----- Original Message -----
From: Charles Whalen
To: Fran Sullivan-Fahs
Sent: Tuesday, December 02, 2008 7:05 PM
Subject: Re: what do you think, charles? from fran
Very complex subject. Peak Oil is not about running out of oil; it's
about
having reached maximum supply and production. There's a big difference.
Basically what Peak Oil does is that it puts a cap on GDP, where the
only
way GDP can grow any further is through efficiency gains. The practical
effect of this is that we will see repeated cycles of rolling recessions
(or
worse, depressions) and recoveries, but without a longer term trendline
of
growth. The longer term trendline will be flat. This is exactly what
we
are seeing. Global oil extraction and production peaked in 2005 and
has
fallen slightly since then. We are now on a very slightly decreasing
plateau and will likely not see larger declines in oil output for a few
years, possibly until 2012-15, when the declines will get steeper.
There
can be, and will be, lots of oil price volatility within this paradigm,
with
price basically determined by demand. What we now have is a
demand-destruction dynamic, where price will moderate demand and
vice-versa,
but where total supply is limited and capped by the global peak that is
now
clearly visible behind us in the rear-view mirror back in 2005. Peak
Oil
is
only visible in hindsight, and we've now got that hindsight to clearly
see
it.
There are mathematical models which explain the extreme price volatility
we
are seeing and will continue to see in the oil market. In the absence
of
any widely developed and available, competing substitute for oil and
with
the supply of oil constrained and limited to the peak we have already
seen
behind us and unable to expand any further, I see mathematical queueing
models as a good proxy and theoretical construct for explaining this
price
volatility. In a queueing model, you have a demand rate and a supply
rate,
just as in the case of the oil market. Mathematical queueing models do
not
directly incorporate price into them, but this can be done by proxy, as
the
length of the queue -- or equivalently, the waiting time in the queue
(which
is proportional to the length of the queue) -- can be thought of as a
proxy
for price, since price will likely be directly proportional to the
length
of
the queue (or equivalently, waiting time in the queue). This may be
somewhat counter-intuitive to those without mathematical training, at
least
on first thought, but the length of the queue (and waiting time in it),
and
hence, by proxy, the price of oil, takes off exponentially and
skyrockets
as
the demand rate approaches the limited, constrained, fixed supply rate.
In
fact, the length of the queue, and hence price of oil, actually goes to
infinity (in the mathematical model) as slack capacity completely
disappears
and the demand rate reaches 100% of supply, bumping up against the fixed
supply constraint. This can be seen mathematically, for the simplest
M/M/1
queue, with the formula:
L(t) = 1/[mu(t)-lambda(t)]
where
L(t) = length of the queue (as a proxy for price) at time t
lambda(t) = demand rate at time t
mu(t) = supply rate at time t
This mathematical model is a good proxy in explaining the
demand-destruction
dynamic in a supply-constrained environment, as we now have with the oil
market having reached maximum global ouput, and the resulting repeated
cycles of rolling recessions and recoveries that we are seeing and will
continue to see, with a flat longer-term GDP trendline, where demand
continues to bump up against this fixed ceiling at the height of each
recovery, causing the price of oil to skyrocket, which then results in
demand destruction, leading to another recession and then subsequent
recovery, and so on and so on.
As demand backs off of the fixed, constrained supply going into each
recession, the mathematical model explains and demonstrates how the
price
of
oil will drop precipitously with the more slack capacity that is freed
up
through demand destruction. Basically what will happen is that with
sufficient slack capacity (of supply over demand) in the global oil
market,
the price of oil will start to drop back down towards its cost of
extraction
and production, which is exactly what we are now seeing.
The only way we can get out of the vicious cycle of this paradigm
(explained
reasonably well by mathematical queueing models), which has stalled and
flatlined long-term economic growth, is to develop a widely available
competitive substitute for oil, which of course would be
electrically-powered transportation, i.e. EVs. That would remove the
constraint and ceiling on economic growth and allow the global economy
to
once again expand.
Charles
----- Original Message -----
From: Fran Sullivan-Fahs
To: Charles Whalen
Sent: Tuesday, December 02, 2008 10:50 AM
Subject: what do you think, charles? from fran
Peak oil hoax: Keeping the idea of EVs alive in the era of cheap gas
Posted by: "doug korthof" [EMAIL PROTECTED] live_oil_free
Sun Nov 30, 2008 7:45 am (PST)
What makes you think Peak Oil is a hoax? You think there's an
infinite amount of oil? You don't believe the decline in discovery &
production rates and increase in demand rates?
I wrote an article about this; while oil is not unlimited, per se,
there's much more of it than the peak oilers think or will admit.
Do you know that the original peak oiler was a Shell exec? Hubble
was writing about peak oil to promote Shell nukular power, and to
jack up the price and increase control of oil supplies.
It's not entirely a bad idea, because the peak oil myth gets people
to accept high oil prices; but it's pernicious if people think we're
going to run out of oil.
----------------------------------------
The Myths of Peak Oil and the "Energy Crisis"
"the problem is NOT that we are running out of oil; the problem is
that we are NOT going to run out of oil before we smother in the
debris of the oil economy...".
The American Petroleum Institute confidently expects to deliver oil
at the present rate of growth until the very last decades of the
21st Century. Newer technologies such as shale-oil extraction, and
revived older technologies, such as converting coal and natural gas
to oil are in ADDITION to this assurance.
The amount of oil in the Earth is finite, of course. Books such
as "The Party's Over" claim much more, that the upcoming end of
cheap energy from oil will necessarily cause global political
disruption, and that there's neither enough time nor enough other
resources to find a substitute.
This version of "Peak Oil" is the one that sells books, is a real
position held by widely read authors, and can be shown to be false.
Explication of the two meanings for "peak oil" remove the salability
of scare books. In one sense it's trivially true, and in the other
sense, it's just false.
1. Peak Oil in one unarguable sense means that it's the end of
easily-recoverable oil. When oil stops bubbling out of Arabia, it
must be pumped or pressure-extracted and separated. The price of
oil will rise correspondingly.
Oil prices of $50 per barrel may explode to $100 or even $500 or
more if oil must be extracted from "shale oil" or converted from
coal deposits. These numbers correspond to pump prices of $1.60,
$3.20, and $14.00 per gallon. Price inflation will eventually
increase the price of gasoline to these levels, as the dollar
degrades over the decades. Even a pump price of $14/gallon is still
a DISCOUNT from one estimate of the real, unsubsidized costs that
are not paid by the oil industry.
So in this sense, "Peak Oil" is trivially true; gas prices are going
to rise, maybe severely! No one doubted, back when bread was 30
cents a loaf, that some day it would be $3; it's just a matter of
time and market pressures.
The price of oil has little to do either with the cost of production
or scarcity. As the Saudi Oil Minister stated, there is no
shortage; they are able to supply ALL their customers. When the
reporter asked about lower prices, the Minister laughed. Big Oil
charges what they feel the market will bear; it's a managed market,
like diamonds.
Big Oil has been consolidating, from reducing the number of gas
stations and refineries to a smaller number of multi-nationals,
effectively allowing Standard Oil to reform itself and join with
OPEC to control the market. It's a monopoly in the sense that folks
who relied on cheap gas and purchased a gas-guzzler are helpless,
for now. They must purchase the fuel or do without driving. In a
sense, we are hooked on the drug of mobility, and have no
alternative. Mass transit was dismantled years ago, and we got
hooked on the freedom of the auto.
In a controlled market, there's a mathematical model for the price-
point where cash returns are maximized. Naturally, drivers react to
higher prices by either driving less or finding other means of
transportation. To the degree that they do so, Big Oil lowers the
price, but only in accordance with the model; there's no shortage,
as there is in a free market, all the customers get the "drug".
Are oil-fired cars "sustainable?" That is, could we run oil-fired
cars indefinitely? Amazingly, it's possible. Given enough power,
we can sequester carbon dioxide from the atmosphere, as plants do,
and accelerate its conversion into burnable Carbon compounds such as
oil. The cost of this oil might be perhaps $2000 per barrel, and we
would all be smothered by the debris of burning the rest of the oil,
but it is theoretically possible. So in this sense, unfortunately,
our oil addiction won't be solved by "peak oil." We have to decide
to get off the "drug" ourselves, nobody else is going to do it for
us.
In another sense, "Peak oil" is the idea that, in the immediate
future, we will run out of physical oil, and not have any. Why does
this matter? Well, it will mean our cars will sit idle, and our
economy collapse. Shopping centers, urban sprawl, and whole
populations will disappear; societies will fight and die over the
last few gallons of gasoline, the last few puffs of CNG, and the
last few pounds of coal.
In this sense, it's just false, as shown by the supplies of physical
oil examined above; moreover, as oil runs out, people adapt. When
trains disappeared, we were "trained" to use cars and busses; those
who depended on trains adapted.
The chief thing about this sense of "peak oil" that bothers me: it
ignores the infinite adaptability of humans. We are clever and
ingenious monkeys; we adapt, within limits. As things change,
commodities become scare, prices rise, and people learn to live with
the new situation. To run out of oil in this way assumes we would
have to fall off the cliff suddenly, from subsidized cheap oil to
scarcity with scarcely a break. The scary image is of suddenly
empty pumps, going from lots of cheap oil to none at all.
Things don't happen this way. It's ironic, to see videos like "the
end of suburbia", when so many people are working so hard to stop
big developments like Rancho Mission Viejo; sprawl is happening now,
and it's an insult to think that it's going away because soon there
won't be any gasoline. Peak oil won't stop sprawl, only difficult
battling and opposition even has a ghost of a chance.
Can there be an "Energy Crisis" without a crisis?
What happens with Peak Oil is illustrated by the claims of an Energy
Crisis. A mild, but sudden, jump in oil prices led to the sudden
popularity of Electric cars. Every automaker seems on the verge of
some day producing an Electric car. From Nissan to VW, Honda, and
even General Motors, which scarcely three years ago arrested would-
be buyers of their Electric car and crushed them all.
Dick Cheney said that we need "a new power plant a week for the next
twenty years," 1,000 new electric plants.
A study of the California grid on www.CAISO.org shows that the only
time we are anywhere near a shortage of electric power is summer
daytime peak periods. The rest of the time, we are shutting down
big generators as electric power goes begging. During off-peak
hours, extra electric is used to pump water up to Lake Castaic and
other reservoirs; the next day, the pumps turn into generators, and
the power helps meet peak demand. Electric generated by this "peak
shaving" technique is still cheaper than firing up dirty "peaker"
units, despite the loss via pumping and generating.
Our current generating capacity of about 52,000 megaWatts is far in
excess of even our peak demand.
A simple calculation shows that we could generate all of this peak
power by rooftop solar panels, assuming every Californian lives
under an average of 1000 square feet of roof; this is realistic,
since the area available includes parking structures, apartment
houses, courtyards, etc. A thousand square feet per person assumes
2.5 residents of an average 2,500 square foot home. 1000 square
feet is 100 square meters of roof, times 200 Watts per square meter
yields an average system of 20,000 Watts or 20 kiloWatts (kW) per
person. If only half of the roof is useable due to shading or
skylights, that's an average system per person, just using rooftops,
of 10 kW. Multiply by 30,000,000 Californians and you get
300,000,000 kW of capacity, or 300,000 megaWatts, about 6 times our
existing generating potential.
So there's no "energy crisis" with respect to electric production.
We have more than enough electric capacity, and, if we used our
solar peak power generating capacity, we would be flooded with
excess electric power. There are equipment outages and storm
damage, of course, but if we installed battery backup solar systems,
we'd be immune to that, too.
What, then, do they mean by an Energy Crisis? Let's look at oil.
Could that be what talk about an Energy Crisis is all about? First,
people don't want to get off oil.
If you claim there's an oil shortage, I'd have to ask where's the
shortage. What this boils down to is that we don't like the high
price of oil.
If we really wanted to get off of oil, and still retain our
mobility, and assuming oil prices remained high and manufacturers
resumed production of all-electric EVs and started making plug-in
hybrids, we can reduce oil far below current US demand of 20 million
barrels per day.
Even better, some of our driving could be done with excess electric
production, especially off-peak charging of plug-in cars.
The average car travels 1000 miles per month. A kilo-Watt-hour
(kWh) is a measure of electric energy or work. There's about 35 kWh
per gallon of gasoline. An Electric car such as the Toyota RAV4-EV,
a small SUV, gets about 4 miles per kWh of energy. So to travel
that 1000 miles only takes 250 kWh of electric energy per month.
The average home uses between 500 kWh and 1000 kWh per month. So
1000 miles of driving could be done on a small fraction of the
energy use of the home.
An average gas car gets 20 miles per gallon, so avoiding buying gas
for 1000 miles saves 50 gallons of gas. At $2/gallon, that saves
$100, not counting oil changes, tune ups, and so on. That's more
than enough to purchase a rooftop solar system large enough to
produce 300 kWh of energy per month. So in effect, if you could buy
a plug-in car, you could use the money you don't spend on gasoline
to help electrify America. And after it's paid for, you get to
drive for free.
Even better: your daytime peak electric production could charge your
car -- or you could "bank" the valuable peak power with the grid
when it needs it most, using the extra credit for that valuable
power to "pay for" off-peak charging of your plug-in car. Both the
daytime peak production and the nightly charging help level electric
usage and actually lower the cost of electric power.
Each plug-in car that doesn't use gasoline tends to lower the price
of gas for the remaining oil-fired cars. Those people who want to
buy a plug-in car, and power it with their own solar system, should
be allowed to do so; the only thing stopping them is a lack of plug-
in cars.
The RAV4-EV ceased production after Chevron bought control of its
Nickel Metal Hydride (NiMH) batteries from GM and sued Toyota,
extracting $30 million in "damages" and allowing Toyota only to make
small NiMH batteries, too small to power an Electric car or a plug-
in. That's why all car companies are forced to experiment with
Lithium batteries, which show promise, but may not last as long as
NiMH. Should an oil company dictate our Energy Policy? Why did GM
and Chevron collude to suppress plug-in cars, and why should they be
allowed to get away with it?
There's in the end no "peak oil" problem, and no "energy crisis".
There's a lack of leadership, a lack of will, a sickening failure to
address our Energy Policy, but that's a lack of mental energy in our
failure to force politicians to rein in Big Oil. Our corrupt
politicians are paralyzed by Big Oil's donations. Big Oil must
smirk when the pols scramble for pennies while they make off with
billions, distracting the gullible with talk of an "energy crisis."
All the talk of "solving the energy crisis" and of Electric cars
would vanish instantly if gasoline fell to $2/gallon. We'd go back
to sleep, and remain vulnerable to Big Oil any time they want to
yank our chain. So the real angst behind the Energy Crisis is the
desire for lower pump prices.
In practice, most of the remaining Electric cars are Toyota RAV4-EV,
and most are powered by energy credits from daytime rooftop solar
electric peak power production. The only thing stopping more people
from making this sensible choice is the failure to resume production
of the Electric car. If the auto companies were serious about it,
they would not defer production of Electric cars for years; Electric
cars, and plug-in hybrids, are not, as GM claims, "cutting edge"
ideas; they are twenty years old, are well proven, and you can see
examples in your own community of people living the "EV-PV"
lifestyle. It's not difficult to "go green" if they let you, it's
EASY, and it's even fun.
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