The Rising Influence of Rising Affluence

[old man]

Rebuttal to D. Yergin’s letter (scroll down). Any bets that the WSJ will publish it?
John

http://www.energybulletin.net/stories/2011-09-18/daniel-yergins-letter-peak-oil-community-and-rebuttal
Daniel Yergin's letter to the peak oil community, and a rebuttal
by Daniel Yergin and Jeffrey J. Brown

________________________________________

There Will Be Oil
Daniel Yergin, Wall Street Journal
For decades, advocates of 'peak oil' have been predicting a crisis in energy supplies. They've been wrong at every turn, says Daniel Yergin.
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Since the beginning of the 21st century, a fear has come to pervade the prospects for oil, fueling anxieties about the stability of global energy supplies. It has been stoked by rising prices and growing demand, especially as the people of China and other emerging economies have taken to the road.
This specter goes by the name of "peak oil."
Its advocates argue that the world is fast approaching (or has already reached) a point of maximum oil output. They warn that "an unprecedented crisis is just over the horizon." The result, it is said, will be "chaos," to say nothing of "war, starvation, economic recession, possibly even the extinction of homo sapiens."
The date of the predicted peak has moved over the years. It was once supposed to arrive by Thanksgiving 2005. Then the "unbridgeable supply demand gap" was expected "after 2007." Then it was to arrive in 2011. Now "there is a significant risk of a peak before 2020."
But there is another way to visualize the future availability of oil: as a "plateau."
In this view, the world has decades of further growth in production before flattening out into a plateau—perhaps sometime around midcentury—at which time a more gradual decline will begin. And that decline may well come not from a scarcity of resources but from greater efficiency, which will slacken global demand.
[More at original article]
Mr. Yergin is chairman of IHS Cambridge Energy Research Associates, an energy research and consulting firm. This essay is adapted from his new book, "The Quest: Energy, Security and the Remaking of the Modern World." He received the Pulitzer Prize for his book "The Prize: The Epic Quest for Oil, Money and Power."
(17 September 2011)
The complete text of Danel Yergin's opinion piece is now online at the Wall Street Journal.
- BA

________________________________________
Rebuttal to Daniel Yergin
By Jeffrey J. Brown
Jeffrey J. Brown is an independent petroleum geologist in the Dallas, Texas area. He has just been named to the ASPO-USA board of directors and has been a frequent contributor to Energy Bulletin and The Oil Drum. His website is GraphOilogy.
He submitted a letter to the Wall Street Journal in response to Daniel Yergin's article. The letter has not yet been published by the WSJ.
-BA


To the Editor:
Contrary to Mr. Yergin’s assertion that advocates of Peak Oil have been wrong at every turn, six years of annual global production data show flat to declining crude oil and total petroleum liquids production data.
The EIA shows that global annual crude + condensate production (C+C) has been between 73 and 74 mbpd (million barrels per day) since 2005, except for 2009, and BP shows that global annual total petroleum liquids production has been between 81 and 82 mbpd since 2005, except for 2009. In both cases, this was in marked contrast to the rapid increase in production that we saw from 2002 to 2005. Some people might call this "Peak Oil,” and we appear to have hit the plateau in 2005, not some time around mid-century.
Only if we include biofuels have seen a material increase in global total liquids production.
In the US, there are some good stories about rising Mid-continent production, and US (C+C) production has rebounded from the hurricane related decline that started in 2005, but 2010 production was only very slightly above the pre-hurricane level that we saw in 2004, and monthly US production has been between 5.4 and 5.6 mbpd since the fourth quarter of 2009, versus the 1970 peak of 9.6 mbpd. Incidentally, US net oil imports of crude oil plus products have fallen since 2005, primarily as a result of a large reduction in demand, because of rising oil prices (which Mr. Yergin predicted would not happen), but EIA data show that the US is still reliant on crude oil imports for two out of every three barrels of oil that we process in US refineries.
However, the real story is Global Net Oil Exports (GNE), which have shown a measurable multimillion barrel per day decline since 2005, and which are measured in terms of total petroleum liquids, with 21 of the top 33 net oil exporters showing lower net oil exports in 2010, versus 2005. An additional metric is Available Net Exports (ANE), which we define as GNE less Chindia's (China + India’s) combined net oil imports. ANE have fallen at an average volumetric rate of about one mbpd per year from 2005 to 2010, from about 40 mbpd in 2005 to about 35 mbpd in 2010 (BP + Minor EIA data, total petroleum liquids).
At the current rate of increase in the ratio of Chindia's net imports to GNE, Chindia would consume 100% of GNE in about 20 years. Contrary to Mr. Yergin’s sunny pronouncements, what the data show is that developed countries like the US are being forced to take a declining share of a falling volume of GNE. In fact, our work suggests that the US is well on its way to “freedom” from its reliance on foreign sources of oil, just not in the way that most people hoped.
In a November, 2004 interview in Forbes, Mr. Yergin asserted that oil prices would be back to a long term price ceiling of $38 by late 2005--because of a steady increase in global crude oil production. It turned out that Mr. Yergin’s predicted price ceiling has so far been the price floor. The lowest monthly spot crude oil price that the EIA shows for post-November, 2004 is $39.
I suspect that just as Mr. Yergin was perfectly wrong about oil prices, he may be confidently calling for decades of rising production, just as we come off the current production plateau and just as an accelerating decline in Global Net Exports kicks in.
Sincerely,
Jeffrey J. Brown
Original article available here

Here’s another comment.
Oil Spring Eternal

Writing The Prize (1991) , and winning a Pulitzer for it, brought Daniel Yergin automatic creds in the energy industry. Through Cambridge Energy Research Associates (CERA) , he has consistently maintained a cornucopian viewpoint about the future availability and price of oil, to the point that the energy depletion community has defined a Yergin unit as the $38 per barrel that in 2005, Yergin predicted would be the steady price of oil. Oil reached two Yergins in 2006, spiked to 3.6 Yergins in 2008, and currently Brent crude is trading at 3 Yergins.
Yergin is in the contradictory position of claiming both that oil prices will stay low and that there will be more extraction of ‘proven reserves” through advanced techniques. Proven Reserves means, “Quantity of energy sources estimated with reasonable certainty, from the analysis of geologic and engineering data, to be recoverable from well established or known reservoirs with the existing equipment and under the existing operating conditions.”
But those advanced techniques cost more money per barrel, which can only be supported by higher and higher oil prices or government stimulus. If prices had stayed at 38/bbl, as Yergin predicted, “additions and extensions” to extraction would never have been profitable. In fact, collapsing and rebounding demand make it difficult to know which extraction technologies will cost less than the price of oil.
Nevertheless, in his Saturday Essay in the Wall Street Journal, Yergin still wants to assure us that There Will Be Oil and that Peak Oil will always be pushed back as we shift more oil from not recoverable to proven reserves. He admits that geologist M King Hubbert got the date of the US Peak correct, but claims that:
Hubbert’s original projection for U.S. production was bold and, at least superficially, accurate. His modern-day adherents insist that U.S. output has “continued to follow Hubbert’s curve with only minor deviations.”
But it all comes down to how one defines “minor.” Hubbert got the date exactly right, but his projection on supply was far off. He greatly underestimated the amount of oil that would be found — and produced — in the U.S.
By 2010, U.S. oil production was 3½ times higher than Hubbert had estimated: 5.5 million barrels per day versus Hubbert’s 1971 estimate of no more than 1.5 million barrels per day. Hardly a “minor deviation.”
What Yergin doesn’t explain is that Hubbert’s 1956 prediction was only for conventional oil extraction in the lower 48 states. Hubbert could not have included the immense amount of oil extracted from Alaska’s Prudhoe Bay – discovered in 1968. But Prudhoe reached peak in 1979 and there haven’t been any comparable discoveries in the US. Cornucopians talk about ANWR and coastal drilling, but we’ve reached a level of consumption where new discoveries would have to be more than immense to make a difference.
Hubbert also did not include deep sea oil from the Gulf of Mexico, like that in the BP oil spill. Hubbert did not include synthetic oils from the environmental disaster of Canadian tar sands. Hubbert didn’t include oil drilled or fracked from the shale in the Bakken Formation. Hubbert also didn’t include biofuels made from crops that require natural gas to make fertilizer and oil to make diesel fuel.
Extracting unconventional oil is far more destructive to the environment than raising a derrick and drilling a pipe. We as a society seem all-too-willing to countenance the loss of fish, birds, bats, bears and people without influence if it will keep the cars running and the lights on, but are we willing to give up our fresh water aquifers, too?
In the comments, Richard Heinberg wrote:
For decades there have been those who warned of oil shortages and high prices, and those who promised there would be plenty of cheap oil for the foreseeable future. For the first three-quarters of the twentieth century, the “cornucopians” proved right. Then, as oil discoveries declined, country after country began to see peaking and declining production. “Peak oil” analysts successfully forecast these production declines nation-by-nation, and during the past tumultuous decade also were generally right about world oil production rates and prices. Meanwhile, the price and production forecasts of cornucopians like Daniel Yergin have diverged further and further from reality. World oil reserves may be large, but the oil industry is replacing cheap, easy-to-get oil with dirty, expensive substitutes. Under these circumstances, reserves are a poor basis for forecasting future production rates. The “peak oil” analysts evidently understand the complexity of the situation, but Yergin–despite his encyclopedic knowledge of oil industry history–seems not to.