peak oil & peak everything lecture at cornell

Peak Oil and Peak Everything

Will Mar([email protected]

April 17, 2012

Lecture Outline

• About Me• Peak Oil Intro (5 slides)• Some Economics (4 slides)• Current State of Affairs (6 slides)• Subs(tu(on and the Final Fron(ers (9 slides)• Peak Everything (10 slides)• Outcomes (3 slides)

• (~1 minute per slide -‐ so let’s hustle!)2

The Scale of the Problem

3

Intro Economics Subs(tu(on Peak Everything Outcomes

Current Global Energy Mix

• 81%: Transporta(on fuels– 46% for gasoline– 9% for jet fuel– 26% for diesel and other liquid

transporta(on fuels

• 19%: Industrial & Commercial– Hea(ng oil, electricity genera(on, plas(cs,

synthe(c rubber, asphalt and tar, wax, lubricants, adhesives, solvents, explosives, paints, sealants, corrosion inhibitors, cosme(cs, fragrances, pharmaceu(cals, fer(lizer, pes(cides, food flavorings, food addi(ves and other industrial and commercial products.

Current Global Oil Mix

Current State

Addicted to Oil

• 81%: Transporta(on fuels– 46% for gasoline– 9% for jet fuel– 26% for diesel and other liquid

transporta(on fuels

• 19%: Industrial & Commercial– Hea(ng oil, electricity genera(on, plas(cs,

synthe(c rubber, asphalt and tar, wax, lubricants, adhesives, solvents, explosives, paints, sealants, corrosion inhibitors, cosme(cs, fragrances, pharmaceu(cals, fer(lizer, pes(cides, food flavorings, food addi(ves and other industrial and commercial products.

4

Current Global Oil Mix

Intro Economics Subs(tu(on Peak Everything OutcomesCurrent State

Peak Oil

• Peak oil is the point at which we have reached a maximum rate in global oil produc(on.

It does not mean that oil is “half gone”

Peak oil is about rates not reserves

Million Dollar Analogy

5


Aggregating Oil Field Peaks

6

Texas Peak Oil

Alaska Peak Oil

United States Peak Oil in 1971


Eventually The World Will Peak

7


Supply Inelasticity

8

$0

$37.50

$75.00

$112.50

$150.00

75,000 78,750 82,500 86,250 90,000

Since 2005, Global Oil Supply Is Almost Totally Inelastic

World Oil Supply Jan 2001 - Jan 2005 (Thousand Barrels per Day)World Oil Supply Jan 2005 - Oct 2010 (Thousand Barrels per Day)

$0

$37.50

$75.00

$112.50

$150.00

25,000 28,000 31,000 34,000 37,000

Since 2005, OPEC Oil Supply Is Almost Totally Inelastic

OPEC Oil Supply Jan 2001 - Jan 2005 (Thousand Barrels per Day)OPEC Oil Supply Jan 2005 - Oct 2010 (Thousand Barrels per Day)


Demand Inelasticity

9

$0

$37.50

$75.00

$112.50

$150.00

0 13,250 26,500 39,750 53,000

Oil Demand Is Almost Perfectly InelasticBr

ent S

pot P

rice

FOB

(Dol

lars

per

Bar

rel)

OECD Oil Demand Jan 2001 - Oct 2010 (Thousand Barrels per Day)


Supply and Demand

10

30 US$

60 US$

90 US$

120 US$

150 US$

75 MMbpd 85 MMbpd 95 MMbpd

Supply QDemand QDemand Q’

Current Price

Current Produc(on Future Produc(on

Future Price

Inelas(cSupply


Substitution

11


Peak Oil Forecasts

12


2% deple(on rate = 35 year half life6% deple(on rate = 12 year half life (the same level of oil produc(on as we had in 1959!)

Many Countries Have Peaked

13

Countries That Have Reached Peak OilCountry

Countries That Have Reached Peak OilCountries That Have Reached Peak OilCountries That Have Reached Peak OilPeak Year Peak Production Rate

(MMbd)% Below

Peak TodayUnited StatesIranNorwayMexicoUnited KingdomIndonesiaEgyptArgentinaAustraliaSyriaEquatorial GuineaBruneiYemenVietnamDenmarkGabonRomaniaTrinidad & TobagoPeruTunisiaItalyUzbekistan

1970 9.659 34%1974 6.022 30%2001 3.418 37%2004 3.383 23%1999 2.649 54%1977 1.686 41%1993 0.893 22%1998 0.847 27%2000 0.700 30%1995 0.623 35%2011 0.563 23%1979 0.501 34%2001 0.457 42%2004 0.397 14%2004 0.389 36%1996 0.370 33%1976 0.299 72%1978 0.234 37%1985 0.190 20%1984 0.120 33%2006 0.119 16%1995 0.103 54%


The World’s Megafields Have Peaked

14

The World’s 20 Largest Oil Fields Have Already PeakedField

The World’s 20 Largest Oil Fields Have Already PeakedThe World’s 20 Largest Oil Fields Have Already PeakedThe World’s 20 Largest Oil Fields Have Already PeakedThe World’s 20 Largest Oil Fields Have Already PeakedCountry Year of

DiscoveryYear of Peak 2007 Production as % of

World TotalGhawarCantarellSafaniyahRumaila N & SGreater BurganSamotlorAhwazZakumAzeri-Chirag-GuneshliPriobskoyeBu HasaMarunRaudhatainGachsaranQatifShaybahSaertu (Daqing)Samotlor (Main)Fedorovo-SurgutsZuluf

Saudi Arabia 1948 1980 7.26%Mexico 1977 2003 2.39%Saudi Arabia 1951 1998 2.01%Iraq 1953 1979 1.78%Kuwait 1938 1972 1.67%Russia 1960 1980 1.29%Iran 1958 1977 1.10%Abu Dhabi (UAE) 1964 1998 0.96%Azerbaijan 1985 2007 0.94%

Russia 1982 2007 0.93%Abu Dhabi (UAE) 1962 1973 0.78%Iran 1964 1976 0.73%Kuwait 1955 2007 0.71%Iran 1928 1974 0.71%Saudi Arabia 1945 2006 0.71%Saudi Arabia 1968 2003 0.71%China 1960 1993 0.67%Russia 1961 1980 0.66%Russia 1962 1983 0.65%Saudi Arabia 1965 1981 0.64%

Total: 27.30%


Global Oil Discoveries Have Peaked

15

0

22.5

45.0

67.5

90.0

1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002

Global Oil Discoveries Peaked in 1965

Global Annual Oil Discoveries (billion barrels) 10 Year Moving Average


A Zero-Sum Game With a Shrinking Pie

16

0

1.5

3.0

4.5

6.0

1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006

Global Oil Per Person Peaked in 1979

Global Oil Production Per Person (Bbl/Person/Yr)


New Fields Peak Earlier & Decline Faster

17

0

17.5

35.0

52.5

70.0

1928193419401946195219581964197019761982

Newer Mega-Fields Reach Their Peak Faster

Years Between Discovery and Peak

0%

3%

7%

10%

13%

Pre-1970 1970’s 1980’s 1990’s 2000’s

Post-Peak Decline Rates Are Much Worse For Newer Fields

Post-Peak Decline Rate by Year of First ProductionWorld Average Post-Peak Decline Rate


Fungibility of Substitutes

Electricity ≠ Liquid Transporta(on Fuels

18


Limits to Speed of Electrification

• In the United States, the average age of vehicles on the road is 10 years– Ten years ago, the

average vehicle age was 8.8 years

• At the current 5% scrappage rate, it would take 20 years to turn over the US fleet of cars

19

0.1%Percent of China's 18.5 million new cars each year that are electric


Grasping at the Final Frontiers of OilLimits to Scale-Up of Remaining

Oil Substitutes

• Engineering Problems– Engineering Complexity– Environmental Shortages

• Social Problems– Environmental Pollu(on– Poli(cal Issues

• Limits From “Peak Everything”– Feedback Loops– Resource Shortages

20

What’s Left?

• Ultra-‐Deepwater Offshore• Arc(c Oil• Poli(cally Difficult Onshore

Oil -‐ (Iraq, Central Africa, etc.)• Heavy Oil (Canadian Tar

Sands, Venezuelan Heavy Oil, Rocky Mountain Oil Shale)

• Biofuels• Gas-‐to-‐Liquids• Coal-‐to-‐Liquids


Engineering Limits to Substitutes

• Ultra-‐Deepwater Offshore– Immense Complexity and Cost

• Arc(c Oil– Immense Complexity and Cost– Ability to Control Blowouts in the Middle of

Winter

• Heavy Oil (Canadian Tar Sands, Venezuelan Heavy Oil, Rocky Mountain Oil Shale)– Scale Limited by Water & Natural Gas

Availability– Refining Capability and Cost

• Biofuels– Scale Limited By Available Land & Water

21


Cost of Substitutes

22Source: A E Farrell & A R Brandt, University of California, Berkeley


Environmental Effects of Substitutes

• Ultra-‐Deepwater Offshore– Risk of Oil Spills and Blowouts

• Arc(c Oil– Blowouts in Winter: Impossible to Contain

• Poli(cally Shaky Land Oil -‐ (Iraq, Central Africa, etc.)

– Lack of Environmental Laws• Heavy Oil (Canadian Tar Sands, Venezuelan

Heavy Oil, Rocky Mountain Oil Shale)– Massive Water Pollu(on

• Athabasca Tailing Ponds Can Be Seen From Space!

– Much Higher Greenhouse Gas Emissions

• Biofuels• Gas-‐to-‐Liquids• Coal-‐to-‐Liquids

23


Environmental Effects of Substitutes

24


Limits to Scale of Electrical Substitutes

• NIMBY– Nuclear– Wind– Gas Fracking– Coal Mountaintop

Removal

• Variability and Intermipency– Solar– Wind

• Loca(on Availability– Hydro– Wind

25

Current Global Energy Mix


Limits From “Peak Everything”

26Source: Prof Charles Hall, Syracuse University


RecedingHorizons

• Feedback Loops

• Resource Shortages

• Net Energy:

Peak Everything

27


• Peak Fossil Fuels– Peak Oil, Peak Natural Gas, Peak Coal

• Peak Minerals– Peak Uranium, Peak Metals

• Peak Food– Peak Fish, Peak Soil, Peak Water, Peak Fer(lizer (peak gas, peak phosphate rock, peak potash)

Peak Gas

28

0

6

12

17

23

1930 1939 1948 1957 1966 1975 1984 1993 2002

US Gas Peaked in 1974 but Decline Has Been Halted by Fracking

US Natural Gas Production (Tcf) Fracking

Countries That Have Reached Peak GasCountries That Have Reached Peak GasCountries That Have Reached Peak GasCountries That Have Reached Peak GasCountry Peak

YearPeak

Production (Bcf/D)

% off from Peak

United Kingdom 2000 10.45684986 47.15%Ukraine 1985 3.75452235 52.19%Romania 1982 3.57715492 70.43%Germany 1979 1.96117317 47.57%Italy 1994 1.77870648 58.60%Denmark 2005 1.0107839 21.77%Poland 1978 0.64114656 38.04%

The Fracking Treadmill“regardless of their produc(vity, [shale gas wells] exhibit an early peak of produc(on and then a rapid decline”

-‐Interna(onal Energy Agency


Peak Coal

29

15.00

17.75

20.50

23.25

26.00

1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009

Coal Quality Has Been Declining Since the 1960’s

US Coal Quality (Million Btu per Short Ton)

0

1.75

3.50

5.25

7.00

1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009

Coal Extraction Productivity Peaked in 2000

US Mining Productivity (Short Tons Per Employee Hour)


Peak Coal

30

300

400

500

600

700

1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009

Appalachian Coal Production Peaked in 1997

US Coal Production East of the Mississippi (Million Short Tons)

Countries That Have Reached Peak CoalCountries That Have Reached Peak CoalCountries That Have Reached Peak CoalCountries That Have Reached Peak CoalCountry Peak Year Peak Production

(Tonnes)% off from Peak

Germany 1985 521.6 65.05%Poland 1988 266.51 50.01%Ukraine 1986 193.1 62.04%Kazakhstan 1988 143.1 22.57%United Kingdom 1981 127.47 85.75%Czech Republic 1984 124.93 59.47%Romania 1989 61.34 49.74%Spain 1983 39.95 81.91%Bulgaria 1987 36.82 21.61%Hungary 1982 26.08 65.20%South Korea 1988 24.3 91.42%Thailand 1997 23.39 23.56%France 1981 22.73 99.56%Japan 1981 17.69 94.82%Mexico 2007 12.5145 25.33%Venezuela 2004 8.107304 50.93%Brazil 1985 7.71 28.99%Zimbabwe 1991 5.62 70.33%


Peak Coal is Leading to Desperation

31

Mountaintop Removal


Peak Metals

32

0

750

1,500

2,250

3,000

1972197619801984198819921996200020042008

Gold Production Has Plateaued Since the 1990’s

World production (Metric Tons)

0

150

300

450

600

1945 1952 1959 1966 1973 1980 1987 1994 2001 2008

Platinum Group Metals Production Peaked In 2007


0

35,000

70,000

105,000

140,000

1990 1993 1996 1999 2002 2005 2008

Rare Earth Metal Production Has Leveled Off


0

4,250,000

8,500,000

12,750,000

17,000,000

19901992199419961998200020022004200620082010

Is Copper Production Reaching a Plateau?



Peak Food

33

It takes 6 barrels of oil to raise one steer

We Burn 10 Calories of Hydrocarbon Fuel For Every

Calorie of Food We Eat in the US

Production system (locale) Edible-protein energy return on investment (EROI)

Carp — extensive pond culture (various)Chicken (US)Tilapia — extensive pond culture (Indonesia)Mussel — longline culture (Scandinavia)Turkey (US)Carp — unspecified culture system (Israel)Global fisheriesMilk (US)Swine (US)Tilapia — unspecific culture system (Israel)Tilapia — pond culture (Zimbabwe)Beef — pasture-based (US)Catfish — intensive pond culture (US)Eggs (US)Beef — feedlot (US)Tilapia — intensive cage culture (Zimbabwe)Atlantic salmon — intensive cage culture (Canada)Shrimp — semi-intensive culture (Ecuador)Chinook salmon – intensive cage culture (Canada)Atlantic salmon – intensive cage culture (Sweden)Lamb (US)Sea bass – intensive culture (Thailand)Shrimp – intensive culture (Thailand)

1-1.1:1.25:1.13:1

.1-.5:1.1:1

.084:1.08:1

.071:1

.071:1

.066:1

.060:1

.050:1

.040:1

.025:1

.025:1

.025:1

.025:1

.025:1

.020:1

.020:1

.018:1

.015:1

.014:1

All Meat is Net-Energy Negative


Peak Food

34


Global food production and global energy consumption have a correlation of 0.99

$0

$37.50

$75.00

$112.50

$150.00

Jan-90 Jan-97 Jan-04 Jan-110

75

150

225

300Food and Fuel Prices Rise Together

Brent Crude Price Oil Price Trendline Food Price IndexFood Price Trendline

0

27.5

55.0

82.5

110.0

1965 1970 1975 1980 1985 1990 1995 2000 20050

3000

6000

9000

12000

Food is Energy

Net Global Food Production Index Number (2004-2006 = 100)Total World Primary Energy Consumption (million tons of oil equivalent)

Peak Food - Peak Fish

35

0

750,000

1,500,000

2,250,000

3,000,000

1950 1959 1968 1977 1986 1995 2004

Atlantic Cod Capture Has Collapsed

Atlantic Cod Capture (t)

0

12,500

25,000

37,500

50,000

1975 1980 1985 1990 1995 2000 2005 2010

Chilean Seabass Capture Has Collapsed

Chilean Seabass (Patagonian Toothfish) Capture (t)

0

37,500

75,000

112,500

150,000

1950 1959 1968 1977 1986 1995 2004

King Crab Capture Has Collapsed

King Crab Capture (t)

0

1,000,000

2,000,000

3,000,000

4,000,000

1950 1959 1968 1977 1986 1995 2004

Global Shrimp & Prawn Capture Peaked in 2003

Global Shrimp & Prawn Capture (t)


Peak Soil• It takes between

200 and 1000 years or more to create just 1 inch of topsoil

• Worldwide, soil is being eroded away 10 to 40 (mes faster than it is being replenished

36

Peak Food

Lower&Food&Supply

More&Crop&Losses

Higher&Produc7on&&&Transporta7on&Costs

Higher&Electricity&Prices

Peak&Oil

Higher&Fuel&Prices Peak&Gas Peak&Coal

Higher&Food&Prices

Higher&Food&Demand

Increasing&World&Popula7on&&&Increasing&PerECapital&Resource&

Consump7on

Higher&Electricity&Demand

More&Floods&in&Some&Regions

More&Draughts

More&Severe&Weather

Increasing&Water&Scarcity&In&Some&

Regions

Aquifer&Deple7on

Increasing&Water&Demand

Glaciers&and&Snowcaps&Mel7ng

Climate&Change

Soil&Deple7on

Higher&Fertalizer&Prices

Higher&Pes7cides&Prices

Higher&Plas7cs&Prices

Increasing&Biofuel&

Produc7on&(Food&v&Fuel)


Mad Max or The Jetsons?

• Renewable Energy Tehno-‐Utopia– Electric Cars– High Speed Trains– Wind & Solar

• Collapse Dystopia– Food Shortages– Economic Depression– Resource Wars

37


Or somewhere in the middle...

• “In our view global oil demand peaks in 2016, with oil prices, before a long, tandem, decline.”

– Deutsche Bank

• Peak Demand & Painful Transi(on– Oil Spikes and Recessions– Basic Materials Get More Expensive– Efficiency Improvements– Electrifica(on of Transporta(on

38

Introduc(on Economics Subs(tutes Effects Outcomes

What You Can Do• Home

– Living in a walkable neighborhood

• Transporta(on– Enjoy cheap interna(onal travel while it lasts– Buy a fuel-‐efficient car

• Community– Join a local sustainability group

• Poli(cs– Vote for people who understand the issue and are proposing sustainable

solu(ons

• Career– Work in an industry that will benefit from peak everything (not an airline!)

• Personal Finance– Invest for Peak Oil (Buy My Book!!) ([email protected])

39

Introduc(on Economics Subs(tutes Effects Outcomes

peak oil & peak everything lecture at cornell

Business