What could I have been proved right *already*? And we haven't even *peaked* yet!!!

So I haven't posted for a while, mainly because I've been quietly living my life and not as doomers would assume busily packing away guns and ammo and MREs and fortifying my basement for the eventual onslaught of oil-apocalypse zombie accountants.

True there's been a *financial-world-induced* recession and low growth continues but far as I know the oil apocalypse famine hasn't begun in earnest yet. I wonder if JD has lost any weight yet in his dieoff diet?

Anyways, today I want to talk about depleted oil fields, solar panels and EROEI. Yes I'll talk about EROEI because even though in a previous post I debunked the use of EROEI in a single direction and as a sole metric to predict the future based on hubbert curves and *sole direction* declining EROEI of the world's energy supplies. The whole dieoff premise is based on the idea that we can only consider oil as a valid energy source, oil's average EROEI is declining and NOTHING else can replace oil. Not solar, not wind, not nuclear. And thus we
are ipso facto doomed and we should hunker down and prepare for the zombie hordes.

Well as it turns out freaking CHEVRON of all companies is now using SOLAR PANELS to get oil out of the ground.

I had thought that once the alleged EROEI of oil gets so low that it "takes a barrel of oil to get a barrel of oil" we could no longer get any oil out of the ground?!?

Well, first of all this just goes to show what I've said all along. In spite of the doomers denying economics and blindly ignoring other energy sources as viable, it's MONEY that gets oil out of the ground.

Even if we turn to the bogus EROEI argument (and nobody talks about EROEI in the oil industry - trust me I work in the oil patch) then duh.
Solar panels have a positive EOREI and it could be easily swapped out for Wind turbines or nuclear power or hydro or whatever.

But here's the interesting thing: doomers will *rightly* point out that this means the endgame is near because we're now using renewables to get oil out. But *what* endgame are we really talking about? It's certainly not doom and "the road" scenarios.

I will point out the corrolary that what this really means is that renewables are now cheap enough in both cost and energy invested terms that it's worth it to use electricity to get oil out of the ground because oil is worth more than electricity at the current time. The price gap between even electricity generated by expensive sources and electricity generated by *horrors* "low EROEI oil" makes it worth it to do. Because you will get MONEY back.

This means there is a massive arbitrage opportunity to leverage cheap electricity to get expensive oil to supply the end product: transportation.

There's another word for this: Profit Potential.

And everywhere in capitalist based economies, profit potential lead to new products to capture this profit potential.

We can either continue to dig oil out of the ground using electricity (but we'll ultimately run into the plateau and decline) OR we can start to use the electricity itself directly for transportation.

My guess is we will do both.

Certain market segments of the rich world and the most successful of the developing county economies (read China) will start to buy expensive electrified vehicles (hybrids, plug in hybrids and fully electric) and the rest will buy cheap but more fuel efficient ICE vehicles and both market segments will have their transportation needs met.

It's going to be a very interesting decade.

Yet more proof "global warming" is overblown

Many of the global warming doomers claim that if we "don't limit" temperature increases to 2C or less (and thus kill the economy in doing so) then we will possibly end up with runaway global warming. I have always doubted this because the eocene, hot as it was, didn't end up with runaway global warming even though there was MUCH MORE C02 in the atmosphere than today.

Seems that even in the Eocene it wasn't quite the horror story that the ridiculous computer models by the eco-fanatics would suggest:

Hot off the presses from yale university:
""The early Eocene Epoch (50 million years ago) was about as warm as the Earth has been over the past 65 million years, since the extinction of the dinosaurs," Ivany says. "There were crocodiles above the Arctic Circle and palm trees in Alaska. The questions we are trying to answer are how much warmer was it at different latitudes and how can that information be used to project future temperatures based on what we know about CO2 levels?"
Previous studies have suggested that the polar regions (high-latitude areas) during the Eocene were very hot -- greater than 30 degrees centigrade (86 degrees Fahrenheit). However, because the sun's rays are strongest at Earth's equator, tropical and subtropical areas (lower latitude) will always be at least as warm as polar areas, if not hotter. Until now, temperature data for subtropical regions were limited.
The SU and Yale research team found that average Eocene water temperature along the subtropical U.S. Gulf Coast hovered around 27 degrees centigrade (80 degrees Fahrenheit), slightly cooler than earlier studies predicted. Modern temperatures in the study area average 75 degrees Fahrenheit. Additionally, the scientists discovered that, during the Eocene, temperatures in the study area did not change more than 3 to 5 degrees centigrade across seasons, whereas today, the area's seasonal temperatures fluctuate by 12 degrees centigrade. The new results indicate that the polar and sub-polar regions, while still very warm, could not have been quite as hot as previously suggested"

The Most Recent Deutsche Bank Peak Oil Report

I reckon many if not most Doomers would read the latest Deutsche Bank Peak Oil Report as spelling doom because they come out and say they expect a peak oil price shock as early as Q2 2013.
Taken out of context that's only two years away so if at that point we were to experience global supply drops, increasing demand (from e.g. China and the Mid-East) combined with no available substitutes we would be doomed.

We're not, however, doomed. Here's why: The Deutsche Bank report although it's an outstanding piece of analysis (and I congratulate them on it) are missing the substitution effect that natural gas vehicles will bring to bear. They have, however, provided what I can only describe as a near-perfect analysis of the effect hybrids, plug-in hybrids and electric cars will have on the transportation market and by extension, the oil price.

To quote from the report what I personally consider to be the most salient setion:
"The market is trying to shift US behaviour towards long term greater efficiency, and as we
have highlighted, that process is starting with the bankruptcy of the US auto industry and the
imposition of greater MPG requirements that may yet prove to be, in our view, be the largest
and least appreciated achievement of the Obama first term. As we have highlighted, and
expected, as automakers compete to build hybrids and electrics their costs will fall, lowering
the oil price at which they become economically attractive. As shown below, we are not at a
high enough price yet to incentivise a US consumer to buy a Prius instead of a Corolla for
purely economic reasons based on greater efficiency vs relative price premium, but that point
is rapidly approaching and explains why our long term price charts have falling real prices. By
2014, US consumers will be incentived to buy a hybrid rather than conventional car at
$3/gallon and falling."

here's my observations and analysis from this piece:
1. Americans are stubborn SOBs and the major problem is that Americans don't want to give up driving big trucks. But they *will* and it will happen within the next five years.
2. There's likely to be another recession in the US around Q4 2013 forced by high oil prices
3. The costs of driving hybrids and electrics will fall due to lowering battery prices and competition so much that it will be a no-brainer to do so. Especially when faced with the choice between taking the bus or driving a smaller electric vehicle. All those F-150s will be left sitting on the driveway and kept only for cases where it's economic to use them (like driving to Disneyland with a family of four as opposed to flying).
4. 2013-2014 is going to be interesting
5. The Canadian dollar will likely be significantly higher than the US dollar during 2013.
6. Electric vehicles such as the Nissan Leaf and Plug-in Hybrids such as the GM volt will likely be sold out and going for higher than sticker price during 2013
7. Diesels will likely also be sold out and going for higher than sticker price during 2013
8. There will be a secondary market in conversions to natural gas for those who can't get their hands on electrics or plug-in hybrids or diesels.
9. I predict I myself will be driving a volt or a nissan leaf or equivalent or else a natural gas vehicle on or before 2013.

So how much would it cost to drive if the world was 100% fueled by renewables?

I haven't been posting much because I've basically been smugly sitting back on my butt waiting for the market to take care of a bunch of the problems we're going to face even before peak oil arrives in a hard way around 2015. But it's nearly the summer and I've been thinking a little about what the world would look like if we had to run it off of electricity derived purely from renewables. We don't of course because we have brickloads of nuclear and shale gas as well as unconventional oil (which will of course eventually peak and decline but not today or next week or next decade even).

So let's get to the meat:

Doomers basically say we're screwed no matter what we do, so let's ignore them. Detractors on the other hand are not religious fanatics (generally), just highly conservative late adopters. The type of person who still buys CDs instead of downloading music from itunes for example.

So anyways. Let's take a look at the question above.

Well, let's establish some baselines. I have previously established that in certain areas we already have par with fossil fuels for solar and wind but let's assume that they are 2X as expensive.

So we're still stuck right? Because the sun doesn't always shine and the wind doesn't always blow?

Wrong. The missing but implicit assumption that isn't talked about is this: we could store the energy in batteries or salt mines or whatever, just that it's EXPENSIVE to do so.

Well what does that mean? Well let's take Vanadium flow batteries as an example. They add between 1.5X to 3X the cost depending on whose figures you take.

So that means if we're being uncharitable to renewables we are looking at 3X to 6X the cost of current electricity if we use the most expensive means of storage.

So let's take a look at that.

Right now in North America, the cost of a kilowatt hour varies between about 10c and 25c.

Let's look at the most inefficient electric vehicle: the Volt. It has to carry around a gasoline engine in addition to it's electric motors (something like the leaf would be better but let's use the Volt as our baseline).

The Volt uses 8 KW/h of electricity to drive 40 miles. That's a reasonable comparison to a gallon of gas in a car that size. So the equivalent of a gallon of gas for a Volt at today's prices is between 80c/gallon and $2 a gallon. That's compared to close to $4 a gallon for gasoline/diesel based vehicles (ignoring the fact that most North American vehicles only get 15-20 mpg but let's ignore that inconvenient fact for now).

So if it costs 80c a gallon at 10c per KW/h then using our estimate for the most expensive storage methods we're looking at between $1.20 per gallon and $2.40 per gallon equivalent. Still cheaper than today's gasoline prices.

If we take the high end at 25c per KW/h as being $2 per gallon then we're looking at between $3 and $6 per gallon.

Now $6 a gallon will have most North Americans weeping in their beer but most of the rest of the world is ALREADY paying more than that TODAY .

To be sure if Americans had to pay $6 every 40 miles driven I doubt there would be so many trips to the ocean or the mountain or stupid trips like driving to NYC from the midwest to pick up some furniture and then back again. But North Americans being resilient folk would figure out how to get around minor problems like that and continue on their merry way.

On another note: one of the problems with Solar Panels Cost right now is that most of the material is wasted during the deposition process. It would be nice if someone could come up with a way to reduce wastage so that the costs could drop. Especially since the Chinese (as is their right) have hiked prices on rare earths to try to force high tech manufacturing to move to China (where the internal price is lower). Anyways, as it happens one of the technical departments in an Oregon university (I forget if it's OSU or PSU) has developed a process to use a type of inkjet printing which should reduce costs. Now if we take the word "most" (as in most of the material is wasted) to mean merely 51% of the material is wasted then we're looking at a 50% drop in materials costs. As materials costs for solar panels are about 2/3 of the final store price, we're looking at a 33% reduction in price for the end consumer. Not too shabby, considering that we're already at par with fossil fuels for the Southern States and Mediterranean Europe.

Interesting times.

Doom by Apocalypse when

Just a short post today.
I recently found on the internet a fairly interesting doomer book called "Apocalypse When" by a professor named Willard Wells. He references someone named Carter and I wonder if this is the Carter of the famed Carter Catastrophe. I'm going to debunk it but I won't go into too too much detail because the incorrect assumptions are so glaringly obvious as to be laughable.

Basically the gist of the book is that this professor has supposedly calculated the probability that civilization will crash and the probability that humanity will go extinct.

Most of his assumptions are actually quite reasonable except two.

1. The more civilized you are the more likely you are to go extinct.
2. The higher level of technology you have the more likely you are to go extinct.

In fact his thesis seems to be that the survivability of the human race ultimately depends on a major catastrophe that wipes out a large chunk of the population and thus in theory removes the man made extinction events which will wipe us out entirely.

He seems to be ignoring history. Primitive peoples are remarkably unable to deal with natural disaster and he seems to be saying that primitive peoples will survive just by being spread out, because they don't have any other advantages.

In fact archaeological evidence shows that human beings have been around as homo sapiens for at least 200,000 years and pre-humans have been around for 2 to 3 million years.

His assumption, however doesn't hold up though because he's basically saying that a large human population sustained by artificial means is more vulnerable to the rug being pulled out from under it than a sparse primitive civilization does.

70,000 years ago there was a large volcanic event that virtually wiped out the entire human race (which probably numbered around a quarter million to a million at the time) and reduced it to some 2,000 individuals. I make that a 98% wipeout worst case.

Now let's consider a scenario like "the road" whereby all crops and food animals are gone. Civilization collapses of course and almost everyone starves (not the cannibals eeek!). Even here, however, civilization is clearly superior to primitive states because of storage technology. All over the planet there are stores of canned goods and seeds et cetera. Moreover there are also stores of *knowledge* in the form of libraries et cetera. Any putative collapse isn't going to go all the way back to primitive times since the infrastructure, the seeds et cetera is *still there*. Thus any so called collapse of civilization is simply a delay until civilization pops up again. But civilization in and of itself generally increases human wellbeing, not decreases, so short of a scenario whereby the entire planet is converted into gray goo (which has also been debunked elsewhere) any putative man-made disaster isn't going to do much worse damage than the event 70,000 years ago and in fact is very likely to do less. I'm including, by the way, a full scale nuclear exchange and nuclear winter et cetera in this. Not everything would be destroyed and especially not knowledge. There is civilization and knowledge *everywhere* on this planet. Civilization will be very resilient to destruction.

So, sorry doomers, I don't buy it. It's a nice book but it's basically doomer porn. For the record, according to the assumptions, we have 72 years left until DOOOOOOM. But then again we are facing olduvai doom RIGHT NOW according to the dieoff crowd and we are facing limits-to-growth doom in about 15 years.

It makes me laugh though it really does. It's like the global warming doomers. Allegedly all co2 being added to the atmosphere can only cause *bad things* to happen and good things never happen. If you design your model to say one thing always then obviously you're going to get the result you want. But a model is not in fact a scientific experiment. It's an animated hypothesis with built in assumptions and is not valid for testing science AT ALL. One example is that global warming will cause everywhere to get drier and thus crops will fail et cetera and WE WILL ALL DIE. Sadly for those raving fruitbars it turns out that increased carbon dioxide in the previous super greenhouse actually made things wetter. Hmmm. I'm thinking that will in fact *increase* the crop growing range and allow us to grow more food. So now we will have to deal with all the tornadoes et cetera that this will cause. Well duh. Build *underground*. Anyways I digressed.

Basically neither us as a species nor our civilization is doomed, though the doomers themselves are all sweaty praying for our destruction.

Ain't happening.

A big fart in the general direction of the doomers. I will now go back to ignoring you again.

Abiotic Oil back from the dead?

I've always been intrigued by the possibility of oil having been formed by non biological processes. Especially since there are trillions of tons of methane out there in space such as on Saturn's moon titan. It stands to reason that there could be non-biological processes which are capable of converting methane into longer chain hydrocarbons.

Now some scientists at UC Davis, Livermore National Labs and Shell Oil Corporation have created a theory and functional computer based model which shows that long chain hydrocarbons could be formed at extreme pressures and temperatures under the Earth's crust at a depth of about 70 kilometers.

That said, as interesting as the science of this is, it in no way changes the fact that we have a flow problem: even if abiotic oil were real, then if we extracted it far faster than it was created, we'd still hit peak oil. So it's not a solution to declining production, just an interesting tidbit of science.

Shale Gas to the Rescue?

As you know I've been writing a reasonable amount about shale gas and its potential to impact any putative decline in conventional oil production. Here's an interesting graph:

You will note two things.
1. The global resource of recoverable shale gas is some 5,500 trillion cubic feet (as compared with the nearly 900 trillion cubic feet to be found in the US.
2. With the exception of China (who though they are a competitor, they are not as outright hostile as some of our other competitors) most of the shale gas reserves are to be found in "friendly" nations.

Also: given that the US has been able to bring online the shale gas equivalent of about a million barrels a day of oil in the last two years by itself, it's reasonable to argue that globally, shale gas could bring online about to five million barrels per day equivalent each year.

That should about cover us for a 5% decline rate in the best possible scenario whereby we can do a smooth transition for appropriate uses to natural gas.

I suspect, however, that between increasing demand for energy and friction costs of moving to oil alternatives for appropriate use cases (such as long distance trucking or shipping), we're still going to see a bumpy ride, though perhaps not quite so bumpy as a total collapse as predicted by our doomer friends.

Maybe it's time to short sell the guns n ammo manufacturers?