T Nation

Why Increase Domestic Oil Production?


#1

The world is running out of oil. Oil will only become more expensive with time. Thus, our untapped oil reserves are like money in the bank -- an investment that will become extremely valuable later as the Middle East approaches a scarcity of cheap oil.

Oil production in a given area follows a bell curve as rising extraction costs overtake technological improvements. Most countries have peaked their domestic oil production and are in decline. US production peaked in 1970 at nearly 10m barrels per day. It has gradually declined to 5m barrels per day today.

This did not happen because of environmentalists blocking access to new oil fields. This happened because we drilled all the cheap oil first, leaving us with oil that is more expensive to extract which makes Middle Eastern oil more attractive. And now with the high prices of global oil, we are hearing talk of increasing US oil production.

This is the worst possible thing to do. First off, there isn't much we can do to increase domestic production. Drilling in ANWR won't even increase oil production by 1m barrels per day. Secondly, OPEC will do everything it can, like cutting back on exports, to make sure that this does not affect global oil prices. And third, if there is any benefit at all, the marketplace will adapt and lose pressure to become more efficient.

And when we have used most of our remaining domestic oil, this means less competition, so OPEC and Venezuela is literally free to bleed us by the balls since we no longer have the option of drilling domestically. It is much wiser to use the threat of domestic competition than to squander our domestic reserves for short lived gain.

I have even heard some nuts suggesting we tap into our emergency 60 day supply of oil -- the "strategic petroleum reserves". This is so shortsighted.

If we really wanted to freak out our enemies, we would increase imports and cut back on domestic oil production, and save our own oil until after Iraq and Saudi Arabia have peaked.

We are facing a very real problem in the future. Oil production will decline at some point. There is a chance that the market will become more efficient and adapt. But this depends on the sharpness of the decline, which will only become sharper if we decide to expand our current production now instead of holding some reserves for later.


#2

Most oil producing countries have faced falling production for many years. They have already peaked. Some have yet to peak, but will peak in the near future.

The following countries have already peaked:

* Japan: 1932 
* Germany: 1966
* Libya: 1970
* Venezuela: 1970
* USA: 1970
* Iran: 1974
* Nigeria: 1979
* Tobago: 1981
* Egypt: 1987
* France: 1988
* Indonesia: 1991
* Syria: 1996 
* India: 1997
* New Zealand: 1997
* UK: 1999
* Norway: 2000
* Oman: 2000
* Mexico: 2003
* Australia: 2004

The following countries have yet to peak:

* Canada
* Russia
* China
* Iraq
* Saudi Arabia
* Kuwait

Estimates are up in the air, but it keep in mind that it is in the interests of OPEC nations to lie about their reserves.


#3

Driving less will help some. But the fact is the problem is much bigger than just driving. Every industry that we rely on depends on oil. Food production depends on pesticides, commercial fertilizers, and other agro chimicals, all of which are petroleum derivatives.

Powered farming equipment, tractors, refrigerators, and transportation all rely on oil. All plastics are oil derivatives. Food production, water distribution, modern medicine, the military all face serious problems in the absence of cheap energy.

The IT industry as well will likely crumble, as in the maintenance and creation of infrastructure it consumes 10% of electricity in the US.

Oil created our modern society and the population explosion. When the first oil well was drilled in 1859, the world population was only slightly more than 1 billion, where it had remained almost stagnant for centuries.


#4

I assume you're talking about the Bakken oil shale in North Dakota/Montana. It's not really even oil. It's shale rock burried 10,000 feet down that has a tiny bit of oil in it that will be extremely expensive to extract. It only contains 3.0 to 4.3 Billion Barrels, not the 200 Billion that television reports and some websites have been yapping about.

http://www.usgs.gov/newsroom/article.asp?ID=1911

And at peak production, it can only really add 100,000 million barrels per day. source --> http://www.aspo-usa.com/index.php?option=com_content&task=view&id=355&Itemid=91

And remember, US domestic production peaked in 1970 at 10 million barrels per day, and is now at 5.1. The Bakken fields could bring us up to 5.2, assuming other oil fields do not decline in production, which of course they will.

Of course, the US will never see 10m b/d ever again, even if all environmentalist opposition disappears and we drill all untapped reserves simultaneously.


#5

Nothing is inevitable, and if we had unprecedented bipartisan and global cooperation, several dozen technological breakthroughs, zero interference from the oil industries, 30-40 years of general peace and prosperity, major legislative and regulatory reforms, then things would look a bit better.

But above all, people have to realize and accept that there is a problem. Convincing people of this is perhaps more difficult to achieve than all of the above combined.


#6

I think what ever happens is going to take some type of commitment, even if you decide to go with oil. Some one is going to have to pony up some money to build refineries. If it were my decision to spend the money to build a refinery, I would want some type of guarantee that we will not be on to hydrogen in 10 years.


#7

And also:

I hope you aren't talking about the crackpot abiotic oil genesis myth, of which there is absolutely zero evidence.


#8

If you would be so kind as to provide evidence for the fossil fuel theory.


#9

There are new technologies coming but they will need more time. It makes sense to look for new oil sources that are readily availble so we can keep our economies going so we can finance research.

The Brazilians just discovered what may be the worlds third largest oil field in the deep Atlantic. If we look in the right places we just might find some of our own.

http://www.economist.com/daily/news/displaystory.cfm?story_id=10677726

There is a theory by the way that says that oil is not a fossil fuel. It may actually be a result of subteranean microbes producing methane gas that gets trapped underground and changed into oil. Proof of this has been found in areas where there never were fossils. Also there are oil wells that were used up that have refilled.

Nancy Pelosi's suggestion to start using up the strategic reserve is absolutely retarded. We filled it when the price was low but once we use it up it will cost a fortune to refill and once it was used up we would be back in the same situation with no reserve.


#10

It would only be more expensive in dollars. If rising fuel prices increase the cost of other goods the increase in dollar value buys less. If money buys less what's the point.

Why would we artificially peak? Raising oil prices will eventually provide profitable price points for alternatives. If you break your leg it will heal stronger and never break there again. It make no sense to break your leg to make it stronger in hopes of preventing breakage.

Right. Now American oil is more attractive than middle east oil. Why wouldn't we drill. Plus if american oil wasn't an attractive or profitable venture, why block access to oil fields that no one wants? Doesn't make any sense.

What good does it do in the ground? If it is not worth getting then noone will seek it. OPEC can do what they want but less barrels of oil = less money for them. We all know that we will find alternative forms of energy, why would they want to short the market when there is no competition only to sell that very same oil when there is competition. Export less or not. We still win.

Either lower oil prices and/or less dependance on forein oil. It's also commical that we protect so many industries by artifical means but we cripple our oil industry with artificial means. Which would we rather depend on forein sources for sugar or oil? Regulation of the two says sweetener is more important to protect than the life blood of the country.

ever since we've been taking oil out of the ground people have been predicting near term shortages. They have alway been wrong. We keep on finding more. Logic says we will run out eventually but to keep believing the alarmists is just plain silly.

Your 100% correct here. This is far from an emergency.

Again, what are you saving it for? If we are down the path of replacement why not sell and use it when it's actually needed?

There is no proof of this, only conjecture. I am going to have to put this up there with global warming soon. Hopefully the alarmists with run out breath.


#11

You've peaked my interest. Do you have any sourses or information on this. Sounds like an interesting read. That would be quite the discovery. Sounds like it opens the door for synthetic oil or gas.

Another interesting one was the discovery the salt water can be ignited in the presence of a particular radio frequency.


#12

This is too long to copy and post but here are some excerpts.

http://www.rolf-martens.com/UNITE!%20Infos/webstyle1/thomas_gold/04_origin_of_methane_and_oil_1993.htm

Introduction

The gas methane, CH4, the principal component of natural gas, does not contain sufficient evidence in itself from which to deduce its origin on the Earth. There is some evidence from its isotopic composition, but interpretations of that are not unique. Information, however, exists in the mode of occurrence of natural gas reservoirs, in the geographic and geological relationships, in associated chemicals, and, above all, in the frequent association with other hydrocarbons, specifically crude petroleum and bituminous coal. Although there are numerous occurrences of natural gas without the heavier hydrocarbons, the association is generally so clear that one cannot contemplate an origin for the natural gas deposits independent of those of petroleum. We shall therefore first consider the origin of the whole set of hydrocarbons, including natural gas, and then discuss aspects that are specific to methane.

Debate about the Origin of Petroleum

It is remarkable that in spite of its widespread occurrence, its great economic importance, and the immense amount of fine research devoted to it, there perhaps still remain more uncertainties concerning the origin of petroleum than that of any other commonly occurring natural substance. (H.D.Hedberg, 1964)
Actually it cannot be too strongly emphasized that petroleum does not present the composition picture expected from modified biogenic products, and all the arguments from the constituents of ancient oils fit equally well, or better, with the conception of a primordial hydrocarbon mixture to which bio-products have been added. (Sir Robert Robinson, President, Royal Society, 1963)
The capital fact to note is that petroleum was born in the depths of the Earth, and it is only there that we must seek its origin. (D. Mendeleev, 1877)

The origin of petroleum has been a subject of many intense and heated debates, ever since this black fluid was first discovered to be present in large quantities in the pore spaces of many rocks. Is it something brought in from space when the Earth was formed? Or is it a fluid concentrated from huge amounts of vegetation and animal remains that may have been buried in the sediments over hundreds of millions of years?

Arguments have been advanced for each viewpoint, and although they conflict with each other, each line of argument sounds strangely convincing. In favor of the biogenic origin of petroleum, the following four observations have been advanced:

(1) Petroleum contains groups of molecules which are clearly identified as the breakdown products of complex, but common, organic molecules that occur in plants, and that could not have been built up in a non-biological process.

(2) Petroleum frequently shows the phenomenon of optical activity, i.e. a rotation of the plane of polarization when polarized light is passed through it. This implies that molecules which can have either a right-handed or a left-handed symmetry are not equally represented, but that one symmetry is preferred. This is normally a characteristic of biological materials and absent in fluids of non-biological origin.

(3) Some petroleums show a clear preference for molecules with an odd number of carbon atoms over those with an even number. Such an odd-even effect can be understood as arising from the breakdown of a class of molecules that are common in biological substances, and may be difficult to account for in other ways.

(4) Petroleum is mostly found in sedimentary deposits and only rarely in the primary rocks of the crust below; even among the sediment, it favors those that are geologically young. In many cases such sediment appears to be rich in carbonaceous materials that were interpreted as of biological origin, and as source material for the petroleum deposit.

On the other side of the argument, in favor of an origin from deeply buried materials incorporated in the Earth when it formed, the following observations have been cited:

(1) Petroleum and methane are found frequently in geographic patterns of long lines or arcs, which are related more to deep-seated large-scale structural features of the crust, than to the smaller scale patchwork of the sedimentary deposits.

(2) Hydrocarbon-rich areas tend to be hydrocarbon-rich at many different levels, corresponding to quite different geological epochs, and extending down to the crystalline basement that underlies the sediment. An invasion of an area by hydrocarbon fluids from below could better account for this than the chance of successive deposition.

(3) Some petroleums from deeper and hotter levels lack almost completely the biological evidence . Optical activity and the odd-even carbon number effect are sometimes totally absent, and it would be difficult to suppose that such a thorough destruction of the biological molecules had occurred as would be required to account for this, yet leaving the bulk substance quite similar to other crude oils.

(4) Methane is found in many locations where a biogenic origin is improbable or where biological deposits seem inadequate: in great ocean rifts in the absence of any substantial sediments; in fissures in igneous and metamorphic rocks, even at great depth; in active volcanic regions, even where there is a minimum of sediments; and there are massive amounts of methane hydrates (methane-water ice combinations) in permafrost and ocean deposits, where it is doubtful that an adequate quantity and distribution of biological source material is present.

(5) The hydrocarbon deposits of a large area often show common chemical or isotopic features, quite independent of the varied composition or the geological ages of the formations in which they are found. Such chemical signatures may be seen in the abundance ratios of some minor constituents such as traces of certain metals that are carried in petroleum; or a common tendency may be seen in the ratio of isotopes of some elements, or in the abundance ratio of some of the different molecules that make up petroleum. Thus a chemical analysis of a sample of petroleum could often allow the general area of its origin to be identified, even though quite different formations in that area may be producing petroleum. For example a crude oil from anywhere in the Middle East can be distinguished from an oil originating in any part of South America, or from the oils of West Africa; almost any of the oils from California can be distinguished from that of other regions by the carbon isotope ratio.

(6) The regional association of hydrocarbons with the inert gas helium, and a higher level of natural helium seepage in petroleum-bearing regions, has no explanation in the theories of biological origin of peroleum.

Advocates of the Abiogenic Theory

Among the early advocates of a non-biological origin of petroleum was the great Russian chemist Mendeleev, the originator of the periodic table of the elements. His arguments, presented in a paper on the origin of petroleum (Mendeleev, 1877) are still valid today. He already knew of the large-scale patterns of hydrocarbon occurrence, but his information on the processes that shaped the Earth was not our present understanding, and made his explanations much more complex than would need to be the case now.

Sokoloff (1889) discussed the "cosmic origin of bitumina" (carbonaceous substances from petroleum to pitch and tar), and he related these to the meteorites, knowing then already about their hydrocarbon content. He stressed that oil and tar occur in basement rocks, such as in the gneiss of Sweden. He could find no relationship to the fossil content of rocks, and he stressed that porosity was the sole circumstance which relates to the accumulation of bituminous substances.

Vernadsky (1933) gave reasons why he considered that with increased pressure and deceased oxygen availability with depth, hydrocarbons would be stable and largely replace carbon dioxide as the chief carbon-bearing fluid.

Kudryavtsev (1959) the most prominent and strongest advocate of the abiogenic theory in modern times, argued that no petroleum resembling the chemical composition of natural crudes has ever been made from genuine plant material in the laboratory, and in conditions resembling those in nature. He gave many examples of of substantial and sometimes commercial quantities of petroleum being found in crystalline or metamorphic basements, or in sediments directly overlying those. He cited cases in Kansas, California, Western Venezuela and Morocco. He pointed out that oil pools in sedimentary strata are often related to fractures in the basement directly below. The Lost Soldier Field in Wyoming has oil pools, he stated, at every horizon of the geological section, from the Cambrian sandstone overlying the basement to the upper Cretaceous deposits. A flow of oil was also obtained from the basement itself.

Hydrocarbon gases, he noted, are not rare in igneous and metamorphic rocks of the Canadian Shield. Petroleum in Precambrian gneiss is encountered in wells on the eastern shore of Lake Baikal. He stressed that petroleum is present, in large or small quantity, but in all horizons below any petroleum accumulation, apparently totally independent of the varied conditions of formation of these horizons. This statement has since become known as "Kudryavtsev's Rule" and many examples of it have been noted in different parts of the world. Commercial accumulations are simply found where permeable zones are overlaid by impermeable ones, he concluded.

Kudryavtsev introduced a number of other relevant considerations into the argument. Columns of flames have been seen during the eruptions of some volcanoes, sometimes reaching 500 meters in height, such as during the eruption of Merapi in Sumatra in 1932. (We since know of several other instances.) The eruptions of mud-volcanoes have liberated such quantities of methane, that even the most prolific gasfield underneath should have been exhausted long ago. Also the quantities of mud deposited in some cases would have required eruptions of much more gas than is known in any gasfield anywhere. The water coming up in some instances carries such substances as iodine, bromine and boron that could not have been derived from local sediments, and that exceed the concentrations in seawater one hundred fold. Mud volcanoes are often associated with lava volcanoes, and the typical relationship is that where they are close, the mud volcanoes emit incombustible gases, while the ones further away emit methane. He knew of the occurrence of oil in basement rocks of the Kola Peninsula, and of the surface seeps of oil in the Siljan Ring formation of Central Sweden (which we shall discuss later). He noted that the enormous quantities of hydrocarbons in the Athabasca tar sands in Canada would have required vast amounts of source rocks for their generation in the conventional discussion, when in fact no source rocks have been found.

Beskrovny and Tikhomirov (1968) noted, as did Anders, Hayatsu and Studier (1973), that of the many possible isomers of petroleum molecules, the particular sub-set found in natural petroleum is also the one singled out in artificial oil production from hydrogen and carbon rather than from biological substances.

Profir'ev (1974) argued that so-called source rocks have no identification that proves their hydrocarbons to be primarily biogenic. He also discounted the hypothesis, often advanced, that the transport and deposition of oil from supposed source rocks to the final reservoir was accomplished by solution in gas: the quantities of gas that would be required would exceed by orders of magnitude the quantities that could be derived from the supposed source materials.

Levin (1958) concerned himself with the formation process of the Earth, claiming that the class of meteorites called carbonaceous chondrites, a low-temperature condensate that was probably responsible for bringing in solids that contained water, could have brought to the forming Earth several times larger quantities of carbonaceous materials than all the ocean water.

Kravtsov (1975) presented much observational material. He showed that the natural seepage of methane in many areas was far more than could be supplied by any kind of gasfield known. If the volcanic gases of the Kurile Islands, for example, are typical of the gases emitted over the time-span of the volcanic activity there, the amount of methane emitted would far exceed the conventional estimate of the present-day total world reserves. He also gave many examples of "Kudryavtsev's Rule."

Kropotkin and Valyaev (1976, 1984) and Kropotkin (1985) developed many aspects of the theory of deep-seated, inorganic origin of hydrocarbons. They concluded that petroleum deposits were formed where pressure conditions permitted the condensation of heavier hydrocarbons, transferred from great depth by rapidly rising streams of compressed gases. In volcanic regions, they noted, decomposition of hydrocarbons would be favored, resulting in the formation of carbon dioxide and water, while in "cool" regions hydrocarbons would be preserved, and could accumulate in alluvial cover and highly fractured beds, depending on the presence of adequate reservoirs and covers. According to these authors "vertical migration of hydrocarbons from levels far below formations rich in biogenic organic matter, which have been considered the source material for the oil, can be demonstrated in a majority of deposits." Kropotkin also presented numerous examples where Kudryavtsev's Rule is satisfied in a striking way.

There were several voices also outside Russia (or the Soviet Union), who argued for a non-biogenic origin. Most notable among them was Sir Robert Robinson (1963, 1966) who, like Mendeleev, can be considered among the most distinguished chemists of his day. He studied the chemical make-up of natural petroleums in great detail, and concluded that they were mostly far too hydrogen-rich to be a likely product of the decay of plant debris. Olefins, the unsaturated hydrocarbons, would have been expected to predominate by far in any material that was derived in that way.

Sylvester-Bradley (1964, 1972) discussed that the meteorites have hydrocarbons, and that hydrocarbons on the Earth derived in major part from such material. He proposed that hydrocarbons streaming up through the crust from great depth would have provided energy sources for simple forms of life. He knew about the biological materials in petroleum, but, like Robert Robinson, he thought that they were due to contaminating additions from microbiology in such locations.

Before discussing further the possible origins of hydrocarbons on the Earth, it is necessary to discuss the present state of knowledge of the formation process of the Earth and the planetary system, and the materials that contributed to the formation.


#13

Very interesting. Thanks.


#14

Gael, will you kill yourself when you are middle aged?


#15

Get Ready for the Oil-Price Drop

by Alan Reynolds

The price of crude oil has jumped as high as $135 lately, up from $87 in early February. The news encouraged some Wall Street analysts to suggest oil might approach $200 before long. In fact, that's quite impossible: The world economy can't handle current energy prices, much less a big increase.

Which in turn means that oil prices will fall.

Market analysts often claim oil prices are almost entirely determined by supply. Demand is said to be insensitive ("inelastic") to price. The standard example is that many Americans have to drive to work and most gas-guzzling SUVs will still be on the road even if the affluent few can trade theirs for a Prius. Whatever the price, we'll pay it.

This idea rests on two fallacies. The first is to exaggerate the United States' importance when it comes to ups and downs in worldwide oil demand. In fact, America is using no more oil than we did in 2004.

Full Article:
http://www.cato.org/pub_display.php?pub_id=9450


#16

Oil will drop and most likely hover between $80-100/bbl.

New technology and new sources, despite Democratic opposition, will soon come on line. This will kill the speculators and prices will fall.


#17

Prices may fall but it will not kill speculators -- just the ones who speculated wrong.

All economic actors are speculators.


#18

swoosh


#19


#20

Gael, you are quoting peak oil conspiracy sites. These are the doom and gloom people, and what they say is not right.

The date for peak oil keeps getting pushed out. It was in the 90's.

When actual experts looked at it, they found 25 years to be the earliest possible date for peak oil.

And yes we can produce over a million barrels from ANWAR. That means 29 years of production.

And proved reserves, which these estimates are, are what we know for a fact we can get. Fields repeatedly have produced well after triple original estimates.

Then America has another 80-90 billion off of our costs, that are also off limits.

And that oil shale you say is so expensive to extract? I believe they now have it down to $20 a barrel. And current technology is capable of extracting 800 billion barrels of the stuff. And yes it is extracted as a high quality oil.

By the way it should be mentioned that the Mid-East is having problems selling all the oil they have. They have contracts that are not being picked up by the market. One reason OPEC is so reluctant to raise production.