Oil Prices Falling - Still Drill?

Off Topic Politics & World Issues
101

[quote]lou21 wrote:
rainjack wrote:
Journeyman wrote:
rainjack wrote:
What is it with the peak oil dipshits?

I don’t know. You made the first mention of peak oil in the thread.

I mentioned the term. You talk the talk.

For those economists who have no understanding of anything outside their field I will explain the idea of peak oil. The economic consequences should be evident to some of the economic geniuses who post on this board. I can explain a great deal more detail on the subject if you wish.

Peak oil is a geological concept based upon simple principles that has been supported on numerous instances during the oil era. The two key components of the peak oil theory are the exponential fall in pore pressure in an oil field after drilling and the nature of exploration.

It is well established fact that pore pressure in a single well (and hence production rate) drops after drilling. Recent technological developments have allowed the fall of production in a field to be temporarily slowed. This may be best seen from the North Sea Brent field. However after initiation of new technology use the production curve falls once again. It should also be noted that attempting to produce from a field faster than optimal speed will cause permanent damage.

The other slightly more nebulous fact that dictates access to oil with time is the nature of the exploration business. Basically you get the big ones first. Geologists working in the middle east used to locate 150billion barrel fields using nothing more sophisticated than a pair of boots and some structural interpretation. Now companies spend many millions of dollars in order to locate fields of the 100 million barrel range. They would not do this if they could find bigger fields. The only superfield (bigger than 6billion) found in recent years is off the coast of Brazil. (This field is under 2.5km of sediment and 2 km of water and needs oil prices to stay steadily in the $80 range to break even on extraction; in contrast to early finds which cost in the $5 per barrel range to extract).

The sum of these two effects is to generate a bell shaped oil vs time graph. This is not significantly affected by the economics of supply and demand. (although a slight proviso could be added that more expensive fields may come online when prices rise they simply aren’t enough fields to effect the price- also every time a new field is exploited it will inevitable decline and its effect upon supply will fall).

This curve may be wider or narrower but the basic shape is followed for all fields in existence. It may safely be assumed that the total world field behaves in a similar fashion. Just because half the worlds oil is still in the ground does not mean that supply will stay constant. In fact it means that supply must decrease.

I can’t be arsed to type anymore. Basically you need to stop thinking of oil as a commodity and start thinking of it as a depleting resource. This needs to be handled in a very different economic fashion. No country can ever ‘drill their way to energy independence’.

I hope this helps?

[/quote]

Well, it’s certainly interesting. I am not sure what this, or many of the posts about numbers and predictions really have to do with the core issue. The only question that really needs to be asked is why we would artificially limit oil exploration and extraction on domestic soil? How much we have and at what price points it is profitable to extract is irrelevant.

102

[quote]lou21 wrote:
The Mage wrote:
The Bakken oil production has increased ~30 fold between 2000 and 2007. (And still climbing.) This is due mostly to “slant” drilling. But this is the fairly normal production, not the shale I was referring to.

The method of in-situ production developed is completely different. The wells actually do not follow a bell curve of production like most wells. They only produce from a small planned out section, and the oil flows at full capacity, then when it drops off, it is practically empty. At that point they simply move the operation over to the next section.

It is a faulty argument to attempt to point out what percentage of our use, or potential use comes from a single source. Simply because we do not use just one source, and there is more then one source available.

That is like saying a single farm is not worth it because it can barely produce enough in a year to feed the world for an hour. But there are millions of farms out there.

There is an estimated 90 billion available off our shores. That is 4,500 days. Then there is the 10 billion available in Alaska. (Using way outdated information.) Now we are up to 5,000 days. Excluding every other source.

Now add in the 800 billion available in the Bakken shale, (estimated recoverable out of the estimated 1.2 trillion barrels there,) and we now have 45,000 days worth of oil. (123 years.)

These calculations are based on a linear model. This is completely invalid for this purpose even as a fist back of the envelope estimate.

BTW my two posts are not to say the US shouldn’t drill as a qualified professional Geologist in the resource industry I welcome more drilling! It just won’t do any good[/quote]

What do you mean it won’t do any good? An artificial limit on a valuable resource has no effect on our economy?

Will it provide more or less profit for american companies? Will this have a positive or negative effect for US share holders, Mutual fund, Pension funds, etc.? Will this provide more or less jobs? Will this increase or decrease the relative value of the dollar?

By your logic, maybe we should stop drilling here all together. Why would any country drill at all?

You seem like an intelligent guy. I must be missing your point.

103

[quote]lou21 wrote:
rainjack wrote:
Journeyman wrote:
rainjack wrote:
What is it with the peak oil dipshits?

I don’t know. You made the first mention of peak oil in the thread.

I mentioned the term. You talk the talk.

For those economists who have no understanding of anything outside their field I will explain the idea of peak oil. The economic consequences should be evident to some of the economic geniuses who post on this board. I can explain a great deal more detail on the subject if you wish.

Peak oil is a geological concept based upon simple principles that has been supported on numerous instances during the oil era. The two key components of the peak oil theory are the exponential fall in pore pressure in an oil field after drilling and the nature of exploration.

It is well established fact that pore pressure in a single well (and hence production rate) drops after drilling. Recent technological developments have allowed the fall of production in a field to be temporarily slowed. This may be best seen from the North Sea Brent field. However after initiation of new technology use the production curve falls once again. It should also be noted that attempting to produce from a field faster than optimal speed will cause permanent damage.

The other slightly more nebulous fact that dictates access to oil with time is the nature of the exploration business. Basically you get the big ones first. Geologists working in the middle east used to locate 150billion barrel fields using nothing more sophisticated than a pair of boots and some structural interpretation. Now companies spend many millions of dollars in order to locate fields of the 100 million barrel range. They would not do this if they could find bigger fields. The only superfield (bigger than 6billion) found in recent years is off the coast of Brazil. (This field is under 2.5km of sediment and 2 km of water and needs oil prices to stay steadily in the $80 range to break even on extraction; in contrast to early finds which cost in the $5 per barrel range to extract).

The sum of these two effects is to generate a bell shaped oil vs time graph. This is not significantly affected by the economics of supply and demand. (although a slight proviso could be added that more expensive fields may come online when prices rise they simply aren’t enough fields to effect the price- also every time a new field is exploited it will inevitable decline and its effect upon supply will fall).

This curve may be wider or narrower but the basic shape is followed for all fields in existence. It may safely be assumed that the total world field behaves in a similar fashion. Just because half the worlds oil is still in the ground does not mean that supply will stay constant. In fact it means that supply must decrease.

I can’t be arsed to type anymore. Basically you need to stop thinking of oil as a commodity and start thinking of it as a depleting resource. This needs to be handled in a very different economic fashion. No country can ever ‘drill their way to energy independence’.

I hope this helps?

[/quote]

Well, it’s certainly interesting. I am not sure what this, or many of the posts about numbers and predictions really have to do with the core issue. The only question that really needs to be asked is why we would artificially limit oil exploration and extraction on domestic soil? How much we have and at what price points it is profitable to extract is irrelevant.

104

[quote]lou21 wrote:

These calculations are based on a linear model. This is completely invalid for this purpose even as a fist back of the envelope estimate.

BTW my two posts are not to say the US shouldn’t drill as a qualified professional Geologist in the resource industry I welcome more drilling! It just won’t do any good[/quote]

I oversimplified things, and yes I know it, but my real point is that this is enough oil to get us to the point where we will quit using it. It is my belief that in 20 year electric cars will surpass the combustion engine in sales. We have enough oil to get us past that point.

And yes peak oil is a real thing. But my problem is with the peak oil crowd who cannot see the benefits of technology. The original date for the world peak was in the 90’s.

A simple 5% increase in our ability to extract oil from the existing fields will give the world the equivalent of another Saudi Arabia.

Also it should be pointed out that the in-situ method does not follow a bell curve. The section they box off is extracted at full capacity, and when it drops off, it means it is practically empty.

And everything I have said still does not take into account gas to liquid technology. From this, methane can be turned into a synthetic crude.

105

[quote]The Mage wrote:
lou21 wrote:

These calculations are based on a linear model. This is completely invalid for this purpose even as a first back of the envelope estimate.

I oversimplified things, and yes I know it, but my real point is that this is enough oil to get us to the point where we will quit using it. It is my belief that in 20 year electric cars will surpass the combustion engine in sales. We have enough oil to get us past that point.

[\quote]

No those calculations you used assumed we could extract at the rate we want. It more like we get oil at the rate the ground wants to give it to us. So remaining american fields will still be producing in 200 years time BUT at no stage in that time can they be reasonably expected to fill the daily requirement.

[quote]
And yes peak oil is a real thing. But my problem is with the peak oil crowd who cannot see the benefits of technology. The original date for the world peak was in the 90’s.
[\quote]

Yeah the 90’s was unrealistic the rate of finding new fields hadn’t slowed at that time. But the oil companies term ‘drilling on wall street’ should tell us that they think the peak is soon. The rate of finding new fields has been slowing for a while. And yes we have looked nearly everywhere (except the Artic circle).

[quote]
A simple 5% increase in our ability to extract oil from the existing fields will give the world the equivalent of another Saudi Arabia.
[\quote]

Yes a 5% increase in efficiency will give the world that much more oil but all it does is delay the peak by a couple of years. Not enough to allow us to carry on driving big SUVs and not caring.

[quote]
Also it should be pointed out that the in-situ method does not follow a bell curve. The section they box off is extracted at full capacity, and when it drops off, it means it is practically empty.
[\quote]

Not sure what you mean by this. The bell curve is for a population of fields within a region. The bell shape is because people extract the big ones first.

[quote]
And everything I have said still does not take into account gas to liquid technology. From this, methane can be turned into a synthetic crude.[/quote]
[\quote]

If we use gas to liquid technology on gas all we do is depleat the natural gas reserves reach their peak faster and have nothing to fill the gap in electricity generation. Gas is still a finite reasource just like oil. And neither the US nor western Europe has enough to rely upon it as an energy source. Just look at how Russia can hold Europe to ransom at will.

Other stuff

There’s no reason at all to artifically limit American production. Apart from issues of environmental protection. Incidentaly the horizontal drilling mentioned before tends to solve this issue allowing placement of drill rig several km away from the field.

The issue is that America can’t be energy independent just by drilling. It would require a mix of as many technologies as possible. Including a very significant (maybe~60-80%) nuclear power fraction. As far as I know wind and solar power just don’t have the answer. We’ve all seen the effect of biofuels. I don’t know how anyone didn’t see that coming.

American production will never again be significant enough to sway the world oil price. In the past production was high enough to have a significant effect. This may be seen from the differing responses to the OPEC cartels. I forget the dates but the first time OPEC tried to limit supply America just pumped more. The second time American production had peaked, all attempts to raise production failed and the whole world felt the economic effects.

I would agree that electric cars will indeed be a major market share by 2020. Mainly because oil will be so damn expensive (I guess supply and demand still govern the economics as long as oil supply is taken as a nearly fixed function). However you still need to make the electricity.

Basically still shit loads of oil down there but no way to get it out fast enough to meet daily demand.
Apologies if my spelling sucks ass in this post, no spell check on this machine and I’m dyslexic.

106

[quote]dhickey wrote:
lou21 wrote:
The Mage wrote:
The Bakken oil production has increased ~30 fold between 2000 and 2007. (And still climbing.) This is due mostly to “slant” drilling. But this is the fairly normal production, not the shale I was referring to.

The method of in-situ production developed is completely different. The wells actually do not follow a bell curve of production like most wells. They only produce from a small planned out section, and the oil flows at full capacity, then when it drops off, it is practically empty. At that point they simply move the operation over to the next section.

It is a faulty argument to attempt to point out what percentage of our use, or potential use comes from a single source. Simply because we do not use just one source, and there is more then one source available.

That is like saying a single farm is not worth it because it can barely produce enough in a year to feed the world for an hour. But there are millions of farms out there.

There is an estimated 90 billion available off our shores. That is 4,500 days. Then there is the 10 billion available in Alaska. (Using way outdated information.) Now we are up to 5,000 days. Excluding every other source.

Now add in the 800 billion available in the Bakken shale, (estimated recoverable out of the estimated 1.2 trillion barrels there,) and we now have 45,000 days worth of oil. (123 years.)

These calculations are based on a linear model. This is completely invalid for this purpose even as a fist back of the envelope estimate.

BTW my two posts are not to say the US shouldn’t drill as a qualified professional Geologist in the resource industry I welcome more drilling! It just won’t do any good

What do you mean it won’t do any good? An artificial limit on a valuable resource has no effect on our economy?

Will it provide more or less profit for american companies? Will this have a positive or negative effect for US share holders, Mutual fund, Pension funds, etc.? Will this provide more or less jobs? Will this increase or decrease the relative value of the dollar?

By your logic, maybe we should stop drilling here all together. Why would any country drill at all?

You seem like an intelligent guy. I must be missing your point.
[/quote]

Yep you are. It won’t do any good to drill more simply because America can’t, whatever it does extract enough to have any but a minor effect upon the world Oil price. Sorry but that’s just the way it is

In general you don’t pump oil you tease it out of the ground. Attempts to pump oil fast out of the remaining American fields would perminantly damage them.

107

Countries don’t drill Companies do. Leave it to the economics.

108

[quote]lou21 wrote:

No those calculations you used assumed we could extract at the rate we want. It more like we get oil at the rate the ground wants to give it to us. So remaining american fields will still be producing in 200 years time BUT at no stage in that time can they be reasonably expected to fill the daily requirement.[/quote]

First reverse your \ to / and the end quote will work better.

When did I ever say I thought we were going to fill our daily requirement? I am not a person who believes in only using our oil. We have a world full of oil, and producers who want to sell it. I believe in the markets.

America would not be in such a decline in production if it wasn’t for government intervention blocking development at every stage, and OPEC attempting to manipulate the market.

And I never said there could not be a decline. Just that it’s not going to happen soon. (Without government and environmentalist help that is.)[quote]

Yeah the 90’s was unrealistic the rate of finding new fields hadn’t slowed at that time. But the oil companies term ‘drilling on wall street’ should tell us that they think the peak is soon. The rate of finding new fields has been slowing for a while. And yes we have looked nearly everywhere (except the Artic circle).[/quote]

Uh no. Nobody was looking in the 90’s. Not when oil was as low as $10 a barrel. This is a basic understanding of the market. When prices drop there is no incentive to look. Now prices are higher, and magically we are finding oil again. [quote]

Yes a 5% increase in efficiency will give the world that much more oil but all it does is delay the peak by a couple of years. Not enough to allow us to carry on driving big SUVs and not caring.[/quote]

Are you actually reading what I am posting? I did not say a 5% increase in efficiency, I said a 5% increase in the ability to draw oil out of the ground. As I said, that 5% will produce the equivalent of Saudi Arabia, or another 250 billion barrels.

This is simply how technology is working. It is not a matter of if we will be able to extract another 5%, but when.

[quote]The Mage wrote:
Also it should be pointed out that the in-situ method does not follow a bell curve. The section they box off is extracted at full capacity, and when it drops off, it means it is practically empty.

Not sure what you mean by this. The bell curve is for a population of fields within a region. The bell shape is because people extract the big ones first.[/quote]

When you stick a pump into the ground, that pump will peak, and then drop off until it is not worth it to pump any more. The in-situ method does not work like this. This is what I was referring to. But it still throws the peak out the window.[quote]

If we use gas to liquid technology on gas all we do is depleat the natural gas reserves reach their peak faster and have nothing to fill the gap in electricity generation. Gas is still a finite reasource just like oil. And neither the US nor western Europe has enough to rely upon it as an energy source. Just look at how Russia can hold Europe to ransom at will.[/quote]

There are litteraly tons of methane that is going to waste just because they did not have a good way to move the stuff. But gas to liquids changes that.

And guess what, it is a renewable resource. We make the stuff. The local water treatment plant near where I live produces the stuff as a byproduct of their process. My nephew works in old dumps extracting the methane the waste produces.

We can make the stuff, but there is also work into methane hydrate. While still in the research phase, the DOE states, “While global estimates vary considerably, the energy content of methane occurring in hydrate form is immense, possibly exceeding the combined energy content of all other known fossil fuels.”[quote]

Other stuff

There’s no reason at all to artifically limit American production. Apart from issues of environmental protection. Incidentaly the horizontal drilling mentioned before tends to solve this issue allowing placement of drill rig several km away from the field.[/quote]

Directional drilling, or “slant” drilling.[quote]

The issue is that America can’t be energy independent just by drilling. It would require a mix of as many technologies as possible. Including a very significant (maybe~60-80%) nuclear power fraction. As far as I know wind and solar power just don’t have the answer. We’ve all seen the effect of biofuels. I don’t know how anyone didn’t see that coming.[/quote]

I don’t see the need to be “energy independent.” But we do need to take advantage of what resources we have.

New-Q-Ler is really the future. I can see solar and wind helping, but nothing holds a candle to atomic energy. (So far.) And once fusion is finally available, the world will change.[/quote]

American production will never again be significant enough to sway the world oil price. In the past production was high enough to have a significant effect. This may be seen from the differing responses to the OPEC cartels. I forget the dates but the first time OPEC tried to limit supply America just pumped more. The second time American production had peaked, all attempts to raise production failed and the whole world felt the economic effects. [/quote]

In the 80’s when they cut production, they found out it hurt them, and the resulting effects on the market resulted in 9 years of reduced demand.[quote]

I would agree that electric cars will indeed be a major market share by 2020. Mainly because oil will be so damn expensive (I guess supply and demand still govern the economics as long as oil supply is taken as a nearly fixed function). However you still need to make the electricity.[/quote]

Yes that is the problem, and why we need to build more nuke plants.[quote]

Basically still shit loads of oil down there but no way to get it out fast enough to meet daily demand.
Apologies if my spelling sucks ass in this post, no spell check on this machine and I’m dyslexic.[/quote]

There is an old term necessity is the mother of invention. (Also gave Frank Zappa the name of his band.)

Recently we saw markets responding to the high oil prices. Last I knew demand in America was down by 800,000 barrels a day.

Then production has been jumping recently, which helped cause the slide in prices. Next year the plug in hybrids are coming online. (Last I knew.)

It was the jump in demand in 2004 that caused the start of the big jump in oil prices. Then it was the speculators who started thinking they were investing in tulips that turned that market into a massive bubble.

T. Boon Pickens appearing on every talk show and telling everyone the world was using 2 million barrels more then it produced, (which was not true,) didn’t help.

It is understandable that people are confused on this very subject, especially when any search of google on oil produces thousands of pages about Peak Oil, and the nutjobs who turned an old outdated theory into a doom and gloom conspiracy theory.

109

[quote]lou21 wrote:

In general you don’t pump oil you tease it out of the ground.
[/quote]

110

[quote]lou21 wrote:

Yep you are. It won’t do any good to drill more simply because America can’t, whatever it does extract enough to have any but a minor effect upon the world Oil price. Sorry but that’s just the way it is

In general you don’t pump oil you tease it out of the ground. Attempts to pump oil fast out of the remaining American fields would perminantly damage them.
[/quote]

Ok, i got you know. I agree that we will do little to effect calculated oil prices. I do beleive the more contries are producing oil the more prices should stabilize and the less impact speculaiton should have on real prices.

Are you assuming that driling’s effect the price of oil is the only benefit to our economy?

111

Actually it can have an effect on the prices, especially if it causes a surplus in world supply.

I know, that is not what we have been told.

No matter what, (as an example,) 500,000 bpd is going to be 182 million bbl difference by the end of a year.

And if OPEC cuts production by that amount, it is still 182 million barrels OPEC did not sell, and make money off of, and America did.

112

[quote]The Mage wrote:
Actually it can have an effect on the prices, especially if it causes a surplus in world supply.

I know, that is not what we have been told.

No matter what, (as an example,) 500,000 bpd is going to be 182 million bbl difference by the end of a year.

And if OPEC cuts production by that amount, it is still 182 million barrels OPEC did not sell, and make money off of, and America did.[/quote]

exactly. sometimes people don’t understand that currency is effected by the same principals of supply and demand that any other good or service is. If there are less dollars going overseas, demand will rise and dollar will be worth more relative to other currancies. This is bit simplistic, but true none the less. Some point out that we won’t necessarily be purchasing the new domestic oil and that it will mearly enter the world market for oil. This doesn’t matter one bit. The effect on the dollar will remain the same. You just have to think about it a bit.

People have to remember that the price of oil, for us, is relative to the dollar. If the dollar increases in value, the price of oil has come down in real terms. The additional capacity will not have as much of an impact on price as the shifting of that capacity to domestic production. This is just basic economics and simple deductive reasoning.