The Etp Model Has Been Empirically Confirmed

[Russ_Watters]

Futilitist has left, but that doesn't mean we can't still talk about him behind his back:

This concept relates to analysing entropy in a single, discrete chemical engineering process. Trying to apply it to a constantly changing global aggregate of oil wells, old and new, across the world, is barking mad.

Another aspect of this that has been touched-on in the past but not explicitly discussed recently is the claim of the graph itself. I've been focusing on its lack of basis, but the graph has an interesting and useful purpose: it purports to show the economic value (value to the economy) of oil is dropping over time. But as anyone who's put even the slightest thought in the issue knows, its upside-down! There is a measure of this already: energy intensity (the inverse, actually). And even Futilitist knows that energy intensity peaked in the late 1970s and has been dropping ever since. In other words, a unit of energy produces more economic output over time, not less. Today, we get more than twice the economic benefit per unit of energy than we did in the 1970s and by the 2030s, it will be about 4x. http://www.eia.gov/todayinenergy/detail.cfm?id=10191

We all know this, from our daily-lives experiences. Everything from cars to air conditioners to light bulbs has gotten more efficient over the past couple of decades -- some of them, spectacularly more efficient. A residential air conditioner, for example, uses 25% less energy today than a standard unit did 15 years ago, for the same cooling output (same benefit). 10 years ago, my house had only incandescent lights -- today, I get the same light for about 1/5th the energy use.

Everyone knows this -- even futilitist, though he'll cling to his blanket of ignorance like the last deck chair on the Titanic. I've never seen someone so desperate to defend himself against acknowledging positive realities.

 

[Russ_Watters]

My big worry back 20 years ago was that we would get to a point where we hit peak oil with no viable replacements. Since that time not only have we found a way to extend our oil supply another few decades (through fracking) but have gotten to the point where technologies like EV's are practical and indeed are commercially viable. That takes away much of the single-source fears, where loss of a single commodity could destroy civilization as we know it.

Yes, while I don't consider hybrids and EVs to actually be commercially viable today for most applications (the price of gasoline is just way too low for them to make sense for most people), what they have accomplished is proof-of-concept, for the ability to scale when the time comes that they are needed. So while we disagree on their place today, we certainly agree on their ability to scale-up as oil depletes, a few decades from now, in an essentially painless transition. 20 years ago, I would not have been confident in that either. Indeed, 10 years ago, I wrote a "paper" discussing the budding energy "crisis" at the time -- not recognizing the still small impact of fracking, I expected the issue of Peak Oil to be impactful by now.

My primary long-term oil replacement concern is for airplanes and to a lesser extent ships. Ships might be able to use natural gas and nuclear. Planes will probably need to switch to something liquid like propane. These solutions may be able to keep them going for a few more generations.

 

[billvon]

So while we disagree on their place today, we certainly agree on their ability to scale-up as oil depletes, a few decades from now, in an essentially painless transition.

Agreed - sort of. They are commercially viable now in small quantities; there are people willing to pay extra for greater gas savings (as a cushion against future increases, even if it's not economical now) and for their other benefits, like lower noise and pollution levels and greater acceleration. That is sufficient to keep them "in the market" and thus allow a rapid scale-up if the price of gas increases significantly.

My primary long-term oil replacement concern is for airplanes and to a lesser extent ships. Ships might be able to use natural gas and nuclear. Planes will probably need to switch to something liquid like propane. These solutions may be able to keep them going for a few more generations.

I think as oil prices increase again, use in cars will be the first to go, thus keeping oil available enough for aviation. I hope ships switch to nuclear, and the loss of cheap bunker fuel may be the incentive they need to make that work. It's nuts to drive a panamax freighter (or even a quarter mile long cruise ship) on oil - and once we don't have the super low quality bunker oil available due to reductions in refining across the board, nuclear will start looking more effective.

 

[Futilitist]

Futilitist has left, but that doesn't mean we can't still talk about him behind his back:

Like I said before, I haven't left. So feel free to talk about me behind my back in front of my face. You guys are so mature!

It's actually a really exciting time for our oil prospects. Our energy future is more secure than it has been my entire life. That gives us more time and flexibility to dabble in renewable energy pipe-dreams for a while, rather than pursuing actually viable alternatives.

Wow. I think you are *WAY* too optimistic.

What viable alternatives?

And I agree with billvon that the Saudis can't control the price of oil.

My big worry back 20 years ago was that we would get to a point where we hit peak oil with no viable replacements. Since that time not only have we found a way to extend our oil supply another few decades (through fracking) but have gotten to the point where technologies like EV's are practical and indeed are commercially viable. That takes away much of the single-source fears, where loss of a single commodity could destroy civilization as we know it.

So, the collapse of civilization is possible. Thanks for finally admitting that. And you would be concerned if oil ran out with no way to replace it. But now we have some supposedly viable alternatives on the horizon. That is a relief. Now all we need is enough time to make them more viable as well as scale up a lot. There's only one problem. We are out of time. And energy.

The Etp model shows why we don't have enough time or available energy to make a "transition" to alternatives.

I guess it's time to start worrying again.



---Futilitist

 

[billvon]

I guess it's time to start worrying again.

You do that! Perhaps on a "non-fraud" forum where they have more respect for your dizzying intellect.

 

[Futilitist]

Non-fraud forums are hard to find.



---Futilitist

 

[Write4U]

It is the price of oil per barrel, in dollars.

The Etp curve represents the thermodynamic maximum oil price. It is a best case scenario. The actual price could be substantially lower, depending on how the economy handles the shock of the net energy decline.---Futilitist

With respect, that does sound counter-intuitive to me. As I understand trade, limited supply results in higher prices, excess supply results in lower prices. Perhaps that dynamic does not hold for this commodity? I should doubt it, else the implications are no longer manageable.

Yet, Intuively I feel that mathematical laws applying to thermodynamics also may well apply in an abstract sense to your well presented scenarios of similar mathematical laws of relative Values (prices of goods) such as the models you posted. A form of fractality which is used universally in many systems. This apparent similarity does not necessarily prove a connection except in the most abstract sense. Thermodynamic functions are similare to Economic functions, but at a different level? IMHO

Bartlett cited individuals utter these words; "strength through exhaustion".
http://www.albartlett.org/articles/art_forgotten_fundamentals_part_7.html

and commented that lower prices would certainly accelerate this process.

I can think of some instances like the Feds lowering the "interest rate" in order to stimulate the economy, or a "close-out" sale of a remaining supply of an outdated resource which is no longer in demand.

So, if we do find a viable and sustainable complete replacement for oil, I can visualize a lowering of oil prices, but as long as our demand exceeds supply, why would a company lower its prices? What purpose would be served?

As an (ex) bid supervisor for a large coatings manufacturer, I would have asked this question of management.

But the question intrigues me, perhaps for its implications. After all we are talking about fluctuations of energy use and that is certainly in the domain of Thermodynamics.

My question is , if such a connection exists, which is the a priori force , Thermodynamics or the Value of available resources to convert into energy . A cyclical system?

 

[Futilitist]

With respect, that does sound counter-intuitive to me. As I understand trade, limited supply results in higher prices, excess supply results in lower prices. Perhaps this dynamic does not hold for this commodity?

I can think of some instances like the Feds lowering the "interest rate" in order to stimulate the economy, or a "close-out" sale of a remaining supply of an outdated resource which is no longer in demand.

So, if we do find a viable and sustainable complete replacement for oil, I can visualize a lowering of oil prices, but as long as our demand exceeds supply, why would a company lower its prices? What purpose would be served?

As an ex-bookkeeper for a large coatings manufacturer, I would have asked this question of management.

I agree that at first it seems counterintuitive with respect to the law of supply and demand. But if you take the time to understand the physics of why oil prices will decline from here on, it will make very good sense. When I saw the Etp model and understood it, it suddenly all made so much sense, I wondered why I didn't think of it myself!

The law of supply and demand is still functioning perfectly. It's just that our demand can no longer exceed our supply going forward.

Here is a good explanation why:

http://www.thehillsgroup.org/depletion2_022.htm

The Energy Factor, Part IV
The Price of Oil

The price of petroleum is controlled by two factors:

1) The cost of production.
2) The $ amount that the end consumer (the NEGs) can afford to pay for it.

What the end consumer pays must be sufficient to cover the cost of production. All production cost must be borne by the end consumer, who includes the end buyer, and the societal cost required to produce petroleum, and its products.

The Petroleum Price Curve, shown below, reflects the two factors that have, and will continue to control petroleum prices. The ETP derived Cost Curve is constructed from the ETP model, and has mapped the price of petroleum since 1960 with a correlation coefficient of 0.965. It is the most accurate pricing model that has ever been developed.

The Maximum Consumer Price curve was also developed from the ETP model. It represents the maximum price that the end consumer can pay for petroleum. It is based on the observation that the price of a unit of petroleum can not exceed the value of the economic activity that the energy it supplies to the end consumer can generate.

The energy content of a unit of petroleum is fixed by its molecular structure. The energy to produce a unit of petroleum, and its products increases with time as a result of the entropy production of the PPS (Petroleum Production System). The energy remaining for use by the general economy declines, and the economic activity that the petroleum can power also declines. Chart# 161 below shows the historical, and projected economic activity in 2014 dollars that a barrel of petroleum (37.5° API crude) has, and will be able to power.



A more complete explanation of how the Maximum Consumer Price curve was formulated is show in chart# 160 below:



The two Maximum affordable price curves labeled 71% (black), and 62% (light blue) are skewed logistic curves. There is no explicit mathematical equation to describe them. They are derived numerically, and the dots represent values for specific years. The 71% curve is the maximum theoretical energy that can be extracted from a unit of 37.5° API crude. Its value is derived from the combustion equations of hydrocarbons. The 62% curve is the average energy extracted from the same hydrocarbon by the end user. It passes through the ETP derived price curve at the inflection point of the ETP curve in year 2012. 2012 was the energy half way point for petroleum production. It was the year when it required one half of the energy content of petroleum to produce the petroleum, and its products.

The individual points are generated from the equation:

$/barrel = (Energy delivered - ETP value/ BTU/$) * 42.

Energy delivered = 140,000 BTU/gal *0.62 (140,000 BTU/gal - the energy content of 37.5° API crude)
ETP value is derived from the ETP function
BTU/dollars is taken from the BTU/dollars graph - Graph# 12

The Maximum Consumer Price curve is curtailed at 2020 at $11.76/ barrel. At this point petroleum will no longer be acting as a significant energy source for the economy. Its only function will be as an energy carrier for other sources. Production will continue as long as producers can realize the lifting costs at existing fields. E&D expenditures, and field maintenance costs will have been curtailed. All production from that point forward will be from legacy fields only. The economic impact that will result from the energy lost to the general economy is beyond the scope of this report.

The energy content of a unit of petroleum is fixed by its molecular structure. The energy to produce a unit of petroleum, and its products increases with time as a result of the entropy production of the PPS (Petroleum Production System). The energy remaining for use by the general economy declines, and the economic activity that the petroleum can power also declines. Chart# 161 below shows the historical, and projected economic activity in 2014 dollars that a barrel of petroleum (37.5° API crude) has, and will be able to power.



Historically, petroleum has been a primary beneficiary to the economy. The economic activity that it powered was greater than the cost of the petroleum. Its historical effect can be seen in Graph# 25 (World GDP vs Cumulative Production). That benefit is now declining, and by the early 2020's an increased use of petroleum will no longer add to GDP. It will become more cost effective for society to begin limiting its use of petroleum as the use of petroleum transitions from a GDP enhancer to a GDP reducer.

~The Hills Group


The economy runs on cheap oil. Expensive oil is no longer affordable. That is why oil is currently priced below the full cost of production. It's about to get worse.



---Futilitist

 

[Futilitist]

The 2012 energy half way point initiated a major change in the petroleum production function. It began a process where the end consumer was no longer able to acquire all the petroleum that the industry produced. More of the energy from petroleum was being committed to the production of petroleum than was being delivered to the consumer. This precipitated the 2014 price decline that reduced prices by 50%. The energy delivered to the end consumer will continue to decline, and the end consumer maximum affordability will decline with it. It will be necessary for the industry to reduce production to compensate. The highest cost production fields will continually be shut in as the price falls below their operating minimum.

The ETP model's predicted rapid decline event is in opposition to the contemporary assumption that production will phase out slowly. The slow decline scenario is known as "sliding down Hubbert's curve". Implied in this belief is the assumption that all barrels of petroleum were made equal in quality, and will remain so in time. Of course this conflicts with the Second Law, and thus can not be an accurate representation of the situation. All barrels were not made with an API of 30-45°, nor is the energy needed to extract, process and distribution them the same over time. It has to increase.

The energy increase that is occurring in petroleum production insures that substitutes for conventional crude will be phased out before the average barrel of conventional crude reaches the dead state. As the energy to produce petroleum increased so did the price to the end consumer. This phase of the price cycle has now ended, and producers will now concentrate on cutting production costs. This will include the very high cost process of replacing reserves that have been extracted.

As the price increased during the prior 2012 cycle, demand for finished products by the non energy goods producing sector of the economy did not diminish. This apparent violation of the Supply/Demand principal occurred because up until 2012 the use of petroleum returned more revenue to the user than it cost them. The use of petroleum was energy positive for the end user; it required less to extract it, and produce its products than it delivered to the economy. After 2012 that was reversed, and demand increases could only result from the energy producing sector. As production begins to decline so also will demand. To keep the the price to the end consumer as affordable as possible refineries will be forced to limit the use of substitutes which are more costly to process. Supply and demand; the supply and demand of energy will limit the extent to which substitutes like extra heavy crude, and shale oil will be used in the future.

The reduced availability of petroleum products, resulting from a reduced per unit value, and a reduced per unit energy delivery ability will have an all encompassing impact on every aspect of contemporary society."
~BW Hill



---Futilitist

 

[Russ_Watters]

I think as oil prices increase again, use in cars will be the first to go, thus keeping oil available enough for aviation.

Agreed, though it will make air travel substantially more expensive. The worst-case for cars is something like a 10% price premium to cut gas usage in half and 30% to eliminate it. But I can see air travel doubling or tripling in price.

I hope ships switch to nuclear, and the loss of cheap bunker fuel may be the incentive they need to make that work. It's nuts to drive a panamax freighter (or even a quarter mile long cruise ship) on oil - and once we don't have the super low quality bunker oil available due to reductions in refining across the board, nuclear will start looking more effective.

Agreed. Some research is probably needed before nuclear can be deployed widespread in commercial shipping, but once it is, it'll be awesome: massive ships that produce no pollution and never have to refuel.

 

[Futilitist]

Agreed, though it will make air travel substantially more expensive. The worst-case for cars is something like a 10% price premium to cut gas usage in half and 30% to eliminate it. But I can see air travel doubling or tripling in price.
Agreed. Some research is probably needed before nuclear can be deployed widespread in commercial shipping, but once it is, it'll be awesome: massive ships that produce no pollution and never have to refuel.

Your unsubstantiated, off topic opinions and projections sound awesome, Russ!



---Futilitist

 

[Write4U]

The law of supply and demand is still functioning perfectly. It's just that our demand can no longer exceed our supply going forward.

Historically, petroleum has been a primary beneficiary to the economy. The economic activity that it powered was greater than the cost of the petroleum. Its historical effect can be seen in Graph# 25 (World GDP vs Cumulative Production). That benefit is now declining, and by the early 2020's an increased use of petroleum will no longer add to GDP. It will become more cost effective for society to begin limiting its use of petroleum as the use of petroleum transitions from a GDP enhancer to a GDP reducer.

~The Hills Group

The economy runs on cheap oil. Expensive oil is no longer affordable. That is why oil is currently priced below the full cost of production. It's about to get worse. --Futilitist

Conclusion: Production of Oil as a primary fuel will stop. I totally agree with that. The implications are staggering.

 

[Futilitist]

Conclusion: Production of Oil as a primary fuel will stop. I totally agree with that.

Yes, in about 5 years.

The implications are staggering.

Yep.

BTW, do you remember when you wrote for me a few years ago? The subject was Rene Girard's theory of mimetic desire, on my theory on the evolution of religion thread on thescienceforum.com:

http://www.thescienceforum.com/pers...088-scientific-theory-evolution-religion.html



---Futilitist

 

[Write4U]

Agreed, though it will make air travel substantially more expensive. The worst-case for cars is something like a 10% price premium to cut gas usage in half and 30% to eliminate it. But I can see air travel doubling or tripling in price.

Agreed. Some research is probably needed before nuclear can be deployed widespread in commercial shipping, but once it is, it'll be awesome: massive ships that produce no pollution and never have to refuel.

Are you suggesting a Thermodynamic device of some sort?

 

[Write4U]

Yes, in about 5 years.
Yep.

BTW, do you remember when you wrote for me a few years ago? The subject was Rene Girard's theory of mimetic desire, on my theory on the evolution of religion thread on thescienceforum.com:

http://www.thescienceforum.com/pers...088-scientific-theory-evolution-religion.html
---Futilitist

Thanks for reminding me, that was a very good exchange, IMO.

As for presenting this OP proposition, you have managed to get several pages of serious critique, due to your well researched materials. Hopefully you found some information, not previously considered and useful in establishing a "connection" between the two.

If the graphs are true, the similarity is remarkable. But does it demonstrate an actual cause/result function?

As for me, let me do some research in Thermodynamics and Trends and find their common potentials.

 

[exchemist]

Futilitist has left, but that doesn't mean we can't still talk about him behind his back:

Another aspect of this that has been touched-on in the past but not explicitly discussed recently is the claim of the graph itself. I've been focusing on its lack of basis, but the graph has an interesting and useful purpose: it purports to show the economic value (value to the economy) of oil is dropping over time. But as anyone who's put even the slightest thought in the issue knows, its upside-down! There is a measure of this already: energy intensity (the inverse, actually). And even Futilitist knows that energy intensity peaked in the late 1970s and has been dropping ever since. In other words, a unit of energy produces more economic output over time, not less. Today, we get more than twice the economic benefit per unit of energy than we did in the 1970s and by the 2030s, it will be about 4x. http://www.eia.gov/todayinenergy/detail.cfm?id=10191

We all know this, from our daily-lives experiences. Everything from cars to air conditioners to light bulbs has gotten more efficient over the past couple of decades -- some of them, spectacularly more efficient. A residential air conditioner, for example, uses 25% less energy today than a standard unit did 15 years ago, for the same cooling output (same benefit). 10 years ago, my house had only incandescent lights -- today, I get the same light for about 1/5th the energy use.

Everyone knows this -- even futilitist, though he'll cling to his blanket of ignorance like the last deck chair on the Titanic. I've never seen someone so desperate to defend himself against acknowledging positive realities.

I agree. There is clearly a long way to go, still, in terms of economic output per kWh.

In fact, I was looking at the 1986 oil price crash (after mentioning it in my last post here). It seems this was due to a delayed effect of all the energy-saving programmes that were initiated in the wake of the 1970s oil shocks. They took time to come to fruition and when they did, OPEC got a nasty shock, because by then they had got greedy and were reliant in a high oil price to support their new lifestyles. (I was working for Shell in Dubai at the time and I recall the price fell at one point below the level needed for Oman to pay its army, which was a bit worrying for a while!)

I see Billvon has had a go at forecasting the evolution of the oil price. I'll stay out of that, as I think personally it is a bit of mug's game, being influenced so much by geopolitics (Putin? Iran? Iraq/IS?) as well as unpredictable market developments. But clearly, there are factors working against the growth in demand for energy, which soften it.

When it comes to oil, I feel it is probably safe to predict that its share of the total world energy mix will shrink henceforth. This is due largely to climate change measures. (It is notable that Shell, who I worked for for many years, has bet the farm on gas substituting increasingly for oil in the long term, for precisely this reason.) Oil will be increasingly reserved for roles in which it has added value beyond its mere energy content (transport fuel, petrochemicals, lubricants, etc) - one of the factors so stupidly ignored by this Etp "model".

 

[exchemist]

Are you suggesting a Thermodynamic device of some sort?

Yes. An engine. Specifically, if we talk of nuclear propulsion, a steam turbine.

 

[exchemist]

Agreed - sort of. They are commercially viable now in small quantities; there are people willing to pay extra for greater gas savings (as a cushion against future increases, even if it's not economical now) and for their other benefits, like lower noise and pollution levels and greater acceleration. That is sufficient to keep them "in the market" and thus allow a rapid scale-up if the price of gas increases significantly.

I think as oil prices increase again, use in cars will be the first to go, thus keeping oil available enough for aviation. I hope ships switch to nuclear, and the loss of cheap bunker fuel may be the incentive they need to make that work. It's nuts to drive a panamax freighter (or even a quarter mile long cruise ship) on oil - and once we don't have the super low quality bunker oil available due to reductions in refining across the board, nuclear will start looking more effective.

Interesting viewpoint, though I'm not sure about the ships thing. So long as you have refining of crude, even if only to make aviation fuel and petrochemicals, you will have relatively cheap residual bunker fuel - or something like it - as a byproduct. Crude does not have enough hydrogen in it to enable it all to be upgraded to distillate fuel. But ships can certainly run on natural gas, though there are issues. Safety is one: a gas escape in the confined space of ship's engine room needs to be carefully guarded against. Suitability of engines is another. Low speed engines, which are prevalent today, are highly efficient (50%+)and ideally adapted to residual fuel, have some trouble running reliably on gas. Medium speed engines and turbines can do fine on it however.

 

[exchemist]

With respect, that does sound counter-intuitive to me. As I understand trade, limited supply results in higher prices, excess supply results in lower prices. Perhaps that dynamic does not hold for this commodity? I should doubt it, else the implications are no longer manageable.

Yet, Intuively I feel that mathematical laws applying to thermodynamics also may well apply in an abstract sense to your well presented scenarios of similar mathematical laws of relative Values (prices of goods) such as the models you posted. A form of fractality which is used universally in many systems. This apparent similarity does not necessarily prove a connection except in the most abstract sense. Thermodynamic functions are similare to Economic functions, but at a different level? IMHO

Bartlett cited individuals utter these words; "strength through exhaustion".
http://www.albartlett.org/articles/art_forgotten_fundamentals_part_7.html

and commented that lower prices would certainly accelerate this process.

I can think of some instances like the Feds lowering the "interest rate" in order to stimulate the economy, or a "close-out" sale of a remaining supply of an outdated resource which is no longer in demand.

So, if we do find a viable and sustainable complete replacement for oil, I can visualize a lowering of oil prices, but as long as our demand exceeds supply, why would a company lower its prices? What purpose would be served?

As an (ex) bid supervisor for a large coatings manufacturer, I would have asked this question of management.

But the question intrigues me, perhaps for its implications. After all we are talking about fluctuations of energy use and that is certainly in the domain of Thermodynamics.

My question is , if such a connection exists, which is the a priori force , Thermodynamics or the Value of available resources to convert into energy . A cyclical system?

Fluctuations in energy use is the domain of economics, not thermodynamics.

The domain of thermodynamics is the transformation of energy and mechanical work, within a defined thermodynamic system - which we do not have, if we are considering the global economy.

 

[exchemist]

IOW, we are behind, compared to those prudent N. Europeans. Are they alarmists or perhaps a little wiser?

Well certainly N America has been notoriously slow to accept the implications of climate change and agree to do something about it, much slower than Europe. But long before climate change was an issue, European governments taxed transport fuel highly. For example, the price of motor fuel in the UK today is about 2.5 times that in the USA, and 80% of this price is made up of government taxes. It is much the same in continental Europe. Vehicles are smaller and more efficient and public transport is more widely used. And we manage fine - we just use a lot less transport fuel in our lifestyles than N. Americans do.

But I don't want to sound smug - living as I do in an incredibly wasteful Victorian house without good insulation and with leaky sash windows - I'm merely pointing out that the sky does not necessarily fall in if you have to reduce oil consumption.