The Future of the Oil Industry: Part 2

THE FUTURE OF THE OIL INDUSTRY
PART 2: The Hubbert Peak

Renewable energy sources are those that can be replenished naturally in a short period of time and, as we’ve seen before, petroleum would need millions of years to form. This is why we call it a non-renewable resource: one that cannot be replaced once it is consumed. If this is true then the most important question that we should be making is when are we going to run out of it? In 1956 a Shell geologist, M. King Hubbert, presented a paper at a meeting of the American Petroleum Institute proposing that the total amount of extracted oil over time would follow a logistic curve. According to this curve, once we have extracted half of the total available oil we would reach its peak (known as the Hubbert Peak or the Peak Oil) and, after that, production will inevitably decline.



Hubbert predicted that the oil production in the continental USA would peak between 1965 and 1970, prediction that was proven true after 1971, for production in the USA has been decreasing since then. It’s said that if the politically created oil shocks of the 1970s hadn’t happened, Hubbert’s prediction that the world’s petroleum production would peak by 2000 would have been also proven correct. Many scientists believe that the world’s peak oil has been delayed for about 10 years, and this would mean that we’re about to reach that time.

So, when are we running out if it?

As Life After the Oil Crash puts it: the issue is not one of "running out" so much as it is not having enough to keep our economy running. In this regard, the ramifications of Peak Oil for our civilization are similar to the ramifications of dehydration for the human body. The human body is 70 percent water. The body of a 200 pound man thus holds 140 pounds of water. Because water is so crucial to everything the human body does, the man doesn't need to lose all 140 pounds of water weight before collapsing due to dehydration. A loss of as little as 10-15 pounds of water may be enough to kill him.

If we consider additionally that the world’s population is growing exponentially and that our industrialized world employs more energy than before (see Part 1), we can see that if we reach the point in which the shortfall between demand and supply is as little as 10-15 percent, we could face serious economical impacts.

So, when are we reaching the Peak Oil Point? The Association for the Study of Peak Oil and Gas estimates that it will be reached by year 2008.



Petroleum companies, even though claim publicly that we are very far from the Peak Oil, have started trying to secure as much global reserves as they can:

• December 1998: BP and Amoco merge
• April 1999: BP-Amoco and Arco agree to merge
• December 1999: Exxon and Mobil merge
• October 2000: Chevron and Texaco agree to merge
• November 2001: Phillips and Conoco agree to merge
• September 2002: Shell acquires Penzoil-Quaker State
• February 2003: Frontier Oil and Holly agree to merge
• March 2004: Marathon acquires 40% of Ashland
• April 2004: Westport Resources acquires Kerr-McGee
• April 2005: Chevron-Texaco and Unocal merge
• June 2005: Royal Dutch and Shell merge
• July 2005: China begins trying to acquire Unocal

What would be the consequences of the Peak Oil?

If we cross the Peak Oil, we would face a serious oil shortage, which effects will depend on the rate of decline and the development and adoption of alternatives. If no alternatives are developed, we would not be able to satisfy our energy needs, which in turn would lower our living standards. Scenarios range from doomsday scenarios to faith in the market economy and new technologies to solve the problem but, in any case, petroleum will be a scarce resource and then its price it’s going to rise.

I thought petroleum companies were pushing prices up…

Yes, it’s a common view. Of course, the fact that petroleum companies are among the most profitable businesses in the world doesn’t help. But they’re actually rich because the price of the petroleum is rising, and it’s not the other way around. Let’s put it this way: petroleum is the most important energy source that we have today, but there are many others who would love to occupy its place. If petroleum prices rise too much, the other energy sources will become cheap in comparison, and could take a piece of the pie. And, believe me: Oil Companies don’t want to share a single crumb of the pie!

The problem is that petroleum prices have escaped from their control. The world is consuming more and more oil, and Oil Companies are producing at almost their maximum capacities. The fact that they’re not able to put more petroleum on the market (controlling its price) is clear evidence that we may be reaching the Peak Oil…


In Part 3 we’re going to see the different scenarios for the world in case we’re reaching the Peak Oil.

See you here back soon!
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Some of the data mentioned here was obtained from the following sources, and you’re invited to visit their pages:
- Wikipedia (Hubbert Curve)
- Wolf at the Door
- Hubbert Peak of Oil Production
- Life After the Oil Crash
- Association for the Study of Peak Oil and Gas
- San Francisco Chronicle

The Future of the Oil Industry: Part 1

THE FUTURE OF THE OIL INDUSTRY
PART 1: Petroleum? What is it?

The word Petroleum comes from the Greek words Petra and Oleum, meaning rock oil. It’s also known as crude oil, naphta and black gold. Petroleum is an important primary energy source, and is also raw material for plastics, solvents, pesticides and other chemical products.

There are many theories explaining the origins of the Petroleum, but let’s stick to the one that’s the favorite of most geologists. According to them, ancient vegetation and prehistoric animals’ remains were compressed and heated over millions of years under thick sedimentary layers of material, metamorphosing first into a waxy material (the kerogen), and then into oil. This oil accumulated into porous rocks forming reservoirs or oil fields, from which the liquids are recovered.

Once we find one of those oil fields, the extraction stage starts. With the help of highly specialized equipment we drill wells until we reach the reservoir. If the pressure is high enough, petroleum will flow by itself without the help of any pumping work. This is called primary oil recovery, and usually we can extract up to 20% of the total volume this way.

When the pressure drops, we need to either install a pump inside the reservoir, or to inject water or gas to maintain pressure. This is called secondary oil recovery and we can get an additional 5 to 15% of petroleum from the field.

Tertiary oil recovery will reduce petroleum’s viscosity in order to pump more of it. There are many techniques to do this but, as they all are very expensive, they won’t be applied unless the oil price is high enough to compensate the costs. Tertiary recovery allows another 5% to 15% of the reservoir's oil to be recovered.

So far, we don’t have either the means or the expertise to recover a full 100% of the petroleum of any given oil field.

What happens to petroleum once extracted?

Once extracted, petroleum goes into refineries where it is boiled to separate the different phases. Basically we heat the petroleum to a temperature where all the light gases (methane, ethane, propane, etc.) evaporate, so we can take and store them. After this, we raise the temperature a little bit more, and we get gasoline. After all of it is stored, we repeat the cycle and we get jet fuel, kerosene, diesel, gasoil, paraffin wax and finally asphalt.

So, we use petroleum just as a fuel, to build roads, and to make plastics. Don’t we?

Even if it’s not easy to see, oil provides more energy than we can imagine, and it’s therefore a substantial part of almost any given human activity. According to Dale Allen Pfeiffer, in the United States 400 gallons of oil equivalents are expended annually to feed each American (as of data provided in 1994). Agricultural energy consumption is broken down as follows:

• 31% for the manufacture of inorganic fertilizer
• 19% for the operation of field machinery
• 16% for transportation
• 13% for irrigation
• 08% for raising livestock (not including livestock feed)
• 05% for crop drying
• 05% for pesticide production
• 08% miscellaneous

If we consider the additional energy we spend on packaging, refrigeration, transportation to retail outlets, and household cooking, we’ll see that we spend nearly 10 calories of fossil fuels to produce 1 calorie of food eaten!

But we’re not talking only about food…

• The construction of an average car consumes the energy equivalent of approximately 27-54 barrels, which equates to 1,100-2,200 gallons, of oil. Ultimately, the construction of a car will consume an amount of fossil fuels equivalent to twice the car’s final weight
• The production of one gram of microchips consumes 630 grams of fossil fuels. According to the American Chemical Society, the construction of single 32 megabyte DRAM chip requires 3.5 pounds of fossil fuels in addition to 70.5 pounds of water
• The construction of the average desktop computer consumes ten times its weight in fossil fuels
• The Environmental Literacy Council tells us that due to the "purity and sophistication of materials (needed for) a microchip, the energy used in producing nine or ten computers is enough to produce an automobile"

Being our society so dependant on petroleum, we can understand why it is called black gold, why everybody is following with much interest the fluctuations of its price, and why many people are getting desperate after it has surpassed the 50 dollar per barrel barrier. Of course we can understand also why so many wars have been ignited on its name...


Please stay tuned for Part 2. We're going to try to answer the questions: is petroleum an infinite resource? Are we running out of petroleum? Are petroleum companies really pushing prices up?

See you here soon!
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Some of the data mentioned here was obtained from the following sources, and you’re invited to visit their pages:
- Wikipedia (Petroleum)
- Shell Exploration & Production
- Eating Fossil Fuels
- Life After the Oil Crash
- American Petroleum Institute
- US Energy Information Administration

The Future of the Oil Industry: Introduction

THE FUTURE OF THE OIL INDUSTRY
INTRODUCTION: The Chain Letter

Two or three weeks ago I received an email from a good friend asking me (and many other people) to “stop buying petrol and gasoline from the two major Petroleum Companies to force them to lower their fuel prices”. This email started a brief discussion with another friend, with whom we were trying to decide if this was a nice project, or if it was only a plain hoax…
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Subject: GAS PRICES

Pretty good idea to lower gas prices...

I hear we are going to hit close to $3.00 a gallon by the summer Want gasoline prices to come down? We need to take some intelligent, united action. Phillip Hollsworth, offered this good idea:

This makes MUCH MORE SENSE than the "don't buy gas on a certain day" campaign that was going around last April or May! The oil companies just laughed at that because they knew we wouldn't continue to "hurt" ourselves by refusing to buy gas. It was more of an inconvenience to us than it was a problem for them. BUT, whoever thought of this idea has come up with a plan that can really work.

Please read it and join with us!

By now you're probably thinking gasoline priced at about $1.50 is super cheap. Me too! It is currently $1.97 for regular unleaded in my town. Now that the oil companies and the OPEC nations have conditioned us to think that the cost of a gallon of gas is CHEAP at $1.50-$1.75, we need to take aggressive action to teach them that BUYERS control the marketplace.... not sellers.

With the price of gasoline going up more each day, we consumers need to take action. The only way we are going to see the price of gas come down is if we hit someone in the pocketbook by not purchasing their gas! And we can do that WITHOUT hurting ourselves. How? Since we all rely on our cars, we can't just stop buying gas. But we CAN have an impact on gas prices if we all act together to force a price war.

Here's the idea:

For the rest of this year, DON"T purchase ANY gasoline from the two biggest companies (which now are one), EXXON and MOBIL. If they are not selling any gas, they will be inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit. But to have an impact, we need to reach literally millions of Exxon and Mobil gas buyers. It's really simple to do!! Now, don't wimp out on me at this point... keep reading and I'll explain how simple it is to reach millions of people!!

I am sending this note to about thirty people. If each of you send it to at least ten more (30 x 10 = 300)... and those 300 send it to at least ten more (300 x 10 = 3,000) ... and so on, by the time the message reaches the sixth generation of people, we will have reached over THREE MILLION consumers! If those three million get excited and pass this on to ten friends each, then 30 million people will have been contacted! If it goes one level further, you guessed it..... THREE HUNDRED MILLION PEOPLE!!!

Again, all you have to do is send this to 10 people and DON"T purchase ANY gasoline from EXXON and MOBIL. That's all. (If you don't understand how we can reach 300 million and all you have to do is send this to 10 people.... well, let's face it, you just aren't a mathematician. But I am... so trust me on this one.)

How long would all that take? If each of us sends this email out to ten more people within one day of receipt, all 300 MILLION people could conceivably be contacted within the next 8 days!!!

I'll bet you didn't think you and I had that much potential, did you!

Acting together we can make a difference. If this makes sense to you, please pass this message on.

PLEASE HOLD OUT UNTIL THEY LOWER THEIR PRICES TO THE $1.30 RANGE AND KEEP THEM DOWN. THIS CAN REALLY WORK
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What I'm planning to do today is just explain why that email is a plain hoax (or chain letter, as you wish), and state some of the questions that the reading of it may rise. On the forthcoming days I'll try to answer those same questions, on my very personal point of view. But before continuing let me warn you that I used to work for one of the Seven Sisters, so you may find my thoughts a little bit biased. Nevertheless is my wish that you form your own opinion on the subjects that we're going to address, and I only hope that you consider the facts that I’m going to express here as part of your own thinking process...

First of all, there’s no mathematician called Phillip Hollsworth on the Internet. If you google his name on the net the only thing you’re going to get is different versions of the above chain letter. Scientists usually publish many papers through their lives, and it’s very rare to find one with no single reference on the net.

Second, he claims to be a mathematician, but his plan for reaching 300 million people by email is very ambitious, considering there are only about 328 million active Internet users in the world according to Nielsen NetRatings. If you consider additionally that not everybody forwards chains, that some people are going to receive it more than once, and that not everybody accesses their email accounts on a daily basis, you will conclude as me that his claim that this mail can reach 300 million people in 8 days is excessively optimistic.

But let’s be positive and let’s assume that the letter actually finds its way, that it reaches hundreds of millions, and that everybody stops buying fuel from those two companies (which by the way have merged in the largest petroleum company in the world: ExxonMobil). Would this action effectively and permanently drive prices down? I’m sorry to say it but the answer is no. If everyone stopped buying from the largest company, the smaller ones would run out of stock, and would have to do our dirty work by buying from them anyway. And we'd probably pay even more for gas, since we would be paying for an additional link in the chain.

So, can we do anything to lower gas prices? Or are they going to stay at today’s level? Are petroleum companies really pushing prices up? Is the opening of Iraqi oil fields going to stabilize prices? Can we keep using our beloved SUVs? Can’t we migrate to renewable energy sources and forget about this oil nightmare?

Those are some of the questions that we’ll try to answer over the next days.

See you here soon!
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For better analysis of the above chain letter, please visit BreakTheChain.org and Rumor Mill.

The Four S’s

Last week I had the unique chance to attend an important International Conference held in Osaka and, while there, I was invited to the Gala Dinner… to take pictures of the event! The dinner was very nice and full of gaijin scientists, and when the President of the Organizing Committee decided to address some words to everybody, nobody cared and almost everyone kept talking. I must admit I felt a little bit embarrassed myself, for I felt it was a little bit rude. I mean, there was this respectable old guy thanking everybody for having came to the Congress from all over the world and blah blah blah, and he wasn’t receiving the attention he ought.

A Japanese Professor who was just sitting next to me, a little bit drunk, told me that he too felt bad for this lack of respect. "You know", he said to me, "we Japanese always respect the Rule of the Four S’s when we’re on a meeting". "The Four S’s?" I asked, "what do they stand for?" "The first S is for Silence", he explained, "for we never make any noise with cell phones, chairs, pens or anything. The second is for Shut Up, for we don’t say a word while someone else is speaking. The third one stands for Sit down, for we just sit and listen to the orator". "And the last one?" I asked after ten seconds of silence. "The last one?" he replied, "the last S stands for Sleep..."

I couldn’t agree more.

I Kiss You vs Numa Numa Dance

Two friends of mine reminded me lately about these two memes and, even though they happened in different years, they’re both funny (in a way)…

I Kiss You

On year 1999 a Turkish guy named Mahir Cagri became the first internet celebrity by creating a personal web page in broken English. His most famous lines were “Welcome to my home page! I kiss you!”, “I live alone! I have home – car” and of course his open invitation to women “Who is want to come TURKEY I can invitate . She can stay my home”. This page is reported to have received half million hits just on its first three days on the net thanks to word of mouth. Mahir posted many pictures of him playing ping pong, the accordion, and wearing a red Speedo, that were as naïve as his writing. He became so famous that he was invited to the USA were he was a guest at the Rosseane Show, and had interviews with the New York Times, the Los Angeles Times, the Boston Globe, Wired Magazine, Forbes, C-NET and others. He even has an entry on Wikipedia! This year, his page was ranked one of the top 10 fads of the decade by C-NET. Check by yourself!

The second story is a little bit longer, but it is worth it so please, check the links to understand the whole stuff. There are many videos so, please, be patient...

Numa Numa Dance

On year 2003 a Moldovan band called O-Zone recorded Dragonstea Din Tei, a song that became a hit in Moldova that year and a summer hit in Europe next year. Some people in Japan liked that song and made a Flash Video featuring some dancing cats, with images and text interpreting the lyrics into similar sounding English or Japanese words. Check that version here.

Gary Brolsma, a New Jersey teenager, saw that Japanese version on the Internet and, bored one day, decided to make his own silly video for his friends. His energetic lip-syncing version was first uploaded to the Internet on December 12th 2004, and became an instant hit counting up to eight million views and popping up on hundreds of websites. Please, check his video (called Numa Numa Dance) here.

That video appeared later on ABC’s Good Morning America, NBC’s The Tonight Show and VH1’s Best Week Ever. Many parodies have been appearing on the internet, of which these are the most famous ones:

• American Idle
• Lego Version
• Chicken Little Trailer
• Marica Tú (Queer you) - Spanish version

By the way, O-zone finally did a presentation on the Japanese TV, in which they used parts of the Flash Video. See that presentation here.

Conclusion: if you want to be really famous you can either do something really great (like finding the cure for Cancer), or just post something silly on the Internet. Good luck!

Risk Assessment and Management Responsibility

First and foremost, my heart is with the American people, most especially with the people from New Orleans who have lost a loved someone, a friend, a home, anything, everything. There’s nothing I can do from here to make things better, except to tell you that my heart is with you all.

I’ve been following the news coming from the USA with much sorrow. Things are going really bad for the people who couldn’t (or didn’t want to) move from the Capital of Jazz when Katrina was predicted to hit the city, and many Americans are blaming the government for not acting faster in solving the crisis. It’s true; many things seem to have gone wrong: The city emergency plan considered the use of school and municipal buses in the event of an evacuation, but they weren’t deployed; people was sent to the Superdome, but no food nor water was available for everybody, and security there was minimum; the Federal Government (Bush et al) responded too slowly to the disaster when a quick response was needed; and so on. Days before the catastrophe, it was known that Katrina could cause a real major emergency in New Orleans, but emergency plans were not executed. So, who’s to blame? The ones who did not activate the Emergency Plan on time? Or the ones who did not grant the resources to manage the crisis in a timely manner?

Ok, let me introduce you to another approach: Risk Assessment. When you deal with many risks (from the management of a gas station to the management of a whole country) and have a tight budget (as it always happens), you should prioritize your resources by using them where they are most necessary. How do you do this? You classify your risks by their magnitude and their likelihood, and assign a priority degree, from high to low. Then, you assign your resources to the higher risks, because there’s where you can be hit harder. In the case of the USA, this assessment was already done by the Federal Emergency Management Agency before the 9/11 terrorist attacks, and listed the three most likely catastrophic disasters that they faced by then: a terrorist attack on New York, a major earthquake in San Francisco and a hurricane strike on New Orleans.

This is how things happen: first, you do a Risk Assessment, then the Top Management analyses the data, and assigns resources to deal with the higher risks, and then a team is assigned to manage those resources and to “fix the risks”. When that’s done, you repeat the cycle, until all the risks are below a sound level. But then, what had happened in the USA? The analysis was done but the resources were allocated somewhere else (Irak?), and the higher risks were not faced. Result? From those three, two have already happened.

I used to work for a huge international corporation. If that company was in the position of the USA, meaning having two major crises from three already identified major risks, without having assigned adequate resources to face them, the Top Management would be history. Gone. Kaput. Because, you know what?, this is NOT how you face risks. This is not satisfactory Management.

I will say no more about this. Many Americans are discussing right now and realizing where the responsibilities lay. I only hope that the souls of those who lost their lives on New Orleans rest in peace, and that everybody else can resume his or hers normal live pretty soon.

Once again, my heart is with you New Orleans.

The Day After Tomorrow

Did you happen to see The Day After Tomorrow? It was a really bad movie about global warming (and then a sudden glacial age, but I didn’t get that). It was a fantastic (I mean, difficult to believe) story that made us all laugh because of how fast the global warming was depicted to occur.

Well, those laughs can now become tears...

I live in the city where the Kyoto Protocol was signed (and agreed). A total of 153 countries (accounting for over 61% of global emissions) ratified the treaty thereafter, with the notable exception of the USA (They signed the Protocol here in Kyoto, but then decided not to ratify it, because it would cause much harm to their industries, and because it was not proved that there was a global warming happening...)

Now, after the tragic events at New Orleans that follow a series of terrible hurricanes hitting North America, after a El Niño getting worse year by year, after the glaciers in Peru that are retreating 20 meters every year (yes, 20 meters every year), after finding that the North Polar Cap has shrunk more than 20 percent since 1979, can the USA, Australia and all the countries that have not ratified the treaty, continue doing nothing? Can they really keep saying that the world is not changing? That it’s not getting warmer year after year? That economical reasons are beyond world climate health?

For our good, I hope not.

Please, ratify the Kyoto Protocol. Maybe you won’t know how good it was, but your grandchildren will.

Yesterday was the BlogDay!

Don't ask me how, but someone (with a huge imagination) found out that the word Blog looks like 3108, and from there, every 31/08 (August 31st) will be called the BlogDay.

Anyway, don't expect it to be a holiday. If you're a blogger, you're supposed to post at least 5 links of pages that you find interesting, but have nothing to do with your usual blogging themes. So, here's my list:

• Dooce Heather Armstrong's blog, which got her fired from her job. Did you ever heard about beeing dooced? This is the place!
• David Byrne Yes, it's David Byrne's blog! And while being there, take a look at Radio DavidByrne
• GoogleBlog Yes, the blog of the guys at Google. Cool Google news that you can know, even before the geekiest Chris...
• Blogger Templates Got bored of your plain template? This is the place to look for a new one! Works well only with Blogspot. Sorry

And these two are in Spanish (sorry!):

• Vero Linda Pechocha The cutest intelligent girl's blog you could ever find (kawaiiiiii...)
• Monos y Monadas Yes, the famous humor magazine best covers!

Enjoy!