Re: EIA oil synopsis

Duff,Robert Joel wrote:

I recently was presented with the following article from the EIA
regarding their synopsis of peak oil estimates.

I guess I'm just shocked at how much the authors of this analysis think
that oil production can be increased. I can see that there is a
difference of opinion about total oil reserves and future oil finds but
even given those differences it seems that the whole argument here is
that if there is this much oil available then we should be able to
provide vast quantities of oil for at least another 30 years.

http://www.eia.doe.gov/pub/oil_gas/petroleum/feature_articles/2004/world
oilsupply/oilsupply04.html

Is that all this argument is, or am I missing something more subtle in
their comments. Seems really crazy to me after all the other reading
I've been doing. Yet, I've seen this commentary referred to multiple
times as if it were a "no duh" there is plenty of oil response to any
naysayer.

Joel

AK:

Joel,

The extreme variations in estimations of oil supply and depletion
scenarios are also fascinating to me. I am not a geologist and have no
hands on experience with crude oil extraction, but I have read almost
everything I could get my hands on regarding the subject since I became
interested in it a couple of years ago. On this ASA site there are
proportionally many more pessimistic scenarios than you would find in
the general press. Most accounts will only see some problems (maybe) in
the distant future (>30 years), and some see no problems at all. From
my reading, I think these optimistic articles are missing something.

As I see it, there are two major questions involving petroleum supplies:
 How much easily recoverable oil is there? and What will the rates of
extraction and depletion look like? The EIAs low estimate of ultimate
recoverable reserves is close to the consensus value of recovery
estimates of 2.2 trillion barrels. In Figure 2 of the site you
referenced, with what they take to be a low estimate, the EIA does not
see a peak until 2026. With their estimate of 3 trillion barrels they
do not see a peak until 2037 and with their high estimate of 3.9
trillion barrels of ultimate recovery they see a peak in 2047. What
this indicates, (which is also confirmed by the calculations of the
pessimists) is that the amount of ultimately recoverable oil reserves
does not change the peak by all that much. Finding another 3 Saudi
Arabias will not change the world's peak by more than about 10 years if
demand increases like it has in the past. Note the ASPO estimate,
(http://www.asponews.org/) which sees the peak coming at any time within
the next 15 years, more likely sooner than later. I suppose the EIA low
estimate may not be all that much different than the ASPO estimate, but
if you look at the two graphs you will immediately see that the EIA
allows for greater rates of production late in the recovery period than
do the ASPO estimates.

That brings us to models of how to portray the possible extraction rates
of oil as a function of the total amount recoverable oil. Consider
three models: the "radioactive isotope decay" (RID) model, the "bass
pond" (BP) model, and the "spend your money" (SYM) model. In the RID
model the greatest rate of extraction occurs immediately and drops
continuously thereafter. If you have an isotope with a half-life of one
year, you will only get 1/8 the number of the decaying particles as you
did 3 years ago. In the BP model we can consider how long it takes to
catch 5 fish if the pond is stocked with 5000 non-reproducing bass.
Initially the time it takes to catch 5 fish will vary little until we
deplete the fish to some amount and at that point it will take longer
and longer to catch the five fish than it did previously at the start.
The SYM model allows for you to deplete your money at any rate you
chose. If you have $5000 in your account, you can take out $50 per day
for 100 days; $10 the first day, $20 the second, $30 the third, etc
until you run out; or virtually any withdrawal pattern you desire.
Which model best represents world oil depletion?

Almost all optimists I have read use the SYM model. If we want the
average of 40 billion barrels a year and we have 1.6 trillion barrels in
reserves, then we have 40 years of supply. It is just about as easy to
get the last 40 billion barrels out as it was to get the middle 40
billion barrels out. Whatever we need, increased prices, better
technology, and human ingenuity will permit us to recover the amount we
want and need--with a slight hiccup here and there for hurricanes, wars,
regime changes, terrorists, etc. In 20 years, who knows what will
develop; we will probably find some replacement for oil by then, so
let's not be stupid and use our funds for all these alternative energy
resources, which may never pan out. Let's not worry about it unless we
get close to the end of the 40 years.

Now the SYM model is for certain the wrong one for modeling the end
production of the oil supply. We need some sort of BP or RID model for
the end of the extraction profile. The beginning period of extracting
the oil is actually the SYM model. We extracted the amount of oil we
wanted and we were not limited by the amount because we wanted less than
the limits of nature allows. When will nature limit the amount we want
to extract? Hubbert's Peak analysis puts this point at half of the
ultimately recoverable reserves (URR). This worked quite well for
predicting when the US extraction would peak. Will it work for the
world reserves? I agree with the EIA and other critics that the amount
of maximum extraction may not be at half or the URR. So when will it
be? I am not smart enough to hazard a guess. The EIA puts this peak
very late in the time of URR recovery. By eyeballing their graphs it
looks to me like they put the peak at about 75%-80% of URR, as opposed
to APSO's 50%. EIA therefore has a very steep decline once the peak
occurs.

My intuition, analysis, gut reaction, (you name it) leans more toward
the APSO position, but I am willing to be convinced otherwise. It seems
to me that any new tertiary or quaternary extraction methods, economic
incentives, better technology, etc. will extend the tail of depletion so
that the decline will be considerably more gradual than the EIS model
indicates, but will do little to change at what point the peak occurs.

Al
Received on Fri Oct 15 14:24:36 2004