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Peak Oil: The Cause of Ultra-Deepwater Drilling June 11, 2010

Posted by Jamie Friedland in Climate Change, Offshore Drilling, Politics.
Tags: , , , , , , ,

As Americans now know, it is difficult, risky, and expensive to obtain oil from deepwater reserves.  So why are we drilling there?  The answer to that question is a simple, two-word phrase you will hear more and more: “peak oil.

Oil is a finite resource (hence the distinction with “renewable” energy sources) that takes millions of years to form.  While more oil will eventually form on this planet again, the current global supply is, for all intents and purposes, all we’ve got.

In 1949, American geophysicist Dr. M. King Hubbert made an alarming prediction: the U.S. will start to run out of oil in 1970.  His theory was not taken very seriously at the time, but his analysis proved to be quite accurate.  As a result, peak oil is also called “Hubbert’s peak.”

On a graph, oil production forms what are essentially bell curves.  For example, in an oil field, production starts off slowly as only the first rigs come online and begin to pump oil.  Production increases quickly as more rigs are added and more oil is pumped.  Production begins to decline as rig construction tapers off or most of the oil is pumped, and then production falls quickly towards zero as the reservoir empties.  Past a certain point, no amount of extra drilling can increase the extraction rate because there is no more oil.

Oil production for a given region forms a bell curve.

This general bell curve holds at any scale: if you add up the production curves of all the individual oil wells in an oil field, you get a bell curve for that field.  If you add up the production curves of all the oil fields in a country, you get another bell curve for that country.  And if you add up all the production curves for all the countries in the world, you get our global oil production curve – also roughly a bell curve.

Hubbert analyzed data from U.S. oil fields and projected that domestic production would peak in 1970.  He was correct.  There have been many oil discoveries since then, and new technology and drilling techniques have given us access to resources previously unaccessible (including many in the Gulf of Mexico), but Hubbert’s peak accounts for this.

The U.S. passed its production peak in about 1970 - just as Hubbert predicted.

Make no mistake, any politician who tells you we need to increase domestic drilling to wean America off foreign oil is misinformed or lying to you. As of 2008, the Energy Information Administration (EIA) reported that the U.S. imports 57% of its oil.  With our country well past its production peak, that import percentage can go nowhere but up.  The only way we can get off of foreign oil is to stop using oil altogether.  Which, as it turns out, we will have to do anyways, regardless of politics.

The longer we use oil, the more of it we will import. We simply do not have enough oil left to drill our way to energy independence.

Our planet, like our country, has an oil production peak.  While peaks are only visible in retrospect, there is concern that we are nearing or potentially even past global peak oil.  It is widely believed that OPEC has long been overstating its reserves and production capabilities.  But even if they aren’t, and we haven’t passed our global production peak yet, we will at some point in the not too distant future.

Oil consumption is steadily rising as a result of inexorable population growth and a constantly industrializing world.  Unless oil production can also continue to rise, it is only a matter of time before oil production cannot satisfy demand.  That has not happened.  And the ramifications for our oil-centric economy in a world in which oil demand vastly outstrips supply are disturbing – they are essentially doomsday scenarios for life as we know it (not because our standard of living cannot necessarily occur without oil, but because we would not be able to recover from an abrupt cessation of cheap oil if we have not already been working on suitable alternatives).

This deserves an entire post of its own, but I have to mention that oil as an energy source is used almost entirely for transportation fuel.  This is why mass transit and hybrid/electric vehicles are so important.  If we can power transportation with our electricity grid, we can eventually power transportation from renewable energy sources like wind, solar, and geothermal. But that transition will take time, and peak oil will not likely give us much.  Especially not if oil companies refuse to accept this reality and politicians refuse to acknowledge and act to prevent this threat.

Critics of peak oil point out that there is still a lot of oil underground, and they are correct.  However, the oil that is left is the most expensive and difficult to obtain.  Energy Return On Investment (EROI) is the ratio of how much energy is obtained from resource extraction compared to how much energy it took to get it, and EROI is a critical measure in this discussion.

There remain vast quantities of oil underground, but most of them are in places that are difficult to access or even beyond the reach of current technology.  A given oil field will provide a finite amount of energy and, at market prices, a certain amount of revenue to an oil company.  If it costs more money and energy to get that oil out of the ground, transported, and refined, than that oil will provide, then it is not worth drilling; such oil will never be extracted (unless prices rise drastically).

Think about the old gusher oil fields back at the turn of the last century, such as Spindletop in Texas.  All you had to do was pierce the reservoir and the oil flowed out under its own pressure.  The EROI from fields like this was well over 100 (and very profitable).

This kind of thing doesn't happen much anymore. Except underwater...

That doesn’t happen anymore.  Today, oil EROIs have fallen by an order of magnitude. Oil companies have long extracted the easiest-to-reach and most profitable oil reserves.  Those are gone.  What remains is the less lucrative oil.  Oil you have to actively pump out of the ground in harsh environmental conditions.  There is a gradient of extraction ease, which is largely correlated with profit potential:

Image Source: The Oil Drum

Once you move offshore, the investment (both financial and energy) is greater.  The deeper you go, the more money and energy that drilling costs.  As oil fields become depleted they lose pressure, so carbon dioxide must be injected into the ground to keep the oil flowing, and that takes more money and energy.  Aside from being terribly polluting, extracting oil from oily sand is very energy intensive; the EROI for projects like the Alberta Tar Sands is about 5.

Oil companies are drilling in ultra-deep water offshore because we are literally running out of oil. The one “bright side” of this is that as oil supply lags further and further behind demand, prices will rise (possibly into the realm of $500/barrel).  When prices go up, really hard to reach oil that was previously prohibitively expensive becomes economically feasible to recover.  But our modern world relies not just on oil, but cheap oil.  For everyday people (and small businesses), oil that expensive might as well not exist.

We may have passed global peak oil. But even if we haven't, moving off of oil should be a no-brainer.

Even if climate change didn’t present a compelling argument to move off of oil, and I cannot overemphasize how much it does, this is a transition that we will need to make anyways.  If we switch to a new fuel source before we run out of oil, we may able to make the transition without too much disruption.  But if we ignore this looming threat and try to make the transition off of oil at the last minute, a global crisis of unprecedented magnitude is a distinct possibility.  We are doing virtually nothing to avert this coming crisis.

Our ignorance is not so vast as our failure to use what we know.” -M. King Hubbert (1903-1989)

Have a nice day!

If you are interested in Peak Oil, I encourage you to look up author James Kunstler, energy expert Matthew Simmons, or check out the discussion and resources on TheOilDrum.

Full list of oil spill questions/answers here.



1. An Appropriately Politicized Oil Spill « The Political Climate - June 16, 2010

[…] Cheap oil fuels the American life as we know it today.  It is our ravenous consumption of petroleum products that drives oil companies to drill ultra-deepwater wells.   As we continue to deplete the world’s cheaper, more accessible oil reserves, more dangerous, expen…. […]

2. Scott - October 9, 2010

Hubbert of “Peak Oil” fame in his famous paper advocated nuclear power as a long term replacement for oil and coal. In fact, the actual title of the paper is “Nuclear Energy and the Fossil Fuels“. In this paper he predicted exponential growth in nuclear power production. In fact, his 1956 paper is as much an advocacy for nuclear power as it is an analysis of oil production projections.

This begs the question “If Hubbert was a prophet of doom regarding oil; why not a prophet of energy salvation regarding nuclear power?”

Put another way, Hubbert is lionized for a prediction that turned out to be correct so far regarding oil; while his prediction that was wrong concerning nuclear power is conveniently ignored.

Jamie Friedland - October 10, 2010

I did not know that and it is interesting. But I don’t think you have presented any information here that challenges peak oil. Peak oil theory posits that there is a finite amount of oil and that we are using it. Hubbert seems to have correctly modeled how we are consuming that finite resource.

You say he thought we would use more nuclear power, but we haven’t so far. Ok, so what? That prediction isn’t intrinsically linked to peak oil and its inaccuracy doesn’t cast doubt upon peak oil. It’s like if I said “based on weather observations, I predict it will rain tomorrow and everyone will bring umbrellas.” If it rained but everyone chose to wear ponchos instead, it would still be raining. I am not revering Hubbert as infallible, I am commenting that he seems to have gotten this one right.

I am going to take a look at the actual paper because I am a little confused about his nuclear prediction: nuclear, used for electricity generation, isn’t really an alternative to oil, which is used primarily for transportation (unless we electrify personal transportation as we are beginning to do now/the title of his paper mentions fossil fuels instead of just oil). I’ll have to see what the full argument he made is.

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