Monday, July 22, 2013

Being A Peak Oiler Means Never Having To Say You're Sorry

It has been about 15 years now since Colin Campbell and Jean Laherrere published their famous article in Scientific American, entitled "The end of cheap oil?" in which they predicted that oil supplies would soon peak and then decline. That article kicked off the modern peak oil movement1. So we can say that the peak oil movement is approaching its 15th birthday.

With that in mind, I think we should have a little retrospection. The peak oil movement1 is old enough now to reflect upon its history, its prior predictions, and its track record.

The peak oil movement has produced a long series of predictions, such as:

  • Production of all liquid hydrocarbons would peak in the mid-2000's or shortly thereafter (predicted by Campbell, Deffeyes, Laherrere, Aleklett, and may others)
  • Production of all liquid hydrocarbons would decline almost immediately thereafter, at about 2% per year (Campbell, Deffeyes, Laherrere, and many others)
  • Unconventional sources of oil, such as fracking, tar sands, and so on, would make little difference, and would not significantly delay the decline (Campbell, many others)
  • Oil production in the Kingdom of Saudi Arabia (KSA) would peak and then start declining in the mid-to-late 2000s. (Simmons, Stuart Saniford, WestTexas, and many others)
  • Natural gas production from all sources (including unconventional gas and fracking) would peak before 2010, and would immediately start declining rapidly (Simmons, Hughes, ASPO newsletter, ASPO Ireland, and many others)
  • Coal would peak around 2011 (Patzek)
  • Civilization would collapse (Savinar, Duncan, Heinberg, Kunstler, Orlov, Hansen, Ruppert, McPherson, and many, many others)
  • Global trade would end or be severely curtailed. Agriculture would re-localize. (Rubin, Kunstler, many others)
...and many other predictions, many times.

All of those predictions have been wrong. The peak oil movement has nearly a 100% failure rate of prediction, across many years, across an astonishing variety of domains.

What's more, many of the predictions of the peak oil movement, have not only been wrong, but drastically wrong. Predictions about a "natural gas cliff" in the late 2000's; predictions about civilization rapidly collapsing, and then reverting to a pre-industrial state; predictions that fracking would never work, or would amount to almost nothing; predictions that ocean shipping would soon end; and so on. Predictions like those were broadly shared within the peak oil movement. They were not only wrong, but drastically wrong.

Failed predictions are not the biggest problem of the peak oil movement, however. The biggest problem is how they respond when one of their predictions fails.

Every time a peak oil prediction fails, which is often, the prediction is immediately forgotten about within the peak oil movement, and is never mentioned again. There are no questions about why the prediction failed. Nobody ever asks, "what went wrong?" There is no retrospection. The theories are not modified in light of new evidence. Every time a prediction fails, peak oilers immediately forget about it and then just issue a new prediction; and when that fails too, which inevitably happens, it too is forgotten. Sometimes a few peak oilers will try vigorously to change the subject, when asked why a prediction failed, or will claim implausibly that the prediction had never been made. They do not, however, address the issue. Clearly, peak oilers are capable of forgetting.

The problem is, that nobody outside of the peak oil movement, forgets. People outside of the peak oil movement, are not part of the unspoken consensus to forget every failed prediction. They wonder why these predictions have failed. When they see the leaders of the peak oil movement simply dodging this issue, over and over again, it makes the movement appear like quackery. By forgetting their failures, the peak oil movement may comfort its members, but it further alienates itself from the wider public.

An example of this, is a recent post on The Oil Drum. The Oil Drum is shutting down at the end of this month, after 8 years of service. It's authors claim that the reason for it shutting down has nothing to do with the decline of readership after repeated failed predictions. No. Instead, one of the editors of The Oil Drum earnestly claims that they decided to shut it down because they've been so right that it would be pointless to continue repeating such correct things:

"The facts, in neither case, change, but the amount of new information while accumulating ... is often repetitive or confirmatory of earlier stories and thus harder to turn into interesting and exciting new material"

I don't feel that is an accurate recounting of the history of the peak oil movement. Nor is it an accurate recounting of the past content on The Oil Drum, or other peak oil websites. If I went back to 2007, I could find a fairly broad consensus, in peak oil circles, that industrial civilization was about to collapse and revert to a pre-industrial state. It's not clear to me, at all, that current stories are confirmatory of that. Even if I ignore the doomsday prophecies, and focus only upon the more sober elements of the peak oil movement, I come across graphs like this one (from Colin Campbell), showing that production of all liquid hydrocarbons should have declined by 25% by now.

This issue of the "memory hole" is very important, because of frequent claims by peak oilers that their movement is a science. Peak oilers frequently claim that their theories are scientific, that their predictions are based upon science, that their conclusions are derived in a straightforward fashion from the laws of thermodynamics, and that their theory is akin to climate science (people deny it because they're misled).

I must remind peak oil adherents that being scientific has nothing to do with just throwing around scientific-sounding terms. Nor does it have anything to do with mentioning the word "thermodynamics" frequently, or drawing tenuous analogies between themselves and climate scientists. Actual science requires falsifiable theories, something which the peak oil movement conspicuously lacks. In science, if a hypothesis fails in its predictions, completely, over and over again, then the hypothesis is wrong and must be modified or abandoned. You cannot just use the same hypothesis to issue another prediction (like, peak oil is perpetually five years in the future) because that method lacks any criterion of falsification. That method could simply be repeated, indefinitely, until peak oil actually occurs, whenever that will be.

It's not useful to retreat into saying "oil must peak some day" and call that a "fact". That is the method employed most recently by many peak oil writers. They say that peak oil is a "fact" because oil must peak some day. While true, that claim is obvious, extremely imprecise, and not a useful prediction. Even the major oil companies, such as Exxon, Shell, and Total, acknowledge that oil will peak some day, have always acknowledged it, and realized it before the peak oil movement ever came along. It's simply repeating a truism to say that oil must peak some day. It's simply a case of forgetting their earlier predictions, and then making their subsequent predictions less and less precise, until what they are saying is so general that it says almost nothing.

The question is whether the peak oil movement has been correct about any specific prediction, or anything which others denied. On the points upon which peak oilers differed from anyone else, they were mistaken. Although oil will certainly peak some day, and then decline, still, the methods from the peak oil movement for predicting when that will occur, how rapid the decline will be, and what will happen to civilization more generally, have been totally incorrect.

The peak oil movement is not science--quite the opposite. It does not contain any valid, specific, predictive hypotheses which were confirmed by subsequent evidence. It has not been honed in light of new evidence. It contains mistaken theories and methods, which have not been abandoned. Thus, the peak oil movement cannot be called science.

The peak oil movement is an ideology which is committed to a specific conclusion, no matter what. As such, the peak oil movement is more like an ideological group. It pretends to be scientific in order to comfort its members, but its pretensions to science are totally superficial. It lacks anything resembling a scientific method.

I realize these points must be very difficult for peak oilers to accept. Many peak oilers have devoted a considerable fraction of their lives and their resources, to the conclusion that oil would soon peak and civilization would soon falter. It must cause them significant suffering to consider that everything they thought about this topic, everything they spent so much time upon, has been wrong. That goes doubly for the many peak oilers who expressed very little uncertainty about these predictions.

Why, then, am I writing this? Do I want to embarrass peak oilers?

It has been fifteen years now since the peak oil movement began. That is long enough. It's time to acknowledge that there are serious problems with even the most fundamental tenets of peak oil theory2. I am not saying that the entire thing has been a waste. I'm sure many people learned a great deal about oil extraction, energy, and other topics, from reading The Oil Drum. However, it's time now to acknowledge that peak oil theory was wrong. It's time either to move on, or to make serious modifications to the theory, and to explain why its predictions have failed and why the newer theory avoids the prior mistakes.

There is a peak energy blog called "question everything", which has the following byline:

"When what is happening in your world doesn't make sense, when it doesn't conform to your beliefs about how things should work, it's time to ask hard questions."

Indeed, it's time to ask hard questions. It has been time to ask hard questions, for at least the last five years. So far, those hard questions have not been asked. Better late than never.

Endnotes

1. By "peak oil movement", I'm referring to the movement unintentionally started by Colin Campbell, Jean Laherrere, and so on. The movement was based upon the theory that global hydrocarbon production could be predicted using extrapolations of curves, such as creaming curves, Hubbert linearization, and so on. Using such curves, the movement predicted that global hydrocarbon production would imminently peak and then decline, which would cause severe disruption to industrial civilization, such as re-localization, and so on. The movement mostly congregated on websites such as "The Oil Drum", "PeakOil.com", "Life After The Oil Crash", and so on. That's who I'm referring to, when I say "peak oil movement". I'm not referring to everybody who believes that oil will peak some day.

2. By "peak oil theory", I'm referring to the theory that global hydrocarbon production could be predicted using extrapolation techniques such as Hubbert linearization, creaming curves, and so on. I am referring to the theory that peak oil was very imminent, and subsequent declines would be fairly rapid. I am also referring to the related belief that imminent peak oil would cause major disruptions to industrial civilization, such as re-localization, and so on. Those things are what I'm referring to, when I say "peak oil theory". I'm not referring to the idea that oil will peak some day, which almost everyone believes.

8 comments:

  1. Tom,

    Thank you for your insightful analysis and writings on energy and the economy. I find your perspective to be a breath of fresh air between the two extremes discussing peak oil who tend to unproductively talk past each other. I agree that it is worth "asking the hard questions" and attempting to modify the theory of how declining oil production will impact the economy and society. I believe that your "New Year Predictions" is a good starting point for this conversation.
    (http://bountifulenergy.blogspot.com/2012/12/new-year-predictions.html)

    My understanding of (part of) your position is as follows. The price of oil will continue to rise (in the short and medium term). At a certain price, it will make economic sense to choose substitutes for oil. In the transportation sector, we have current technology (hybrid vehicles) and emerging technology (battery electric vehicles) for personal transportation. For shipping over land, we will use more rail and less trucking. For shipping over water, at a certain price anhydrous ammonia will be an economically viable fuel. Air travel is a more difficult challenge, and there is no current viable substitute for petroleum in this mode, so demand may drop in response to increased price, at least in the near term.

    Regarding substitution in the economy, my understanding is that most historical examples involve moving from stable-priced to lower-priced goods. My question is, what are examples of goods (in any sector, not just energy) where substitution has occurred for goods where prices are continually increasing. And what happens to the cost of the substituted goods over time in these examples?

    CS

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  2. CS,

    Thanks for your thoughtful remarks.

    Wrt your question about goods substitution during increasing prices. One example which pops to mind was the substitution of aluminum for copper in computer cabling, such as ethernet cables. Back in the late 1990s, almost all ethernet cables (and other data cables) were made out of copper.

    Copper is a fairly uncommon element, and there's not enough of it to continue making computer cables for very long. Copper prices started increasing.

    The industry switched to aluminum at some point. I think the switch happened about 5 years ago. These days, computer cables have very little copper in them.

    I suppose the issue is becoming less important, because more people use Wifi nowadays anyway, which is another substitute for copper cables. However, if you but an ethernet cable at a store, it's not made out of copper anymore.

    Aluminum is about 2000x more abundant than copper, and it's one of those elements which will probably never run short, because it's one of the 8 or so elements which are super-abundant and which make up most of the crust of the earth. Furthermore, it can be recycled indefinitely. We'd run out of space before running out of aluminum.

    Aluminum is worse than copper for computer cables. Ethernet cables made of aluminum have a shorter maximum distance without using repeaters. However, I doubt if even 1% of people noticed the transition of computer cables from copper to aluminum. I didn't notice. I read about the transition after it had happened.

    -t

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    Replies
    1. Thanks, Tom.

      My goal in asking about other substitutes is to understand how eventual substitutes for oil will impact the economy, and what the transition period (say 10-20 years) might look like. You gave the example of substituting aluminum for copper in ethernet cables. It appears that copper cost about $1/lb. from 1989 to 2004, and then jumped to about $3.50/lb. since then. Aluminum cost about $0.70/lb. from 1989 to 2004, and then jumped to about $1.20/lb., and may be declining from that high.

      Copper: http://www.infomine.com/investment/metal-prices/copper/all/
      Aluminum: http://www.infomine.com/investment/metal-prices/aluminum/all/

      ***

      I found a more direct example of energy substitutes. Following the Arab Oil Embargo of 1973, oil prices roughly quadrupled. The US (and other industrialized oil consumer nations) responded in two ways over more than a decade. 1) On the supply side, we found new non-OPEC sources of oil that were economical at the higher prices, such as Alaska and the North Sea. 2) On the demand side, we made efficiency gains (in vehicle mpg and other areas), and also made substitutions in electricity generation and industrial power from oil to coal and natural gas (and nuclear to some degree).

      The share of oil in US electricity generation dropped from a high of 20% to around 10%. The share of coal in electricity generation increased from about 12% to about 22%. The price of coal rose from about $20 in 1970 to about $55 around 1980 (in 1997 dollars), and despite falling since then has never reached its previous low price.

      The nominal price of electricity rose from about 2 cents/kWh in 1973 to about 6.3 cents/kWh in 1983, or 3.15 times higher. Inflation over that period resulted in general prices that were 2.25 times higher. So electricity prices rose faster than overall prices (inflation rate) during the 1970s energy crisis.

      Over a longer period, the nominal price of electricity rose from $0.02/kWh in 1973 to $0.0885/kWh in 2006, which is 4.425 times higher. The inflation rate over that period is comparable, equivalent to a price that is 4.5 times higher in 2006 than in 1973. This is consistent with your view that the economy will adjust to substitutes, and that the shorter term impact is more disruptive than the longer term impact. Coal does remain more expensive today than before it became one substitute for oil in electricity generation. It is possible that electricity prices have not risen as much as coal prices in part because of efficiency gains in power plants.

      Electrical generation fuels: http://www.wikinvest.com/stock/Foundation_Coal_Holdings_(FCL)
      Retail electricity nominal prices: http://www.data360.org/dsg.aspx?Data_Set_Group_Id=397

      Is it likely that energy prices (beyond just oil) will never be lower than they are today (inflation-adjusted), and in fact may rise either continually or toward a new plateau?

      CS

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    2. CS, you said:

      "Is it likely that energy prices (beyond just oil) will never be lower than they are today (inflation-adjusted), and in fact may rise either continually or toward a new plateau?"

      I think energy prices will reach some new plateau in the future. Whether that plateau is above or below what we pay now, is hard for me to say. I think it depends upon technological developments which are difficult to predict, especially for me, since I'm not a battery engineer.

      Costs of renewables and batteries are falling fairly quickly. At this rate, perhaps they will one day be cheaper than what we pay now for energy and oil. That seems plausible.

      I don't think per-capita energy costs in first world countries will change enough in the long run to make much of a difference to living standards there. In the short run there may be bubbles and valleys and transitions, but they will pass. Once renewables and electric cars and trucks are deployed on a wide scale, I'd guess their prices will be similar to, or slightly higher than, what we pay now. Their prices are only slightly higher, according to all the estimates I've read, than what we have now. Especially for electricity since that has many alternatives which are only slightly more expensive than what we pay now, and anyway, most of an electricity bill pays for the grid, which isn't changing too much.

      From what I've read, the cost of an an-electric car, such as the Nissan Leaf, will decline to about $22,000 USD (from about 28,000 now, speaking in inflation-adjusted terms here) as they are mass-produced and as batteries become cheaper. In which case, their total cost of ownership will be slightly lower than the equivalent Nissan Versa hatchback that they replace, when you take fuel costs and electricity costs into account.

      I would guess that solar panels will fall enough in price that they will be used for peak shaving in desert areas, during the day when everyone uses their air conditioning. In desert areas, people use their air conditioners during the sunny mid-day which perfectly suits solar panels. I would guess that solar panels will eventually be widely deployed for this purpose (like within 15 years) even without any government subsidy. This matters a lot, since air conditioning uses 1/3rd of electricity during peak periods, according to what I read recently.

      I don't think we'll see large reductions in carbon emissions any time soon, unfortunately. Instead, I think we'll find out what global warming looks like. (Or rather, people born recently will find out. I'll be dead). We may reduce emissions in the industrialized countries, if we switch to renewables and electric cars over the next few decades. However, China will still increase its emissions. China won't prematurely shut down the massive number of coal-fired power plants they're building now. Neither will India or anywhere else in the developing world.

      My broad guess, is that China and India will eventually rise to 1st world living standards, and we will all eventually transition from fossil fuels to renewables, but not in time to prevent global warming and ocean acidification.

      -Tom S

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  3. Tom:
    "I don't think we'll see large reductions in carbon emissions any time soon, unfortunately. Instead, I think we'll find out what global warming looks like."

    Certainly we won't with your policy preferences (?), it seems. However, if policies to deal with that issue were adopted (which surely isn't PHYSICALLY impossible, at least, and according to some extremely necessary), I wonder whose predictions about the future would turn out to be closer - yours or what you call "the peak oil movement"?

    I have never considered myself part of a "peak oil movement", by the way, but I have over the last 5-10 years read and heard many of their views. I agree that many people in that "movement" (or whatever) draw more or less weird-sounding conclusions from all kinds of data... but I was always more interested in the data than other people's conclusions drawn from it, and feel like I have learned significantly about the world and energy thanks to people who try to analyze peak oil etc.

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  4. Asdf:
    "Certainly we won't with your policy preferences (?), it seems."

    Asdf, the article says nothing about my policy preferences.

    For goodness sake, don't respond to my pointing out failed predictions, by trying to infer bad motives or nasty political preferences. My policy preferences are not relevant here.

    "I wonder whose predictions about the future would turn out to be closer - yours or what you call "the peak oil movement"?"

    That's easy--mine. Peak oilers and energy decline adherents badly misunderstand the most basic issues here, which explains why their predictions fail over and over again, month after month, year after year, decade after decade. I do not share their confusion, as most people don't.

    Almost any expert in the world, whose expertise was broadly related, could provide you with far better predictions than anyone in the peak oil/energy decline movement.

    -Tom S

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  5. Hi Tom,
    I love your blog. As someone who has suffered a lot of anxiety over peak oil doomerism it's really nice to get the other side of the story. I was wondering if you could comment on this article

    http://m.smartplanet.com/blog/take/the-21st-century-population-crash/1117
    It worried me quite a bit and I'd love to get your perspective.
    Thanks!!

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  6. Sar-uh,

    I'm glad you liked the blog.

    "As someone who has suffered a lot of anxiety over peak oil doomerism it's really nice to get the other side of the story."

    Don't worry too much about peak oil doomerism. Civilization is never collapsing because of peak oil, nor is it collapsing because of energy decline of any kind.

    -Tom S

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