The Etp Model Has Been Empirically Confirmed

[Russ_Watters]

Found another oldie but goodie. Early in your 2013 thread, we were discussing the failure of the Hubbert Curve and I requested you provide a number for US oil production above which you would acknowledge Hubbert's prediction was falisified. You responded:

It would have to exceed the 1970 peak of 9.6 million barrels a day in order to invalidate current peak oil theory.

Well guess what: it did, in May and June: 9.7 million barrels a day:
http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_m.htm

You also bemoaned what you considered overly optimistic projections about future productions. In fact, each years' projection has proven to be overly pessimistic and they have been revised upwards every year to compensate. Today, the lowest of the projections have us topping-out at 10 million barrels a day, for the annual average. Let me say that again: even the most pessimistic estimates have us exceeding the 1970 peak.
http://www.eia.gov/forecasts/aeo/pdf/0383(2015).pdf

Another one bites the dust.

 

[Futilitist]

You can't have the model matching and not matching at the same time. It has to be either one or the other.

No, it doesn't. The price of oil followed the Etp curve until it intersected the maximum price curve in 2012. Since falling below the maximum price curve during the oil price crash beginning in June of 2014, the oil price will, from here on, generally remain below the maximum price curve, since it is essentially the price limit. That is how the damn model works. You don't get to decide how it has to work.

Inflation is economics 101 stuff, futilitist. That you think it is BS just shows how badly ignorant you are of what you speak.

I didn't say inflation was BS. I said the improper application of the concept in your argument was BS.

Great! Then provide it for us. We can't very well be criticized for not understanding something we've never seen!

I am sorry, I cannot provide it for you. But it hardly seems necessary, since the most basic concepts are being disputed, not the details.

No, it most certainly was not. That thread was closed because you didn't have the details of the model, so you couldn't provide them for us, so there was nothing to talk about.

There was plenty to talk about. Like I said, we were not arguing over the minute details, so seeing the whole engineering report was not necessary. I managed to understand it pretty well before I had my own copy. I can tell that you really don't understand it, but I'll bet you could. I don't think you are genuinely trying.

So, we're in the midst of a collapse of industrial civilization that started more than a year ago.

That is correct.

Pretty boring collapse.

Only so far.

When do I get to riot, futilitist?

That is entirely up to you. Use your best judgment.



---Futilitist

 

[Futilitist]

Found another oldie but goodie.

Quit wallowing in the past, man. What a waste of your time. And a total distraction from the topic of the thread. Why aren't you concentrating on the discussion at hand?

Early in your 2013 thread, we were discussing the failure of the Hubbert Curve and I requested you provide a number for US oil production above which you would acknowledge Hubbert's prediction was falisified. You responded:

Well guess what: it did, in May and June: 9.7 million barrels a day:
http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_m.htm

You also bemoaned what you considered overly optimistic projections about future productions. In fact, each years' projection has proven to be overly pessimistic and they have been revised upwards every year to compensate. Today, the lowest of the projections have us topping-out at 10 million barrels a day, for the annual average. Let me say that again: even the most pessimistic estimates have us exceeding the 1970 peak.
http://www.eia.gov/forecasts/aeo/pdf/0383(2015).pdf

Another one bites the dust.

Interesting, but I wouldn't start celebrating just yet. More than 3 million barrels of that 9.7 mbd is currently being produced at a loss. How will all that expensive oil continue to be produced in the future?



---Futilitist

 

[exchemist]

I am not sure what you mean here. The Etp model is based on the second law of thermodynamics. It models the entropy in the life cycle of oil production. The price of oil rose as it became harder to get out of the ground over time, i.e., it took more and more energy to get the energy. The energy from oil must produce enough economic activity (GDP/barrel) that consumers can afford to pay for the entire oil production system, including investment in future production. This runs in a self-sustaining loop until the thermodynamic limit is reached, and the total cost of oil production exceeds the consumers ability to pay for it. This occurred around March of 2012. The oil price crashed in June of 2014 and from here on out, the net energy in a barrel of oil can no longer support both the economy and the entire oil production system. The oil industry will shrink while the economy will get weaker. Oil will reach what is called the "zero state" around 2021. At that point, it will take the energy from 1 barrel of oil to produce 1 barrel of oil, and oil use will no longer add to GDP. Oil currently provides about 38% of world GDP.


In order to meet the total cost of current oil production plus investment in future oil production, the current price of oil would have to be around 150 dollars per barrel.



---Futilitist

There, in a nutshell, you can see the self-contradictory idiocy of all this, and its utter scientific and economic illiteracy. The alleged inability of oil energy to support the needs of the world economy results in a price fall, apparently.

Futilist has once more come out of the woodwork, after a long hibernation, because of the fall in the Chinese stock market over the last few days. He's hoping that this time, at last, "The End is Nigh", as he has been claiming for the last few years.

 

[arfa brane]

The energy from oil must produce enough economic activity (GDP/barrel) that consumers can afford to pay for the entire oil production system, including investment in future production. This runs in a self-sustaining loop until the thermodynamic limit is reached, and the total cost of oil production exceeds the consumers ability to pay for it.

I looked at your graphs on the site you linked to. You say the two curves, the 72% curve and the 63% curve, or whatever the consumer curve is, represent the energy available from a barrel of oil, a constant, against the dollar value of both, first to the market I assume, and the consumer. I assume the consumer gets less energy than 72% because of how that consumer consumes the energy, i.e. wastefully.
But a barrel of oil is a barrel of oil, also a constant.

So why not just plot average production costs worldwide with the world price of oil? And, can you explain the two curves in the graph in your OP? What do they represent and how are they calculated?

 

[exchemist]

More than 3 million barrels of that 9.7 mbd is currently being produced at a loss. How will all that expensive oil continue to be produced in the future?



---Futilitist

This level of economic illiteracy is sub-Chavez, almost psychiatric.

 

[Russ_Watters]

No, it doesn't. The price of oil followed the Etp curve until it intersected the maximum price curve in 2012.

Please provide the equation for the "maximum price curve" as well.

I didn't say inflation was BS. I said the improper application of the concept in your argument was BS.

Calling BS without explanation is unresponsive. Look, you've known about this problem (not using inflation) in your analysis for years -- you've heard it from a lot of different people. No examination of "affordability" of a product ever works properly if it is not inflation adjusted because without adjusting for inflation you are just tracking the today's dollars cost of an item without taking into account how many of today's dollars a typical consumer has available to spend. IE, if the price of something doubles, but you have twice as many dollars to spend, it hasn't gotten any less "affordable". Your claim that it has is flat-out wrong -- and obviously so.

I am sorry, I cannot provide it for you.

Can't or won't? Either way, without providing the model, it isn't possible for you to prove your claim of its accuracy.

But it hardly seems necessary, since the most basic concepts are being disputed, not the details.

Yes, you are failing on basic concepts, but without seeing the model it is impossible to know how those basic concepts even relate to the model.

There was plenty to talk about.

Like the weather and our favorite sports teams? The topic of the thread was, ostensibly, the ETP model and without access to the model, there was little about it we could discuss. Just like in this thread.

I can tell that you really don't understand it, but I'll bet you could. I don't think you are genuinely trying.

[shrug] I cannot be expected to learn something you won't show me. Wanting to see the very thing you are saying I don't understand should show my strong desire to learn how it works.

Separate post:

Why aren't you concentrating on the discussion at hand?

Because you won't provide the details of what the thread is supposed to be about. It is impossible to verify something we aren't allowed to see.

That is correct.

Only so far.

That is entirely up to you. Use your best judgment.

You're dodging, let me rephrase: We're now almost two years past due on the social unrest this "collapse" was supposed to have caused. That's a really bad prediction failure given that when you made the "prediction" it was supposedly already underway. So I request that you update it. When can we expect the major social unrest that you predicted would start almost two years ago to start now?

Interesting, but I wouldn't start celebrating just yet. More than 3 million barrels of that 9.7 mbd is currently being produced at a loss.

Your previous claim contained no such hedge. You are trying to weasel out of it by adding this new caveat. Still, I'm interested in hearing about it. Please provide the source of your data that says 3 million barrels produced at a loss as well as historical data that shows it is unusual (and thus a special case that makes it a legitimate exception to your previous claim).

 

[Futilitist]

I looked at your graphs on the site you linked to. You say the two curves, the 72% curve and the 63% curve, or whatever the consumer curve is, represent the energy available from a barrel of oil, a constant, against the dollar value of both, first to the market I assume, and the consumer. I assume the consumer gets less energy than 72% because of how that consumer consumes the energy, i.e. wastefully.
But a barrel of oil is a barrel of oil, also a constant.

The energy in each barrel of oil is constant, but it's energy returned on energy invested (EROEI) is falling rapidly because of rising production costs. Thus the net energy of oil available to civilization is starting to decline.

So why not just plot average production costs worldwide with the world price of oil? And, can you explain the two curves in the graph in your OP? What do they represent and how are they calculated?

I don't understand your first question, so I don't know how to answer you. As to your second question: The curves in my OP graph are the Etp model curve (Etp derived cost curve) and the Etp maximum price curve (62% Maximum affordable price curve).



---Futilitist

 

[billvon]

Quit wallowing in the past, man. What a waste of your time. And a total distraction from the topic of the thread. Why aren't you concentrating on the discussion at hand?

In two years when the Etp model has been proven false you'll be saying the same thing about it.

"Look, quit wallowing in the past. What a waste of time. The Etp is a total distraction from the perfect Est model I have presented. Why can't you concentrate on it instead of the meaningless Etp?"

Interesting, but I wouldn't start celebrating just yet. More than 3 million barrels of that 9.7 mbd is currently being produced at a loss. How will all that expensive oil continue to be produced in the future?

By being produced when oil prices are higher.

 

[billvon]

The energy in each barrel of oil is constant, but it's energy returned on energy invested (EROEI) is falling rapidly because of rising production costs.

And as EROEI improves for tight oil (1.0 in 1970 for tar sands; 5.23 today) that will rise.

 

[Futilitist]

By being produced when oil prices are higher.

The current oil price situation is not good for tight oil producers. When do you expect that oil prices will be high enough for tight oil to be profitable?



---Futilitist

 

[Billy T]

... The price of oil is determined by the laws of physics, not supply and demand. - The Etp model is confirmed." ...---Futilitist

I have Ph.D. in physics and don't know of any such law. As the price of oil has now fallen by about 60% from where it was when you predicted a rapid rise due to the increasing cost of marginal units of production, how does that conform to the laws of physic or confirm you model?

It seems to me that the fact that global production of about 3 million barrels / day MORE than demand is what has made your model, based on physics you claim, so ridiculously out of contact with the reality. IE that it is the law of supply and demand operating that set this extraordinary low oil price, not some unspecified "law of physics."

 

[exchemist]

I have Ph.D. in physics and don't know of any such law. As the price of oil has now fallen by about 60% from where it was when you predicted a rapid rise due to the increasing cost of marginal units of production, how does that conform to the laws of physic or confirm you model?

It seems to me that the fact that global production of about 3 million barrels / day MORE than demand is what has made your model, based on physics you claim, so ridiculously out of contact with the reality. IE that it is the law of supply and demand operating that set this extraordinary low oil price, not some unspecified "law of physics."

Quite. He's off his rocker.

 

[exchemist]

The current oil price situation is not good for tight oil producers. When do you expect that oil prices will be high enough for tight oil to be profitable?



---Futilitist

Who knows? And it doesn't matter. Until the price goes up, the tight oil will just sit there and then we can extract it if and when we need it. Thermodynamics is not going to make it somehow harder, or less worthwhile, to extract if we leave it for a bit. There's no penalty for taking the cheapest oil out first.

 

[billvon]

The current oil price situation is not good for tight oil producers. When do you expect that oil prices will be high enough for tight oil to be profitable?

As the cost of tight oil production declines further, more wells will become profitable. Current tight oil wells are profitable between $40 and $110 per barrel depending on location, depth, viscosity of oil etc. This range will continue to drop with time. So right now _some_ tight oil wells are profitable and that number is increasing.

As demand rises (as it always does during times of low oil cost) oil costs will rise, moving more wells into the profitable range.

 

[Futilitist]

I have Ph.D. in physics and don't know of any such law. As the price of oil has now fallen by about 60% from where it was when you predicted a rapid rise due to the increasing cost of marginal units of production, how does that conform to the laws of physic or confirm you model?

The price of oil is determined by the first and second laws of thermodynamics. Though the price of oil seems to be directly controlled by supply and demand, both supply and demand are determined by the laws of thermodynamics. For example, the price of oil is currently too low for tight oil producers to make a profit. That is because the cost of production is based on the cost of the energy required for oil production, and that cost is rising due to entropy. For another example, if the price of oil were to rise to 150 dollars a barrel tomorrow because of a war or whatever, the oil consumers would not be able to afford it because there is not enough energy in a barrel of oil to produce enough GDP to pay for itself and the ongoing cost of production. See?

It seems to me that the fact that global production of about 3 million barrels / day MORE than demand is what has made your model, based on physics you claim, so ridiculously out of contact with the reality. IE that it is the law of supply and demand operating that set this extraordinary low oil price, not some unspecified "law of physics."

Supply and demand is not operating the way it should if the price of oil is below the cost of oil production. Continuing this way will bankrupt the oil companies. If, instead, the price rises to a level sufficient to pay the full cost of oil production, the oil consumer will be bankrupted. Catch-22.



---Futilitist

 

[Kristoffer]

Futilitist, you're the fraud, not this forum.

It's pretty self-evident you have no clue what you're talking about.

Everyone else should do what I'm gonna do and just leave Futilitist to his delusions.

 

[exchemist]

The price of oil is determined by the first and second laws of thermodynamics. Though the price of oil seems to be directly controlled by supply and demand, both supply and demand are determined by the laws of thermodynamics. For example, the price of oil is currently too low for tight oil producers to make a profit. That is because the cost of production is based on the cost of the energy required for oil production, and that cost is rising due to entropy. For another example, if the price of oil were to rise to 150 dollars a barrel tomorrow because of a war or whatever, the oil consumers would not be able to afford it because there is not enough energy in a barrel of oil to produce enough GDP to pay for itself and the ongoing cost of production. See?


Supply and demand is not operating the way it should if the price of oil is below the cost of oil production. Continuing this way will bankrupt the oil companies. If, instead, the price rises to a level sufficient to pay the full cost of oil production, the oil consumer will be bankrupted. Catch-22.



---Futilitist

And yet somehow the oil companies - all the many hundreds of them out there, from full range multinationals to niche E&P specialists - are, all of them, oblivious to the impending thermodynamic disaster.

 

[Futilitist]

As the cost of tight oil production declines further, more wells will become profitable.

That makes absolutely no sense, billvon. Production efficiency improvements are not sufficient to reduce the cost of tight oil production faster than entropy is increasing it.

Current tight oil wells are profitable between $40 and $110 per barrel depending on location, depth, viscosity of oil etc. This range will continue to drop with time. So right now _some_ tight oil wells are profitable and that number is increasing.

The current spot price of West Texas Intermediate Crude is $39.44 a barrel. The producers do not actually get that much for it at the well head.

As demand rises (as it always does during times of low oil cost) oil costs will rise, moving more wells into the profitable range.

Demand is currently falling despite what it is always supposed to do during times of low oil cost. That is why the price keeps dropping.



---Futilitist

 

[billvon]

That makes absolutely no sense, billvon. Production efficiency improvements are not sufficient to reduce the cost of tight oil production faster than entropy is increasing it.

Entropy does not increase costs. Advances in drilling technology, however, DO decrease costs - and have been proven to do so over the past ten years.

Demand is currently falling . . . .

Nope.

From the EIA:
=========
EIA estimates global consumption of petroleum and other liquids grew by 1.1 million b/d in 2014, averaging 92.4 million b/d for the year. EIA expects global consumption of petroleum and other liquids to grow by 1.3 million b/d in 2015, unchanged from the previous month's STEO. Growth in 2016 global consumption was revised upward by 0.1 million b/d compared with last month to an average of 1.5 million b/d.
========

From the WSJ:
=========
Oil Demand Growing at Fastest Pace in Five Years, Says IEA
Lower Oil Prices Will Only Start to Dent Non-OPEC Production Next Year, The Energy Watchdog Says

The price of gasoline has been falling. “Oil’s plunge below $50 barrels a day from triple digits a year ago has seen demand react more swiftly than supply,” the IEA said.

By Benoît Faucon
Aug. 12, 2015 4:16 a.m. ET

Demand for oil is increasing at its fastest pace in five years, boosted by an oil-price drop below $50 a barrel, a top energy watchdog said Wednesday, as it sharply upgraded its consumption-growth forecast for the commodity.

But in a blow to the Organization of the Petroleum Exporting Countries’ strategy to defend its market share, the International Energy Agency said lower oil prices would only start to dent rival production next year.

In its closely watched monthly report, the IEA said global oil demand would grow by 1.6 million barrels a day this year, an upward revision of 200,000 barrels a day from its previous forecast, and would keep rising by 1.4 million barrels a day next year. The organization—which advises industrialized nations on energy—said consumers were responding to lower oil prices while macroeconomic prospects were better than expected.

“Oil’s plunge below $50 barrels a day from triple digits a year ago has seen demand react more swiftly than supply,” the IEA said. “Against this backdrop, many participants in the oil industry have adopted a new mantra – ‘lower for longer’.”

The news comes after OPEC also upgraded its oil consumption views for 2015 in a report Tuesday. Global oil demand is expected to grow by 1.38 million barrels a day this year, some 90,000 barrels a day more than it previously expected, the oil producers’ cartel said.
=========