Data abuse at The Oil Drum

This is just sloppy:

These charts show very similar patterns in the rise of both Oil and the €uro against the Dollar, a clear sign that the record 147 $/barrel had much to do with the weakness of the greenback.

Yes, clearly a 25% rise in the euro ($1.28 to $1.60) caused a 130% spike in oil prices (from $60 to $140/bbl) in 2007/8.

The Oil Drum series on Canadian oil sands

The Oil Drum has now posted the second part of its series on the Canadian oil sands (parts one, two). In my view it's overly dismissive of some of the environmental charges against oil sands, but is nevertheless highly informative and useful for anyone interested.

One chart I liked (I had been searching for a good version) was this from CERA on well-to-wheel emissions for different types of crude. Oil sands come out not much dirtier than other oil sources.

CERA is chaired by Daniel Yergin (of The Prize and of recent Peak Oil notoriety) and is a highly knowledgeable, well-respected, and middle-of-the-road energy firm, so I trust their numbers on this to be pretty robust.

Peak Oilers acting on their beliefs

On the topic of Peak Oil, Ryan comments:

One frustrating thing about doomsday scenario types is that they're never wrong. It's always "just wait, it's coming." In fact, I think this is part of the appeal of following those arguments.

On a related note, the peak oilers I've talked to are so certain these problems are going to happen, yet few take big actions in response. If they really thought these problems were going to happen, wouldn't they buy a farm in Montana, spend their salary on water and food storage, invest in motorcycle companies, etc?

This is a fair point, but not all Peak Oilers suffer from this disconnect between belief and action - The Oil Drum offers believers advice on topics from employment to rainwater harvesting to survival plans for the rich and the not-so-rich in the post-apocalyptic, post-petroleum world.

The latest Peak Oil spat

A reader has asked for me to weigh in on the recent Peak Oil spat; in truth I was meaning to do so, but the commentary has piled up and I felt increasingly intimidated by the task of commenting on it. But here's an attempt at a quick synopsis:

To warm up, on Monday, Daniel Yergin (author of The Prize, the best book about oil I've ever read) wrote a piece in FP saying basically that Peak Oil fears are overblown because the combined response of technology and demand will adjust the world to declining conventional supply.

Then, main provocateur Michael Lynch published an NYT op ed calling Peak Oil "a waste of energy" and making the aggressive claim that oil is destined for $30/bbl in the long term.

The response was quick and furious; not one but two point-by-point rebuttals from The Oil Drum, as well as one by Morgan Downey (the author of the best book about oil I haven't finished reading yet, Oil 101 - I got diverted but it has received great reviews from very credible sources). And from the complete other end of the spectrum, Climate Progress took Lynch to task, going so far as to offer a bet:

Here’s my bet to Lynch. Let’s take the average price of oil from 2010 to 2015. For every $1 a barrel it is below $40, I’ll pay you $200, if you pay me a mere $100 for every $1 a barrel it is above $40.

That should be a no-brainer since I am giving him 2-to-1 and spotting him $10 a barrel off of what he says the right price is.

As I've mentioned before, I fall somewhere in the middle - I think $30/bbl is implausible, but the combination of 1), massive unconventional reserves (oil sands in Canada and Venezuela, deepwater in Brazil and who knows where else) that can be produced at a cost around $50-100/bbl, and 2), the power of high prices to destroy demand and incentivize development of alternative energy sources makes it unlikely that prices will settle much higher than $100/bbl in the next decade. Now, there may be volatility and prices spikes driven by supply shocks - we may have one coming, in fact, as the current recession has slammed exploration capex - but these will only last as long as it takes to deploy additional capital like it was deployed in 2007/2008.

(There is the chance that major geopolitical chaos could result in sustained higher prices, but that isn't the mechanism Peak Oilers are betting on.)

Peak Oil is many things - a mathematical tautology, an effective gimmick:

But regardless of the holes in Hubbert’s theory, peak oil, the gimmick, still serves to remind us that some day the oil will be gone, out of our reach, or most likely of all, extraordinarily expensive. Peak oil, as a way of understanding the real costs–political, economic, environmental–embedded in oil production regardless of the day’s market price per barrel, needs to live on.

... but I do not see it as a rigorous analytical argument that justifies energy alarmism in the short term.

Department of "Really???"

From The Oil Drum:

Over the very long term, it seems to me that businesses will be much smaller and more local and there will be a great deal more manual labor. There were be differences of opinion on what the world may look like, and what time frames will be. Possible outcomes:

--Electricity / no electricity
--Water / no running water
--Electric cars / solar cars / trains / walking
--Current countries / new country boundaries
--Tractors / Draft animals

Should we be preparing for this change now? What career choices do you see as reasonable ones? What educational choices should people be making now?

REALLY??? In our lifetimes??? Could you in good conscience tell a college freshman to "try to focus on careers that don't rely on electricity"???

The Oil Drum

Faithful reader and lonely commenter Ryan asks:

Would love your comment on the Oil Drum. I have an uncle who's obsessed with it whom I argue with all the time.

Most things I've seen on the site are alarmist, don't understand economic adjustment paths, and don't cite reputable people.

My headline answer is that it is a great aggregator of information, but doesn't add a lot of value as a filter and the quality of its commentary can vary widely. I recently re-added it to my RSS feed, although it's lower on my resources reading priority list (the WSJ's Environmental Capital is on top). Among the positives are nuggets of wit and the most comprehensive daily round-up of energy news I know of.

It's almost never concise.

It is very concerned with Peak Oil, often putting out alarmist scenarios and disdaining commenters who dare to dissent (a bit like Paul Krugman). In general its commenters are have pretty deep industry knowledge, so its current market intelligence is pretty good, but then you get future forecasts like this ("Linear extrapolations of historic EROI trends") which just make you roll your eyes:


So there is a fair amount of interesting content, but posters are fallible and sometimes have their own agendas so it should not be taken for the Gospel. I'm not saying that Peak Oil is necessarily wrong, but it's not a certainty either (except in the most tautological sense) and The Oil Drum, while it has its place in a portfolio of sources, is not the best place to find a balanced conversation.

The Oil Drum is back (on my RSS feed)

I just added The Oil Drum back to my RSS feed. I had unsubscribed because their posts tend to be on the longer side, but I figure since now I'm actually blogging (as opposed to just reading blogs) on resource-related topics, I can't afford to not keep track of the generally vibrant discussion they host on energy-related topics.

When I went to their site for the first time in a while, I couldn't help but chuckle at the quote in the upper lefthand corner of the page:

“My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel.”
—Saudi saying

Indeed.