Debunking the Debunkers of Peak Oil

Posted byJasunPosted inWords

Note: these links are com­piled w/ com­ments by my wife. I am 100% agnos­tic about this subject.

Dav­e’s McGowan’s archive of peak oil arti­cles (many) includes this one:

Paul Joseph Wat­son & Alex Jones (PrisonPlanet.com) on Peak Oil 
McGowen’s argu­ments are para­po­lit­i­cal- based on chal­leng­ing the nar­ra­tive, hid­den agen­da and the source but it is 20 years on from then, and debunk­ing of “peak oil” nar­ra­tive has been effec­tive — it is essen­tial­ly dead in the pub­lic imag­i­na­tion to wit:
What to make of the present US occu­pa­tion of Syria?:
The US mil­i­tary has ille­gal­ly occu­pied Syr­i­an sov­er­eign ter­ri­to­ry since 2014, pre­vent­ing Dam­as­cus from access­ing its own oil and wheat fields. The Sen­ate vot­ed 13–84, reject­ing a res­o­lu­tion to with­draw US troops.
Trump pub­licly states that it is for the oil:
Don­ald Trump has insist­ed the US mil­i­tary pres­ence in Syr­ia is ‘only for the oil’, con­tra­dict­ing his offi­cials who have main­tained that the remain­ing forces were there to fight Isis. https://www.youtube.com/watch?v=U10p3Tn9V5Y
US allies fund­ing ISIS:
An excerpt from the 2014 Hillary Clin­ton email, released by Wik­iLeaks, which acknowl­edges that Sau­di Ara­bia and Qatar sup­port­ed ISIS: https://thegrayzone.com/2016/10/11/hillary-clinton-isis-saudi-arabia-qatar-wikileaks-emails/
A cou­ple fur­ther things to consider:
  1. Pos­si­bly the most impor­tant fac­tor over­looked by the debunkers is EROI: Ener­gy Return on Investment

In 100 years the EROI of oil extrac­tion has gone from ~100:1 to some­where between 5:1 and 20:1 and even a 5;1 return is not guaranteed.

‘$500 bil­lion in cap­i­tal destroyed’: How the US shale indus­try vapor­ized mon­ey even before the pan­dem­ic struck — and why the mar­ket melt­down is only has­ten­ing its decline: https://www.businessinsider.com/us-shale-oil-industry-vaporized-money-before-energy-markets-collapsed-2020–5

Mon­ey in, noth­ing out — that is a neg­a­tive EROI. 

In gen­er­al, frack­ing has a par­tic­u­lar­ly low EROI and would not have been pur­sued at all (in the US) except that the eco­nom­ic pol­i­cy after the 2008 crash was to lend mon­ey at 0% inter­est. This bor­rowed mon­ey made the frack­ing boom pos­si­ble. The US became the biggest pro­duc­er of oil (shale) over the next decade and a net exporter even though com­pa­nies oper­at­ed at deficits. In 2020 with the covid lock­downs hun­dreds of shale oil sec­tor com­pa­nies went bankrupt.

“The Fed­er­al Reserve is entire­ly respon­si­ble for the frack­ing boom … The real cat­a­lyst of the shale rev­o­lu­tion was the 2008 finan­cial cri­sis and the era of unprece­dent­ed­ly low inter­est rates it ush­ered in.” ~ Amir Azar, a fel­low at Colum­bia University’s Cen­ter on Glob­al Ener­gy Policy
  1. And the prob­lem with shale oil (fracked) is that it pro­duces only the light dis­til­lates, which are good for jet fuel and gaso­line but does­n’t pro­vide diesel, which the entire big engine ship­ping com­plex depends on ‑ships, trains, trucks, trac­tors, min­ing equipment.
So the issue isn’t when oil will run out. It’s about when con­ven­tion­al oil extrac­tion peaks, which hap­pened in 2006 accord­ing to the IEA’s 2010 World Ener­gy Out­look. 
Shale oil and oil sands bitu­men has filled the gap for now (along with decreased demand), but it’s ngmi for much longer.
  1. The oth­er prob­lem is that there is lit­tle wig­gle room for what price pro­duc­ers and con­sumers of oil can oper­ate, which is some­where near $80 USD/barrel. When the price goes much high­er, man­u­fac­tur­ers lose their prof­it mar­gin and when it goes much low­er, the oil com­pa­nies do. That means pro­duc­tion must be main­tained at a rate that keeps the price with­in that mar­gin. When pro­duc­tion decreas­es the price goes up etc.
In a $20 oil envi­ron­ment, 533 US oil explo­ration and pro­duc­tion com­pa­nies will file for bank­rupt­cy by the end of 2021, accord­ing to Rys­tad Ener­gy. At $10, there would be more than 1,100 bank­rupt­cies, Rys­tad esti­mates. Noble Ener­gy, Hal­libur­ton, Marathon Oil and Occi­den­tal have all lost more than two-thirds of their val­ue. Even Dow mem­ber Exxon­Mo­bil is down 38%.

Prices are so weak that Rys­tad Ener­gy has warned that hun­dreds of US oil explo­ration and pro­duc­tion com­pa­nies could file for bank­rupt­cy by the end of 2021.

The bank­rupt­cy wave has already start­ed. Ear­li­er this month Whit­ing Petro­le­um (WLL) filed for bank­rupt­cy, mark­ing the first high pro­file Chap­ter 11 fil­ing of the cur­rent cri­sis. Dia­mond Off­shore Drilling (DO) joined the bank­rupt­cy club on Sun­day. Dia­mond, which pro­vides off­shore drilling rigs for Hess (HES), Occi­den­tal (OXY) and BP (BP), was post­ing loss­es months before the crisis.

Fitch Rat­ings is warn­ing that more than $43 bil­lion of high-yield bonds and lever­aged loans in the ener­gy sec­tor will default in 2020. For con­text, that’s near­ly five times the sector’s aver­age lev­el of defaults over the pre­vi­ous dozen years.

  1. The most effi­cient and eco­nom­i­cal way to man­age declin­ing oil pro­duc­tion is to reduce demand, which is what the folks at BC’s hydro­elec­tric util­i­ty found with a major study in the 1990’s. 

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