The bloviator Yergin has apparently written another book "The Quest" which follows "The Prize", vying for a second Pulitzer Prize.
The WSJ has posted a Yergin penned piece: There Will Be Oil
Amazing the number of wrong interpretations the guy can make in a single commentary.
Yes, Yergin wrote a second political book on the topic of oil and I preempted him by writing a technical book on oil depletion. see http://TheOilConundrum.com
This is a fristing of his points in the WSJ piece he wrote introducing the book:
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."
The missing point that Yergin won't mention is that crude oil has definitely peaked. The other oil that is starting to be counted is called “all liquids”. This can include natural gas liquids, biofuels, etc. Those have effectively made up the difference. There is no doubt that crude oil peaked in the 2005 to 2008 time frame. One has to just look at the accounting.
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.
The peak is plateauing right now. All those other liquid products are valiantly trying to maintain a peak
This is actually the fifth time in modern history that we've seen widespread fear that the world was running out of oil. The first was in the 1880s, when production was concentrated in Pennsylvania and it was said that no oil would be found west of the Mississippi. Then oil was found in Texas and Oklahoma. Similar fears emerged after the two world wars. And in the 1970s, it was said that the world was going to fall off the "oil mountain." But since 1978, world oil output has increased by 30%.
The warnings have been continuous. On the scale of human existence, tens of years is not a long time.
Just in the years 2007 to 2009, for every barrel of oil produced in the world, 1.6 barrels of new reserves were added. And other developments—from more efficient cars and advances in batteries, to shale gas and wind power—have provided reasons for greater confidence in our energy resiliency. Yet the fear of peak oil maintains its powerful grip.
Choosing the years 2007 to 2009 is cherry picking and badly torturing the data. A couple of years this may have happened, but global discoveries peaked in the 1960s. Discoveries are very erratic and are fat-tailed phenomena so a few large discoveries every once in a while will create unwarranted optimism.
Marion King Hubbert was one of the most eminent—and controversial—earth scientists of his time. Born on a ranch in San Saba, Texas in 1903, he did his university education, including his Ph.D., at the University of Chicago. One of his fundamental objectives was to move geology from what he called its "natural history phase" into its "physical science phase," firmly based in physics, chemistry and, in particular, rigorous mathematics.
Hubbert was mainly an empiricist when it came to oil depletion estimates and his math was not actually very rigorous and he was renowned for not showing his work. He was more rigorous in his other research. What I tried to do was add rigor to his oil depletion work which was highly intuitive.
In the late 1940s, Hubbert heard another geologist say that 500 years of oil supply remained in the ground. This couldn't possibly be true, he thought. He started doing his own analysis. In 1956, he unveiled the theory that would forever be linked to his name. He declared that U.S. oil production would hit its peak somewhere between 1965 and 1970.
To be fair, it wasn't really a theory as much as a heuristic.
Hubbert used a statistical approach to project the kind of decline curve that one might encounter in some—but not all—oil fields, and he assumed that the U.S. was one giant oil field. His followers have adopted the same approach to assess global supplies.
Yergin has no clue what statistics means in this context. Hubbert didn't use a statistical approach, and this is obvious from the way he calculated his curve, as it was a deterministic heuristic. I am not a follower of Hubbert and a few other analysts are using a true stochastic approach to estimate the tails of oil depletion.
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."
This occurred because Hubbert didn't do the stochastics correctly. Peak oil is actually a fat-tail effect that pushes the perfectly symmetric Logistic curve into an asymmetric curve. The fat-tail occurs because of dispersion in rates of discovery and in the variations regions of area explored. This gets back to the idea that oil does not exist in “one giant oil field”. Yergin should not be pounding on Hubbert anymore and he should realize this.
"Hubbert was imaginative and innovative," recalled Peter Rose, who was Hubbert's boss at the U.S. Geological Survey. But he had "no concept of technological change, economics or how new resource plays evolve. It was a very static view of the world." Hubbert also assumed that there could be an accurate estimate of ultimately recoverable resources, when in fact it is a constantly moving target.
It is a constantly moving target because information only comes out slowly. Only a few countries like the UK and Norway require accurate bookkeeping of oil production. In these places we can predict the decline very accurately. I have trends from a few years ago that I continue to track and they are still spot on for UK and Norway.
Hubbert insisted that price didn't matter. Economics—the forces of supply and demand—were, he maintained, irrelevant to the finite physical cache of oil in the earth. But why would price—with all the messages that it sends to people about allocating resources and developing new technologies—apply in so many other realms but not in oil and gas production? Activity goes up when prices go up; activity goes down when prices go down. Higher prices stimulate innovation and encourage people to figure out ingenious new ways to increase supply.
Yergin likely only has the slightest concept of Energy Returned on Energy Invested (EROEI). The tar sands and other places use huge amounts of energy. The innovation is there but it is innovation on how to use energy to get back meager returns.
In the oil and gas industry, technologies are constantly being developed to find new resources and to produce more—and more efficiently—from existing fields. In a typical oil field, only about 35% to 40% of the oil in place is produced using traditional methods.
The average “shut-in” reservoir was left with 60%-65% of the oil left behind. So what he said is true and the amount of energy it will take to scrape that out of the pores is the real issue.
One example is the "digital oil field," which uses sensors throughout the field to improve the data and communication between the field and a company's technology centers. If widely adopted, it could help to recover an enormous amount of additional oil worldwide—by one estimate, an extra 125 billion barrels, almost equivalent to the current estimate reserves of Iraq.
This is why the discoveries are all in the past. The new technologies have been in place. Part of my stochastic model incorporates an accelerating technology to take into account search over a finite volume, and this still will not bring up the declining tail.
New technologies and approaches continue to unlock new resources. Ghana is on its way to significant oil production, and just a few days ago, a major new discovery was announced off the coast of French Guiana, north of Brazil.
This is called the law of diminishing returns. The fat-tail is real but it doesn't reverse the course.
As proof for peak oil, its advocates argue that the discovery rate for new oil fields is declining. But this obscures a crucial point: Most of the world's supply is the result not of discoveries but of additions and extensions in existing fields.
When a field is first discovered, little is known about it, and initial estimates are conservative. As the field is developed, more wells are drilled, and with better knowledge, proven reserves very often increase substantially. A study by the U.S. Geological Survey found that 86 percent of oil reserves in the U.S. were the result not of what was estimated at the time of discovery but of revisions and additions from further development.
I debunked the USGS reserve growth work in my book. This is really a bookkeeping problem, and this does not happen in other parts of the world, where the initial estimates are spot on. The reason that the initial estimates are underestimated in the USA is because of financial regulations to avoid fraudulent claims, therefore companies essentially only report what their wildcat wells report. It is now a moot point in the USA because discoveries peaked in the USA in the 1940's, and all these numbers have been continuously backdated.
Estimates for the total global stock of oil keep growing. The world has produced about one trillion barrels of oil since the start of the industry in the 19th century. Currently, it is thought that there are at least five trillion barrels of petroleum resources in the ground, of which 1.4 trillion are deemed technically and economically accessible enough to count as reserves (proved and probable).
This is a fat-tail effect. The issue is now on how fast we can extract the oil, and thus peak oil has become a throughput or flow problem.
Based on current and prospective plans, it appears that the world's production capacity for "oil and related liquids" (in industry jargon) should grow from about 92 million barrels per day in 2010 to over 110 million by 2030. That is an increase of about 20%.
Watch how much of this is the alternative “all liquids” category, what he calls related liquids. Yergin is a cagey political crony and master of deception and sloppy to boot, see my summary at the end of this account.
But this is no done deal. There are many "buts," having to do with what happens above ground. The policies of governments around the world—especially concerning taxes and access to resources—have a major impact on whether and when oil is discovered and developed.
Wars and civil wars, social turmoil and political upheavals, regional conflict, corruption and crime, mismanagement of resources—all of these can affect not only current production but also investment and future prospects. Environmental and climate policies can alter the timing and scale of development, as can geopolitics and politics within oil-producing countries.
This is the “drill, baby, drill” argument in a nutshell. No one really believes this but it is the only thing one can say to avoid an open revolt.
Meeting future demand will require innovation, investment and the development of more challenging resources. A major reason for continuing growth in petroleum supplies is that oil previously regarded as inaccessible or uneconomical is now part of the mix, such as the "presalt" resources off the coast of Brazil, the vast oil sands of Canada, and the oil locked in shale and other rocks in the U.S.
In 2003, the Bakken formation in North Dakota was producing a mere 10,000 barrels a day. Today, it is over 400,000 barrels, and North Dakota has become the fourth-largest oil-producing state in the country. Such "tight" oil could add as much as two million barrels a day to U.S. oil production after 2020—something that would not have been in any forecast five years ago.
In the worst cases this is like extracting oil from the asphalt in a parking lot, and in the best cases, like Bakken, these fields have very short lifetimes and are flow limited. Take a look at how many small rigs and multiple processing centers are planned around North Dakota.
Overall U.S. oil production has increased more than 10% since 2008. Net oil imports reached a high point of 60% in 2005, but today, thanks to increased production and greater energy efficiency (plus the use of ethanol), imports are down to 47%.
I did a recent study of this and the increase is largely due to a few large Gulf rigs coming online and the fat-tail is being maintained by many stripper wells and a little from Bakken. The USA is definitely in decline.
Things don't stand still in the energy industry. With the passage of time, unconventional sources of oil, in all their variety, become a familiar part of the world's petroleum supply. They help to explain why the plateau continues to recede into the horizon—and why, on a global view, Hubbert's Peak is still not in sight.
Unconventional sources of oil are not petroleum. In summary what Yergin has written is very predictable because you can find it in any of the industry projections. I included a chapter on the cornucopian views in the book and you can see how in detail how they are debunked point by point.
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."
If I were to make a blanket statement, the cornucopian vision of energy industry analysts such as Daniel Yergin and Michael Lynch is an incorrect interpretation because it exists simply to support business-as-usual (BAU) philosophy. Businesses will pay a lot of money for information that is in-line with what they want to hear, instead of getting negative info. Same thing with the general public unfortunately.
Yergin may be a Pulitzer Prize winner but his consulting company CERA is part of IHS (Information Handling Services) which sells fossil fuel consumption information to companies, and then the seemingly neutral IEA (International Energy Agency) and EIA (Energy Information Agency, the DOE’s service) incorporates these records into the global updates. And this information is expensive! It cost thousands of dollars to get a yearly subscription to the IHS services. The info from the agencies are merely roll-ups. So it is comical that Yergin can’t even get the numbers correct, putting down 92 million barrels per day instead of 87 million barrels of oil per day for consumption in 2010. I looked this up and at the end of November 2010, the International Energy Agency reported the world production of all liquids was 87 million barrels per day. Yergin’s book has been in the planning for a long time and I bet he took one of his old projections and assumed it would be correct, but it came out 5% short. If cheap, plentiful, and convenient energy sources equates to industrial productivity, that is 5% lower productivity that the world’s economy didn’t have access to.
Yergin essentially spews garbage. No second Pu for U!