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Oil’s not peaking. It’s jumping the shark

COLBY COSH: Throw a dart at the periodic table and there’s a group claiming that element is “peaking”


 

“You’ve heard of peak oil,” the Globe & Mail asks us this morning. “How about peak gold?” Peak gold, O wise Globe editors? Are you insulting our intelligence by picking such an popular, recognizable substance to create a stir over? Throw a dart at the periodic table, and I can practically promise you that for whichever element you impale, you will be able find a cluster of Hubbertian cranks frantic to raise awareness over its imminent, irreversible, apocalyptic “peaking”. A single Italian study sweeps a whole buffet of minerals off the desk: mercury, lead, gallium, selenium. They missed aluminum, but someone else has it covered. Salon was complaining about peak copper four years ago, and as any fool can tell you, peak copper means peak silver!

How about peak lithium? Surely not… wait, yep, there’s a peak lithium guy. Helium? C’mon, helium makes up a quarter of the goddamn universe! Sorry, peaked. Phosphorus too. You may be under the impression that we’re all swimming around in a sea of nitrogen but turns out that’s peaked. And you may be certain that long-passed, purely local peaks of many resources represent rehearsals for more intractable global limits, and cannot possibly just mean that the Republic of So-and-So found better things to do than mining arsenic. Pretty much everything’s peaking, all at once. Very soon now we’ll all be scurrying like ants across an eight-thousand-mile celestial object that looks suspiciously like an apple core.


 

Oil’s not peaking. It’s jumping the shark

  1. Ahem, Colby. Supply & Demand meet at Price. Just because you can find some shrill moron to tell us that a particular item's price has "peaked" doesn't mean that, in fact, some of them have peaked.

    I would submit that anything available in abundance (nitrogen, if you can extract and purify it cheaply from air) whose price has risen substantially may just, indeed, have peaked.

  2. Well, at least there will be room for the intergalactic freeway, then. Haven't you read the signs? They've been posted on Pluto for lightyears.

    Sidebar: and I bet you were one of those kids who sang this one, too. [youtube GFIvXVMbII0http://www.youtube.com/watch?v=GFIvXVMbII0 youtube]

    • Oh, c'mon, LynnTO, 30 seconds of google and wikipedia would have provided the proper quote:

      <blockquote cite="http://en.wikiquote.org/wiki/The_Hitchhiker's_Guide_to_the_Galaxy">There's no point in acting surprised about it. All the planning charts and demolition orders have been on display at your local planning department in Alpha Centauri for 50 of your Earth years, so you've had plenty of time to lodge any formal complaint and it's far too late to start making a fuss about it now. … What do you mean you've never been to Alpha Centauri? Oh, for heaven's sake, mankind, it's only four light years away, you know. I'm sorry, but if you can't be bothered to take an interest in local affairs, that's your own lookout. Energise the demolition beams.

      • It's been well established on these boards that I am a square, and most certainly not "with it". So forgive me for even attempting to make some sort of reference that had a singular twist of what passes for originality.

        In the meantime, ID doesn't seem to be taking well to external sources at all these days, so I wouldn't take your citation's rendering poorly too seriously.

        • DON"T PANIC!!

  3. I think most Canadians want to know when we reach "peak beer pricing". Then we'll take it to the streets.

    • I love this one. "Peak beer pricing" will never happen as long as we have a government with one, and one only attribute…GREED. Liberal TAX-AND-SPEND and SPEND AND TAX. Both work equally as well for a liberal government. And now the HST… How to Scew us Tax. Seriously, folks, as much as I srtill remember Harris, we must get rid of this bunch just as soon as we can and that menas next election. We should be smart enough by now to remember only one rule… NEVER VOTE FOR TEH INCUMBENT!! and there go the gold-plated pensions. Some of the rest just might pick up a cue from this, too.

      • I'm trying to figure out whether you're trying to be funny or whether you're serious. How do you get from beer pricing to pensions?

  4. Of course, won't "peaking" peak too if it is over-exploited by ravenous journalists? Something must be done! Reduce "peaking" now! Cap and trade "peaking"!

  5. Not that this invalidates your larger point, but wrt helium, keep in mind that what's being discussed is "extractable" resources. Helium may make up 1/4 of the universe, but I think a bit of that helium is considered "unextractable" being, as it is, inside of stars, on distant planets and comets, etc…

    Also, with all of these resources (I presume, I admit I haven't read all 10 articles) the "peak" involves economics as well as overall supply. The argument is not so much "soon, there'll be no more gold", or even "soon there'll be less gold still in existence than all of the gold we've extracted". The argument is "at some point, the cost of extracting gold, versus the profit from extracting gold, will cross one another on the graph, making it no longer profitable to extract gold, and production will decline accordingly". There'll still be gold, it just won't be worth the effort of taking it out of the ground anymore, therefore extraction of gold will have peaked.

    • And the balance of power will finally shift to a cackling Russell Oliver.

  6. Hey, this gives me another opportunity to plug my Gaia Economic Pie Slice Traders Hypothesis (GEPSTH)
    http://tinyurl.com/yzdvpm3

    It was argued in an economics blog concerning finance, but it could be equally adept for explaining "peaking", Avatar, just about anything…

    Elementary, my dear Watson!

  7. All I can say is…Julian Simon has already addressed this argument, and even won money in a bet over it.

    • I trust this is meant ironically. You can't really believe that unlimited population growth is the solution to all our problems with sustainability.

    • "When something we need becomes scarce, the price goes up, then people find a way to either get more or do the same thing with different stuff, and then the price drops like a rock. Net effect: technology improves and some people get rich. That's about it."

      And this will go on forever and ever and ever…

    • I disagree with the "if there aren't as many people" part.

      Firstly, the number of people around is only loosely correlated with innovation. You most of the innovation in the world from the US, just 6% of the world's population. In the muslim world, there is next to nothing in terms of innovation. Not much innovation coming out of Bangladesh, either.

      Secondly, if population goes down, so does demand, and so does price, so supply does not need to increase anymore.

      Thirdly, if you really think an increasing population is better, then what is the perfect population? Certainly it's not possible to maintain exponential growth. Surely we cannot fit a trillion people on this earth comfortably. So where is the magic number? 500 billion? 50 billion?

      There is no optimal number of people. Whether population rises or falls is of no consequence, unless if falls to 0 or rises to a trillion, neither or which will happen. The only things that are really affected by population changes are models built upon flimsy assumptions that populations will always rise and fall at the same rate (eg the CPP, social security and medicare).

      • (1) Obviously culture and peace have a lot to do with it too, yes. However it's obvious that part of the US's success is due to the fact they accepted immigrants from all over the world. This gives them an edge in terms of available talent.

        (2) This is partly true and partly false. If population goes down a little bit then demand drops and so does supply, but if it goes down significantly then one loses economy of scale: things that made sense to mass produce before are no longer profitable in large quantities, so they become small-order items. Price per item skyrockets. And that's before taking into account the reduced manpower available to make product, maintain factories, and create new ways to streamline.

        (3) We're a long way from getting to the spatial capacity of the earth's land surface…I mean, a long way. Then there is a lot of space currently covered by water. Then there is added surface to be used by building multi-storey structures. Worrying about running out of space is a bit like worrying about the sun burning out. Yes, it's going to happen eventually, and one hopes people in that far-off era have a solution in mind, but it's so far off that it's not even worth thinking about at this point.

        Also, we won't maintain exponential growth. Disease and our own self-destructive tendencies will assure that. If anything, we're going to need every individual available.

        "There is no optimal number of people. "
        True. However, there is an optimal sign to the slope of the population curve: positive.

        • 1) No, I think numbers and immigration have little to do with it. I think freedom and an open marketplace have everything to do with it. People innovate when they have the resources to do so. I think we've been close in terms of innovation, but we're such a small percentage of world population I didn't mention us.

          2) well, I think you'd have to drop down to a very small world population before populations of scale are no longer in play. There was mass production of goods in the late 1800s and early 1900s when world population was less than a billion.

          3) I agree that we're a long way from reaching a limit. However, if you're willing to say that growth is always a good thing, then there must be a point at which that reaches a limit and it's no longer a good thing. Where is that limit? Frankly, I think that limit simply does not exist, because I don't consider growth in and of itself to be a good thing.

          I disagree that population growth is optimal when positive. I don't think there is any optimal growth. There's lots of populations around that do just fine with stable population, in fact many regions of Canada are not growing in population, only the big cities are growing, thanks to immigration.

          • (1) Canada has the same resources and pretty much the same freedom / open marketplace as the US. Yet our innovation is smaller. Perhaps bigger per capita (questionable) but smaller overall. Why? Because we're only 10% their size in terms of population.

            (2) There was mass production, but it wasn't nearly as cheap. Example: wooden book shelves. Every family can now afford a set even though wood itself is more scarce, whereas 100 years ago they were a luxury reserved for the rich and treasured by those who inherited them. This is partly due to technology (also driven by increasing volumes that companies wanted to produce) and partly due to the larger customer base which makes for great economies of scale.

            (3) The limit occurs when we run out of space. Given that I expect this to be in several thousand years minimum (and unlikely – we're going to get decimated by an epidemic, a nuclear exchange, or Malthusian ideology first), I also expect that we'll be advanced to the point where I can't even imagine what our options will be (but I'm sure there will be some). So as far as I'm concerned there is no limit.

            Canada's current situation is not a good one – that's actually why the government is desperately trying to attract large numbers of immigrants. We are barely maintaining population growth at the moment. As soon as it goes negative there is going to be a major economic contraction.

            The housing market, for example, is based on the premise that land value increases over time. This relies on the premise that population is always increasing. As soon as that premise fails, long-term real estate investment becomes a losing venture. All the stuff about economies of scale aside, this alone would be enough to take down the economy. We can sustain a large abrupt population hit, but not long-term population decline.

          • (1) sorry, but I completely disagree. The main reasons Canada lags in innovation are (a) Americans individuals and companies are richer and spend more on R and D and (b) we have an economy that is highly intensive in resource industries, namely oil, lumber, and mining. Those industries have innovation but nothing in comparison to tech or medical industries.

            The reason the government needs immigrants is because all of our social programs depend on an increasing population, much like a ponzi scheme requires new joiners. But there is nothing inherently good about that, we should have programs that can stand the test of time and different circumstances, not ponzi schemes.

            No, the housing market does not base itself on that premise. In fact, house prices over time have been relatively table, it's not til the 2000s that they went completely haywire. And there is no growth in population that could have supported the insanity of the US housing market, when small boxes in San Diego cost a million dollars and tree houses in Arizona cost 2 million.

          • Its the resources that attracted the innovative immigrants to the US. All other things being equal, we have the same capacity per capita to produce those riches as the US does but not the same amount of population, so not the same total amount of resources and not the same total amount of demand for the innovation. In this case, higher population wins.

          • Well, I think I'll just claim to disagree with your assessment and Gaunilon's, I've laid out my reasons for the differences above.

    • What a deluded moron

      • I only speak on behalf of the fool, you know. You can't expect too much.

    • I was going to make this exact post!

      • uh, which? The one I posted about Julian Simon, or the one LMK posted about what a deluded moron that Gaunilon guy is?

    • So basically, even though oil takes millions of years to "ferment" and we are using more and more everyday, we shouldn't worry about running ou of it because there are people around?
      Talk about missing the point!

      • You know, back in Roman times there was actually considerable concern that wood, as a finite resource, would eventually run out and so its use had to be restricted. So they restricted it, thus delaying the discovery of coal for centuries.

        You'd be surprised what people will come up with when there's serious profit to be made. You'd also be surprised how easy it is to mistake the fads of your own era for eternal truths. Studying history helps to combat that.

      • Oliver, alternatives only make sense when the existing situation no longer does. For all its faults, Fossil Fuels are STILL the winner. Ontario squandering its wealth on solar energy to the detriment of hydro and coal is not what will make solar (or whatever) the winner. Ever more scarce oil and coal and gas will.

        Humans adapt. Always have.

  8. argh. stupid html. why the heck can't i cite the damn thing?

  9. Peak oil (and other fossil fuels) is possible because it cannot be captured and reprocessed after burning. Potash and a few other minerals would also fall into the same category. But, so far, the peakers have been wrong because new deposits are found, existing supplies are used more efficiently, improved extraction technology and substution/mixing of expensive material with cheaper material. The thawing polar region alone will allow a provide a huge new territory to be pillaged.

    The peak metal theory, OTOH, glosses over the fact that the metal is purified not burned, so it can be recycled. All those old computers and useless windtowers can be reprocessed into useful products.

    Personally, I’d like to see peak government but that willl never happen either.

  10. We've now reached the limit of political and philosophical discourse. There are no more original topics (at least not ones that can be extracted without inordinate cost). We'll just have to continue to crticize others, I guess.

  11. I don't get it: are you suggesting that oil extraction will increase monotonically on into the future? If nothing else, the earth will be consumed by the Sun when peak hydrogen happens and it turns into a red dwarf in another ten or so billion years.

    So, really the only thing we might disagree on is that oil production will peak soon, or that its effects might be dire. I suspect peak oil production won't be much higher than we are at today. The downtrend might be a few years yet in the future.

    I don't expect it to be catastrophic. Oil prices will rise to the substitution point of renewables, with the odd spike. People will stop, or at least slow, wasting energy like drunken sailors. Higher energy prices will cause some changes in business models. I thinka agriculture might change more than most industries.

  12. You guys feeling peakish? Just think of the sorry story of Thomas Malthus and you will feel better.

  13. Entertaining post Colby. Who knew there was peak nitrogen? Tell them to someone with the bends.

    According to the crazy link, peak nitrogen is caused by peak methane! I thought methane was the chief cause of global warming next to CO2? What about CO2, where's the peak for that? Oh yeah, the crazies have exempted that one because of another crazy idea floating around.

    • Tell that to the people of the island nation of Nauru who are a tad worried about peak water.

      • Tell them it's all OK, there's been no warming for 15 years, nor has there been any rise in sea level.

        • And their phosphorus is still there, they just need to look harder?

    • Don't worry, there's lots more fossil fuels to burn. If we wanted, we could get atmospheric CO2 up to 2500 ppm with only a little effort and a few decades. Wouldn't that be fun? What we really need to do is thaw that permafrost, then we'll have more methane that we know what to do with.

      • You do realize that arctic ice cover is back to normal, do you not? Probably not.

  14. Very soon now we'll all be scurrying like ants across an eight-thousand-mile celestial object that looks suspiciously like an apple core.

    This made me chuckle.

  15. Welcome to LIMITS TO GROWTH. Pretty soon we'll have peak population, the true elephant in the room.

    • That's been done already. Bought the T-shirt. Peak population is nowhere near. The elephant is the size of a mouse.

      • Yup… Malthus, The Population Bomb, Chinese one child policy…

        • Hitchens wrote a good article recently about the impending catastrophe of the latter, which caused millions upon millions of infant girls to be aborted or killed.

          • A study from Oregon State University seems to think overpopulation might be a problem, maybe Greenpeace will start campaigning against families although I don't think it would work well with the public. http://blog.oregonlive.com/environment_impact/200

            Do you remember the name or where you read that Hitchens article, Hitch is always fun to read.

          • Thanks, Peter is also fun to read.

          • I had no idea there was a second Hitchens, I actually didn't notice it was not the more famous one. This one is a good writer too. It's very sad, that story.

    • There's about 5 billion too many people on the face of the Earth now. Not that I'm saying a man-made solution should be implemented. But I won't be surprised if the Earth itself comes up with a way to rid itself of the Cancer of Human-kind, or at least the vast majority of it. It can Start by ridding itself of the Tumours that are the Big-Cities.

      • Big cities concentrate us parasites off of arable land. You got a better idea? Besides, you know, offing 5,000,000,000 of us.

        • A good start would be to make then Environmentally Friendly.
          Things like, eliminating the Smog, running the sewage through Bio-mass reactors, compost and recycle garbage. Go back to making products that last longer, like they use to.
          And before you all jump all over me about the falsehood of 'Global warming' and 'Climate Change', isn't polluting our world less a good idea?

  16. How about Carbon? Has that peaked?

  17. Sure, plenty of oil left.
    Once we peak here on Earth, there’s all those hydrocarbons on the moon of Saturn – Titan.

    Just build a pipeline, and watch all those “Peak Oilers” look ridiculous.

  18. Peaking is what my friends used to call it when they would get a fit of uncontrollable giggles after smoking weed. Funny to watch. A likely trigger would be some extremely insightful comment like, "MAN these nachos are GOOD!!"

  19. It is encouraging to know Maclean's readership reflects its writing: immature and moronic.

    • Nice of you to join us ;-)

  20. Peak hyperlinks. Seriously.

  21. Or, as is almost certainly the case, the Wall St, gang of thugs and their enablers at the Fed needs a plausible explanation to explain the skyrocketing price of gold…other than the obvious truth. The truth being that ETF gold is just as bogus (for the exact same reasons) as the market is right now, and everybody wants PHYSICAL gold for the exact same reasons as they have throughout history. If you don't understand what I'm saying, do some reading.

    • I think the hoarding of gold by investors – most notably John Paulson – is rather unwise. Gold has historically been the basis for currencies, but other commodities have filled that role. Why not have a silver or bimetallic standard, for instance?

  22. Germany in the 1940's had no domestic oil supplies, and was largely reliant on oil from Romania (and basically had no oil when the allies realized that oil refineries make excellent targets for bombers). You can tyrannize Europe just fine with liquefied coal. Today we have other alternatives as well – nuclear, wind, solar, natural gas and bio-fuels. If the price of doing things with oil goes above the price of any of those alternatives, people will simply switch. The impact of "peak oil" is only as problematic as peak oil's alternatives – which are hardly cataclysmic.

  23. Colby Cosh, do you actually get PAID for this tripe? What a gig!! Just build a ridiculous straw man argument based specious comparisons, link in some dubious websites and you're all done!

    I know this wrecks everyone's fun but I need to emphasize a couple of facts. In the 1950's, when Hubbert made his predictions that oil production would peak in the lower 48 states between 1965 and 1970, he was widely derided. But he was right. There are a number of problems with extending Hubbert's work to the world, including unreliable estimates, unexplored areas due to remoteness or political instability and the difficulty of finding oil under deep water and ice.

    Regardless, the science behind Hubberts Peak is sound. As an area is explored, the biggest fields tend to be found first and there comes a point (where roughly half the pool is drained) where production declines and nothing can change it. Unless somebody comes up with an amazing new energy source, we will run low on oil and gas. And we'll probably be not very well prepared. And idiotic commentary like thisdoesn't help.

    • The problem isn't so much with the logic – yes, oil will get progressively more expensive to find and buy, but rather it is with the apocalyptic conclusions that most peak oilers hold. There are existing alternatives to oil – biofuels, natural gas, electric cars and liquid coal are all existing technologies. If oil goes up in price too much, those alternatives will be preferable. As the price of oil rises in response to a smaller supply, there will also be a substantial premium in investing in more efficient biofuels and better/cheaper electric cars.

      Moreover, markets are not myopic. Today's oil prices already price in expectations of the future (made by people who are investing their own money, and who have every reason to do their homework when it comes to future oil supplies). Oil doesn't have to disappear today for prices to reach the levels needed to push individuals to switch to alternatives, and private companies to research alternatives. The mere possibility will (and has) drive oil prices up, and provide a considerable incentive for private industry to develop the best electric car, or a cheap source of biofuel.

      Governments are perhaps the only source of problems I can think of. For instance, governments may not upgrade the energy grid fast enough to accommodate electric cars. Governments only care about what will happen 3-5 years into the future, when they need to get re-elected. Even then, rolling blackouts will eventually push governments to do the right thing.

  24. I like how flippant people are, since they think that oil just makes cars go vroom vroom and don't realize that nearly everything around you is made from oil. Your furniture is made from oil, your rug is, your clothes are, the paint on the walls are, your keyboard is made from the stuff, pesticides are made from that stuff, as is soap, and all your plastics.

    Oh, and food production is highly dependent on oil.

    I live in a country where 99% of the population should have flunked high school science.

    • Oh no – without oil there will be no way to make furniture and soap! Surely we will devolve into a country of smelly naked people that have to read about chairs in history books, assuming there are still books.

      • Again, I'm surprised at how flippant people are.

        Well, they say ignorance is bliss, and I do see evidence of it every day. There is a reason the United States places a high degree of strategic interest in oil, this should be very obvious to you, but it isn't, so what I am left with in order to try to communicate with you the importance of depleting a resource which is the foundation of modernity?

        I want to give you just one example of common ignorance in this area. Do you know what oil shale is, and how in the 1970's when oil reached 30 dollars a barrel it would then be used as a oil resource? You know why it didn't happen and won't happen at any price? There's what's called a return on energy energy investment in mining for oil. It's usually expressed as a ratio – in a new oil field, for every 50 barrels you get out of it, 1 barrel of oil in terms of energy is used to get those 50 barrels of oil. In shale, it's 1:1 – it takes 1 barrel's worth of energy to get 1 barrel out. So it's rarely mined. The $30 price figured is based on the cost of energy in the 1970s, well, that figure has gone up 3x,and when oil is $200 a barrel it will go up by 8x, and so on.

  25. I think the point Richard is making is that (if Peak Oil is indeed true) people aren't looking at the entire ramifications when they consider the theory. The costs of everything would rise dramatically. Our society heavily relies on oil.

    It may not be the end all be all, but there would certainly be consequences.

  26. Wait… I'm trying to see if oil is on the periodic table…

    So in response to how ridiculous the Globe and Mail was to homologate oil and gold extraction, you go on and homologate all elements on the periodic table. Who's the bigger fool now.

  27. Peak oil is the only thing that we should really be concerned about. All of society needs to know that, in the coming decade, oil shortages will become apparent and will change our lives and our economies permanently. Unfortunately, Western governments think and plan only as far ahead as the next election cycle and will continue to ignore this problem until it is far too late to do anything about it.

    Making flippant comments about peak everything does nothing to open dialogue and trivializes the impending problem of peak oil.

    For more information on peak oil, refer to the following website where eminent scientists weigh in on peak oil:
    http://www.peakoil.net/
    http://viableopposition.blogspot.com/

  28. Any discussion about oil prices over the next decade must include an attempt to quantify emerging economy demand as an important driver at the margin. Here is a simple thought experiment using Chinese demand to give some idea of the magnitude of the supply issues we face:
    -China moves from 3 bbls/person/year to the South Korean per capita consumption level of 17 bbls/person/year
    -Transition takes 30 years
    -No peak in global production

    In next 10 years we must find 44 million BOPD. If you superimpose peak production on top of this demand profile using the following parameters oil prices would increase approximately 250% in real terms over next 10 years:
    -Oil demand elasticity of -0.3
    -Current production 84 million BOPD, current price US$ 80
    -Peak production 100 million BOPD
    -Post peak decline rate of 3-4%

    If you want to try the model for yourself using your own assumptions it can be found at: http://www.petrocapita.com/index.php?option=com_content&...

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