You're right Stan. Engine efficiency doesn't matter. Just measure the fuel it uses. Inefficient engines will use more. Are you really saying that 10:1 oil really ends up as 3.5:1 after refining, transport and infrastructure. That says that of the 9 barrels remaining after pumping it out of the ground, 5.5 are consumed in refining it, transporting it and building/maintaining whatever infrastructure is needed. That would have applied even in the days of 100:1 meaning that 60 or so barrel of the 99 remaining would have been consumed by this process - leaving us at 40:1. That really bites as EROEI decreases. When you're at 100:1, you still end up at 40:1 after all of those steps, but at 10:1, you end up at 3.5:1, at 5:1, you end up 2:1, and at 3:1, you get to 1.2:1. By the time you get to 2.5 to 1, you're out of business because, refining/transport/infrastructure take you to 1:1. I don't think transport and refining use very much, so other infrastructure (and whatever is diverted from being burned into plastics, asphalt, etc.) must be most of it.
We mustn't forget bunker sea oil. It moves 90% of the worlds goods in this over globalized world and, at 1:1, it will be the fuel of choice until wind comes back into vogue. At that point, my patented battery operated battery charger should be ready and available to any government that finds itself prepared to hurl stones at one another. Preppers. . .Unite!
QB,
What really happens is that refining, transportation and infrastructure takes about 20% of each barrel produced. If you produce a barrel of oil from wells with a 100 to 1 yield to the point of well completion, you will still have about 80% of 0.99 barrels after refining and infrastructure deductions. That is 0.792 barrels, so 100 to 1 has dropped to 1/(1-.792) = 4.8. It's worse than you thought, but 10 to 1 is not horribly worse than 100 to 1. At 10 to 1, you have 0.72 of each barrel left after all deductions and an overall effective return of 1/(1-.72) = 3.6. At 3.5 to 1 at the wellhead, you would have 0.57 barrel left and the effective return after infrastructure deductions would drop to 2.3. You are right that it would really begin to bite as the wells become poorer, but in actual fact a field consisting of such wells would never be drilled. As I noted previously, about the poorest prospects currently being developed return better than 10 to 1 at the wellhead.
Stan
I never get these articles about the price of oil not being able to go high enough to sustain supply. People waste so much money on non-essentials. I'd bet the average person spends about 50% of his income on nonessentials like a new Iphone, movies, cable tv, extra/unnecessarily expensive vehicles, dining out, vacations, fashions, starbucks, drinking, gym memberships, etc,etc Oil is an essential. Modern society NEEDS oil to survive. Theres plenty of room for much higher prices. Given the choice between a new iphone and being able to get to work, what are most people going to choose? People arent going to pay the cable bill instead of buying enough fuel to get to the drug store to get their medications. Look at all the people on the road driving high end vehicles, or big SUV's, and etc. All of those people can afford MUCH higher gas prices. Check some stats of the number of vehicles on the rd in the past 10-20 years, its increasing exponentially as the populations increases. That means demand is rising.
There is so much superfluous spending going on, whole industries would have to completely collapse before we could legitimately say that society can not afford higher fuel prices. I think gas to $10 per gallon is completely doable. It doesnt mean that this is desirable, or GOOD for the economy. It means that we COULD pay that much or more if we absolutely had to, though most of us would probably have to make some lifestyle changes.
As long as Applebees, Starbucks, and Disneyland keep packing people in, I dont see a society incapable of supporting higher prices for necessities like oil.
Let's try again Stan with your new info and 10:1 oil. We'll ignore the 1 barrel needed to be input into the system and instead require 1 barrel be set aside to extract the next 10 barrels:
- 10 barrels at the well head.
- 2 consumed by refining and transporting and infrastructure - 8 remaining.
- invest 1 barrel to get the next 10 out - 7 remaining.
- That leaves us with 3 barrels invested to get 10 or 3.33 to 1.
At 3.5, I get 3.5 in, 0.7 lost to refining, 1 invested in the next 3.5, giving us 3.5/1.7=2.06:1 - still fairly close to your value.
There's also the issue of some grades taking more or less energy to refine than others. As well as varying transportation costs due to varying distances and available transport options.
What that says is that 100:1 was really 4.8 to 1 and 10:1 is actually 3.33:1, meaning that in the old days we had 3.8 units available for society with each unit invested in the oil industry and now we have 2.33, or about 58% of what we had. When we hit 3.5:1 (all tar sands, we'll have 1.06 units for society or about 28% or what we had. Maybe that is the perspective we need to have. I'm guessing though that the 20% refining/transport value is too low for tar sands. For example, at 25%, refining/transport, 3.5:1 is 3.5/1.875 = 1.87:1, at 30%, it is 3.5/2.05 = 1.7:1. Do you know the actual value?
It's also important to note that little issues like where to draw the boundary for energy invested is more important at low EROEI.
QB,
Your calculations are the more realistic. Mine differed essentially because I left it as optional whether or not one took a net barrel of oil and later used part of it to obtain another. It is more realistic to assume, as you did, that the game always continues; that on average, a certain fraction of each barrel produced will be spent in drilling another well.
People refer to a "fracking revolution" in oil and gas production, but the real revolution has been horizontal drilling technology. Fracking has been around since the '50s and was essential long before horizontal drilling began. Widespread horizontal drilling has only occurred in the U.S. so far and is less than two decades old, but it has made huge reserves available at 10 to 1 yields from shales and tight sands. This will eventually spread to the rest of the world and should postpone oil doomsday for a good while; hopefully a few decades.
As Brushhog noted above, we can surely tolerate much higher prices if necessary. We should eventually be able to reach a somewhat stable situation in which the price per barrel of oil allows drilling of 10:1 prospects to continue for a long time. Right now, contrary to Gail's assessment, I think that about $70 per barrel oil would permit about 3 to 1 return on dollars invested in 10 to 1 oil yield wells. That won't save the companies that were barely viable drilling for $100 oil and a lot of their wells will never pay out now, but many others would survive and both the oil supply and the economy would be just fine. Recall the years '79-'85 when oil was about $100 (2016 dollars) per barrel. After the oil shock recessions ended in '82 we had four years of high economic growth rates even before the oil price crash in late '85. The market was oversupplied with oil at $100 then, just as it has been more recently.
I went back today and reheard chapters 19 and 20 to remind myself of the basics. We are trying to update the status from where the Crash Course leaves off. I would love to see Chris and Adam do addendum updates as interstitial chapters, but that may not be possible. Either way, the big takeaways from these chapters is how little net energy we have left, especially if we deduct how much we use globally for food.
Third World nations that still use old agriculture will be much better off when the net oil squeeze happens. The article on Sun Drop Farms tomato greenhouses was hopeful since they use electricity and not oil to grow. That doesn't solve the problem, just shifts the energy sourcing slightly away from oil and buys a little time.
Anyway, chapters 19 and 20 were a good refresh.
My calculator works just as well as Stan's and Quercus' does, but I'm afraid we might be missing the point and are focusing too close to our navels. Price will be determined on availability. That means F.O.B my fuel tank. "Tar" sands is something I know about, from first hand experience, and it ain't about barrels in and barrels out. It's about BTU's in and BTU's out. The bottom of the barrel is # 6 bunker sea crud (oops, I mean crude). When everything is said and done to a barrel of oil, you are left with about 1.6 gallons of #6 out of a 42 gallon barrel. The "tar sands" are exactly that; glorified crud that needs to be thinned out with Natural gas condensate if you ever hope to move it anywhere. And, thanks to the engineers at Suncor and Syncrude, they're showing a return even at $20 a barrel
. Since Alberta has an abundance of natural gas, that is the "go to fuel" to process this thick shit if you want to be in the business. And, I won't even start talking about the fresh/brackish water requirements and the energy it uses in the process. I won't belabor the point, but have a gander at the following article for some clarification of the theoretical verses the practical. As the light stuff gets harder to find, you are left with "the bottom of the barrel", so enjoy the ride, no matter what the price. Fortunately for me, my kids and grandkids will be working on the solutions. Have another look at my #61 post and see if the cartoon addresses to situation
Pssst! Hey buddy, want to invest in energy??? Invest 1 unit and get 3 units in return.
Sounds too good to be true. Would you buy this deal from anyone selling it? If it were true, why would they be selling it to you or me? Assuming it is true, how much would you invest? Why wouldn't you borrow all you could right now to get a guaranteed monster return?
Perhaps it isn't true. Perhaps they are only looking at specific energy inputs and ignoring all the other costs. Can't these costs be exchanged for oil cost equivalents using the current price per unit of oil - currently about $50/barrel? After all, shouldn't labor hours and equipment rental costs that are required to extract the oil be included? What about access roads? What about land leases and governmental royalties/taxes/permits? What about the odds of drilling a dry well? Shouldn't all of those costs also be factored in the investment? If the investment is only based on ERoEI, what difference does it make whether the price is $2/per barrel or $200/per barrel?
Obviously, there is more involved than just ERoEI. The hucksters who are selling the story conveniently ignore all the other costs. So why do we continue to buy the story? Are we that addicted to narratives (and oil?)
Grover
You're on the right track here but I'll disagree with the part where Stan and yourself have taken a mostly fixed cost and made it a variable cost.
- 2 consumed by refining and transporting and infrastructure - 8 remaining.
This is a fixed cost, not a variable cost. Just because you pulled a 1:100 barrel out of the ground, or a 1:10 barrel, nothing at all changes in terms of how much energy is then required to move and refine it.
That part is fixed. A rail line takes X units of energy to build and maintain and a refinery takes Y units to operate.
So it's convenient, but inaccurate, to try and fix that amount of energy in proportion to the barrels coming out of the ground.
For the sake of simplicity, let's just say that having a rail transport line cots us a million barrels and building a refinery cost us a million barrels. Thus, the first 2 million barrels out of the ground are what was required to transport and have a refinery. Period. No more and no less. Whether we get a billion barrels out of the ground or just two million, is important, and it matters in other ways if those were low of high net energy barrels, but it doesn't change the costs of moving those barrels to a build refinery.
Those investments are fixed.
However, the actual refining costs us some energy and that is variable. Each barrel will 'cost' us the same amount to refine in terms of energy, but that amount is a very small proportion of each barrel. Nowhere near 20%
Under this sort of analysis the 100:1 barrels deliver a lot more energy to society than the 10:1 barrels because the fixed costs are, well, fixed. This is the nature of any fixed cost industrial investment. You pay greater the unit throughput the less the fixed costs 'costs' you per unit.
So the two variables you have to know about once the fixed costs are in play are (1) your profitability and (2) to your unit output.
That is (1) the net energy and (2) the number of barrels produced.
So a 100:1 field producing a billion barrels is a whole different beast from a 10:1 field producing 100 million barrels, assuming the fixed costs are the same.
In this story, the fixed costs are the myriad roads, bridges, pipelines, trucks, drill bits, experienced drill operators, and all the million other bits of software, hardware and human experience that have to be in place for oil to be produced.
I honestly think a super detailed study would be required to even have a vague grasp of that but we know that prior and existing levels of energy output from oil production have been and continue to be sufficient to pay this fixed cost.
I am almost 100% certain that the thermodynamic approach that's been linked to by the Hills Group is wrong. There's just no possible way that the collective oil industry is about to hit the 1:1 mark.
You might be able to convince me that the tar sands are perilously close, or this or that specific deepwater project, but Saudi Arabia is producing oil from 1000 foot deep wells that are up to 60 years old, (and still producing thousands of barrels per day each!). Those wells are clearly very, very far into the favorable net energy green zone and there's no possible way they will be shut down because some new wells are no longer as favorable.
That's, frankly, a silly idea.
And the shale plays are favorable as well. Not as favorable, but still worth doing. I am less clear if we'd be able to run the entire US culture and society on those alone, but we won't have to run that experiment until and unless global oil trades are compromised and shut down.
But even then my bet would be that after some adjustments, the bulk of society would continue to function reasonably well. Sure, a lot of things like casual driving long distances would cease, but life would go on.
So when people say "oil goes to a price people are unwilling to pay" I cringe a little because we'd pay a lot more for oil if that's what it cost because the work it performs is just amazing.
A more accurate and supportable statement would be "the global credit markets will buckle under a much higher oil price and would probably cease to expand which would then create a major financial accident as the debt markets can either expand or collapse."
So it's not even that 'the economy' cannot afford a higher oil price, it certainly can. No problem. What's at stake with a higher oil price, especially a sudden one, is a shock to the existing pile of debt and its continued expansion.
Now that will cause a host of problems and more than a few predicaments, but that has more to do with the fact that we've built a really crappy monetary system for ourselves and less to do with a sudden decrease in the thermodynamic output of oil.
Chris,
You are correct that refining does not impose a 20% cost per barrel, but it is also not a negligible cost. It averages about 12% for the mix of feed stocks, fuels and heating oils that presently account for most U.S. oil consumption. The rest of the 20% was just a rough estimate of the present level of fixed and infrastructure costs. The proportions of fixed and variable costs would be very different if we were considering oil from tar sands.
I agree with you completely where you wrote "I honestly think a super detailed study would be required to even have a vague grasp of that but we know that prior and existing levels of energy output from oil production have been and continue to be sufficient to pay this fixed cost." That detailed analysis is a continuing process that has largely been reduced to economics. As long as producers can earn sufficient return on their investments, they will continue to drill and produce. Refiners and transporters will continue to provide finished products to purchasers as long as they can do so profitably. And as long as purchasers obtain the required financial returns on their purchases they will continue to buy the refined end products.
But that is not the end of the story. The chain could be profitable from top to bottom, but would not be stable unless there was a reasonable balance between supply and demand. The short term balance was cratered in 2014 by shale oil production, but it should soon recover at a price the public will happily pay - unless destabilized again by a major reduction of supply due to some event such as war in the middle east. The long term balance will eventually be disrupted when it is apparent that 3 to 1 dollar returns on drilling will not produce enough oil supply. Drilling will remain profitable, but the credit markets will probably buckle under the Red Queen effect when most of the old 100 to 1 oil is gone.
Stan
Chris said,
A more accurate and supportable statement would be "the global credit markets will buckle under a much higher oil price and would probably cease to expand which would then create a major financial accident as the debt markets can either expand or collapse."This is very insightful.. This holistic understanding of how the parts of the machine, the feedback loops so to speak, work in concert. Really interesting perspective on our oil/energy predicament vs. our money predicament.So it's not even that 'the economy' cannot afford a higher oil price, it certainly can. No problem. What's at stake with a higher oil price, especially a sudden one, is a shock to the existing pile of debt and its continued expansion.
Now that will cause a host of problems and more than a few predicaments, but that has more to do with the fact that we've built a really crappy monetary system for ourselves and less to do with a sudden decrease in the thermodynamic output of oil.
The fact is, we can't handle contraction because our money system can't handle contraction - no other reason really. The money system wags the dog here… serious re-invention is needed.
My own thought experiments have led to this possible patch:
1) Get rid of central banks
2) Allow for markets to price, "money"
3) When a loan is made, in order that the system does not become dynamically imbalanced as a result of the need to pay interest on top of the principle… create the principle at the same time but put it into a pool of money that will be distributed as some form of helicopter money in equal amounts to ALL families, all people dependent on the system… this way;
a. the money exists in the system to pay all liabilities, principle + interest. Deflation won't go away but it won't be as much of a problem either.
b. Inflationary tendencies if they exist tend to benefit regular people - seigniorage democratized.
Our economy is struggling to expand because the production of oil is flat. One of the costs of doing business that has been reduced is the cost of money. This 4-5% cut at most over the last 20 years. If the interest rate is raised in the face of flat oil production then the added cost of doing business would have to be balanced with cuts in other areas. I don't think this would come from added efficiencies since most of those require more complexity which in turn requires more energy to support it.
I agree with Jim H that we should let the market price money, but I wonder if it would change much at all. The big issue as I see it is the reverse leverage pressure on the banks as the economy shrinks and the foundation of our money supply shrinks with it. Any printing at that point is more money thrown at less. That is inflation.
OK Chris and Stan,
I'm trying to answer the question "What is the final net benefit to society (in barrels delivered to the non-energy sector of the economy vs barrels used by the energy sector) now? What was it when oil at the wellhead was 100:1? What is is likely to be in the next 10-20 years?" A few questions that might get us closer to that answer.
- Stan says refining consumes about 12% now. How much does it consume when the input is tar sands upgraded with NGL? How much did it consume of the old 100:1 oil?
- What is the relative ratio of infrastructure construction and maintenance costs (in terms of energy) relative to total oil processed by that infrastructure over it's lifetime? Now? When oill was 100:1? in the future?
"What is the final net benefit to society (in barrels delivered to the non-energy sector of the economy vs barrels used by the energy sector) now?How important is it to you to drive to work in your Lexus everyday? This whole discussion is pretty much revolving around transportation and until we stop moving an average 150 lbs. of flesh in a 2000+ lbs. machine on miles of asphalt, the answer becomes insignificant.The US and their western allies are in the middle east because that's where the light crude is. The rich will continue to exercise their advantage in this regard to the detriment of others until everyone is forced to use their feet.
Your question entails just too many variables to adequately answer such an amorphous question.The question I would ask is, "what is the best use of these resources for the benefit of all of mankind rather than for the convenience of a select few?" The PP website is founded on this premise and continued discussions on the details, while very enlightening, fail to do service to mankind in a practical way.
Now, having said that, if you want continue the quest in understanding, visit:
I agree that your's is a good question to ask too. For those of us who are forging a way to live when the oil is no longer available, it is one of the most important questions. Others will look to us when the time comes.
However, the majority of the privileged few will likely keep transporting their flesh on that asphalt until something stops them. That something is likely to be disruptive enough that we all want to know when it's coming. The answer to my question plays at least some role in determining when and perhaps how that disruption will occur.
Thanks for the link. I'll follow it when I have some time over the next few days.
Which opens up the next question…'who amongst us is able to determine what is "best for mankind"?' Over and over history has shown us that those who claim to know what is best for the 'collective', 'common good' have inevitably led their unfortunate people down the road of disaster.
As Hayek put it …'The curious task of economics is to demonstrate to men how little they know about what they imagine they can design'.
Interesting…thanks for sharing.
Reality sucks! If I could make up my own reality I sure as hell woul…wouldn't you?
Here’s that local event that I’m proud to have helped design, publicize and pack the house for with our terrific, all volunteer 350 team as a venue for the historic, but low key climate campaigner against fossil fuels, Bill McKibben. If you haven’t heard Bill speak – and I never had in person – have a listen. He's why the house was packed - a great guy - you can skip to 13m 15s to hear him speak (I guess vimeo doesn't embed, so you have to copy the link):
If you don't have them, or you just have a bunch of nay-sayers, then what in the world are you doing out there, who is on your team, where are you going? Oh right, I forgot, the Koch Bros. the great friends of the Libertarians, such great fossil fuel humanitarians, paying climate deniers in Washington to make sure everyone knows their product isn't really throwing the planet into upheaval! They've bought the "Don't bother me!" vote, always a winning disinterest group! - the everything will be great if the evil government just finally goes away crowd. It's 2016 my friends. Look around the world. Look at the packed populations, the mass cultures, teaming cities, the arms and explosives stacked high everywhere, nuclear material. Do you really believe it's going to be great if governments just go away or start getting heavily nationalistic? Do you think they will just go away? When I look around, where they disappear, strongmen and gangs with guns control the turf.
Bill McKibben is working hard to make sure Trump is never elected, and I'm with him, not Her, and not Chris on this one, though I'm with Chris on other things. But this one is important, and it has to do with how much you do or don't work with others who have similar goals and integrity, it seems to me. But for me, that's true all around, including friends of mine - including my own brother - that like Hillary too much, and didn't support Bernie. What are they thinking?!! I thought we were similar! Don't they see who she is? That's how it is these days, splits all around…And guess who it helps - the blood-suckers in the status quo.
My question for this thread is: Yes, and so...what's your action step? Okay, I know, the preps. Fine, I agree. But what about gov't? Are we pretty much assuming that things will just get quiet, and then life will creep slowly on in our various friendly frontier communities just like the days of the old west, except when the armed zombie starving terrorist populations have to be fended off every now and then? Sounds great! But I think I'll see what else might be possible.
I remember a story about a man who traveled to Europe and was impressed by cars that got many miles on a tank of gas. Returning to the US he wanted to modify his vehicle to increase its mileage per tank of gas, which he discovered IS possible. However, it's apparently illegal. A crime so heinous he could go to jail for after market modifications of a vehicles engine in order to significantly increase fuel efficiency.
Also, I saw on 60 minutes one time a Jay Leno interview and remember him driving an antique car powered by steam.
It seems to me we have partial solutions out there but obtaining the information and being allowed to implement them - well we are presented with roadblocks. Anyone know of a place to get open source info on building home-made steam engines or after market modifications. For off road post collapse use only of course.
AKGrannyWGrit