Jul 082012
 July 8, 2012  Posted by at 8:22 pm Energy

George Monbiot recently made a major about-face on his peak oil stance, on the grounds that unconventional oil represents a new reality. The basis of his u-turn is a recent report on unconventional oil by Leonardo Maugeri, (former) oil executive at Italy's Eni, published at Harvard University, where Maugeri's a Senior Fellow at the John Kennedy School, Belfer Center, which we discussed here at TAE in Unconventional Oil is NOT a Game Changer.

George Monbiot:

We were wrong on peak oil. There's enough to fry us all

Peak oil hasn't happened, and it's unlikely to happen for a very long time.

A report by the oil executive Leonardo Maugeri, published by Harvard University, provides compelling evidence that a new oil boom has begun. The constraints on oil supply over the past 10 years appear to have had more to do with money than geology. The low prices before 2003 had discouraged investors from developing difficult fields. The high prices of the past few years have changed that.

Maugeri's analysis of projects in 23 countries suggests that global oil supplies are likely to rise by a net 17m barrels per day (to 110m) by 2020. This, he says, is "the largest potential addition to the world's oil supply capacity since the 1980s". The investments required to make this boom happen depend on a long-term price of $70 a barrel – the current cost of Brent crude is $95. Money is now flooding into new oil: a trillion dollars has been spent in the past two years; a record $600bn is lined up for 2012.

I sent George a short response to his article, by way of opening a dialogue:

What we are facing is a demand and price collapse that will render unconventional supplies uneconomic. Natural gas is leading the way over the next few years. The high cost and low EROEI are fatal flaws.

And received this reply:

If there's a collapse in demand, peak oil is not an issue, right? If there's a resurgence of demand, unconventionals become economic again. As for EROEI being a constraint, try telling that to the tar sands producers in Alberta.

With best wishes,


The debate continues. Here is my next installment:


A demand collapse will certainly put peak oil on the backburner for a number of years. The next few years will be remembered for financial crisis as we move into what will be at least as bad as the Great Depression (and very likely worse, since the bubble was much larger this time). Peak oil will not have gone away, however.

We have used the cheap and accessible oil (and other fossil fuels) and what remains will be exceptionally, and increasingly, expensive in both financial and energy terms. Predictable consequences will follow from this, but in a complex interaction with many other factors, notably the context of the huge credit bubble bursting. This amounts to crashing the operating system. For a while, resource constraints will be relieved due to economic seizure (i.e. the collapse of both the money supply and the velocity of money).

During the period of financial crisis, deflation and deleveraging, weak demand will buy us some time, but at the cost of setting us up for a supply crunch later. The period of sharply falling prices will kill investment in the energy sector, because the cost of production will fall less quickly than prices, meaning margins will be squeezed. Both physical and financial risks will be much higher. A lack of economic visibility will be anathema to what are inherently long term projects.

In addition, trade collapses during periods of economic depression, as for instance letters of credit become impossible to obtain, and the lack of funds for maintenance compromises the integrity of distribution infrastructure. Infrastructure may also be deliberately targeted during the inevitable upheaval. All of these factors act to reduce supply, and would be difficult, or impossible, to reverse quickly if demand were to rise.

When supply and demand become tight, what transpires is not a simple price spike, but an exaggerated boom and bust dynamic. This has been underway since 2005/06. The first full cycle unfolded from 2005/06 to 2008. The second began in 2008/09 and will probably end with a price bottom relatively early in this depression with a resurgence of military demand, given that oil is liquid hegemonic power.

That should feed into the third cycle, which should send prices sharply higher in real terms, if not to a new high in nominal terms. This price volatility, against a backdrop of severe economic contraction, upheaval and fear is leading towards a profound societal change, most likely a significant period of involuntary loss of socioeconomic complexity.

You mention the tar sands, and they are indeed an interesting case – an arbitrage between cheap natural gas and expensive syncrude that can continue while the price disparity is maintained. They are able to make money, even though they are not producing much net energy. Unfortunately for the tar sands producers, the price disparity is set to reverse.

The hype surrounding shale gas has crashed the price to the point where it is on the verge of putting producers out of business. Natural gas in North America appears to have bottomed, while the perception of glut in unconventional oil, combined with weak demand and a lack of appropriate infrastructure for internal North American sources, is set to undermine oil prices considerably.

Tar sands projects will be under acute threat under those circumstances – not imminently, but over the next five years or so. Once one cannot make money from some combination of artificial input/output price disparity, public subsidy and the ability to socialize externalities, then EROEI becomes the defining factor, and the EROEI for tar sands is pathetic.

While I agree that oil men do not base decisions on EROEI, ultimately EROEI will determine their ability to make money, and that is their driving motivation. Finance can only temporarily allow people to ignore thermodynamics.

EROEI effectively determines what is and is not an energy source for a given society (ie to maintain a given level of socioeconomic complexity). Unconventional fossil fuels are caught in a paradox – that their EROEI is too low for them to sustain a society complex enough to produced them.

They can only be produced for the relatively short period of time that the complex society built on conventional sources continues to maintain its current capacities, but as the conventional sources disappear, and that society can no longer support itself, the ability to undertake all the activities required for unconventional production will be lost. The hype has no foundation.

We have been living in a major departure from reality in many ways, as always occurs during bubble times, but those times are coming to an end. Instead of overshoot, we are headed for undershoot, and we are not going to like it.

Note the critical paradox of unconventional supplies. That is where the cornucopian view of energy, where Monbiot now seems to have landed, breaks down.

The same argument applies to renewable power as it is currently practiced. Without affordable conventional fossil fuels, the increasingly complex alternatives cannot be developed and exploited.

We find ourselves in a world of receding horizons.

Unconventional supplies are always priced at conventional energy plus a premium, thanks to their crucial dependency on conventional supplies.

What high Energy Return On Energy Investment makes possible, low EROEI will eventually take away, following a brief boom that constitutes the last gasp of our modern energy bubble era.

Image: Raúl Ilargi Meijer: Data source: David Murphy



Home Forums Peak Oil: A Dialogue with George Monbiot

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  • #4567
    Otto Matic

    Thanks for the ClubOrlov headsup, I was going to wander over there sometime this week, he posts irregularly.

    Particularly rye observations on neurosis tag teaming with psychosis in the Peak Oil mosh pit.

    My favorite:

    “…Take your typical neurotic (refuses to face Peak Oil, spouts gibberish about it when pressed), put that neurotic through a terrible, ego-destroying crisis, and that individual may regress and lapse into psychosis.

    What happens to individuals also happens to entire societies. Take a neurotic Peak Oil-denying industrial civilization, put it through a terrible global financial crisis, tell it that economic growth is over forever, and what you get a psychotic, delusional industrial civilization..”

    Over there, yah, right there, one just flew over the cuckoos nest…haha


    A most erudite reply, Nicole.

    Monbiot’s essay also appears on his website, http://www.monbiot.com, which also includes references, so it’s worth looking at this to get some idea of his evidence base. It is pretty flaky. For instance he writes:

    “Maugeri writes (page 47): “In 2011, Continental has estimated the Bakken OOP alone at 500 billion barrels. In terms of oil in place (not all of which is recoverable), both the Price and the Continental estimates would put the Bakken formation ahead of the largest oil basins in the world, making it the biggest one.”

    Had Monbiot been seriously assessing the reliability of Maugeri’s work he would have picked up on the parenthesis “not all of which is recoverable” and looked into what actually was recoverable. For instance the USGS website claims this is about 3 or 4 billion barrels, i.e. less than 1% of Maugeri’s figure. No wonder Maugeri glossed over this, and shame on Monbiot for not bothering to investigate.


    In: “We find ourselves in a world of receding horizons,” the notion of “receding horizons” seemed an interesting metaphor and wondered how to visualize it?

    A search led to: “Model Predictive Control, or MPC, is an advanced method of process control that has been in use in the process industries such as chemical plants and oil refineries since the 1980s. … The prediction horizon keeps being shifted forward and for this reason MPC is also called receding horizon control. Although this approach is not optimal, in practice it has given very good results. …”


    So, in the oil industry, it is not simply a metaphor.



    I defined the The Law of Receding Horizons years ago when Nicole and I were still writing for the Oil Drum. The core of it is based on the fact that as soon as alternative energy sources, from shale to wind to biofuels, start to look profitable because oil prices rise, they no longer are, precisely because oil prices rise, and all alternative energy sources depend heavily on the use of oil in their production. It can be used in many other fields too: there are tons of things that look viable if and when not all costs are counted. Which they’re often not. The idea is loosely based on something Ken Deffeyes addressed with regards to shale in Wyoming, which has seen many instances of boom and bust through the decades. You can see the horizon but never reach it.


    The picture I have of receding horizons: oil is an essential input to oil production. On the downslope of the peak oil curve, the next barrel costs more to produce, resulting in a positive feedback on costs and the progressively steeper slope of net energy.

    Robert 1

    Greenpa said:

    “One aspect to photovoltaic power generation that is NEVER discussed is: it is desperately vulnerable to terrorist or vandal attack. All you need to do is break a few panels- and major disruption of service can follow, as the system gets unbalanced. Can you buy or build a weapon that will break windows over a fence and 200 yards away? Oh, yeah, easy.”

    Another issue re vulnerability of solar panels, PV or Thermal capture, is that of deterioration of output due to panel surface damage. I can remember my grandfather telling about seeing cars coming out of a Mexican desert road after a sand storm. All of the paint had been sand blasted off of one side of the cars and the window glass on that side was frosted by the force of the sand. Although it should be possible to protect the surface of solar panels by changing direction or covering the surface during inclement weather, I have not seen this discussed by solar energy advocates.

    I just finished watching a film on the US dust bowl and it reminded me of this problem:



    Robert 1


    Thanks for the documentary about the Dust Bowl. Several analogies in it to today’s world of greed and loss.
    At the end…

    “People are thinking differently about taking care of the land.”
    “Don’t fool yourself.”
    “You can’t convince me we’ve learned our lesson.”
    “It’s just not in our blood, to play a safe game.”


    I can’t help but be a fan of George Monbiot because of his exceptional book Age of Consent that argues for a people’s world parliament. Brilliant stuff. I’ve admired his writing for years after, so when he declared Peak Oil was over I was confused, certainly enough to post his article on peakprosperity.com for their response, and they wisely directed me to TAE. Thank you for your clarity, Stoneleigh, and thank you in particular to billhartree for pointing out what George missed. Incredible.

    As intelligent and focussed as the debate is, however, I can’t help but side with the comment from SteveB. I too believe that the real problem is that the matrix of our money system is actually working against us. As Marshall McLuhan once wrote: “We shape our tools and afterwards our tools shape us”. I will probably be derided for even bringing up this meta-issue, but our money system really does need to be superseded in order for us to survive and evolve to something new. We seem to be all caught in money’s mass-psychopathological catch-22…

    To quote The Matrix: “What if you were unable to wake from [a] dream? How would you know the difference between the dream world and the real world?” The trouble is that even if you are aware of that difference (and can separate the matrix of money from the real and natural world) but are still unable to wake from it, the rules of the dream world apply regardless. I hope it doesn’t need to end like in the movie Abre Los Ojos. 🙁


    Ms. Foss, I believe your emphasis on EROEI is spot on. As I frequently rant, we’re not mining hydrocarbons, we’re mining energy. The return on that energy is what makes it useful. The rest, as they say, is detail, where the devil still lies comfortably.

    Unfortunately, I think peak EROEI has come and gone and has recently become low enough to be noticeable, resulting in the higher prices we’re paying now to simply run in place. Despite the small fluctuation in prices we’re seeing, I’m sure this upward trend will continue. I’m skeptical that demand destruction will make a dent in the higher costs caused by EROEI decline, but since reliable aggregate EROEI figures are impossible to come by, I am not certain of this.

    What worries me are feedback effects, and supply chain viability. As energy prices rise, more and more of our interdependent supply chains will no longer be viable. Eventually, even the supply chains to the energy industry itself will fail, at which point we’re facing a decidedly non-linear decline in hydrocarbon energy delivery.



    I hope Monbiot does eventually respond but I’ve no expectation of that. However, when you said, “If EROEI falls by a factor of ten, production would have to rise by a factor of ten just to keep supplying the same demand (ie to stand still),” that was surely wrong. If EROEI is 80, then the net energy of 80 units is 79. To get the same net energy with an EROEI of 8 would “only” need something near 90 units of production. That’s not a factor of 10 increase, more like a factor of 1.125. That’s still a huge ask, of course, but the comment just struck me as wrong.


    Perhaps Japan will develop Kr-F laser fusion and make it into a game changer. I don’t know of any other technology that has even a remote chance of having a high enough EROEI besides KrF laser fusion.

    btw, the NIF facility in the USA is based on a totally inferior technology that can never be viable for a power plant. It was designed to simulate nuclear explosions, not to make a power plant, and it does not work yet anyway.


    Everyone here is missing the coming black swan events. After hearing and repeating all the end of the world scenarios I have come to the conclusion that there is a strong chance we will survive and prosper.
    First I’ll refer you to a book called Abundance by Peter Diamandis. If you read it you will get a sense of how things can be getting better. Next I will mention two developments that are world changing but highly ignored.

    First is the E-cat heat generator (called cold fusion in general) that has reached 1000 C steam. Cost of fuel is essentially zero and no radioactive waste.

    Second is a Plasmic transition engine. This works by exciting a mixture of noble gases in a sealed chamber which drives a piston. The expanded gas then collapses. A small two cylinder engine can produce up to 250HP and run for many thousands of hours at , again, very little cost. https://www.inteligentry.com They need a better web site but it will explain a lot.

    Lucas Durand

    You wrote:
    “Everyone here is missing the coming black swan events.”

    If you can see an event coming, it is NOT a black swan.

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