December 06, 2008
Charley Maxwell On Problems With Peak Oil

Energy industry analyst Charley Maxwell wonders whether democracy will fare well after oil production goes into permanent decline and economies around the world contract year after year.

I think itíd be fair to say that our sponsorship of democracy around the world was rather presumptively based on the fact that there would be an expansion of living standards that you and I would understand would have to be based on hydrocarbons. The question is: can it be based on hydrocarbons? I think the answer is plainly noÖ.

Our modern world is based on hydrocarbons. I think itís going to slow and maybe even stop. And now I think the question isÖ

RB: Itís going to slow? You mean our way of life?

CM: Our rising standard of living. This is the first time you are getting people saying, ďEvery generation has created children who have a better standard of living than their parents. This is the first generation where that is not proving to be so.Ē And I think there will be more generations where itís proving not to be so. To me, thatís the final problem here, that we lose our political way on the basis of economic problems that really are not so much bad policy as they are the misadventure of running out of fundamental materials that we need to support our economy in sustained growth.

People say, well, we have the scientific ability to work around that. And I think that we do over time. So I would expect that 100 years from now, the world will have a higher standard of living than [we do] now.

But nevertheless, it will slow. We canít innovate scientifically as fast as the problems are going to accrue. So we are either going to slow to zero growth or to very low growth, perhaps something equivalent to our population growth, and then your per capita ceases to grow. Anyway, thatís what I fear.

Will an extended period of economic contraction cause the failure of democracy in some countries? Sounds plausible.

Some are more optimistic about our ability to handle declining oil production. But Maxwell argues many of the potential substitutes for oil require capital expenditures (capex) that take too many years to effectively respond to declining oil production. For example, nuclear power plants take several years to build. But Maxwell also mentions rail capacity increases that would be needed for big increases in coal production. I've made this same argument in comments of previous threads here. I do not see how we can capex fast enough even if have the technologies.

The capex argument is an interesting one from another standpoint: Energy sources that have short build times have the potential to play an outsized role in replacing oil. Solar photovoltaics looks like the strongest candidate by that measure. A PV factory can make solar panels rapidly and the panels can be installed rapidly. Any idea on how long it takes to build a PV factory? Probably depends heavily on type of PV. Maybe scaling up of thin film PV is faster than silicon because the silicon PV factories are dependent on silicon crystal factories. Anyone have insight on this?

But PV poses a big problem because PV puts out electricity. In order for electricity to substitute for oil in most transportation applications we need better batteries. In order for electricity to substitute in rail we need a big rail build of electric lines along the rails as well as construction of electric engines. Not sure what is the time line required to do that. But we have a basic problem with how to use electricity to substitute for oil.

The big liquid hope for oil substitution comes from biomass energy to produce ethanol or biodiesel. If we need genetic engineering of algae to make this happen then that could take several years. Scaling it up would take years too. Obviously corn ethanol can't scale far enough. Cellulosic technology would scale higher than corn ethanol. But we'd lose a lot of wildlife habitat to forest destruction if we went with cellulosic technology to make ethanol.

Maxwell sees Peak Oil as very near and expects an accelerating decline in oil as a source of our energy.

What Iím saying is that as oil withdraws, it hits America with particular force because of our heavy dependence. I think oil is 40 percent of our total energy; worldwide, by the way, I think itís 39. But I see it something like this, and Iím quoting from the BP Statistical Review: in 1996, oil was 40 percent of the worldís energy. In 2006 it was 39. So oil is not growing as fast as some others, or it wouldnít be losing ground. So [thatís been in the last] 10 years, exactly a decade. I think it is going to take five years to lose the next percentage. And then Iíve calculated that itís going to take three years to lose the next percentage. And then two years. Then a year and a half, and then a year. Something like that. It wonít be that exact. But I am just trying to give you the scale of whatís happening.

Maxwell thinks we'll hit the final oil production peak plateau in the 2013-2017 time period. After that the decline starts. He does not see how we can maintain economic growth during a period of declining oil production.

Maxwell says he was originally unenthusiastic at the prospects for compressed natural gas (CNG) as a transport fuel. But he says he's rethinking his position because he only sees batteries for electric cars as the only other possible alternative. We do not know yet when or even if batteries will become cheap enough and sufficiently high in energy density to make electric cars suitable substitutes for internal combustion engine (ICE) cars.

T. Boone Pickens is promoting the CNG car idea. He combines it with a big build of wind turbines as a means to free up natural gas from its current use to generate electric power. Maxwell thinks the assorted shale natural gas finds in the United States put the US in a good position to maintain natural gas production for the next 20 years.

Share |      Randall Parker, 2008 December 06 10:54 PM  Energy Fossil Fuels


Comments
aa2 said at December 7, 2008 12:12 AM:

When something goes wrong in a democracy, the group in power blames the opposition party. For example if it takes many years to get started because of way too much bureaucracy, the party in power blames the opposition party. In a dictatorship, the ruling group has no such luck, the buck stops with them.

In this credit crisis the democratic nations are broke and begging for money from dictatorships. The dictatorships saved up huge reserves over the last decade for a simple reason. They knew a rainy day was going to come eventually and they wanted to remain in power through that rainy day. In a democracy if any money is saved up by one party, the opposition party will spend that money to buy votes when it comes to power. Therefore the incentive is to save no money, and instead borrow as much money as possible.

Phil said at December 7, 2008 1:05 AM:

I think we should put quote marks around the term "democracy".

To most of our politicians, it's a synonym for blindly following the free-market economy religion.

I think it's a luxury we allow as long as the fat cats keep getting fatter.

Xenophon Hendrix said at December 7, 2008 5:58 AM:

Nowadays, it takes a long time for any infrastructure project to get going. It wasn't always this way, as WWII, for example, shows. Perhaps if we get in enough pain we will dispense with a lot of red tape.

Ray said at December 7, 2008 6:16 AM:

A synchronous motor is also a generator so an electric locomotive could be built with the capability to generate power back to the grid when a train goes downhill. I think we are going back to the future. In 1910 the vast majority of American towns were served by freight and passenger rail, while most cities had more than one train station. The amount of rail network that we have lost since then is staggering. As rail companies have consolidated only the most desirable right of way has been kept in service, and these few routes have been double tracked to ease the congestion. If Obama wants a huge infrastructure project putting the tracks back where they were sixty years ago would be a big one. PV makes the most sense in orbit where the sun shines 23+ hours per day and there is no atmosphere to contend with. We will need microwave transmission of power from space, and medium voltage inverters on a huge scale, but we have the technology to do all of this. We are going back to the future boys and girls--to the turn of the century as in 1900. In 1900 people did not take long trips by horse unless they were relocating. (think Oregon trail) In the future we shall use electric cars, scooters, and perhaps horses for short range transportation, while electric trains become our long range solution. The interstate highway system may become next to useless barring a major breakthrough in battery technology. Agriculture may be a bit of a problem. Perhaps microwave transmission of electrical power to a combine harvester will be possible allowing for industrial scale agriculture to continue with less fossil fuel demand. We need to distinguish between technologies that we have developed and ready to use and those that depend on science that we do not have yet. Rebuilding our infrastructure based upon a realistic assessment of our capabilities is critical.

Fat Man said at December 7, 2008 6:36 AM:

Now that oil is $40/bbl, it is clear that oil at $140 was a symptom of a money bubble, not peak oil. I think that rail lines and N plants are fine public works projects with lots of good environmental effects, but they cannot be sold as a cure for peak oil to a public that is paying $1.68 for gasoline.

Fat Man said at December 7, 2008 6:40 AM:

"In a dictatorship, the ruling group has no such luck, the buck stops with them."

Really? Does that explain why dictatorships arrest critics and throw them in prison? Or persecute ethnic and religious minorities? Or sponsor cults of personality?

Marv said at December 7, 2008 7:00 AM:

A couple of related remarks;

1. Factories will never be able to scale up to War time speed (planes ships etc.) because of health and safety policy of the local company, and state. as a maint. mechanic, I have seen my own productivity go down, it now takes longer to do the same job I did 21yrs ago because of policy and paper work and pretesting criteria.(confined space to enter a basement! & X-ray walls to drill a tap con screw ĺĒ deep into block) Yet there has never been an incident in my own department.

2. we as a civilization now get it, we must think efficiently, in the factory we used compressed air to blow off parts, the over all compressed air grid is only 10-15% efficient. The same results are obtained using a 1/4hp blower to remove residual.

Inconclusion, if we are going to get this right, there should be a lot of organized input to rebuild the grid, energy infrastructure and autos/batteries- A123 vs offshore suppplier. Obama has the right words, but it must be action that counts today, letís see what January brings- imho
Marv

JAY said at December 7, 2008 7:14 AM:

There's no such thing as peak oil. We will have all we need as long as we want it and over time its price will trend down. Democracies are far stronger than dictatorships. The trend of history is on freedom's side. Stop worrying and enjoy your freedom and prosperity.

jb said at December 7, 2008 7:37 AM:

Yes it will take years to replace oil with other things. So what? The oil isn't going to disappear overnight. And as it grows more expensive, people substitute away as they can. Yes, it may slow growth. But slow growth causes, amongst other things, significant drops in demands for gas.

There are all sorts of promising developments in solar, nuclear, piezo-eletric and various other forms of power generation.

We've already seen direct reductions in oil consumption based on oil prices. There is no doubt that people can and do substitute for oil when the price gets too high.

Randall Parker said at December 7, 2008 7:58 AM:

Fat Man,

Now that oil is at $40 during the worst economic downturn since WWII it is clear that we can cut oil prices by cutting oil demand.

It is also clear that a variety of oil projects won't get funded at this price point. So eventually supply will shrink and oil prices will go back up to the break-even levels for tar sands and other more expensive oil sources.

Xenophon Hendrix,

Necessity is a mother. We do not yet feel enough pain to override all the bureaucratic barriers in the way of fast infrastructure build. But the pain of peak oil will become so high that I expect a lot of those barriers to fall.

acai said at December 7, 2008 8:06 AM:

i wonder how much bush made off the oil price hikes while he was in office.

Lethalox said at December 7, 2008 8:50 AM:

My problem with this post and lots of posts on Peak Oil is that effectively ignores two very critical areas:

1 - Economics and the market
2 - The ultimate resource, human innovation

Do we have a problem with Peak Whale Oil, or Charcoal any other substance that was widely consumed 100 years ago? A good starting point for this can be found here - http://www.econtalk.org/archives/2007/09/grab_bag_munger.html As we saw when oil was going to $140 dollars a barrel society was incented to reduced usage. Large sums of money were funnelled into finding ways of reducing oil consumption. One could argue that price was not high enough long enough. Consider in the USA, we have really not opened up more of the coastline to drilling, nor have we opened oil shale yet. We have not adjusted the laws so that business can write off through depreciation smaller (actually lighter) vehicles. We have not adjusted to laws to allow for lighter cars. For example, the first car that I ever road in was a 1972 BMW2002. You can't make the car today because if fails all sorts of federal safety regulations (crumple zone, air bags, etc). That is a trade off our society has made. It can be unmade. I think there is a plausible case to be made that the richer the society is, the easier than transition will be. My guess the price oil will start to return to the long-average. The last time I heard that price was around $2/gal of gas a few years ago.

Also I don't think this is the worst economic downturn since WWII. We have seen a reduction in employment, but we have not seen a drastic cut in output yet. I think the point is very debatable.

As to dictatorships an democracies, I think the trend is toward democracies as a whole and that is wealth function. In other words, as people/societies get richer, they want more freedoms. But I also encourage people to listen to this podcast on Dictatorships and Democracies. It was absolutely facinating - http://www.econtalk.org/archives/2007/02/bruce_bueno_de.html

Cheers Alex

Hellfish said at December 7, 2008 10:13 AM:

acai, Great contribution to the discussion, dumb ass.

pond said at December 7, 2008 10:13 AM:

I agree with the basic argument of the post. Peak Oil has passed, and we are now on the downward side. The world might have been able to boost extraction over the next decade or so, had oil remained so high that all sorts of exotic, non-conventional oil plays made economic sense. Now they don't. So whether you say the scarcity of cheap oil killed the money bubble, or the money bubble killed expansion in oil extraction rates, it adds up to the same thing: we will pump less oil this year than last year, and in 2007 we pumped less than the year before. And in 09 we will pump less than in 08.

If the drop in oil price helps to refloat the Growth Economy, the price of oil will shoot back up, killing the recovery. That's the kind of vicious trap we're in right now. The only escape hatch is some form of abundant, pretty-cheap energy. Without some miracle development in solar/wind, it means fusion. But fusion is said to be (still) 30 years away.

Democracy (or individual liberty, which is what most politicians mean whey they talk about democracy now) is quite fragile to society-wide shocks. Just look at how many freedoms America lost after 9/11. That same pattern has replayed in the UK after the London bombings.

Already the strands seem to be fraying. From the extreme polarization of American mainstream politics, where Right and Left stopped talking to one another, we enter an age where every presidential election is marred with charges and suspicions of cheating and fraud. Many in America seem already to distrust 'democracy' as it has been practiced here. The latest sign of this fraying has been the reactions to the $700/$850 billion bank bailout bill. Enormous numbers of voters, in an election year, weeks from the election, were energized to write to their representatives complaining about that bill. I've seen figures quoting something like the mail congressmen received ran 80% against the bill. It passed anyway -- costing even more.

Results like this make everybody cynical; even before this a majority of Americans in one poll agreed with the statement, 'Business gets whatever it wants from the government.'

Yes, democracy is threatened. Badly, scarily so.

Ray said at December 7, 2008 10:34 AM:

Pond said, "Without some miracle development in solar/wind, it means fusion. But fusion is said to be (still) 30 years away."

That's the problem. We don't know when if ever fusion will be practical. Should we use tokomaks, or will some form of spherical confinement be possible? Plasma is hard to work with. We would be well advised to stick to using technologies for which the science is already known. This leaves the rest as an enormous yet possible engineering challenge. Light water reactors, breeder reactors, and photovoltaic are all examples of known science. Light water reactors are a stopgap measure because the supply of U-235 is limited. Breeder reactors look more promising in the long term, but it is space based solar that I believe has the best long term promise. The question is whether there will be enough left of western civilization to build space based solar if we wait too long?

iron308 said at December 7, 2008 10:37 AM:

aa2- In a dictatorship, the ruling group has no such luck, the buck stops with them.

Fatman- Really? Does that explain why dictatorships arrest critics and throw them in prison? Or persecute ethnic and religious minorities? Or sponsor cults of personality?"

I think it is also safe to add the "evil" West, specifically the USA as the 'source' of all the problems in the dictatorial governed countries. If they were so forward thinking why are the standards of living in those many countries so bad.

iron308 said at December 7, 2008 10:46 AM:

I think we should put quote marks around the term "democracy".

To most of our politicians, it's a synonym for blindly following the free-market economy religion.

I think it's a luxury we allow as long as the fat cats keep getting fatter.

Let's not confuse a free market with the heavily regulated market that confers big advantages to big businesses able to buy politicians. It is the latter that we operated in.

BruceMcF said at December 7, 2008 10:58 AM:

According to the modeling commissioned by Alan Drake, electrification of the DoD-designated STRACNET (Strategic Rail Corridor Network) would take six years if pursued at full commercial urgency. For an 80mph system, the total price tag would be about $250b, $450b for a 110mph system. Most of that could, of course, be funded by access fees.

http://www.theoildrum.com/node/4301

The problem with pollyannas who point to the current price of oil is that it is not a drop in price following an increase in supply (as in the mid-1980's, when Saudi Arabia turned on the taps to punish the Soviet Union), its a drop in price following a decrease in demand. If all we have to do is to keep the economy in recession to avoid an oil-price spike, then the cure would seem to be worse than the disease.

tom bri said at December 7, 2008 11:02 AM:

...RB: Itís going to slow? You mean our way of life?

CM: Our rising standard of living. This is the first time you are getting people saying, ďEvery generation has created children who have a better standard of living than their parents. This is the first generation where that is not proving to be so.Ē...

This Maxwell is either very young, or never paid much attention. At least since the sixties, when I became aware, doom-criers have been saying exactly these things. I expect it goes back much farther, at least to Malthus.

Does he really think our standard of living is getting worse? By what measure?

The guy comes off as a dope. Why should anyone care about what else he has to say if he is this ignorant?

BDP said at December 7, 2008 11:21 AM:

The current reduction in oil prices has varying effects. Marginal wells are probably being closed as they are not economical. Whether they will be worth re-developing if prices go up again - is an unknown. The infrastructure will shrink as new drilling, pipe lines, etc are not needed. Political fall out is inevitable. Countries that rely on oil revenue such as Venezuela, Russia, Iran, etc. are suffering a major drop in the local standard of living. Political instability could become an issue. Assuming you agree with the "peak oil" concepts, the low prices are delaying the implementation of systemic modifications/development, necessary to respond to an energy scarce environment.

Wars, piracy etc could all result as competition for scarce resources develop. Bush & Cheney both had great foresight to try and control the Iraq oil resources. They just didn't have the skill needed to succeed. We will see more??

The old chinese curse: May you live in interesting times.

BDP

Randall Parker said at December 7, 2008 11:29 AM:

acai, Hellfish,

Neither of you are elevating the quality of discussion here. Paranoia and insults are not helpful when trying to understand what is or what will be and why.

Randall Parker said at December 7, 2008 11:38 AM:

tom bri,

Charley Maxwell is 76 years old. Also, Charley Maxwell has made some impressive calls on oil price directions. For example, in 2003 he forecast a tripling of oil prices. He also predicted the current downturn in oil prices. He knows a lot more about oil than you or I. You are using your own relative ignorance to judge a person who knows a lot more about the subject than you do.

I didn't choose to quote him just because he has a provocative opinion. Both Maxwell and 82 year old Henry Groppe know the oil industry extremely well and are very rational in their analyses. You ought to pay attention to them because they know their field.

tom bri said at December 7, 2008 11:47 AM:

I was being a bit facetious. His age is irrelevant. I don't doubt that he knows a lot more about oil than I do. But does he know much about the economy outside his little area? It sounds like not. The things he says are simplistic, ridiculous, or just plain wrong, to anyone who has spent a few decades paying attention.

Randall Parker said at December 7, 2008 11:56 AM:

tom bri,

He says a lot of different things in the interview. Which specific things did he say that you disagree with and why? Just whacking at someone: What's the point? I do not want insult-fest comment sections on posts.

BruceMcF,

I'd forgotten about Alan Drake's estimates. 6 years is fast enough for rail electrification since I expect rail to be able to outbid other uses for oil as oil supplies decline. Also, partial electrification (e.g. just doing the Northeast Corridor and other shorter heavily traveled routes first) yields partial dividends. It is not like construction of a nuclear power plant where you have to build the entire thing before turning it on.

We can also electrify some other pieces of the transportation puzzle. Plus, we can shift toward smaller hybrids. But I still expect contracting oil supplies to lead to contracting total economic activity. The substitution won't happen fast enough.

However, the bright side in this is Maxwell's estimate that the oil production decline won't start until 2017. If true that gives us more time to develop needed tech. Though the production plateau that precedes the decline will effectively mean a reduction in supply due to reduced exports as per the Export Land Model. So the 2010s still look like an economically stagnant period for the Western countries.

Wolf-Dog said at December 7, 2008 12:12 PM:

If we had spent the $1 trillion wasted in the Iraq war during the last 5 years, on the electric car related research, this would have solved the problem. Just 100 nuclear reactors at the cost of $5 billion each, plus another $500 billion for battery research, would have helped a lot. Note that the government is spending laughably low amounts of money for electric car research. And so far the private sector risked very small amounts of money on electric cars and energy sources, and despite this there is enormous progress. If Obama really keeps his word and spends $$250 billion per year for the next 4 years on energy, this would make a major difference.

James Bowery said at December 7, 2008 12:23 PM:

Bruce,

You might want to read my short argument over at the Pickens Plan for superconducting electrification of the railways.

Basically, the argument is that with the excess transmission capacity of buried SC cables, there would be no problem piggy-backing power load balancing over the railroad rights of way.

Taking 20% cost reduction per production doubling as a reasonable competitive industrial learning curve, we can expect the recently demonstrated SC cost of $60M/2000feet (which is $30k/ft), to end up costing something like $200B for 30,000 miles.

simone said at December 7, 2008 2:22 PM:

Experts provide us with an excellent store of what we now know. They have proven without exception to be very poor at predicting the future. I will go a step further and say that when "experts" begin making prognostications about the world like Nostradamus one should not listen. This type of speculation has nothing to do with this man's expertise on oil and markets. Randall why are are you peddling these wild prophesies? Seems out of sorts with this blod.

Randall Parker said at December 7, 2008 4:13 PM:

Simone,

All experts are wrong predicting the future? You mean, Charley Maxwell was wrong predicting the big move up in oil prices in 2003? Or that Henry Groppe was wrong predicting the big drop?

You need to separate media personalities from real experts. Some people make excellent predictions in their areas of expertise. I find it valuable to figure out who those people are. The guys predicting little increase in oil production these last 5 years are people I'm paying attention to now. Track records are worth looking at.

Ray said at December 7, 2008 4:38 PM:

Thank you James Bowery for posting a very cool link. http://www.supercables.com/Reference/tabsartikel.pdf

I had no idea that so much progress had been made in super-conducting transmission. Could you elaborate a bit about how the buried DC transmission line would power the train? I could see how a time varying field could be magnetically coupled to a secondary on the locomotive, but your link referenced DC transmission. Another great advantage would be keeping the line out of the weather. My mother was stranded for several hours on an electric train between Peoria, IL and St. Louis, MO back in 1949. The cause was ice on the lines. Today the electrical lines, trains, and tracks are all gone, but the abandoned railroad bed is still visible.

I'm a bit skeptical about high tech solutions in general such as Mag-Lev, or bullet trains because of our national tendency to both cost and time overruns on projects. I'd prefer that we just get started by putting the tracks back where they were in the old days, and use diesel electric motive power. I think we need to start moving away from trucks and cars soon, but I also thought liquid nitrogen temperature superconductors would never be very practical back when I first saw them at Argonne Natl. Lab in 1988.

Fat Man said at December 7, 2008 9:35 PM:

"If we had spent the $1 trillion wasted in the Iraq war during the last 5 years, on the electric car related research, this would have solved the problem."

More likely, we would have wasted $1T on electric car research. The battery powered electric car is a long way from a new idea. My great-grandmother drove one before World War One.

The fundamental problem remains the batteries. Batteries are an even older technology. They were the first form of electric current generation dating back more than 200 years. The biggest problem with improving batteries is that there is only so much chemistry. We can surmise that every plausible combination of compounds has been tried and that the ones we have are pretty much it.

Another fundamental issue is charging times. They are constrained by the relationship Watts = Volts * Amps. Even a recharge through a 240 V 30 A line (electric ovens and dryers) is only four times faster than a standard 120 V 15 A line. Anything that would make recharge on the fly tolerable would require insulated gloves and shoes and safety eye wear.

Of course the real question is why. We can manufacture liquid motor vehicle fuels out of anything with carbon in it such as coal or garbage. So the exhaustion of petroleum supplies is not a reason to spend money on bevs. Global warming is a possible issue, but the easier solution is to replace coal and gas burning power plants with solar or wind or (god forbid) nuclear.

Randall: What I mean is that peak oil can not be cited explain the oil prices of the past couple of years. They clearly were part of an enormous financial bubble that has burst. No one is claiming peak iron, peak aluminum, or peak wheat, but their prices followed the same arc as oil. This does not mean that peak oil does not exist, nor does it mean that the price of oil may not go up in the future, it just means that the recent price excursion was just that and not evidence of a deeper supply demand trend.

Joe said at December 7, 2008 9:51 PM:

When many people are making predictions, someones always right. Expert predictions are worthless. The world system is far to complex and we have limited information. The information we don't know is far greater than the information we do.

John Moore said at December 7, 2008 9:55 PM:

Peak oil is indeed a threat, because of the lag time of replacement fuels, and because our rich democracies have overburdened themselves with obstacles to rapid reaction. The recent oil price volatility appears to be a sign that demand in good economic times is high relative to production.

However, a peak oil crisis could be solved *relatively* quickly with the use of coal. We have lots of it, a whole bunch. It can be burned directly, and most importantly, it can be reformed into oil or gasoline or methanol. Unlike nuclear, it has much less of a NIMBY problem and facilities can be built sooner. In WW-II, the Germans used coal successfully to substitute for the oil they could not obtain.

Hence the investment in existing distribution and utilization systems (oil pipelines, gas stations, transmission lines, autos and trucks and aircraft) could be preserved - at least during the emergency.

This is still a lot of capex, but it is minor compared to that required by current alternative fuels.

The problems with most alternative fuels are:

1) energy density - solar, wind and biomass require lots of land (and lots of infrastructure) per unit of energy (kWh for convenience)
2) peak load problems - solar and wind systems don't provide reliable, continuous power. This is a problem sort of like peak oil - when demand exceeds supply, something bad happens rapidly.
3) capex - technologies which require replacing vast amounts of infrastructure will be very expensive and take a long time
4) transportable energy source - gasoline is a remarkably good transportable energy source - 40 times as dense as the best battery. Any solution needs to provide a reasonable solution for transportation, without replacing all existing rolling stock and distribution systems.
5) technological immaturity - after invention comes engineering and operating. Then comes reengineering, etc. It takes a while for a good technology to get good, and for its side effects to be known.

A lot of alternative fuels are being selected with priority being "sustainability", general environmental friendliness, and low/zero CO2 emissions.

Those priorities would vanish in a prolonged peak oil crisis (like we almost just had).

Randall Parker said at December 7, 2008 10:32 PM:

Fat Man,

Lead acid batteries are an old technology. Lithium nanophosphate batteries are a pretty new technology. Some other battery chemistries are pretty new. A lot of technologies get heavily refined for decades before finally fulfilling their promise. Just because a technology is a long time coming does not mean it is not going to come.

Peak oil and the oil price peak: Sure, speculation plays a role. But speculation alone couldn't take oil from $12 per barrel up to $147. Look at the numbers on production costs for oil. They've gone way up. Part of that is due to a big rise in demand for drilling equipment. But what caused the big rise in demand? It has become necessary to drill into a lot more smaller fields rather than a few bigger ones that are easier to tap.

Even in the deepest downturn since WWII we still have oil that is double the price of 7 years ago.

Joe,

A small number of people have superior track records in prediction (e.g. Warren Buffett). It is one of the amazing things about the press that it makes little effort to figure out who those people are.

James Bowery said at December 7, 2008 10:55 PM:

Could you elaborate a bit about how the buried DC transmission line would power the train?

By the nature of the SC transmission lines, there are stations every mile or so for recirculation of the cryogenics that could also provide top-side access to power as needed.

Stu said at December 8, 2008 4:37 AM:

All those people who maintain that there is heaps of oil out there are just morons. Tell me why we are bothering to mine shale oil, tar sands if there is heaps of oil. With tar sands you move and process about 4 tonnes of earth to get one barrel of low grade crappy crude. The cost is huge compared to conventional oil, and the environmental damage is outrageous. Would we be doing this if there was heaps of conventional oil out there. Obviously we are running out of production capacity for oil or we wouldn't be exploiting these inferior and expensive options. Say what you want, but you don't find people with lots of good food in their fridges at home scrounging through the rubbish bins for food.

Our way of life is unsustainable, period. And we will have to reduce drasticly our energy and fuel consumption or have the reduction forced on us soon by nature, with no way out.

cancer_man said at December 8, 2008 6:25 AM:

"Maxwell thinks we'll hit the final oil production peak plateau in the 2013-2017 time period."

Hilarious. First peak oil was supposed to hit in the 1990s as foretold in the 1970s, then many predicted 2001-2003, it got moved back to 2008- 2012 and now he is saying 2013-2017. Any takers for 2020 when 2011 rolls around?

And how many times to we have to hear that this generation will have the highest standard of living...oh, until 2100 when things look good again?

The only thing worse than The Club of Rome is Warmed Over Club of Rome.

Randall, isn't there a way to lead off these types of posts with somthing like "Past Pundit"?

D. F. Linton said at December 8, 2008 7:48 AM:

Coal to Liquids/Gas to Liquids/Waste to Liquids. Oil will not run out in a step function. Prices will rise and substitutions will become economic eventually. Using all of the world's coal and natural gas should kick the can far enough down the road for other technologies to arise. Please don't say "global warming", if the choice is condemning ourselves and future generations to poverty or adapting to a warmer planet, take a wild guess how that will go.

Nick G said at December 8, 2008 1:08 PM:

Randall,

Maxwell and Groppe are very good oil analysts, but that doesn't mean they know much about the alternatives.

There's very little danger of OECD nations running out of electricity - if necessary (and with a little bit of sense it won't be) coal will provide an effective (if dirty) bridge to wind, solar, and nuclear. Anything to the contrary is simply unrealistic - it just won't cost that much to build out wind. For instance, to replace current US coal would only be about $2.4T.

PHEV's like the Chevy Volt will allow the average driver to eliminate 90% of their fuel consumption at no loss of convenience. The Volt is likely to cost no more than the average new vehicle in just 5 years (depending on the balance of supply and demand). Consider the Prius: it costs $4k less than the average new light vehicle, and it won't cost more than $4K to add a large battery (the current price estimates for the Volt are inflated to capture early-adopter premia, and a $7,500 tax credit).

Batteries are already perfectly good in every way but cost, and even there the breakeven point is only about $2/gas. Fortunately, it looks like the US and China will push PHEV's as hard as possible in the next few years, despite temporarily low gas prices. Vehicles with electric drive trains (hybrids like the Prius) are already at 3% of new light vehicle sales - that can go to 75% PHEV's in 10-15 years if pushed reasonably hard. Light vehicles less than 6 years old account for 50% of VMT, so we could easily eliminate 50% of light vehicle oil consumption in 15 years, with no loss of convenience, and very little additional cost.

Of course, we could eliminate 50% of light vehicle oil consumption in 6 months, with carpooling (the horror!).

BTW, trains generally already have electric motors (they're serial hybrids, for low speed torque) - the main tracks just need to be electrified.

We're going to face a lot of challenges in the coming decades, including climate change, water shortages, and various limits on resources, and I think Maxwell is including these other challenges. All in all, though, he appears to be overstating the problems from Peak Oil.

dougb said at December 8, 2008 3:08 PM:

Anyone read tom golds book on abiotic oil? The deep hot biosphere. Opinions? Seems people have cried wolf on peak oil quite a few times. Doesn't mean they won't be right eveentually I suppose, but it is making me wonder. All my knowledge on this is secondhand.
So I'm trying to figure out which experts to listen to.

Randall Parker said at December 8, 2008 7:38 PM:

Nick G,

The alternatives now have big industries supplying them. So we have lots of financial data on a variety of PV, wind, and other alternative energy suppliers. I can see big cost reductions in PV. I can also even see substantial cost reductions in biomass.

Wind has been at a higher sales rate for longer though and with a much bigger industry behind it so far the big cost reductions haven't come down the pike yet.

But I'm not that worried about our ability to make electricity. I am more worried about our ability to use electricity in applications where we now use oil. Sure, we can replace oil for heating with ground sink heat pumps. Sure, we can electrify railroads. But I'm still worried about the car batteries.

Carpooling: you are right about the horror. ;>

Fat Man said at December 8, 2008 9:24 PM:

"Sure, speculation plays a role. But speculation alone couldn't take oil from $12 per barrel up to $147."

Actually, Oil traded between $20 and $30/bbl for most of the time between 1980 and 2004. The price busted out of that channel briefly in the late 90s when the Russian/Asian financial crisis drove it down to $10/bbl. But it quickly recovered. The excursion since early 2004 has been truly remarkable, but it also accompanied other signs of a commodities bubble that has now burst. See "Back at Junk Value, Recyclables Are Piling Up" by Matt Richtel and Kate Galbraith in the NYTimes on December 8, 2008. Given the response of commodities prices and currency values across asset classes, I feel confident that the period of 2004 -- 2008 was a bubble. It says nothing about the underlying supply demand relationships which will only be discernible after a period of recovery. Speculation is one thing that happens in a bubble, but it does not cause the bubble nor burst it.

"A lot of technologies get heavily refined for decades before finally fulfilling their promise. Just because a technology is a long time coming does not mean it is not going to come."

Yes, but in most cases it takes about two generations for a technology to reach a plateau. The airplane was invented in 1903. The 747 flew in 1968. The transistor and the computer were invented about 60 years ago. Batteries are a 200 year old technology. Check the chart at this article in the notes section. I don't see the exponential transformation of a technology like I would with a chart on airplanes or transistors. I am not saying it can't happen, I am just saying I won't bet on it.

Larry said at December 8, 2008 11:10 PM:

If peak oil is imminent, it seems silly to worry about climate change.

Much weaker Democracies (the US in the 30's and many more around the globe) survived a worse financial crisis than peak oil implies, even if we get caught by surprise.

Even if climate change doesn't foster a Manhattan project for batteries, etc., a sustained, energy-driven slowdown will.

I like Cowen's directive to look for policies that are robust - i.e., that aren't dependent on precise guesses about the future or specific (i.e., questionable) theories about the same. Investment in alternative energy R&D meets that test.

That said, technology is advancing so quickly now that I have trouble thinking that anything except grossly misguided policy will derail the continuation of the progress of the generations. This era's young live far better than their parents, albeit at the cost of security and older certainties that have melted away like some glacier.

Fat Man said at December 9, 2008 10:31 AM:

"Even if climate change doesn't foster a Manhattan project for batteries, etc., a sustained, energy-driven slowdown will."

Mentioning the Manhattan Project makes me want to scream. In 1942 when the project began, the phenomenon of nuclear fission had been known for than 10 years. At the time, Henri Becquerel's 1896 discovery of radioactivity was less than 50 years in the past. A lot of brand new physics had been developed in the first 30 years of century XX. There was enormous intellectual headroom for important technological advances. And who knows? perhaps one day we will use those advances instead of regarding them as bad ju-ju.

The Manhattan Project was able to exploit the discovery of a previously unknown fundamental forces of the universe. Batteries are in a very different position. They were a century and a half old when the the first nuclear reactor was started, and are now two hundred years old. There are no new physical forces lurking out there to make batteries more useful.

And please keep the Apollo project analogies to yourself as well. You can see the moon from here, the Saturn V was just a scaled up V2. It was a neat hack, but kind of a technological dead end, unless you like Tang. You cannot see a battery that is less than 30" * 12" * 12", weighs less than 300 lbs, and holds 72 kWh. And I don't think you will.

Engineer-Poet said at December 9, 2008 10:48 AM:

You folks who don't think peak oil is in the past, look around.  The only reason we had $147/bbl a few months ago (which the producers did not want) is because the producers were out of capacity (the first time since 1859).  The production from all the supergiant fields is either on plateau (Ghawar) or somewhere between decline (North Sea) and collapse (Cantarell).

Let me repeat this:  PEAK OIL IS IN THE PAST.  IT IS BEHIND US.

Quoth Fat Man:

Another fundamental issue is charging times. They are constrained by the relationship Watts = Volts * Amps. Even a recharge through a 240 V 30 A line (electric ovens and dryers) is only four times faster than a standard 120 V 15 A line. Anything that would make recharge on the fly tolerable would require insulated gloves and shoes and safety eye wear
Yeah, right... all it would take is welding cable and basic sensors to catch poor connections before they overheat.  All you need for that is to watch the voltage drop across the contacts; trivial stuff.
Of course the real question is why. We can manufacture liquid motor vehicle fuels out of anything with carbon in it such as coal or garbage.
You beg the question of whether you can get enough of the raw material, or if you could afford it if you could.

The US produces about 250 million tons of garbage/year, but consumes about 1.3 BILLION tons of oil per year.  Clearly garbage cannot come anywhere close to replacing oil.  Coal-to-liquids costs ~$100,000 for 1 bbl/day of production, and emits enormous amounts of CO2.  There is also the declining quality and increasing impact (levelling mountains) of coal mining.

We can get enough electricity to run our entire transport system without getting in trouble with raw materials or emissions.  The only thing which might let us continue with liquid fuels is algae, and that's nowhere near a sure thing.

Fat Man said at December 9, 2008 9:52 PM:

"all it would take is welding cable and basic sensors to catch poor connections before they overheat. All you need for that is to watch the voltage drop across the contacts; trivial stuff."

Don't forget the insulated gloves and boots, and your safety eyewear. Oh yeah, and your house's main panel.

I agree that garbage does not supply enough carbon to replace all of our current liquid fuel uses. Your 1.3 GT figure for oil consumption is about twice the figure I have worked with. It would take about 500 MT of carbon to do my number and the trash might be only 20% of that. Of course, solid waste does not include liquid waste which is also rich in carbon:-). But, there is lots of coal, and since we are going to make electricity out of sunshine and fresh air, we can use the GT or so of coal we mine every year to make liquid fuel.

Expensive? Maybe. What are the alternatives? I do not believe that electric cars are a realistic one. I also know that countries cut off from oil supplies (e.g. Germany, South Africa) have gone to CtL rather than electric cars. My guess is that we will do the same.

BTW, isn't there a contradiction between worrying about CO2 in the atmosphere and believing that peak oil has been passed.

P.S. algae is a lot more practical if you just want to use it to fix carbon, instead of hoping it will produce fatty acids for bio-diesel.

Randall Parker said at December 9, 2008 10:32 PM:

Fat Man,

Regards Peak Oil and Global Warming: We still have coal to worry about and its consumption has grown enormously due to China's economic growth. China now emits twice as much CO2 as the US and most of that is due to coal.

However, LuŪs de Sousa and Euan Mearns expect atmospheric CO2 concentrations to fall well short of 500 ppm due to Peak Oil. They expect CO2 emissions to peak around 2020. Is that too high? Heck if I know. James Hansen thinks anything over 350 ppm (or somewhere in that neighborhood) is too high. Others think the danger point is higher. I do not think the science is strong enough to let us know.

Algae: It might turn out to be the ticket. But when?

Engineer-Poet said at December 10, 2008 7:17 AM:

Quoth Fat Man:

Don't forget the insulated gloves and boots, and your safety eyewear. Oh yeah, and your house's main panel.
I thought you weren't stupid enough to be serious about this.  Apparently I was wrong.
  • You don't need insulated gear to handle a 220 V plug.
  • You don't need safety glasses either, because the power connection will be cold until fully inserted.
  • My house's main panel is good for 300 amps (1-hour recharge for a Tesla, < 10 minutes for a Volt), but the real fast chargers would be at charging stations.  It would be a small matter to bring 4800 V to a dedicated on-site transformer.
Your 1.3 GT figure for oil consumption is about twice the figure I have worked with.
20 mmbbl/day * 365 days = 7.3 billion bbl/yr.  7.3e9 bbl/yr * 362 lb/bbl / 2000 lb/ton = 1.3e9 tons/year.  We have to replace oil used for diesel, heating, jet fuel and industrial uses too.
there is lots of coal, and since we are going to make electricity out of sunshine and fresh air, we can use the GT or so of coal we mine every year to make liquid fuel.
Don't bet on it.  Not even Sasol is doing CTL any more; it costs too much and pollutes like crazy even discounting CO2.
I do not believe that electric cars are a realistic one. I also know that countries cut off from oil supplies (e.g. Germany, South Africa) have gone to CtL rather than electric cars.
Faith-based energy policy?

PHEVs are proven realistic.  We've got plenty of options for batteries that Nazi Germany and SA did not have (reticulated vitreous carbon lead-acid, advanced lithium-ion, zinc-air, sodium nickel chloride).  All of these are on the market in various forms, waiting for price pressure and government policy to expand into traction batteries.

BTW, isn't there a contradiction between worrying about CO2 in the atmosphere and believing that peak oil has been passed.
Hardly.  Shrinking supplies of oil and natural gas will increase demand for coal, which emits more carbon per BTU (~2x as much as oil for CTL processes).  We can get rid of a lot of the carbon by going electric (esp. moving freight to rail and electrifying the rail system) because the efficiency of ICE drivetrains is so low, and electric can use carbon-free generation without modification.

Doug said at December 10, 2008 8:21 AM:

"Wolf-Dog" said, "And so far the private sector risked very small amounts of money on electric cars and energy sources, and despite this there is enormous progress." That seems to be a fine reason for governments largely to stay out of the matter. If the government becomes a competitor in some capacity, private men of great intelligence and ambition will probably turn their attention to some other, more promising opportunity.

Nick G said at December 10, 2008 11:00 AM:

Well, GM found two suppliers who could provide batteries that met their specs in every way. Cost appears to be the only question mark remaining. Would you agree?

Tesla says that conventional, small format batteries cost only $400/KWH a year ago - large formats, with cheaper chemistries, should be substantially cheaper. The Volt's 16KWH battery would only cost about $5K at $300/KWH, which looks extremely likely. Make sense?

Nick G said at December 10, 2008 11:43 AM:

A small quibble with "Now that oil is at $40 during the worst economic downturn since WWII "

We're not there yet. Based on GDP and employment, it's not especially severe yet compared to others. Not that such an outcome doesn't look fairly possible, but it's important to keep in mind that these reductions in oil consumption aren't due to "the worst economic downturn since WWII".

Nick G said at December 10, 2008 11:47 AM:

" You cannot see a battery that is less than 30" * 12" * 12", weighs less than 300 lbs, and holds 72 kWh. And I don't think you will."

There's credible research that points to 10x increases in li-ion energy density.

In any case, it doesn't matter. The Volt battery, at 16KWH, is sufficient to reduce fuel consumption by 90% for the average driver. Isn't that enough?

th said at December 11, 2008 5:24 PM:

T Boone Pickens, the same guy that said just 3 years ago the future of energy in the US was coal, at that time he was heavily long BTU, now he goes to Clinton birthday parties with Pelosi. James Hansen, he and his gang of liars just had to retract his dan rather about october 08 being the hottest month on record, kinda like saying this is the worst economy since WW2. You got any offers from NPR yet?

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