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U.S. Military Launches Alternate-Fuel Push

Yochi J. Dreazen, Wall Street Journal
Dependence on Oil Seen as Too Risky; B-1 Takes Test Flight

With fuel prices soaring, the U.S. military, the country’s largest single consumer of oil, is turning into an alternative-fuels pioneer.

… Just as important [as the growing cost of oil for the U.S. military, the military is increasingly concerned that its dependence on oil represents a strategic threat. U.S. forces in Iraq alone consume 40,000 barrels of oil a day trucked in from neighboring countries, and would be paralyzed without it. Energy-security advocates warn that terrorist attacks on oil refineries or tankers could cripple military operations around the world. “The endgame is to wean the dependence on foreign oil,” says Air Force Assistant Secretary William Anderson.

Some Pentagon officers have embraced planning around the “peak oil” theory, which holds that the world’s oil production is about to plateau due to shrinking resources and limited investment in many of the most oil-rich regions of the Middle East. Earlier this year, they brought Houston investment banker Matthew Simmons to the Pentagon for a presentation on peak oil; he warned that under the theory, “energy security becomes an oxymoron.” House Democrats have proposed creating a new Defense Department position to manage the military’s overall energy needs.

Alternative fuels are part of a broader — and not so long ago unlikely — conversion by the military to “green” initiatives.
(21 May 2008)

Hirsch on CNBC: Peak oil problem “as massive as one can possibly imagine”

CNBC via The Oil Drum
Robert Hirsch, author of Peaking of World Oil Production: Impacts, Mitigation, and Risk Management (a.k.a the Hirsch Report), appeared on CNBC this morning. He said flat out that new technologies and new drilling won’t solve the peak oil problem, and that we should expect $12-15/gallon gasoline followed by rationing.

Watch the video or read the transcript below the fold.

… HOST: … What do you say to those people? [peak oil skeptics]

HIRSCH: They’re incorrect, and the reason that they’re incorrect is that they don’t understand the magnitude of the problem and how long it’s going to take to bring substitute liquid fuels on and to introduce energy efficiency on a massive scale. That’s something that we analyzed and it takes decades. And the reason, simply, is that the magnitude of the problem is enormous.

[McTeer says we should drill more.]

HOST: Dr. Hirsch, what do you say to that–the idea that we should be drilling in places like ANWR and drilling offshore. Would that solve this problem of a plateau in oil production?

HIRSCH: There’s no single thing that’s going to solve this problem because it’s as massive as one can possibly imagine. And the prices that we’re paying at the pump today I think are going to be the good old days because others who watch this very closely forecast that we are going to be hitting $12 and $15 per gallon. And then, after that, when world oil production goes into decline, we’re going to talk about rationing. In other words, not only are we going to be paying high prices and have considerable economic problems, in addition to that, we’re not going to be able to get the fuel when we want it.
(20 May 2008)

Defying the experts

Roger Howard, International Herald Tribune
At a time of rapid price increases, our natural resources seem ever more precious and their future more uncertain. In particular, the arguments of advocates of “peak oil,” who assert that global oil production has now climaxed and will start to decline, appear increasingly plausible.

Fortunately, however, a coming centenary puts their claims into a timely and fitting perspective. Almost 100 years ago – on May 26, 1908 – British geologists, working in a remote Persian wilderness, first discovered oil in the Middle East.

Remarkable though it may now seem, almost all experts of the day felt that the Middle East was largely barren of oil.

… It is significant that regional oil was discovered in the Middle East by several men – including William Knox D’Arcy and Frank Holmes – who were notoriously dismissive of expert opinion and worked almost entirely on gut feeling.

The truth is that the future of oil, more than almost any other substance, defies prediction.

… But the fundamental, underlying cause for optimism is the rate at which technology and scientific skills are advancing, thereby allowing existing reserves to be kept on tap for longer than anyone ever predicted and for new sources to be discovered in places where, not long ago, they were considered unreachable.

Of course, such relative optimism is no excuse for complacency.

Roger Howard is the author, most recently, of “The Oil Hunters: Exploration and Espionage in the Middle East 1880-1939.”
(20 May 2008)
With the Iraq war, the idea of planning national policy on the basis of “gut feeling” has lost its appeal for many Americans. -BA

Three raging bulls as oil barrels higher

Shirley Won, Globe and Mail
Energy stock funds have been on a tear as the price of oil keeps soaring, and at least one fund manager is sinking more of his own cash into his portfolio because of his belief in the “peak oil” story.

Eric Sprott, portfolio manager and controlling shareholder of Sprott Asset Management Inc., invested some of the proceeds from the firm’s recent initial public offering into his Sprott Energy Fund last Friday.

… “We have been believers for a number of years … that we are in what we call the peak oil scenario, where the prices will rise essentially forever because the world needs more oil than it can possibly produce and, in fact, production will go lower,” Mr. Sprott said in an interview yesterday.

… Laura Lau, a portfolio manager at Sentry Select Capital Corp., also believes in the peak oil theory. “I do believe that production is diminishing, but I also believe that, with higher prices, there will be a supply response from non-conventional sources,” like oil sands and gas shale, she said.

Ms. Lau, who co-manages the Sentry Select Canadian Energy Growth Fund, sees crude oil reaching $200 a barrel, but “I would not say it would be sustainable.”

People will change their habits and drive smaller vehicles, while developing countries like China, which subsidize oil prices for their consumers, may not continue to do so, she said.
(21 May 2008)

The Sigmoid Fraud

Unlike Sigmund Freud, I don’t do psychology as a career but I do see something seriously disturbing about the fact that a majority of depletion analysts view the Logistic Function as something that contains some deep and significant meaning.

On the contrary, the Sigmoid curve –as the simplest manifestation of the Logistic– remains a cheap empirical relationship that describes a value that increases and then saturates below some constrained limit. It indeed does follow from the solution of a non-linear differential equation, but this equation describes the temporal dynamics of a simplistic birth-death model used to describe interacting entities. One can choose populations of biological creatures or concentrations of chemical reagents to plug in to the equation. But you don’t insert oil molecules into the equation and expect it to make any sense.

Take a look at this post at TOD on whale oil harvesting in the 1800’s. Although the original poster does not bring up the Logistic to describe the saturation, plenty of commenters do. Fair enough, whales do fall into a biological classification, and they do give birth and die. But whale oil harvesting never tracked a population rise in whales themselves. It actually tracked the reverse. So, instead of calling it a “birth-death” model we should refer to it as a “death-birth” model. The parameter “death” represents the culling of the whale population for oil and any residual “birth” comes about because the whales can reproduce themselves based on the size of their population. Then as an exercise for the reader, one can plug some values into the birth-death equations as described here: Derivation of Logistic Growth.

But then we get to the real twist. Since whales do reproduce, if we play our cards right, then the amount of whale oil that we can harvest has no limit! The URR of whale oil essentially becomes infinite since the cumulative never abates. And unless we harvest the whales to extinction, the Logistic Function will fail miserably in describing whale oil production. (In actuality, cumulative whale oil production likely saturated because crude oil replaced whale oil as a harvestable resource.) See passenger pigeons if you want to get closer to a saturated harvest driven to extinction.

This whole analysis when incorrectly applied to oil exploration and production can induce early psychosis. On the one hand, oil does not reproduce like a biological entity nor does it act like a chemical reagent. So the equations themselves make no sense. But since oil only gets consumed and obeys the rules of a finite resource (abiotic-oil-mental-midgets notwithstanding), it will eventually saturate. So the Sigmoid falls into our lap in spite of itself. The fraud survives in effect only because it looks like an S-curve !

To avoid this mental anguish, I prefer to use the Dispersive Discovery formulation for discoveries and the Oil Shock model for extraction/production dynamics. This approach makes intuitive sense, the math falls out naturally, and you don’t have to continue to psychoanalyze insane ramblings of people that live in some freakish world where square pegs fit into round holes and empiricism has the dynamic range of a stupid heuristic. The rise and fall of the oil culture deserves a better understanding than the Logistic can ever offer.

End promised rant
(15 May 2008)
It sounds right, but what do I know? I’m just a liberal arts major. It wiould probably require a technical writer or a science writer to put this post into terms that can be understood by the 99% of the population that didn’t make it through Statistics and Calculus.

Oh, for an Isaac Asimov!

The ideas shouldn’t be that hard to translate. Terms would have to be defined, examples and graphics presented. The result would be a long article understandable by non-technical but motivated readers.

Recommended by Big Gav. -BA