2014.05.12 happy hydrocarbon hype

The last few notes here have generally been about how much people’s attention can be misdirected, and how much confusion can be generated, by all kinds of subtle deceptions, outright lying, and various kinds of pretense. This fits right in. This time, it’s about that kind of thing, specifically about confusion about our situation with oil.

If you happen to be somebody who has been reading my little notes here, and have read all the stuff I’ve been saying about our hydrocarbon problems over the last few years, you might skip this. For you, chances are probably good that I’m not going to present anything that’s news. This one is a rehash for people who have missed all that.

 

The cause for this is something that popped up on Facebook a few days ago from an online pal. What he had there was a copy and paste of a short article on a site that people would generally call an investment website. He didn’t put up a link to the page, and although I found the page (I actually keep an eye on that site now and then myself, although a lot there is questionable), I’m not going to point to it here, either. There’s a good reason for that.

What he posted there was the text of this page that he described as an “upbeat” narrative about our oil situation.

There’s a big problem here. Casually readers of that piece probably would call it “upbeat”, unfortunately, it’s a deep pile of bullshit. It’s a sales pitch, a piece of PR propaganda.

There is one way to regard it as upbeat, and that is in terms of what the real purpose of the thing is, to divert capital to the oil drilling rig business. If that is your business, then things might very well be regarded as a bit happy. The reason for this is not such a wonderful batch of news for everybody and everything else.

The central factor in all this involves tight oil deposits. This is what you find in the Bakken shale formation, which is mostly within the borders of North Dakota (hence the “oil boom” of ND we keep hearing about), and also the Eagle Ford area in Texas. [Important side note while I’m at it: people talk about the stuff casually calling it “shale oil”, which is a misnomer that can lead to serious confusion. If you look up the terminology, shale oil actually refers to what you get from processing kerogen, and that’s a much different matter.]

If you try to sort out why somebody would consider this saga as a great opportunity for investment in oil drilling equipment, you also find the problems.

Despite the impression people seem to often have, tight oil deposits like the Bakken are not some new discoveries. They’ve been known for some time. There are good reasons why we have only been hearing about them, and there has been so much activity related to them, in recent years.

Tight oil deposits are found locked in hard shale rock formations in somewhat scattered small pockets. Getting the crude oil out of the ground is a different endeavor than what we’ve generally known about drilling operations. It’s much more difficult and complex, which in turn means more expensive. This is where things get into the “new methods and technologies” hyped up so often; hydraulic fracturing (AKA fracking) to break up the rock and get little slurps of oil out, horizontal drilling techniques, multiple-bore drilling rigs, all that stuff.

In short, compared to oil well drilling of the past, into large vast deposits in easier porous geological formations, to get the same amounts of oil out of the ground, not only is the drilling and extraction work a lot more complicated (and expensive), you have do just do a lot more to get a given amount of oil out of the Earth.

This means much greater costs for a given quantity of oil. Part of why we’re seeing all this activity now, and all the talk about it, is that it’s only happening now, in recent years, as the price of crude oil has gotten so high. Without high oil prices, it’s a money losing proposition. That’s one reason the stuff has been sitting there ignored for decades, and now people are working this. The other big reason is that, to make a longer story short, that’s what’s left. The larger deposits, easier and cheaper to get out of the ground, have been seriously depleted.

[Since I’m writing this basically for people who have ignored all the loads of pages I’ve written before, with all the loads of pages I’ve linked to, I should point out that “depleted” or “depletion” are often misunderstood words, and that leads to a term that has been badly misunderstood by many people, largely because of, surprise, loads of misinformation, and people arguably deliberately confusing people about it. The term is “peak oil”, a handy term, until it was so badly confused, referring to the patterns found by geophysicist M.K. Hubbert decades ago, while working for Shell Oil, sometimes referred to as Hubbert’s curve. Many people have gotten the idea that “peak oil” means, basically, “the oil is almost gone”, which is completely wrong. That’s not what it means at all. It about diminishing returns, basically, and it does mean trouble.]

All this also involves another kind of cost, and diminishing returns of Energy Return on Energy Invested; i.e., how much energy you get out of the end product over the energy that went into the whole process (expressed as a ratio). From what I’ve already said, you can see that not only is the financial situation affected by what I’ve described, but the EROEI goes down too. Simply put, it takes more and more to get less and less back; diminishing returns.

The nature of tight oil also means that the wells deplete much faster than the norms of the past, given the geological circumstances. Which takes us right back to… a lot more drilling, in more complicated and expensive ways.

People have written loads of great informative pieces covering all this in much better form than this quick little skim, including David Hughes, in some depth, or many articles by Gail Tverberg in her ongoing blog, and Richard Heinberg, to name a few.

Basically, to keep this short, the recent hype about a “shale revolution” has a certain amount of basis of actual facts of reality scattered around its roots, grown into a tangled mass of confusion, and turned by wishful thinking, and for some people, a glimpse of a way to gather other people’s money, into serious mass delusions.

The whole subject is a large one, a complex subject of geological, technical, and economic matters, and most people are completely unaware of any of that, and their substitute for the complex reality is often some fluff piece somewhere selling them a shiny delusion of “Saudi America” and “the shale revolution”.

I’m not doing a comprehensive report on all this, right here and now. Just to sketch a bit…

One comment in that fluff PR piece was the assertion that soon, within a year or so, thanks to the “shale revolution” and tight oil, the United States would soon become the number one nation on Earth in daily oil extraction rates (AKA “oil production”), moving from its #3 position and surpassing the current #1 Russia and #2 Saudi Arabia. (That, incidentally, probably surprises a lot of people who didn’t know Russia was pumping out oil at a rate faster than any nation in the world, and probably assume that rank belongs to Saudi Arabia.)

Part of that was claiming that the US rate would rise to exceed the 1970-1971 peak, which would be necessary to move ahead of Saudi Arabia and Russia, passing the all time US peak of about 9.5 million barrels of crude per day. (Again, if you don’t understand Hubbert’s curve, for God’s sake, please do the reading and get your head around it. If you don’t, you simply cannot understand our oil situation, period.)

People looking at the recent US oil production figures can see that there has, in fact, been a pretty impressive looking upward spike in the oil production rate over the last few years. This, unfortunately, can really lead people astray if they have no other information and understanding of context, and sells the whole “shale revolution” and “oil boom” and “Saudi America” nonsense to people who only see that, with no frame of reference.

All of what I talked about earlier leads to what some people have taken to calling “the Red Queen syndrome” (referring to Alice in Wonderland), the idea being that it will take more and more drilling to keep oil flowing at the same rates.

Again, the nature of the tight oil deposits means wells that rapidly deplete. People who know what they’re actually talking about, are not trying to sell hype, and study this stuff are generally saying that the Bakken and Eagle Ford shale zones are very possibly going to reach their regional peaks and go into decline, within the next couple of years or so, as existing wells decline rapidly, and the “sweet spots” are becoming fewer and fewer, less and less there that has not been exploited.

[That requires another additional note. Beyond those areas, there is this unfortunate baseless belief among too many people that thanks to the miracle wonder of fracking, we can now just go anywhere and punch holes in the ground and extract previously unreachable oil. Wrong.]

The last I checked, the US daily crude oil extraction rate had gotten up to around 7.7 million barrels per day. The all time peak of 1970-1971 was about 9.5 million. Remember that the reality of Hubbert’s curve means that not only does the depletion of those rapidly peaking and declining tight oil wells factor into the total, but in the meantime, all the other “conventional” sources are draining.

Then, even if the US manages to reach that 9.5 million barrels per day level again, that’s nowhere near the amount the US blows through per day.

 

When my online friend posted the copy of that piece, he added his own comment: “I wonder if this means that solar, wind, and electric cars are pushed further down on the adoption time line”. Unfortunately, he raises a very good point.

The combination of wishful thinking, misinformation, manipulation, and full on delusion of the kind of stuff I’ve been talking about, including the snake oil sales spiel that prompted this, all the “Saudi America” and “shale revolution” nonsense, is certainly causing problems in terms of avoiding everything we need to be doing, things we needed to be working on seriously decades ago.

But even that gets into a subject of its own, which is that what we need to be doing is not all about the kinds of things my friend mentions there, the kind of thinking that says we’ll just substitute things, power everything with different energy sources, and carry on as usual. The necessity and practical reality is going to be a bit different.

Just that topic is a hard one with a lot of people. This, then, is another topic I’ve talked about countless times before, the tendency of bipolar splits, into simplistic opposing groups that are avoiding really addressing things reasonably. To repeat that, in simplified form, we’ve got the “drill baby drill” crowd believing that if only the wrong political people were out and the right political people were in, and this, or that, or the other condition, we would magically have endless infonite cheap supplies of finite resources, or the group who just assume and believe that under different conditions, we can just substitute different energy supplies (green, alternative, renewable, etc.) and swap them in, and carry on just the same, but different (and yes, that phrasing sounds absurd, but explaining is another essay I’m not repeating again right now).

It’s a much harder argument to get across that we are simply going to be dealing with necessity and rethinking and reworking a lot.

One really basic broad theme on the agenda will be having to rework the results of the trend of things in the US, more or less since the end of World War II, especially in the last sixty years or so, even more so in the last fifty years, of abandoning cities organized the way cities have been through human civilization, and generally ending up with something Steve Ludlum (writer of the Economic Undertow blog) managed to distill in short form a while back. He described the situation as “having everything 15 miles away from everything else”. That’s another topic of its own, and… yes, it’s been covered, ad nauseum, by me, by many people.

But who pays any attention?

That, dear reader, is the biggest problem of them all.

 

the petroleum primer

Shale Bubble

Hubbert peak theory

EROEI

America’s Feel-Good Oil Bonanza

The Real Oil Extraction Limit, and How It Affects the Downslope

Why America’s Shale Oil Boom Could End Sooner Than You Think

The Oil ‘Revolution’ Story Is Dead Wrong

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