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Oil Springs Eternal

Donal, dagblog
Writing The Prize (1991) , and winning a Pulitzer for it, brought Daniel Yergin automatic creds in the energy industry. Through Cambridge Energy Research Associates (CERA) , he has consistently maintained a cornucopian viewpoint about the future availability and price of oil, to the point that the energy depletion community has defined a Yergin unit as the $38 per barrel that in 2005, Yergin predicted would be the steady price of oil. Oil reached two Yergins in 2006, spiked to 3.6 Yergins in 2008, and currently Brent crude is trading at 3 Yergins.

Yergin is in the contradictory position of claiming both that oil prices will stay low and that there will be more extraction of ‘proven reserves” through advanced techniques. Proven Reserves means, “Quantity of energy sources estimated with reasonable certainty, from the analysis of geologic and engineering data, to be recoverable from well established or known reservoirs with the existing equipment and under the existing operating conditions.”

But those advanced techniques cost more money per barrel, which can only be supported by higher and higher oil prices or government stimulus.

… Nevertheless, in his Saturday Essay in the Wall Street Journal, Yergin still wants to assure us that There Will Be Oil and that Peak Oil will always be pushed back as we shift more oil from not recoverable to proven reserves.

In the comments [under Yergin’s WSJ article], Richard Heinberg wrote:

For decades there have been those who warned of oil shortages and high prices, and those who promised there would be plenty of cheap oil for the foreseeable future. For the first three-quarters of the twentieth century, the “cornucopians” proved right. Then, as oil discoveries declined, country after country began to see peaking and declining production. “Peak oil” analysts successfully forecast these production declines nation-by-nation, and during the past tumultuous decade also were generally right about world oil production rates and prices. Meanwhile, the price and production forecasts of cornucopians like Daniel Yergin have diverged further and further from reality. World oil reserves may be large, but the oil industry is replacing cheap, easy-to-get oil with dirty, expensive substitutes. Under these circumstances, reserves are a poor basis for forecasting future production rates. The “peak oil” analysts evidently understand the complexity of the situation, but Yergin–despite his encyclopedic knowledge of oil industry history–seems not to.

(17 September 2011)

Yergin on Energy 2.0
via MarketWatch

Pulitzer Prize-winning author Dan Yergin says the global supply of oil and gas has risen in the last 20 years, defying the predictions of “peak oil” theorists. In the Big Interview with WSJ’s David Wessel, he looks at the world’s energy future.
(17 September 2011)
If video does not display, go to the original article.

Book review: Daniel Yergin’s “The Quest”

Steve LeVine, Oil and Glory (blog), Foreign Policy
… So begins oil historian Daniel Yergin’s much-awaited new book, the sequel to The Prize, the standard work on the industry. I reviewed The Quest for the San Francisco Chronicle, and to avoid repetition suggest that those interested read the piece here. Suffice to say that we get much new ground — the events in oil since the 1990 publication of his Pulitzer Prize-winning masterwork, in addition to lengthy mini-histories on global warming and the various alternatives to fossil fuels, including solar, wind and electric cars.

Yet The Quest lacks the magisterial quality of the original, a meticulously researched, groundbreaking history that chronicled how the major events of the 20th century — both world wars, for instance — pivoted on oil, and delivered deeply etched personality portraits of those who counted. The Quest by comparison is a primer, based largely on other people’s books and articles, and does not attempt to tackle history on a similar scale, nor to introduce the actors in three dimensions.

There are factual mistakes — for instance, Yergin has the Baku small-bore pipeline (“Early Oil”) decision occurring in 1996 and John Browne’s eureka moment in 2001, respectively one and two years off the mark — and selective fairness: Unlike the warts-and-all descriptions of historical oilmen in the original, which made you feel like you understood what made these trailblazers tick, Yergin seems to bend over backwards in the sequel to avoid telling detail that could possibly embarrass more recent and present-day players. Yet he practices no such discretion when it comes to Marion Hubbert, the father of peak oil, and former California Gov. Gray Davis, both of whom suffer withering treatment at Yergin’s hand.
(19 September 2011)
Steve LeVine is a contributor to Energy Bulletin.

Yergin is half-right about oil, but other half is what matters

Jan Lars Mueller, ASPO-USA via Energy Bulletin
In “There Will Be Oil” (September 17, WSJ, Page C1), Daniel Yergin concludes that a peak in global oil production is “nowhere in sight.” By focusing on the timing of such a peak, however, he dangerously distracts attention from the monumental challenges facing the oil and gas industry today, and the new energy and economic reality the world has entered. With demand for oil and all forms of energy continuing to rise exponentially—including rapid growth in China, India, and other developing countries—and huge uncertainty whether fossil fuels can keep pace—the most foolish course of action would be business as usual.

… Let’s all loudly agree: we are not running out of oil! But we are rapidly depleting the high-quality relatively easy-to-extract-and-refine oil that has fueled a tremendous expansion of the world economy since the dawn of the petroleum age. Yes, petroleum companies may continue to make money developing new resources, especially if rising global demand helps drive high fuel prices. But overall “energy profits” for society —the energy returned from invested resources—are shrinking rapidly, even as oil prices and corporate profits may rise. How consumers will fare and how the world economy will function under this new energy reality is cause for serious concern, discussion, and action.

Jan Lars Mueller is Executive Director for the Association for the Study of Peak Oil & Gas USA (ASPO-USA), which promotes open dialogue and understanding of Peak Oil, resource depletion, and the role of energy in the economy. ASPO-USA is hosting its annual conference November 2-5 in Washington DC.
(19 September 2011)

Daniel Yergin’s letter to the peak oil community, and a rebuttal

Jeffrey J. Brown, Energy Bulletin
Yergin wrote in the Wall Street Journal:
“Things don’t stand still in the energy industry. With the passage of time, unconventional sources of oil, in all their variety, become a familiar part of the world’s petroleum supply. They help to explain why the plateau continues to recede into the horizon—and why, on a global view, Hubbert’s Peak is still not in sight.”

Oil geologist Jeffrey J. Brown responds:
“Contrary to Mr. Yergin’s assertion that advocates of Peak Oil have been wrong at every turn, six years of annual global production data show flat to declining crude oil and total petroleum liquids production data. … I suspect that just as Mr. Yergin was perfectly wrong about oil prices, he may be confidently calling for decades of rising production, just as we come off the current production plateau and just as an accelerating decline in Global Net Exports kicks in.”
(1X September 2011)

Hubbert’s Peak or Yergin’s Plateau?

Steve Maley, RedState
In 1956, Shell geologist M. King Hubbert correctly predicted that oil production in the United States would reach a peak around 1970. Since his Peak Oil theory fits so well with the Malthusian worldview of “Progressives”, anti-capitalists and anarchists, Hubbert has become a posthumous hero to the Left, an unusual role for a scientist polluted by the filthy lucre of the oil industry.

… Unlike elements, natural gas and oil can be created from other substances by alchemy (or, really, by chemical engineering). Gas and liquids can be manufactured from related compounds found in nature, such as coal, tar sands or kerogen. Economics also control the degree to which these technologies expand the effective oil and gas resource base.

Oil resources are not infinite, and it is unarguable that most of the easily accessed, conventionally producible oil has already been discovered. I agree with Yergin’s conclusion, that rather than “Peak Oil” we may be entering a period of “Plateau Oil”. Instead of a symmetric bell-shaped curve, we are on a limb of the curve that flatten or grow slowly for some time. Reserves will be added at the economic frontier, where the search for reserves is justified whenever the marginal cost of finding and developing is less than the current market price. Ultimately, if we let free market forces dictate, new technologies will replace hydrocarbons at such time as they achieve a lower price in the marketplace.
(17 September 2011)