Posts Tagged ‘oil forever’
Tuesday, November 17, 2009 | Written by Jim Beach
Posted under: Energy and Oil |
Tags: abiotic oil, hubbert's peak, oil forever, peak oil, scarcity myth |
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This lecture is entitled “The Scarcity Myth.” Today, we’re going to do Part Five, which is our final piece, discussing the thesis, “How we will never run out of oil.”
We’re on agenda item 9 today, which is “Proven Resources Are Undercounted.” Proven Resources is a phrase that has a definition, which is “oil deposits that there are current plans to extract.” In other words, if we know of oil, but have no plans to extract it at that time, if no oil company has announced that they are going to go drill and get that oil right now, that oil does not count as part of our proven reserves. This gives us billions and billions of barrels of oil that are not counted. Roger Bentley from the Association for the Study of Peak Oil and Gas said, “Proved reserves (43 years worth) have been very conservative (counted) indeed. They do not reflect the total oil that has been discovered, but only that small portion for which definite plans are in place for current access.” The SEC, the Securities Exchange Commission, which is part of the United States government, has very strict rules about what type of oil can be counted as part of your reserves. Of course, a company like Exxon is worth more the more reserves that they have. But the SEC does not allow you to count tar sand, polar oil, coastal oil, ANWR or deep-sea oil. Some of our best resources are not counted by the SEC, which severely limits how much proven reserves the U.S. has. Our proven reserves are vastly undercounted.
Remember, that Canada has three times as much oil as Saudi Arabia and none of that is counted! The United States has even more oil than Canada and of course it’s not counted, because most of it falls into the categories that are not counted, such as coastal oil and tar sands. The G7, the group of economic superpowers in the world, has pushed for greater transparency and has requested that the oil-producing super nations like Saudi Arabia be more open in their actual reserves. The Saudi response was very predictable; they said, “Western nations are not dealing with the oil producers as partners why should they have the advantage of knowing details of oil producers reserves data on reserves is information and information is power.” It makes sense that the Saudi’s would not want us to know how much oil they have. If we knew how much oil was really available, the price would fall dramatically.
Let’s look at undercounting of proven reserves on a country-by-country basis, Saudi first. One of the huge advantages that Saudi Arabia has is that oil only cost one or two dollars per barrel to produce. It’s almost like you could stick a straw in the ground and have oil come out. They have 80 known reservoirs with about 261 billion barrels, but that data is over 40 years old, which makes me wonder two things. Remember yesterday when we discussed how reserves are almost always undercounted at first? And secondly how the technological factor surely would allow us to find more oil than the 261 billion barrels that they quote? Currently Saudi Arabia is just using 11 of their 80 known reservoirs. Why would they use all of their reservoirs? The market would literally be flooded with oil and the price would plummet. In December of 2004, the Minister of Petroleum and Natural Resources announced that in fact that the 261 billion barrels was really 461 billion barrels! Even Saudi Arabia has been dramatically underestimating the amount of oil that they have. And the final kicker: there has been no exploration in Saudi Arabia for the last 35 years, because they don’t need to find any more oil. Why spend the money to find it when that would suppress the market price?
Other countries are also dramatically underestimating how much oil they have. Iran claims to have about 125 billion barrels, but outsiders believe that it is actually closer to 500 billion barrels. Iraq was thought to have 115 billion barrels in reserve and after the United States oil companies entered after the war that number was determined to be 467 billion barrels. The Gulf of Mexico was originally estimated to have around 6 billion barrels, and it’s already produced 13 billion barrels, and it’s still going. Yesterday we said that it may have as many as 1 trillion barrels of oil, but again they’ll were not counted because of the regulations of the United States government. Prudhoe Bay in Alaska originally was estimated at 9 billion barrels, but so far it’s produced over 15 billion barrels and is still going.
Tupi field in Brazil was originally estimated at 5 billion barrels (in 2007) and when drilling began they discovered that it really had closer to 30 billion barrels. The same is true in Italy where they underestimated by 400%, and the United States Geological Service estimated that in North and South Dakota there were 151 million barrels of oil. They changed their estimate to over 3 billion barrels of oil.
Agenda item number 10: proven reserves are uncounted. We just gave you a definition of what proven reserves are and obviously we’re not counting a lot of things. We’re not counting the 1.6 trillion barrels of Canadian oil shale. We’re not counting any of Venezuela’s heavy oil, because it falls outside of the definition the United States rules. Western states oil shale of several trillion dollar barrels is not being counted. Trillions of barrels that are not counted.
Agenda item number 11: oil is being priced in the depreciating commodity, the dollar. For every barrel of oil that you sell today you get less dollars than you did say 2001. As the dollar continues to weaken, the cost of oil goes up and it becomes more expensive, in dollars, to buy a barrel of oil. So when people say that the price of gas is going up, it is not because of Saudi Arabia, it is not because of the war in Iraq. The price of oil is going up is because President Bush and Pres. Obama, both Democrat and Republican, have let the dollar become so weak, which makes our gas more expensive. If you’re at the pump and you’re upset about the cost of gas, get mad at both political parties.
Finally, I want to sum up with a discussion of in whose interest it is to tell us the truth. This is agenda item number 12. Who has a reason to tell us how much oil that we have? If it were common knowledge that there were trillions of barrels of oil, we wouldn’t pay four dollars a gallon. Europeans wouldn’t pay seven dollars a gallon. The price would plummet. Governments also make a tremendous amount of their revenue based on taxing gasoline, and it is usually based on a percentage of the sales price. The governments of the world like it when the price of oil goes up, as they make more money. Pres. Obama has even announced that he hopes that the price of gasoline doubles. This is for environmental reasons, but is also for tax reasons.
Interestingly, OPEC doesn’t want the price to get too high, because if the price of oil gets too high, then the Western industrialist entrepreneurs are encouraged to start looking at other energy alternatives. So Saudi Arabia and OPEC will work very hard to keep oil somewhere within the $50 to $100 per barrel range. This brings up one of the most interesting points, that the oil industry’s biggest worry is over abundance, not scarcity. In the 1980s, oil prices plummeted. One of the reasons is because for the first time ever we instituted conservation programs. As I said at the very beginning of this, five days ago, I am an environmentalist. I’m in favor of conservation. I’m in favor of cars having high miles per gallon. Conservation makes oil prices plummet.
Our final vested player is the oil industry. Judging from their profits, it is clear they are doing well. There’s no incentive for them to do anything except to support high cost of gas. They also generally make a percentage of sales price, meaning high prices help them as well.
OPEC wants the price to be high. Governments want the price to be high. Oil companies want the price to be high. Everyone makes more profit because of the supposed looming shortage. It justifies high prices. High prices will only be paid if you think you’re going to run out of oil.
We have come along way in the last five days. The number one thing that I hope I’ve opened your eyes or is a possibility that we may never run out of gasoline. Clearly, we are playing games when it comes to counting the amount of gas that’s available, but more importantly I think it’s safe to say that my grandchildren’s grandchildren’s grandchildren’s grandchildren will have plenty of oil to run their cars and they heat their houses.
In about an other month, I’m going to have another lecture series, this one on global warming, which I’m sure will be just as controversial as this oil scarcity myth lecture series.
Have a great day.
Tags: abiotic oil, hubbert's peak, oil forever, peak oil, scarcity myth | Posted under Energy and Oil | No Comments
Wednesday, November 11, 2009 | Written by Jim Beach
Posted under: Energy and Oil |
Tags: oil forever, oil myth, oil scarcity, run out of oil |
1 Comment
Slides and Podcast at bottom….
Today, I want to do something a little bit different and instead of talking about entrepreneurship, I want to give you one of my most popular lectures. The Podcast has more detail than this write-up…..
This lecture is about oil and it’s called “The Scarcity Myth.” The thesis of the lecture is that we will never, in 1 billion years, run out of oil. I know that everyone off the top of their head thinks that this is a crazy idea, but I hope that I can convince you that, in fact, oil is a commodity that is as plentiful as air and something that is God-given for us to use. I will divide the lecture into two or three different days, because it’s quite long.
I want to talk a minute about the different things that I will be discussing in this lecture. Please see “the agenda” in the slides.
So let’s dig in, first with a little bit of background. I want to make it very clear that I am an environmentalist. I love the environment. I love going outdoors. I love waterfalls and fields of green grass and trees. I live in a place that has as many trees around it as possible, so I look out my window and see beautiful trees. I love the fall. I love snow skiing and I love being out in the wilderness. I consider myself an environmentalist, however, I also consider myself a realist. I believe in economic growth. I believe in having enough energy to survive and to have a good economic system in an expanding economy. So many assume that environmentalists are only the people who care, but many times they are in favor of stopping economic growth.
Some more background: a couple of statistics just to get these out on the table. Please see the slides or refer to the Podcast for more detail. Is it possible today that science is wrong when it talks about fossil fuels? Are we so arrogant to believe that just because we’re in the 21st century that we’ve gotten it right and it couldn’t be wrong?
Finally, the Department of Energy the Department was created by Jimmy Carter in 1977, with the goal being to lessen our dependence on foreign oil. Of course that hasn’t happened at all, and they now spend $24 billion a year with 16,000 employees and another hundred thousand employees on contract. Could anyone tell me what the Department of Energy does? It certainly has not been filled its goal of decreasing our dependence on foreign oil.
So let’s move now to our first point, reviewing the history of predictions for oil’s end. Please see the slides of listen to the Podcast to see all the prediction’s for Oil’s end. In short, we’ve been predicting that we were to run out of oil since the day we discovered it. Pay particular attention to a Shell employee named Hubbert. He came out with the idea that there is a bell curve of production and that we are very quickly approaching the peak of oil production. He proposed that we would start having decreasing oil production in the 1970s, and it was proven true for the United States. Since the 1970s, we have been producing less and less oil in the United States, but that raises the question, “Why are we making producing less oil in the United States?” Is it because we are running out of oil or is it because the environmentalists won’t let us drill anywhere and get the oil that we do have here in the United States. We will hear a lot about Hubbert and his famous peak theory later.
Colin Campbell wrote a book called “The Coming Oil Crisis” and in that book he predicts “war, starvation and economic recession, possibly even the extinction of Homo sapiens” – the human beings. All because we’re going to run out of oil. My question then is, as I wrap up point number one, is when do these people ever get held accountable? Do we ever go to the oil intelligencia and say guys “You’re just wrong. You predict that oil will run out, but you have no evidence.” I love the quote from Prof. Adelman of MIT who says “that just as the Stone Age did not end for a lack of stones, the oil age will not end because of the scarcity of oil.” My thesis is again that we will never run out of oil.
There is something called the life index which is the ratio of proven reserves to current production. Or at the current grade of use, how long will it take us to use up the amount of oil that we have. In 1948, that life index was 23 years. Today most geologists believe that the life index is 43 years, or that we have about 43 years of oil left. We’re going to look into that number and see if we really believe it.
How much energy do we have now? How much oil and other energy sources? First let’s look at oil in 1980 (see above). We had about 600 billion barrels of oil left in the world. Of course since 1980, we all been driving around, heating houses, using up tons of oil in our cars, using oil to produce all the plastics and paints and so if any of the environmentalist or the oil geologists are correct, we should have less than 600 billion barrels of oil today. In fact today, we have about 1.2 5 trillion barrels of oil left. In other words for the last 25 years we’ve been using oil at an incredible rate, but you know what, we have more oil today , double the amount, that we had in 1980. When was the last time an oil company told you that?
Every year, proven reserves of oil is increasing by about 3.75 to 4%. Every year we find 4% more oil. If you read the paper, you see it all the time. They just discovered a huge tract of oil off the coast of Brazil which may have as many as several trillion barrels. In the Gulf of Mexico, they now think there could be several trillion barrels of oil. Montana officials just announced that they’ve discovered huge tracts of oil. We are finding more oil all the time, but of course they don’t want you to know that because if you knew that they were finding oil all the time, would you pay four dollars a gallon?
Then the question then is how fast are we using it up? Every year we use about 2 to 3% more than we did in the preceding year, and 2 to 3% is less than 4%, which means the amount we have left over is increasing every year at 1 to 1.5%. We have more oil every year even though we are using more oil, and that’s just counting the liquefied form. We also have 6000 trillion cubic feet of natural gas and that amount has gone up 10% since 2004. I don’t even know what 6000 trillion is called, is that a bazillion? A zillion? They have buses that run on natural gas here in Atlanta, the Marta buses. Lots of them run on natural gas and we have 6000 trillion cubic feet of it, and we’re concerned about running out of energy!
The United States has 31 billion barrels of oil and 231,000,000,000,000 ft.³ of natural gas on federal lands, not in the entire United States, but just on federal owned land. In addition to that, the United States has about 15 billion barrels of oil and 60,000,000,000,000 ft.³ of gas offshore in areas that current government policies prevent us from exploring. And this is amazing! The United States has 86 billion barrels and 420,000,000,000,000 ft.³ of gas offshore that is currently under explored. In other words that is oil and gas that is we know is there but we’ve made no plans to go get it.
This brings up a really important point. We have 43 years of proven reserves. Proven reserves is a phrase with the definition. Words have definitions. Proven reserves is a phrase with a definition: if there is not an oil well drilled into the oil basin, it does not count as part of proven reserves. We have almost 100,000,000,000 barrels of oil not allowed by the rules of our government to be counted.
In the continental United States, we have, in addition to the figures I was just talking about, something called oil shale. Oil shale is basically dirty oil, oil that has earth mixed into it. Sometimes rock has to be taken out of it. Up in Canada right now T. Boone Pickens is doing a tremendous amount with oil shale. You go and dig up an entire acre of land to send it through a huge machine, extracting oil from it and then you put the dirt back into the hole. Some environmentalists hate this process because it is very, very destructive to the earth, but you know what nothing grows in oil shale. It’s too dirty for plants to actually exist there. Once you take the oil out and put the dirt back into the hole, you end up with usable land and environmentalist are upset! Colorado, Wyoming, and Utah have 800 billion barrels of oil shale, which is more than all of the oil in Saudi Arabia!! And we’re told that we could not be energy independent!! The United States could be energy independent if we wanted to. Also this oil can be profitable at about $25 a barrel. Right now we’re paying $60 or $70 a barrel.
ANWR is the Alaskan oil reserve, the big fields in Alaska that you hear about in the news all the time. ANWR has 10.4 billion barrel barrels of oil, or twice the amount of Texas, and is currently illegal for us to go get. The proposals ask for 2000 acres, which is less than the size of your average airport, 2000 acres of the 19,000,000 acre preserve will be used to drill for oil. And look at the revenue that would be created by drilling in ANWR. Billions of dollars for the government to spend and a trillion dollars that would not leave the US and support terrorism. This is true for all of Alaska. Billions of barrels of oil that we are not allowed to get.
To learn about the role of methane, coal and nuclear power, please refer to the Podcast.
That’s all for now. I will continue to build my case tomorrow. And listen to the Podcast, as it has more detail than this blog…
Tags: oil forever, oil myth, oil scarcity, run out of oil | Posted under Energy and Oil | 1 Comment
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