The Coming Oil Crisis

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The Coming Oil Crisis by Colin Campbell.

ISBN 0906522110 Review from Amazon: Contributed by W.J.George, Petroleum Economist, London

"If ever the precisely appropriate book turned up at exactly the opportune moment, this is it. During 1997, an academic debate of immense significance for the future of civilization began to surface in a remarkably diverse array of media. The debate concerns the question, is there enough crude oil left in the world to get us to 2010 without a historically unprecedented discontinuity. The whole character of society in the 20th Century, and of its history, economics and politics is more a product of oil than of any other factor.

Campbell's book is the most interdisciplinary and broadly informed book available on a wide range of these issues. He has about four decades of experience in every aspect of the oil business, from finding the stuff in the field, to analysis, management, finance and consulting. It simply drips with honesty, frankness, realism and wisdom. He penetrates the maze of conflicting information and disinformation, as well as imprecise and confusing definitions, noting that there are colossal vested interests with motives to distort and confuse: oil is money and money is power. Campbell does not pretend that he knows what will happen but gives us a range of plausible scenarios. These events will produce a major change in thinking and our perceptions of reality. Campbell notes linkages between all kinds of systems components: for example, the politics of the Middle East. The book is very well written. It is replete with tables, discussions of the principal personalities in this issue area, and organized tables of explanation of important concepts and terms. Was this a welcome breath of fresh air!"

Oil production from any oil well follows a characteristic curve with a peak in its middle. Oil production in the USA peaked decades ago. Aggregate oil production on the entire planet will peak within 20 years. Yet demand will keep rising steadily due to the industrialization of China and India. As a result, prices will skyrocket. The economies of any highly oil dependent country, especially the USA, will be utterly smashed.

A more interesting book would be a compilation of quick summaries and analyses of all the we're-gonna-run-out-of-oil books written in the last 50-80 years, complete with a summary table of predictions vs outcomes.

Don't see:

Known oil reserves in the ground are still going steadily up; i.e. we are finding new oil faster than we are using it up.

-- AndrewMcGuinness

This is an utter lie. Oil discoveries have peaked decades ago. And the oil industry / governments are pathological liars on the subject. For example, Iraq's "known oil reserves" have stayed at 100 bbl despite pumping out more than 40 billion barrels of oil and not finding anything new.

The actual test here is simply the movement in the price of oil over the long term.

Doesn't that assume the price of oil reflects the cost of production?

It also assumes that oil production is continuously increasing instead of having a Hubbert peak. And our current practice of speeding up production only makes the peak sharper and sooner.

Quoting Sheikh Ahmad Zaki Yamani: The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.

Capitalism in theory and practice

If producers are aware of the peak then price will still be a reliable measure (and really, the only good measure) of economic need.

Of course not, since American corporations don't plan beyond the next quarter, and American politicians don't plan beyond the next election. By the time TheComingOilCrisis gets on American people's radar screens, it will be far too late. This is because the American economy isn't just built on oil, but on cheap oil. So what price should the market assign to the last barrel of cheap oil? If oil production drops, leading to a rise in prices, and the only way to replace it is to invest massively in some new technology, it will cause massive economic upheaval and dislocation. IOW, depression, chaos, and trauma.

I'm really not sure what the big deal is. Every time, over the past 50 years, someone writes a book that says we're running out of oil, our proven reserves increase and the real price of oil goes down. That's not to say that oil will never run out, obviously untrue. But as we near the end, prices should increase over a significant period of time, gradually pushing up the economic incentive to shift away from oil. Look, people want to get to work, and people want stuff that businesses have to transport. As long as this huge demand exists, you can bet your ass that Toyota et al will figure this out and have vehicles to sell us that get us from place to place, with no government involvement necessary.

So where are those elusive "proven reserves" that keep magically increasing?

In fact, oil discoveries peaked in 1960. Ever since then, oil prospectors have been hunting for dregs. And we are rapidly approaching the point where it will cost 1 barrel of oil just to find 1 barrel of oil.

The "significant period of time" will be counted in years, and the "gradual" rise in oil prices ... represents a very naive understanding of markets. In the worst case scenario, world oil production has already peaked, and the transition to energy alternatives still hasn't begun! World oil production peaking around 2020 is only the very best case scenario.

Can you summarize the basic idea behind the dynamic that makes this possible (the one that says prices don't increase in the face of an expected shortage)? I.e., what part of my understanding of markets is naive?

Electricity utilities in the USA have ordered 180,000 MW of new powerplants to be fired by natural gas. Because, of course, natural gas is cheap. Apparently, none of them calculated the effect that hundreds of gas-fired plants would have on the price of a dwindling, and ever more expensive, supply of natural gas. But hey, that's just the invisible hand of the infallible market for you.

How is it possible for prices to stay low while a resource disappears, while a species goes extinct? Because people are idiots, that's why. Because people fail to "realize" that the resource is disappearing. Because there is always an oversupply of ignorant nay-sayers, usually economics undergrads, who poo-poo the idea of resource depletion.

The energy business is run on hard numbers, surveys of the ground, etc, and armies of people are employed to crunch economic numbers from all sorts of places. They are pretty impervious to disinformation from your "ignorant naysayer" StrawMan.

Which is exactly why stock market bubbles have never and will never exist. And it's why the energy companies in India buy American owned power at guaranteed high prices rather than use their own existing supply. Economic activity isn't the result of "hard data" and "need", but of fear, greed, and arm-twisting. There's as much difference between economics classes and realekonomik as there is between civics classes and realpolitik.

Why is it that 98% of the time, goods and services get to the people who want them given the right level of economic development?

Also I'm still waiting for a few names of the natural gas-based power producers that you say are unaware of the coming gas crisis. Like I said I'll get back to you with the statistics on short positions on those stocks.

(Digression: this is aside from IMHO good arguments that we shouldn't burn every last drop of oil in the ground for environmental reasons, and that governments do have a place in correcting externalities like pollution by making the price of oil products artificially higher).

Purported (many) and Real (few) Alternatives to Oil

We're going to be short of all kinds of power, not just that generated by oil. People who jump in saying hydrogen or fuel cells don't realize that these are for energy storage, not generation. They also don't realize the massive cost of converting the current gasoline distribution infrastructure to hydrogen or electricity. Nuclear plants can generate electricity for heating, cooking, lighting, etc, but can't cover cars. Modernizing the electrical grid would require 50-100 billion dollars of investment. Upgrading it so it can transport several times as much power, to cover automobiles, would be prohibitively expensive. And that's without accounting for the massive cost and inconvenience of batteries.


Even if you solved the distribution and storage problems, how would you generate the needed electricity? Nuclear plants remain expensive, though perhaps not prohibitively so, because of their complex health and security precautions. Does anyone imagine those requirements will decrease? Wind power has become cheap enough, if mass-produced - there is enough by the great lakes to power all of Ontario, and ought to be enough in Saskatchewan to power North America. But only Europe is heading in that direction.

Finally, even if all of these problems can be solved, they will never be solved either in a cheap or orderly manner. The massive expense and chaos associated with this transition is exactly what is meant by the term crisis. A crisis which, as we see, will hit North America first and foremost.


How about ethanol as fuel instead? There is already a significant ethanol industry in Brazil.

Many industries exist in Brazil that aren't viable in first world countries. For example, the industry of homeless people living in garbage dumps and recycling scraps for their subsistence. (Sorry, that's the clearest, most succinct example I can come up with.)

Ethanol is not viable in first-world nations because agriculture is mechanized, requiring heavy inputs of petroleum-derived fertilizers and diesel fuel. There is no energy gain in using ethanol; every erg of power is ultimately derived from petrol. Modern agriculture invests more fossil energy in fertilizer and machinery propulsion than is ultimately captured by photosynthesis. Without that investment, yields would drop considerably. To change this situation would require a massive revolution in North American agricultural practices, with a catastrophic impact for the economy.

Natural gas is another non-starter, despite its popularity with the ostrich crowd. Natural gas production in the USA peaked in 1973 and has stayed flat since then. And despite flat production, the cost of that production has constantly increased; every year, more wells have to be drilled than the year before just to match last year's production. And of course, natural gas can't be transported overseas without enormous cost.

Now let's consider coal. The USA is very likely to switch to that energy source, to its peril. It has been calculated that the US coal industry produces no net economic gain for the USA because the cost of caring for sick miners and victims of pollution outweighs the value of coal as an energy source.

So that leaves nuclear and wind power. Wind power can be cheap if it is mass-produced. In the current political climate, it is difficult to imagine the US industry or government investing massively in wind power. Quite probably, serious investment will not start for another decade or two. And nuclear power will always remain expensive because its health and security requirements make it complex. But since wind turbines are decentralized and nuclear power is inherently centralized, the USA (the most centralized federation on Earth) has naturally chosen the latter.

Solar power is also a bust. First, it takes as much energy to create a photovoltaic panel as the panel will generate throughout its entire life. [Where on earth did the author get this information? Correct my if I'm wrong, but this is pure b. s.] So photovoltaics aren't actually power generators but more like inconvenient storage modules.

Instead of using photovoltaic cells, sunlight can be focused to make steam that drives generators.

Second, radical new technology like the solar chimney would be much too advantageous for the blacks and arabs (dominant costs: labour, glass and concrete). As for how the USA will stop them, just look at how the USA stopped Iraq from 1) complaining about Turkey illegally diverting its waters to Israel, 2) switching to the Euro in its international petrol transactions, 3) being a power in OPEC, 4) not giving the USA its cut of Iraq's profits. And there's the entire spectrum of economic and political leverage. Look at how the IMF is crushing the Argentinian economy on the USA's behalf.

So you are predicting that the US will attack any nation that starts to use this cheap technology?

Undoubtedly. Can you really see the loony Christian far right "they've got WMDs", "Iraq is harbouring Al Qaeda", "Geneva convention doesn't apply in this case", "lets build a legal black hole in guantanamo bay" BS & power brokers that control your media and your government giving up their power without getting as dirty as it takes?

Will TheComingOilCrisis screw the USA vastly more than any other nation?

Sounds like real opportunities with real benefits, worth the cost of investment!

America is a place where Crisis is met as a challenge, where the opportunity side of crisis is embraced, where new paradigms are implemented and the dangerous side of crisis is also avoided. Those who are faced with crisis can do so with fear, gloom and doom, or with courage, adaptation, flexibility and promise. Americans tend to work toward solutions to challenges as the answer to crisis, and are not going to be the cringing, we can't help it, it's inevitable, things are falling apart, and there is nothing we can do about it. Americans prefer a SimpleMinded approach which can make TheComingOilCrisis the CrisisAvoided. It is the American Spirit and the American Way.

Yes, the USA could meet the coming oil crisis and come out the better for it. But it won't. Not unless some kind of socialist revolution kicks the plutocrats from power.

Europe has several competitive advantages over the USA. First, its energy generation is more localized, with more cogeneration (heating homes using waste heat from power plants). Second, its energy consumption is vastly less wasteful, with much less reliance on cars. Third, it has the political will to invest massively in necessary infrastructure, and embrace decentralized technology (wind turbines versus nuclear power). All these things mean that for Europe there will be vastly less chaos, expense, and sheer trauma than for the USA. Thus the severe "crisis" to the USA's dominance of the world.

One of the advantages Europe has had in the past and will lose in the future is the 50 year history of economic aid and military assistance provided by the USA.

And good riddance to it. Good riddance to the USA's military control of Europe. Good riddance also to the Third World's massive economic aid to the USA. Once the USA's hegemony over the world starts to go, it will go.

The USA will implode because it has been in a continuous economic recession / depression for decades. Because its economy and political systems are rotten to the core. Because its society has vastly greater religiosity, irrationality, psychopathy, and every other dysfunction than any first world nation. Because not only will the USA be losing its military / political / economic hegemony over the world, but it will be facing a massive economic challenge (the end of cheap oil) which it is singularly vulnerable to and unprepared for. And at about the same time, it will certainly lose its entertainment industry. And it just might have to deal with the loss of biotech intellectual property. So it won't just be reeling from one hammer blow, but three or four of them, simultaneously. Oh, and add to that the fact that the US military has just entered into an apocalyptic war they can never hope to win.

Religion is a dysfunction?

Ask any psychologist. Recent studies seem to indicate that religion is caused by insecurity and low trust in humankind. These are dysfunctions in our modern high-trust societies.

Several problems here:

-- BrucePennington

"Oil production in the USA peaked decades ago."

Even if this claim is true, it doesn't necessarily mean anything. The amount produced and the amount that could be produced are two different things. Production has been limited by increasing environmental regulations declaring some areas off-limits to exploration and drilling.

The current production rate is at maximum, there is no spare capacity anywhere on the planet. The production rate isn't limited by environmental regulations, but by the fact that we've exhausted all of the easily accessible large oil fields. So we have to go after smaller and smaller oil fields in ever more remote locations. This means that the cost of pumping out a barrel of oil, measured in barrels of oil, is constantly rising. In a few decades, it will cost 1 barrel of oil to find and pump out 1 barrel of oil. At that point, even a market price of infinity will not produce any oil. This is why geologists are right and economists are wrong.

OPEC regularly limits production in order to maintain or increase the market price of oil. Limited production = spare capacity.

The knee-jerk response whenever someone (like OPEC) points out that supplies are dwindling is to accuse Middle Eastern nations of anti-American price fixing.

So how do you explain it when an OPEC member state breaks with the rest of the cartel and raises production? According to you, there are no new reserves being discovered, and there is no spare production capacity? So where does the extra oil come from?

What cartel? OPEC hasn't been a power since the 70s. How is one supposed to "explain" things that don't exist?


This just in: OPEC will cut its production target by 3.5% beginning Nov. 1 amid fears of an oil glut in the fourth quarter. (Headline from Sept 24, 2003 edition of The Wall Street Journal) Some interesting phraseology there - "cut its production", "fears of an oil glut". How do you explain that?

Moved to HydrogenIsNotViable

For the record, it is possible that a combination of cheap wind energy, good design, and hydrogen fuel cells will save the USA's GreatCarEconomy. TheComingOilCrisis will not automatically usher in a CarFree world. It will merely result in tremendous expense, chaos and trauma from which a weak, vulnerable and unprepared economy like the USA's is likely to suffer greatly.

One might find searching for web pages with the keywords "thermo-depolymerization Appel Con Agra" to be of some interest. Changing World Technologies and Con Agra Corporation are jointly involved in synthetic gasoline production via a process they have labelled "thermo-depolymerization." The thermo-depolymerization process is not yet cost effective, but the claim of Changing World Technologies that they can produce usable gasoline seems interesting enough in its own right.

Japan tried something similar with bio products during the Second World War with very limited success, not having the coal resources that fueled Germany's more successful synthetic fuel plants. (An interesting search term is "Japan pine gasoline world war", and adding "Honda" brings up an interesting story about the origin of Honda Motors.)

Someone touched on this earlier but the discussion drifted away. I don't really understand is why its a problem either. As oil becomes progressively /prohibitively/ expensive, the economic incentives to finding practical alternatives become progressively compelling. Also, what constitutes a practical alternative can become less and less appealing as the situation gets more and more desperate. This means horrendous things like public transport, boring performance and the demise of the SUV. But it seems to me in all my flowering ignorance that some kind of plant could be engineered that could produce something like oil in a sufficiently cheap and efficient manner, that didn't require huge energy expenditure to harvest.

The reason why economic incentives don't matter is because it takes energy to make energy. This is completely unlike every other resource. One does not consume concrete in order to create concrete, nor does one consume steel to make steel (well, not in any significant amount anyways). And that's just one of the reasons why oil is special.

As for there being practical alternatives, the problem is that there aren't. For Europe and Asia, there are. Anything that produces electric power is perfectly acceptable to Europe and Asia. But for the USA it's a completely different question.

In the case of the USA, we're not talking about any generic source of energy. We're talking about a source of fuel for automobiles. And there aren't any. None whatsoever. Hydrogen is a myth and a deranged fantasy. As for using some kind of biomatter, that doesn't stack against the fact that one gallon of petrol represents 100 tons of plant matter. And you know that biodiesel they're making now? They're making it by cutting down rainforest and speeding up global warming. All so some fools can pat themselves on the back for being green and eco-friendly. The UK looked into banning it, but they found out it would violate free-trade agreements.

Finally, yes the best alternatives to petrol are mass transit and CarFree cities. The only problem there is that it would take between 30 and 50 years to do the switch over in the USA. 20 years if you've got the resources, which the USA doesn't have, and you're in a real hurry. And that's counting from when you start the switchover. The USA has at most 8 years from now. Tick tock tick tock. The clock is ticking and nobody cares. And why would they? The next election is at most 4 years from now, and the next financial report is only next quarter.

I disagree. Hydrogen is a viable replacement, and one of the better ones, in fact. You don't have the problem of highly toxic batteries that need regular replacement. The 1 gallon to 100 tons of plant matter is completely wrong as well. In fact, it is so obviously wrong as to be intellectually dishonest. In fact, the entire comment above is pretty much eco-nutcase ranting. Cutting down the rain forest to make biodiesel? Just what part of a rain forest do you think they make biodiesel with?

With the oil palms growing in the (poor, and getting poorer) soil where the rainforest used to be. This process is already in full swing in Malaysia. Or, in Brazil from the soya bean plants growing where the rainforest used to be. Try a quick google of some of these words.

Yup. That's the difference between people who think for themselves, and thus are capable of using google, and people who grovel for every thought in their head from the Wall Street Journal and New York Times. Hydrogen is a psychotic dream fantasy that has absolutely nothing to do with the real world. Does anyone seriously believe that the USA will build 1000 nuclear reactors and replace half of its rolling stock of cars to H-cars within 10 years? Hell, photovoltaic cells and wind turbines powering the world are a dream fantasy as well, but not so completely psychotic that the people who believe in them will have to be put to sleep after the harsh reality of the real world throws them into a catatonic state. And the 100 tons? That's how much ancient plant matter it took to make that gallon of petrol. You get the same figure in every result of "<unit> of petrol <something something> plant matter".

I thought those fevered rantings seemed familiar. Welcome back, Richard. I should have known that you would be an eco nut. I'll make a bet with you. In 8 years, I'm going to be putting gas in the tank of my sports car, and getting terrible gas milage, instead of telling you that I should have read the Wall Street Journal less. Of course, I did check my facts with Google before posting. Google didn't agree with you. It seems you can make the energy equivalent of a gallon of gasoline from enormously less plant material.

It doesn't really matter though, biodiesel is neither viable as a means to sustain the GreatCarEconomy nor eco-friendly. More like eco-hostile. Add in the expense of displacing arable land and degrading natural systems that provide extremely valuable services to humanity and you've got a killer solution. As in, kill you die. And yes, the economic value of nature has been computed and found to be extremely high. IIRC, higher than the nominal output of the entire world economy. Destroying rainforest is on par with setting oil wells on fire to roast marshmellows.

(I may be back for this and a couple other pages but I'm staying off of RecentChanges. So I'm not really back yet.)

nuclear power will always remain expensive because its health and security requirements make it complex

This is either a lie or a misconception. Nuclear power does produce electricity at around 3 cts/kWh or even less (see; currently only coal is cheaper, but not by much. The main cost is that of the power plant, nuclear fuel is very cheap compared to that, even if uranium prices rise. Sure, a nuke plant is complex, but 3000 wind mills aren't exactly simple, either. The security and health problems already figure into these numbers, though the regulations are completely blown out of proportion. (Some scrap metal is considered nuclear waste, even though it is not more radioactive than scrap metal from the non-nuclear industry. Coal plants spread(!) more radioactivity than nuke plants and nobody gives a shit. An estimated 30.000 people die every year from coal fumes, a feat that could also be achieved by blowing up two(!) nuke plants every year using many tons of high explosives.) There's fuel for tens of thousands of years, assuming the deployment of breeder reactors. Really, there are real world reasons for choosing nuclear power, not just a stupid conspiracy.

What's a deal killer is the fact that nuke plants are highly centralized technology, whereas windpower is fairly decentralized. We don't need this world to be controlled by the same sick rich fucks that are leading humanity to extinction any more than it already is.

I'd like to see a meaningful definition of "decentralized" and an argument why that is a good thing. If it means "everybody can produce his own electricity", then the only decentralized method is the diesel generator, unless you find a viable storage technology to make wind and solar work off-grid.

There's no evidence that pyroprocess is any cheaper than purex.

There is. It's far simpler, requires no large plant and produces far less byproducts. It's coupled to the IFR, which requires no precisely manufactured fuel, but the fuel rod is simply cast. This is cheaper.

...and even that is irrelevant. PUREX isn't expensive either, only more expensive than milling fresh uranium. Assume reprocessed fuel costs twice as much as fresh fuel, you still get electricity for no more than 4 cts/kWh, which is damn cheap.

''It seems my opening the 'peak oil' can of worms has stimulated some VERY intelligent discussion in this wiki. Good, keep it up. Tell us more about PUREX for instance.

I think things will not go to pot as fast as some are predicting, but it is not going to be pretty in my old age. I would suggest that a large city is not a place to be shackled to. Try a farming town in the country for a more survivable habitat. And start purchasing things relating to wind and solar now, while you have spare cash to do so, and can get them.'' -- KirkBailey 4.2.07

Consider the ant

Our present society which is governed by far to many self-seekers may have to undergo drastic changes when the natural course of self-indulgence has fully played out. Instead of trying to perpetuate consumption at high levels, a survivable society may have to "consider the ant" and a New Social Order to replace the "its all about me" tendencies which have become more evident each passing day.

See alternatives which will not depend on increasing, but rather will result in diminishing energy consumption:

The irony is that once the oil runs out, America will no longer have to finance the very terrorists that wish to destroy them. -- BrucePennington

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