oil peak vs. oil panic: revisiting m.k. hubbert

Oil Peak vs. Oil Panic:Revisiting M.K. Hubbert

Amos Nur Geophysics Department

Stanford University

Oil Peak vs. Oil Panic: Revisiting MKHubbert

Abstract

Worldwide, per-capita oil consumption is closely correlated with standard of living. In developing nations like China and India, increasing prosperity therefore requiresincreased per-capita oil consumption. However, oil is a finite resource whose production globally is about to begin to decline irreversibly. This is a source of increasing panicfor consumers. Consequently the growing demand for oil is leading to bargaining local skirmishes between producers and consumers of which the Gulf war, the 9/11 attacks, andthe war in Iraq are just the most recent ones and are being closely followed by Iranand Venezuela. These skirmishes pale in comparison with the looming panic that could lead to a global conflict among major consumers(specifically the US and China) when they mustcompete for dwindling oil reserves in the future.

Oil Peak vs. Oil Panic: Revisiting MKHubbert

Abstract

Worldwide, per-capita oil consumption is closely correlated with standard of living. In developing nations like China and India, increasing prosperity therefore requiresincreased per-capita oil consumption. However, oil is a finite resource whose production globally is about to begin to decline irreversibly. This is a source of increasing panicfor consumers. Consequently the growing demand for oil is leading to bargaining local skirmishes between producers and consumers of which the Gulf war, the 9/11 attacks, andthe war in Iraq are just the most recent ones and are being closely followed by Iranand Venezuela. These skirmishes pale in comparison with the looming panic that could lead to a global conflict among major consumers(specifically the US and China) when they mustcompete for dwindling oil reserves in the future.

Projected World Energy Supplies

19001900 19201920 19401940 19601960 19801980 20002000 20202020 20402040 20602060 20802080 30002100

2020

4040

6060

8080

100100100 BILLION

BARRELS

BillionBarrels

of OilEquivalent

per Year(GBOE)

BillionBarrels

of OilEquivalent

per Year(GBOE) Natural

GasNatural

Gas

HydroelectricHydroelectric

Crude OilCrude Oil

Solar, WindGeothermal

Nuclear Electric

1993

CoalCoal

Decreasing

Decreasing

Fossil FuelsFossil Fuels

New

TechnologiesN

ew Technologies

World Energy DemandWorld Energy Demand

Edwards, AAPG 8/97

Heavy + OilHeavy + Oil

Production history of 8 giant or super-giant oilfieldsRef: Matthew R. Simmons,Twilight in the Desert, 2005

M K Hubbert

1956

M K Hubbert

1956

StanfordRock Physics &Borehole Geophysics

The big question:What rules the oil business?

Demand (market forces) or

Supply (limited resource availability)?

* Demand means that market forces take care of any problem.

* Resource availability means political panic at some point in time.

bbls/year bbls/person/year______________________________________________________

World 3.3x10**9 4.6

USA 7.5x10**9 24.0

China 1.9x10**9 1.5

India 1.1x10**9 1.1________________________________________________________________

Current Consumption

What if?

Added bbl/year Added %/yr

bring China + India pp to

world average now 8.3x10**9 32%

1/4 of US consumption now 11.5x10**9 44%



the whole world pp to

1/4 of US consumption level now 13x10**9 50%



US consumption level now 52x10**9 200%

We found the most oil during the 1960s; production follows discoveries; technology hasn’t helped much

Pressure on Supply : Major oil discoveries are behind us… but in a high energy

price environment E&P is no longer commercially independent business


Buyer Acquired

BP Amoco, ArcoChevron Gulf Oil, Texaco, UnocalExxon MobilPhillips/Conoco Conoco/PhillipsTotal ElfStatoil SagaRepsol YPF

Should we panic? - of course not.

Are we panicking? - yes, we definitely are.

The first 3 skirmishes:

• Kuwait in 1991• The 9/11 attacks• The war in Iraq


The first skirmish:

Kuwait, 1991


The 2nd skirmish:

USA, 2001


The second skirmish: The 9/11 attacksThe second skirmish: The 9/11 attacks

The 3rd skirmish:

Iraq, 2003


The third skirmish: Iraq

Months before the attacks of 9/11 the White House was already considering toppling Saddam, and … was … studying Iraq's oil fields ...Dick Cheney was pivotal both in advancing the administration's plans for regime change in Iraq and in formulating U.S. energy policy.

(Specifically)… a map was studied…. in the spring of 2001 by (a Cheney task force) of White House and a select group of oil company executives meeting in secret. It …show(s) … Iraq's …southwest … neatly divided … into nine "Exploration Blocks."

A National Security Council directive, dated February 2001, instructing NSC staff to co-operate fully with the task force …that … would be considering the "melding" of two policy areas: "the review of operational policies towards rogue states" and "actions regarding the capture of new and existing oil and gas fields."

From Linda McQuaig, 2004

The third skirmish: Iraq

Months before the attacks of 9/11 the White House was already considering toppling Saddam, and … was … studying Iraq's oil fields ...Dick Cheney was pivotal both in advancing the administration's plans for regime change in Iraq and in formulating U.S. energy policy.

(Specifically)… a map was studied…. in the spring of 2001 by (a Cheney task force) of White House and a select group of oil company executives meeting in secret. It …show(s) … Iraq's …southwest … neatly divided … into nine "Exploration Blocks."

A National Security Council directive, dated February 2001, instructing NSC staff to co-operate fully with the task force …that … would be considering the "melding" of two policy areas: "the review of operational policies towards rogue states" and "actions regarding the capture of new and existing oil and gas fields."

From Linda McQuaig, 2004

The next emerging oil skirmishes:

IranVenezuela


I call these local skirmishes becausethey are ‘bargaining’ conflictsbetween oil consumers and producers.

The real big problem are the emergingglobal conflicts among consumers whomust compete for the same dwindling crucial resources.

I call these local skirmishes becausethey are ‘bargaining’ conflictsbetween oil consumers and producers.

The real big problem are the emergingglobal conflicts among consumers whomust compete for the same dwindling crucial resources.

Consumption

OIL IN WW-II

Germany

•Desparate drive to Baku for Caspian sea oil•Drive through North Africa to theMiddle East oil fields

Japan

•Attack Pearl Harbor, trigger WWII in the Pacific

OIL IN WW-II

Germany

•Desparate drive to Baku for Caspian sea oil•Drive through North Africa to theMiddle East oil fields

Japan

•Attack Pearl Harbor, trigger WWII in the Pacific

When the Panic Moment ?


Now 2045

Con

sum

ptio

n Fu

ture

Conclusions 1. The petroleum decline problem is independent of Hubbert’s model.

2. The notion that market forces will take care of the looming petroleum shortages is a belief based on ideology and hope. The finiteness of recoverable petroleum reserves is fact.

3. To gradually replace fossil energy with alternatives on the scale of tens of billion barrels/year will require several decades and trillions of dollars.

4. A different approach to our national energy security policy will become growingly crucial to avoid future wars. Using force to secure stable global sources and free flow of oil will not work in the long run.

End of Main Talk


The future isn’t what it used to be.

““There is no There is no likelihood man can likelihood man can

ever tap the power of ever tap the power of the atom.the atom.””

Robert Millikan, Nobel Prize in Physics, 1923

[after TRW Inc, 1985]


Evolution of World Oil and Gas ResourcesEvolution of World Oil and Gas Resources

Source: IHSE IRIS21 / PEPS 2005

GasLiquidsNumber of Discoverie

Gachsaran

Burgan

Ghawar

Ahwaz

MarunUrengoy

North Field

Astrakhan

South Pars

Kashagan

(excludes USA and Canada)

We found the most oil during the 1960s; production follows discoveries; technology hasn’t helped much

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050-

10

20

30

40

50

60

Bill

ion

bbl/y

ear

Pressure on Supply : Major oil discoveries are behind us… but in a high energy

price environment E&P is no longer commercially independent business

[ M. K. Hubbert, 1956]TIME (THOUSANDS OF YEARS)

Human affairs in time perspective


The Size of the World’s Oil Business

$6.8 ·1012/yrActual cost of gasoline/price in Europe @$5.2/gallon

3.

$3.4 ·1012/yrPayment at the pump @ $2.6/gallon

2.

$1.6·1012/yrPayment to producers @ $50/bl1.

Adding Natural Gas:

Multiply by x 1.5 $2.4 - $10 ·1012/yr

GERMANY IN WWII

JAPAN IN WWII:

Conclusions 1. The petroleum decline problem is independent of Hubbert’s model.

2. The notion that market forces will take care of the looming petroleum shortages is a belief based on ideology and hope. The finiteness of recoverable petroleum reserves is fact.

3. To gradually replace fossil energy with alternatives on the scale of tens of billion barrels/year will require several decades and trillions of dollars.

4. The emerging conflict is not between consumers and producers butamong competing major consumers. Because of that a totally different approach to our national energy security policy will become growingly crucial to avoid future global conflicts. Using force to secure stable global sources and free flow of oil will not work in the long run.

•As worldwide greenhouse-gas emissions climb, so will global temperature and sea level.•{Technology Review, March 2005}

• Petroleum related fraction of selected economies

PROCESS ENERGY CONSUMED PER NET ENERGY (COMBUSTION HEAT VALUE) OF FUEL PRODUCED

1.6000GasolineHydrogen by reforming

1.6000Natural gasHydrogen by reforming

1.6500WaterHydrogen by electrolysis

0.4380SoyBiodiesel

0.5650CornEthanol

1.8648Wood/grassEthanol

1.4312WoodSynthetic compressed gas

2.0212WoodMethanol

1.8150CoalMethanol

1.5090Natural gasMethanol

0.0349UraniumNuclear

0.0165Natural gasCompressed natural gas

0.0455OilFuel oil

0.0652OilDiesel

0.1670OilGasoline

Fuel ProductionFeedstockFuel

End of slide show

Conclusion:

• M.K. Hubbert’s model - why does it (roughly speaking) work?

• The consumers burn the oil while the producers burn the money.

• Oil peak vs oil panic.

• Conflict between consumers and producers vs conflict among consumers.

Oil and War: Oil Peak vs. Oil Panic

Prof. Amos Nur Geophysics Department

Stanford University

What is in it for Israel?

1. R & D opportunities in future– Energy technology– Hydrogen production– Gas hydrates– Desalination technology

2. Thinking about oil related national security and international conflicts issue.

What if?

Added bbl/year Added %/yr

bring China + India to

world average now 8.3x10**9 32%



1/2 of US consumption now 25x10**9 96%

the whole world to




US consumption level now 52x10**9 200%

“On Predicting”


How do you want it – the crystal mumbo-jumbo or statistical probability? [Harris, 1992]

JAPAN IN WWII:

• “For the first time in our history, ideology and theology hold a monopoly of power in Washington. Theology asserts propositions that cannot be proven true; ideologues hold stoutly to a world view despite being contradicted by what is generally accepted as reality. When ideology and theology couple, their offspring are not always bad but they are always blind. And there is the danger: voters and politicians alike, oblivious to the facts”.

• [Bill Moyers, 12/2004, Harvard University]

Complete cycle of world crude oil production


1920 1950 1980 2010 2040 2070 21000

10

20

30

40

50

60

Year

Pro

duct

ion

Rat

e (1

09 bbl

s/yr

)

80% (80 years)

Demand

Prodcution

Q∞=2100x10 9

bbls

Modified from M.K. Hubbert (1956)

After Smith & Lidsky (TLE, 1993)


Production vs. Consumption in US lower 48 states

1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 20500

1

2

3

4

5

6

7

Year

Pro

duct

ion

(Billi

on b

bls/

year

)

ConsumptionNOW

Production

Production includes crude oil, natural gas liquids and refinery gain. Source: EIA.

China’s Oil Production and consumption, 1980-2000

“On Predicting”


How do you want it – the crystal mumbo-jumbo or statistical probability? [Harris, 1992]

Abstract

• Worldwide per-capita oil consumption is closely correlated with the standard of living. In developing nations like China and India increasing prosperity therefore requires increased per-capita oil consumption. However, oil is a finite resource whose production globally is about to begin to decline irreversibly. Consequently the growing demand for oil is leading to a growing global conflict in which the Gulf War, the 9/11 attack, and the war in Iraq are just the first three skirmishes. These skirmishes pale in comparison with the looming potential conflict over oil with China.

Oil and War: Revisiting

M. King Hubbert’sPrediction

Amos M. NurStanford University

Population changes due to ecological disturbance

Population Changes Due to Ecological Disturbance

P3’

P2’

P1’P3

P2

P1

PO

PU

LATI

ON

(NU

MB

ER

)

TIME

ORIGINAL EQUILIBRIUM FINAL EQUILIBRIUMECOLOGICALDISTURBANCE


[M.K. Hubbert, 1956]

oil peak vs. oil panic: revisiting m.k. hubbert

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