What will we do when the oil starts to run out?

[JohnT]

Originally posted by Sandman


Mnf. The first article claims that it's going to work because it's a private company this time - and now they're asking for government money. You'll forgive me if I remain sceptical.

Because two pieces, written by two people, one espressing his personal viewpoint, the other representing his company, differ in their opinion about a side-issue that isn't germaine to the subject matter at hand?

Shell's asking for a handout. You would too if given the opportunity - that's what you go to Congress and testify for.

[JohnT]

Originally posted by Odin


But it won't stop increasing as the supply slowly dwindles. decreasing supply plus increasing demand equals increasing prices. Can you afford $12/gal easily? What about $20/gal?

The point is, the supply isn't "slowly dwindling", Odin. Like all minerals, oil reserves are a strict function of price and technological capability - there's more oil available at $60/barrel than there is at $15. Even at prices of $20/barrel, there are over 1 trillion barrels of reserves, of which about 60% will be ultimately recoverable (again, given current technology). At $60/barrel, the reserve figures more than triple as oil from conventional (old Texas wells) and unconventional (North Sea, Alberta tar sands, Colorado shale) sources comes online.

[Odin]

Just because new sources will become profitable, that doesn't mean that TOTAL output of oil per year won't start to decrease.

[Dauphin]

If total output fell, it would mainly be because alternative fuels become comparatively cheaper. In such a case declining oil production would not be a major concern.

[Imran Siddiqui]

Originally posted by Odin
Just because new sources will become profitable, that doesn't mean that TOTAL output of oil per year won't start to decrease.

And what makes you think that "TOTAL output of oil per year" will start to decrease with all these alternative extraction methods picking up any slack of easy crude extraction methods? Because you want it to?

[Kuciwalker]

Originally posted by Sandman
The oil shale article is from two months ago. I'm desperate to know how this splendid technological marvel is proceeding.

OMG it's liek TWO MONTHS OLD!!1111

[Sandman]

Originally posted by JohnT
Because two pieces, written by two people, one espressing his personal viewpoint, the other representing his company, differ in their opinion about a side-issue that isn't germaine to the subject matter at hand?

Shell's asking for a handout. You would too if given the opportunity - that's what you go to Congress and testify for.

One has to wonder why they need government cash if it's such a guaranteed money-spinner.

[Imran Siddiqui]

Who said they need anything?

[KrazyHorse]

Originally posted by Odin
Just because new sources will become profitable, that doesn't mean that TOTAL output of oil per year won't start to decrease.

WTF.

[KrazyHorse]

Odin, people don't drill for oil if it will cost them more to extract than they can make from the sale.

The price of ****ing oil has everything to do with supply.

It's not quite a smooth curve, and it tends to lag price due to the volatility in the market, but increasing the price obviously increases the damn supply.

[Kuciwalker]

For that matter, the price of almost anything has everything to do with the supply.

[KrazyHorse]

Not everything. If we manage to stay on the carbon economy for another 100 years we might well find out that the oil supply will get relatively inelastic by then. And that could be trouble, given that the demand will also be inelastic in the short run...

[Kuciwalker]

Which is why I qualified my statement. In another 100 years I'll probably be dead though and/or we'll have fusion power or some equally wondrous technology.

[JohnT]

Originally posted by KrazyHorse
Odin, people don't drill for oil if it will cost them more to extract than they can make from the sale.

The price of ****ing oil has everything to do with supply.

It's not quite a smooth curve, and it tends to lag price due to the volatility in the market, but increasing the price obviously increases the damn supply.

Here's a really cheezed-up chart I threw together in about 3 minutes to kind of explain the idea.

First, a definition:

Proven Reserves: Proved reserves are those quantities of petroleum which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current economic conditions, operating methods, and government regulations. Proved reserves can be categorized as developed or undeveloped.*

Then the chart:



I flipped the y-axis so that it becomes visible as to what happens to supply as the price of a resource (not just oil - this applies to bauxite, silicon, iron, etc as well) rises.

Think of it this way... you have this huge pool of oil where, at a certain price, there is no incentive to pump it out - I put the level at $12 but it's likely lower (some Saudi wells have a cost-basis of $1.50/barrel). Essentially, at that price level, the amount of proven reserves is "0" as it is uneconomical for it to be pumped out - it is now worthless.

The next level, from $12-$22, I called the "OPEC zone" because that's the price where the OPEC states can happily export about as much oil as they damn well please w/o having to worry overmuch about too-rapid development elsewhere in the world. It's not as if there's no oil pumped in Texas at this point, but the demand for it is only that which can't be met by cheaper ME crude. There are about 800 billion - 1 trillion barrels of proven reserves in these countries - 261 billion in Saudi Arabia, 125 billion in Iran, 100 billion in Kuwait and Venzuela, etc. http://www.eia.doe.gov/emeu/international/reserves.html

The third level, from $20-$35 is where the non-ME conventional wells are beginning to be profitable enough so that serious exploration in these areas begins again - Texas, the North Sea, Mexico, Russia are all happy here. Business is good, so good that exploration jumps to a level unseen since the 1980's. There's another 1 trillion barrels in this range, though they aren't as concentrated as the ME fields are.

The fourth level, about $35, is where alternative methods of extraction come into play. Now the reserves don't jump up immediately - in order to spend billions on a process that is profitable at $35/barrel, you must be damned sure prices will always remain above $35 (which is why countries don't jump to increase their "proven" reserves at the slightest bump in price). But, as amply demonstrated in this thread and elsewhere at the net, once you break $40/barrel, so much oil is available at that price that it becomes unsustainable... and it collapses to a point where conventional (drill and pump) sources can support the worlds needs.

Hope that helps!

*That's the short definition, here's the long one:

Proved Reserves
Proved reserves are those quantities of petroleum which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current economic conditions, operating methods, and government regulations. Proved reserves can be categorized as developed or undeveloped.

If deterministic methods are used, the term reasonable certainty is intended to express a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate.

Establishment of current economic conditions should include relevant historical petroleum prices and associated costs and may involve an averaging period that is consistent with the purpose of the reserve estimate, appropriate contract obligations, corporate procedures, and government regulations involved in reporting these reserves.

In general, reserves are considered proved if the commercial producibility of the reservoir is supported by actual production or formation tests. In this context, the term proved refers to the actual quantities of petroleum reserves and not just the productivity of the well or reservoir. In certain cases, proved reserves may be assigned on the basis of well logs and/or core analysis that indicate the subject reservoir is hydrocarbon bearing and is analogous to reservoirs in the same area that are producing or have demonstrated the ability to produce on formation tests.

The area of the reservoir considered as proved includes (1) the area delineated by drilling and defined by fluid contacts, if any, and (2) the undrilled portions of the reservoir that can reasonably be judged as commercially productive on the basis of available geological and engineering data. In the absence of data on fluid contacts, the lowest known occurrence of hydrocarbons controls the proved limit unless otherwise indicated by definitive geological, engineering or performance data.

Reserves may be classified as proved if facilities to process and transport those reserves to market are operational at the time of the estimate or there is a reasonable expectation that such facilities will be installed. Reserves in undeveloped locations may be classified as proved undeveloped provided (1) the locations are direct offsets to wells that have indicated commercial production in the objective formation, (2) it is reasonably certain such locations are within the known proved productive limits of the objective formation, (3) the locations conform to existing well spacing regulations where applicable, and (4) it is reasonably certain the locations will be developed. Reserves from other locations are categorized as proved undeveloped only where interpretations of geological and engineering data from wells indicate with reasonable certainty that the objective formation is laterally continuous and contains commercially recoverable petroleum at locations beyond direct offsets.

Reserves which are to be produced through the application of established improved recovery methods are included in the proved classification when (1) successful testing by a pilot project or favorable response of an installed program in the same or an analogous reservoir with similar rock and fluid properties provides support for the analysis on which the project was based, and, (2) it is reasonably certain that the project will proceed. Reserves to be recovered by improved recovery methods that have yet to be established through commercially successful applications are included in the proved classification only (1) after a favorable production response from the subject reservoir from either (a) a representative pilot or (b) an installed program where the response provides support for the analysis on which the project is based and (2) it is reasonably certain the project will proceed.

[Jaakko]

So, how about the rather gargantuan oil consumption forecasts of the future, to the tune of needing one present day Saudi Arabia per 5-10 years to sate the world's appetite? I really can't see new technologies evolving quite that fast, so if the figures are accurate, there definitely needs to be a large political change coming up.