The Oil Drum: Local

This is the post where I try and draw my own conclusions from the Conference. And not recognizing many of the papers in this does not mean that they weren’t important, but rather that from my own perspective that this is what I got most from.

The recurrent word that cropped up, again and again, was Scale. It was an attempt by the speakers to try and convey to their audience the size of the problem that is coming at us, increasingly rapidly. That one word encapsulates the difference between those who talk of the world energy problem in Quads (quadrillion Btu’s), as opposed to those that talk of the solution in terms of kilowatts and Megawatts. (The handy Dashboard on my Mac tells me that a Megawatt is 56,869 Btus/min. A Quad is 1,000,000,000,000,000 Btu.) The current shortages of gasoline are largely brought about by a transient closure of refineries that affects around 1 mbd of oil supply. The time is not far distant when such shortages will become more regular as we compete for supply in a more competitive global market.

The tipping point that seemed still a comfortable distance away three years ago when the American ASPO meetings began in Denver, is now just about here. And the solutions that have been discussed do not approach, as yet, the millions of barrels a day (mbd) of fuel replacement that we may need before long. At the same time, to return to the theme of my own paper, we do not have the educated human resource that we need. Data from my Dean of Enrollment shows that ACT report national high school student interest in engineering was at 14% in 1982. By 1992 it had dropped to 9%. By 2005 it was down to 5%, and has fallen below that since.

This is a guest post by WebHubbleTelescope.

I find it interesting that much of the mathematics of depletion modeling arises from considerations of basic time-series analysis coupled with useful transforms from signal processing. As a case in point, Khebab has postulated how the idea of loglet theory fits into multi-peak production profiles, which have a close relationship to the practical wavelet theory of signal processing. Similarly, the Oil Shock Model uses the convolution of simple data flow transfer functions that we can also express as cascading infinite impulse response filters acting on a stimulated discovery profile. This enables one to use basic time series techniques to potentially extrapolate future oil production levels, in particular using reserve growth models ala Khebab's HSM or the maturation phase DD. ^[1]

In keeping with this tradition, it turns out that the generalized Dispersive Discovery model fits into a classic canonical mathematical form that makes it very accessible to all sorts of additional time-series and spatial analysis. Actually the transform has existed for a very long while -- just ask the guy to the right.

It seems as though I have inhabited two different worlds in the past 24 hours. I went from the relatively small (500 folk) meeting in Sacramento where Peak Oil is viewed as imminent, to the halls of the Convention Center in Las Vegas, where the Quadrennial MinExpo is showcasing the latest machines to over 41,000 folk involved in the Mining Industry. It overflows that very large (600,000 sq. ft) building and extends out into the parking lot. Here, with an industry in considerable profit, the displays were large and much more optimistic than I have seen them in previous years. The two meetings were, however, joined by a common complaint that the human resource, the engineers and scientists needed by both communities, are in critically short supply.

Wandering the booths, with only one day to catch all the new and different products, I did come across a couple of items that are, I believe, worth a brief comment before I write a concluding post to wrap ASPO-USA 4. In that post, I will give some of my own interpretation of the conference.

Note: This is an updated version of a post from earlier this week. Some more recent quotes have been added at the end of this post.

Despite recent optimistic news on new shale gas reserves, the totality of North American natural gas production remains on a treadmill, as the grim EROI reaper has relentlessly raised the marginal cost of producing- to currently above the price of natural gas futures. While shutting in production is not easy to do once wells are drilled, low prices with rising cost structures can put the crimp on future expansion. Chesapeake (CHK), the largest US natural gas producer and operator of land rigs, announced last evening they will be curtailing production, cutting their rig count and reducing capital expenditures. (Of course, it is possible that this is the first example of an energy production casualty due to the credit crisis if the reason for this capex drop is lack of easy funds...)

In recent years, each time Chesapeake Chairman Aubrey McClendon announces some production or capex decreases, it has marked a bottom in the commodity (see graphic below fold). As this will surely be followed with similar announcements by other E&Ps in the near future (I expect Sanridge Energy and Petrohawk Energy soon), there will soon be a drop in monthly gas production--perhaps as much as 5%.

Every year in late summer, you will start hearing references in the media about the conversion to winter gasoline, such as the following (originally in the Bradenton Herald, but the link is long dead):

Motorists can thank a mild hurricane season in the Atlantic for the lower gas prices, according to the American Automobile Association.

Other factors include the end of the summer driving season and a cheaper winter fuel mix.

Gas stations sell a special, more expensive fuel blend during the summer to cut down on smog during hot months. Stations nationwide will start selling a less-expensive winter fuel blend Friday, which could lead to even lower prices, analysts said.

So what does this mean, and why does it make winter gasoline less expensive?

NB: This is a reposting of an article written by Robert two years ago on how winter gasoline differs from summer gasoline, and why this tends to make winter gasoline less expensive than summer gasoline. We also now have a lot of reports of gasoline outages due to short supply following Hurricanes Gustav and Ike. Feel free to discuss those in this thread or scroll down to the refinery/pipeline/gas shortages thread.

Day three of the ASPO-USA Conference in Sacramento was focused on where we go from here with fuels other than oil. It began with a session on coal and natural gas reserves and the potential of biofuels. There was considerable information on each of the slides that each of he presenters provided, and so I encourage you to go and look at the presentations which should be up soon on the ASPO site.

David Hughes had the first slot, and talked of the issues that are raised by coal consumption. David began by contrasting a quote by Emerson that

Coal is a portable climate. It carries the heat of the tropics to Labrador and the polar circle; and it is the means of transporting itself whithersoever it is wanted. Watt and Stephenson whispered in the ear of mankind their secret, that a half-ounce of coal will draw two tons a mile, and coal carries coal, by rail and by boat, to make Canada as warm as Calcutta, and with its comfort brings its industrial power.

with the more recent pronouncements of James Hansen that coal is the enemy of the human race.

Ed's Note: The intent of this thread is to combine two different discussion items:

1. A one-hour special on the oil situation, The Hunt for Black Gold. It features a discussion of peak oil, an interview with Sarah Palin, Matt Simmons, Randy Udall, and a closer look at oil company profits, and a discussion of alternatives. It was shown on CNBC yesterday, and will be shown again today, Thursday, Sept. 25 at 1 a.m. ET and on Sunday, Sept. 28 at 10 p.m. ET.

2. Heading Out's discussion of Day 2 of the ASPO-USA conference, which can be found below the fold.

hit $160 before it hits $85

hit $85 before it hits $160

stay in a trading range between $85 and $160

it's still all geopolitics and other "above ground factors," so what does a price signal mean anyway?

it's all about the varying dollar value and speculation...why bother?

Shortly after Hurricane Ike hit, I wrote an article called Implications of a Ten-Day Refinery Outage. It is a few days later, and we know a little more. The purpose of this article is to give an update on the situation.

Based on what I am seeing now, we are likely to see significant gasoline outages in the next few weeks. These may not be as long-lasting as those with Katrina, but they may temporarily be more severe, at least in some parts of the country. Diesel may or may not be a problem. We are an exporter of diesel, so can theoretically reduce exports if need be. Also distillate (used for diesel) supplies are currently at a more adequate level than are gasoline supplies. Jet fuel stocks seem to be at a relatively adequate level, so shortages may not be a problem.

Figure 1. EIA Weekly Gasoline Stocks (includes blending stocks)

As one can see from Figure 1, EIA weekly gasoline stocks are diving, on a path to 180 million barrels of gasoline or less, in the next week. Weekly gasoline supplies when Katrina hit in 2005 declined, but not nearly to the extent we are seeing today.

Figure: Japanese researchers testing uranium extraction from seawater using a braided adsorbent fiber (JAEA 2006). Is this the way of mining of the future?