Ferguson meet with representatives from Southern California Edison and the Southern California Gas Co. in Tallinin, Estonia. Along with John Phillips of the Energy Coalition and Mike Peavy, chairman of the California Public Utilities Commission, they write and sign an agreement - called the Estonia Protocol - to cut the city's energy use by 30 percent.

Of course, it takes time to come up with measures such as this, perhaps a decade, and the authors went to places like Sweden, Aspen, San Francisco, Italy and Estonia. The city plan refers to the 30% thusly:

While considered by many to be "stretch goals', we are firm in our commitment to demonstrate something really meaningful.

The big boys have their Uppsala , Rimini and other Oil Depletion Protocols. We have our own.

As a followup on this plan, here's one development that's supposed to come under its rubrick. The building industry balks at any extra expense:

But Ed Kibbey, executive director of the Building Industry Association's Desert Chapter, said the city has no proof that the extra costs of its new standards will be balanced by long-term savings.

Developers comply, he said, because "their concern is with time, 'cause time costs money. They've got a market that is good, and they want to get their sticks in the air to sell them."

Conlon [director of the city's new Office of Energy Management] replied that the new standards are only interim proposals and will not be written into an ordinance until the city completes a cost-effectiveness study, which will have to pass muster with the California Public Utilities Commission.

A followup piece describes a retrofitted energy-efficient house with an air conditioning system that is supposed to cut

energy use from the 7,000 watts most air conditioners run on to about 300 watts, about the same as three light bulbs, said Virginia Nicols, communications manager for the Energy Coalition.

The quote is mostly likely incomplete, since the calculation leaves out the energy used to create ice (energy storage) at night. For California homes, energy rates are not cheaper at night. Such an incentive could help, but energy demand would still be great.

8/25/06 Update: per Desert Sun followup , Buford Crites states it's:

stuck in the deep sand of the California regulatory labyrinth.

and regarding the 'thermal-storage air conditioning system, which makes ice at night to cool their house by day':

The couple's electric bills zoomed. May's bill was $205, compared to $66.73 last year, said Dennis Hanks. And the couple's June and July bills showed similar increases. The problem, Hanks said, is that the system, made by Ice Energy of Colorado, runs all night, outweighing any daytime savings. "We don't know what to expect; it's a prototype," Hanks said of the system.'

Update (06-12-01): Palm Desert set to approve plan.

And a bit farther afield, here's a piece about electricity demand in the American West. Note the reference to the Tragedy of the Commons.

An update: California Connected on PBS tv presents one energy researcher, Peter Lehman.

Report: U.S. Coupon Wealth Largely Untapped

The Onion reports that the Department of Consumer Savings says that, in the midst of inflation, Americans are missing out on big money-saving opportunities.

Amory Lovins would be proud.

one reader's book reviews

Regarding the tension between politics and science, Herman Daly says this in his September '08 Scientific American article, in the Economics in a Full World:

In choosing between tackling a political impossibility and a biophysical impossibility, I would judge the latter to be the more impossible and take my chances with the former.

Herman Daly is co-editor of an anthology on ecological economics, Valuing the Earth, including the classic essay The Tragedy of the Commons by Garrett Hardin.

The Wikipedia article on Peak Oil has a list of books, some of which appear on this Amazon list by one R. Hutchinson.  James Howard Kunstler (of The Long Emergency) and I would call Mr. Hutchinson a cornucopian.