SM Stirling takes on peak oil

From the comments to Keynes and Peak Oil:

Sigh. I've seen this nonsense before; last time it was nuclear war as the longed-for destroyer of modernity, with all the survivalists stocking their cabins, or planning to outrun the fireball down the interstate.

Ecological collapse via pollution, famine (remember the "Club of Rome" and Paul Erlich?) and 'social breakdown' were big in that crowd too.

OK, here's the short form: "peak oil" is utter crap; it's not an analysis, it's a wish-fulfillment dream.

The people pushing the concept quite obviously aren't -afraid- limits on oil supply will crush the modern economy, they -hope- it will. They'd be very, very sorry if their dreams come true, of course.

Longer form: substitutability is infinite.

First, we don't get most of our energy from oil. We get most of our energy from -coal-. And we are not short of coal. There's enough in the state of Wyoming alone to maintain current consumption for approximately 1000 years. The Chinese are adding 8 megawatts of coal-fired generating capacity -every day- and aren't finding it hard to get ahold of the stuff, though they burn it rather carelessly.

Second, hydrocarbons are all fungible. You can do anything with one that you can do with another; it's just a matter of relative costs and convenience.

Coal, for example (or oil sands, or shales, or the ultraheavy oils like the Orinoco fields) can be made into liquid fuel. It costs a bit more -- prices have to be consistently around $40-$50 in 2008 dollars for the equivalent of a barrel of petroleum to give a reasonable return on the investment in conversion plants.

We haven't done it much up until now (except in South Africa and a few other places who have special incentives) because it costs more; the production cost for a barrel of Saudi crude is around $2.00.

Every time higher prices prompt investment in alternative sources of liquid fuel, the Saudis wait until the money's committed and then pull the plug by driving prices down and bankrupting the investors.

They probably can't pull the plug this time because increased demand from Asia is driving the ramp in prices and the Saudis don't have as much spare capacity as they used to.

Third and more generally, the combination of a market economy and the scientific method doesn't just manipulate resources: it -creates- resources.

When prices for something get high, money flows into finding more of it, doing more with less of it, and finding other things that do the same thing as it does. Scarcity creates abundance; high prices produce low prices.

All three processes are now in evidence.

For example, the Brazilians just discovered a supergiant field of about 6 billion barrels that will turn them into a major oil exporter. The field is in water so deep (and formations so deep) that it couldn't even have been -detected- ten years ago, much less tapped economically.

Want to bet this won't happen again and again? There are 31 billion barrels off Greenland, according to the latest estimates... and then there's the deep Arctic...

The Bakken formation in the American West holds about 500 billion barrels of oil -- more than twice Saudi Arabia's reserves, and about four or five times our conventional reserves -- but was a geological curiosity rather than a producing field until recently, because it's deep, thin, and in difficult rock.

Current horizontal drilling technology now makes about 5 billion barrels of it recoverable at high rates of profit and the first wells are going in in North Dakota even as we type.

Want to bet more won't become accessible?

Moving on to "doing more with less of it", note that one unit of GDP now needs only half the amount of petroleum that it did in 1970. In other words, we get twice the economic output per barrel.

Anyone want to bet this process won't continue, too?

Just to take one example, plug-in hybrid cars are just becoming available.

When mass-produced their production cost is not much different from conventional cars and they get, in effect, around 200 mpg of gas(*), because they use (mostly coal-generated) electricity for the first 40 miles of travel.

An electric car with a 40-mile range is not, to put it mildly, rocket science. It has a gas-powered generator set to take over if you need to go longer, so there's no loss of flexibility, which is the problem with all-electric vehicles.

82% of American cars travel an average of 40 miles or less per day. I only take longer trips about once a month, for example.

Because they recharge in off-peak hours, we could replace 70% of our current car and light-truck fleets with plug-in hybrids (and reduce our consumption of petroleum by about 50%) -without even adding any electrical generating stations-. Quite literally all you need is an extension cord.

We'd have to burn more coal, of course, and fission more uranium... but we're not short of either coal, or uranium. Myself, I prefer the nukes. And then there's natural gas; US reserves of that have doubled in the past two years as improved recovery technology made gas-shale formations in Louisiana, Texas, Pennsylvania and New York economically accessible. That's why Pickens is hyping natural-gas driven vehicles; the stuff is a drug on the market.

And as I said, that's just one of the market-driven devices coming onstream now.

Moving on to finding substitutes, there are too many to mention, so let's take just one.

Ethanol from grain is probably a dead-end, but ethanol from sugarcane, at current levels of efficiency (which have increased by about 15x in the past two decades), is fully competitive -- the Brazilians already get about half their liquid fuels that way, and despite their new oil bonanza are expanding production. The tropics are full of potential sugarcane land.

Production of ethanol using tailored enzymes to break down ordinary cellulose is certainly possible -- there are demonstration plants in operation right now -- and about 6% of America's arable land would grow enough cordgrass and switchgrass to -entirely- replace other sources of liquid fuel.

It's an old truism that you can't outguess the market. That's because the market is a massively-parallel computer in which each human being is a processor. It's the collective brainpower of the human race. Apply it to any problem through the market pricing mechanism, and voila... solutions. Unless the government or some goo-goo gets in the way, of course. Then you get wars and mass death by famine.

(*) more if you use biofuels, of course.

His official fansite. "Longer form: substitutability is infinite." This is very questionable, but perhaps someone else will try to take his rebuttal apart. Despite his books, it appears that Mr. Stirling is very much enamored with what cheap abundant energy makes possible.