Welcome to the age of diminishing returns

Friday, September 12, 2014

The Greatest Peak Oil Novel Ever Written

Herman Melville never mentioned "peak whale oil" in his "Moby Dick", published in 1851. But the novel can be understood taking into account the fact that the American whaling industry was going through its production peak just during those years. We may consider "Moby Dick" as the greatest peak oil novel ever written.

In 1970, the United States went through their production peak for crude oil. Production reached a maximum then started a decline that has been lasting up to a few years ago. The peak was an epochal event, it was the "great U-turn" of the American economy, which ushered in a new era of larger social inequality and diffuse poverty.

But the reaction to the peak itself was a deafening silence. Earlier on, the peak had been discussed and extensively debated since the time when, in 1956, the geologist Marion King Hubbert had predicted it. When it arrived, however, the peak was not noticed, not discussed, not understood. It was a non-event, if there ever was one, at least in terms of public perception. The same was true for other important peaks: the British coal peak in the 1920s, the oil peak of the Soviet Union in 1988 and more. These peaks brought great changes in the world and were related to the fall of great empires. But they were not perceived. The same thing is happening with the global oil peak ("peak oil"): the closer we get to it, the less interested the public becomes.

There is a reason why these epochal events leave no trace in most people's perception. It is because we tend to see the world in narrative terms, not in terms of facts and data. We perceive only the things that generate an emotional reaction on us and in order to generate this reaction there must be a story, a narration. We could say that all narrative is about a quest for something; it is about succeeding against difficulties, it is about the transformations that occur because of dramatic events. It is this transformation that makes our mind resonate with the events described. We react to events because we perceive a narration, not because we read numbers written in a table. Think the other major problem of our times, climate change, carries a tremendous narrative potential; it is not just that it may bring dramatic events but because we feel something for our planet. We perceive the fact that we risk to destroy the earth's ecosystem and we feel something about it: it the narration of a dramatic event. It is for this reason that "climate fiction" ("cli-fi") is so much discussed today.

But how about "peak fiction"? Peak oil (or any production peak) is just a point on a smooth curve that started at zero and will unavoidably go to zero in the future. It may decline faster than it grew (the "Seneca effect") but it remains a smooth curve. And there is not so much drama involved: we already know (or should know) that, one day or another, we'll run out of all those things we consume and which cannot be replaced. So, what can we learn from something unavoidable? It is the same as dying of old age. We know it has to happen, someday, but dying of old age is not what novels are written about. Think of the "Iliad" if it were to tell us that Hector died in peace in his bed. Think of Tolkien's trilogy if it were to tell us that Frodo sold the ring in exchange for a retirement plan.

So, in narrative terms, we must see the peak indirectly, through its consequences and the story that these consequences tell. Think of "Moby Dick"; Herman Melville's novel, published in 1851. In it, you won't find any mention of the "whale oil peak." And yet, there was such a peak (as shown in the image) just during those years. Whales were efficiently exterminated to the point that their numbers started diminishing and, with them, also the production of whale oil. Eventually, the whale oil industry collapsed as a result of its own efficiency. The fact that whales were disappearing was not perceived by the whalers of the time and there is no evidence that they understood - or even imagined - the concept of "peak whaling". But the melancholy that pervades "Moby Dick" and its basic theme of an unattainable quest shows that Melville perceived that there was something deeply wrong with the whaling industry of the time.

The symbolism contained in "Moby Dick" has been described many times. Captain Ahab's ship, the "Pequod," has been correctly interpreted as "America" (or, more exactly, the United States) and the desperate quest for the white whale as a symbol of the desperate human quest for something unattainable. The symbolism of so long ago remains valid today if we replace "whale oil" with "crude oil." We would want oil to last forever; but that is as unattainable for us, just as killing the white whale was for Captain Ahab. And, just as the Pequod and its crew destroy themselves in their impossible chase, so it may happen to the ship which is America today, destroying itself in the desperate task of squeezing the last drops of oil from the earth's crust.

Maybe, one day, someone will write a novel which will reflect our plea for crude oil so perfectly - although indirectly -  as "Moby Dick" did for whale oil in its times. If there will ever be such a novel, it will tell how we ended up in the terrible situation we find ourselves in, today. But it will never mention "peak oil" and not even crude oil as a source of energy; just as Melville never says in his novel what whale oil was used for.

h/t "James B"

Friday, September 5, 2014

Depletion: the problem with gold

Depletion is the true elephant in the living room of our age: it is a gigantic problem but it is rarely - if ever - recognized. Few people understand that depletion does NOT mean that we run out of anything. It means that producing a mineral commodity becomes so expensive that fewer and fewer people can afford it. It is happening with all mineral resources and, in this post, Steven Rocco reports about the situation in the gold mining industry. Clearly, we are not running out of gold, but with the cost of fuel increasing by a factor of five in ten years, you can't but wonder how the gold industry will be able to maintain the present production rates. (UB)

From the blog "SRSrocco Report", reproduced by permission of the author

GOLD MINING INDUSTRY: Fuel Costs Explode Over The Past Decade

 By on August 4, 2014 
The gold mining industry literally devours energy to produce an ounce of gold.  In the past decade, fuel consumption at the top gold miners more than doubled, but the actual energy cost grew at a much higher rate.

The huge increase of diesel consumption at the top 5 gold miners is due to several factors.  As ore grades continue to decline, the gold mining companies need to extract more ore to produce the same amount of gold.  Thus, the massive haul trucks that transport this ore burn more diesel in the process.
Furthermore, as open-pit mines age, they deepen which forces the haul trucks to travel longer distances at a higher grade.  One of the largest haul trucks in the world is the Caterpiller 797F.  These haul trucks are massive and can transport 400 metric tons of ore in a single trip.

CAT 797 pic

The CAT 797F has a standard 1,000 gallon tank and has options for a 1,500 and 2,000 gallon tank.  The graphic below (from the Engineering Network) provides some of the costs and statistics of the CAT 797:

CAT 797F

The CAT 797F costs $5 million a pop and uses six tires that cost $42,500 a piece.  Here is a fascinating cost factor that I found quite surprising.  According to an article in the Engineering and Mining Journal:

studies show tire costs can exceed 25% of total haul-truck operating costs per ton; and total tire service and replacement costs over the useful service life of a haul truck can exceed the original purchase price of the truck.
Basically, tires cost just as much or more than the haul truck itself.  That is an amazing statistic that just goes to show how expensive it is to mine gold.
In addition, you will notice the CAT 797F has an excellent fuel consumption rating of 0.3 miles per gallon…. which is a little more than 3 gallons per mile.  To get an idea of how much more diesel the gold mining industry consumes today, let’s look at the following chart.

Top 5 Gold Miners Gold Production & Diesel Consumption

Diesel consumption per ounce of gold produced more than doubled from 12.7 gallons per ounce in 2005 to 25.8 gallons per ounce in 2013.  You will notice that the diesel figures for 2012 and 2013 are the same.  At first I thought we would see an increase in 2013, but as companies started cutting back on construction of new mines as well as high-grading (extracting higher grade ore), consumption remained flat.

We must remember, these gold mining companies consume diesel in the transportation of their waste rock and ore, mine construction and to a lessor extent… electric generation when connecting to the grid is not possible or economical.

Diesel consumption per ounce of gold produced increased in 2013 at Barrick and Newmont, but fell at AngloGold, Goldfields and GoldCorp.  However, total diesel consumption in the group increased from 583 million gallons in 2012 to 591 million gallons in 2013.  The reason the gallons per ounce figure remained the same in 2013 as it was in 2012 was due to an additional production of 300,000 oz of gold.

While the top 5 gold miners doubled their diesel consumption per ounce of gold produced since 2005, their actual energy cost increased a great deal more.  The next chart reveals just how much these costs increased.

Top 5 Diesel Consumption & Cost Per Ounce

In 2005, these gold miners spent an estimated $30.48 of diesel per ounce of gold produced.  This figure doubled by 2008 to $69.92 when the price of a barrel of oil skyrocketed to $145.  When the recession hit in 2009, causing the price of oil to plummet, diesel costs for the gold miners declined as well.
Then over the next three years, diesel costs per ounce increased significantly from an estimated $55.91 in 2010 to $102.43 in 2012.  Even though the figure in 2013 is slightly lower than 2012, costs have more than tripled since 2005.

I estimated these figures by using the average annual price of diesel stated by the EIA – The U.S. Energy Information Agency.  Here is their data table:
U.S. Diesel Prices

The price of gallon of diesel was $2.40 in 2005, hit a peak of $3.97  in 2012 and averaged $3.92 in 2013.  So, not only have the gold miners doubled their diesel consumption for each ounce of gold produced (2005-2013), the price of diesel increased 63% during the same time period.

Now, if we go back just a few more years and look at the rate of change since 2003… its staggering.  I don’t have the actual diesel consumption figures for the top 5 gold miners for 2003, so here I provided some estimates below:

2003-2013 Estimated Change In Diesel Consumption & Cost

2003 = 12 gallons per ounce (conservative estimate)
2003 = $1.51 price of gallon of diesel
2003 = $18.12 diesel cost per ounce
2013 = 25.8 gallons per ounce
2013 = $3.92 price of gallon of diesel
2013 = $101.14 diesel cost per ounce

What a difference a few years makeaye?  Here we can see that the price of diesel in 2003 ($1.51) was almost a Dollar less than it was in 2005 ($2.40).  I was conservative and estimated that diesel consumption declined to only 12 gallons per ounce in 2003 compared t0 12.8 gal/oz in 2005.

Thus, the actual estimated diesel costs per ounce increased more than five times since 2003… actually 5.6 times.  Which means, the top 5 gold miners spent on average, $101 on diesel for every ounce they produced in 2013 compared to $18 in 2003.

Even though this diesel cost figure only represents a small part of the overall costs to mine gold, energy still represents the largest factor in determining the value of gold.  When I say that, it goes above and beyond the additional sources of energy such as electricity a gold mining company purchases when they process and refine gold.

It’s important to realize that all the mining equipment and materials used in the gold industry are not produced out of THIN AIR in the same way the Fed creates money.  All the metals and products that go into manufacturing mining equipment are only made possible by the huge amounts of energy consumed in the process.

This is also true for the materials consumed at the mine.  For example, Barrick purchased 292,000 metric tons of lime in 2012 at its mines.  Lime is listed as a material cost on its balance sheet, but the overwhelming factor to produce lime is calculated by the energy consumed in all forms and all stages.

We must remember, lime is extracted by huge excavators and moved by huge trucks which is then transported from the quarry to the mine by more trucks.  This all consumes a great deal of energy.  Again, the value of the lime used in the gold mining industry comes from the amount of energy consumed in all forms and stages.

Lastly, we also need to consider all the human labor in all stages.  Lime isn’t extracted or transported by robots (not yetLOL), but by humans.  Human labor is a form of energy.  So, when a reader sends me an email saying that labor is a higher cost than energy on a typical gold company’s balance sheet, I politely respond by saying… HUMAN LABOR IS ALSO A FORM OF ENERGY.
In conclusion, the gold mining industry consumes a lot of diesel to produce an ounce of gold.  As we can see, total diesel costs are rising even faster.  I am not concerned about the impact of increased diesel costs on the gold mining industry in the following years.  However,  the real threat to the industry will be a lack of available fuel supplies in the future… not the energy cost.

I will discuss this in more detail in future articles and reports.

Tuesday, September 2, 2014

Cli-fi: ten assorted doomsday scenarios

Image created by Robert A. Rohde / Global Warming Art.

In fiction, it is allowed to extrapolate the consequences of normal phenomena to their extreme forms and to examine events that could happen, no matter how they are perceived as unlikely. Hence, the interest in "climate fiction" ("cli-fi") as a way to explore the possible consequences of climate change in situations much more extreme than those of the usually sanitized scenarios presented by scientists.

It seems that, so far, only a few of the many possible climate related catastrophes have been explored in detail in movies and novels. So, I have prepared here a list of ten apocalyptic scenarios, all related to climate change (of course, many more can be conceived). "Scenarios" and "fiction" are closely related concepts, except that the latter doesn't necessarily have to take the laws of physics. In this case, none of these scenarios is physically impossible; but they are stretched a bit (a lot) for increased fictional dramatic effects.  The list may serve as a source of inspiration for those of us who are trying their hand at writing cli-fi novels. The scenarios are arranged in an approximate order of increasingly catastrophic events. 

1.  "The Great Coal Flame" (or "Saddam squared"). A giant coal fire which can't be extinguished. We all know how, in 1991, the Iraqi troops retreating from Kuwait dynamited some 700 oil wells, generating giant fires. The damage generated was not terribly catastrophic and the fires could be extinguished in less than one year, choking them at the mouth of the wells. However, we can think of something more difficult to stop if we imagine that the fire could affect a large coal deposit. There already exist underground coal fires which have burned for centuries and seem to be impossible to extinguish. Let's imagine something much bigger, maybe as the result of a tactical nuke landing by mistake (or purposefully) on a major coal mine. The result would be a giant fire covering an enormous area; it would be probably much more difficult to  extinguish than the localized oil well fires of Kuwait in 1991. Maybe this would not be a global disaster but, already now, uncontrolled coal fires account for about 3% of the world's CO2 emissions; if a major coal mine were to catch fire, the resulting disaster could considerably accelerate the process of climate change. To say nothing of the damage generated in terms of ashes, sulfur oxides, mercury, and other poisonous chemicals.

2."Super-Calving." or "Heinrich's return". The rapid collapse into the sea of large amounts of ice. "Calving" is a well known phenomenon in which large masses of ice detach themselves from ice shelves and create icebergs. Normally, the process causes no damage to humans (except for special cases, such as for the "Titanic"). But imagine that very large chunks of ice were released at a much faster rate than the present one. It has happened in the remote past in episodes known as "Heinrich's events" described a "Armadas of icebergs crossing the North Atlantic". The process could disrupt navigation in areas near large ice sheets, such as near Greenland and it could also generate giant waves - not tsunamis, but large enough to cause damage at considerable distances. Then, the presence of large amounts of ice floating in the ocean would have significant effects on climate and on the oceanic thermohaline circulation. The combination of these phenomena would disrupt commerce and transportation in a vital area for the world's economy. Not really a worldwide disaster, but a big disaster anyway.

3."Hyperstorms" Giant storms wreaking disasters. An increase in the frequency and the size of hurricanes is expected to be a consequence of climate change. In some conditions, hurricanes could become truly enormous and in this case they would take the name of "hypercanes", continent-size super-storms which reach the stratosphere, with side effects such as destroying the protective ozone layer. Because of this effect, it has been speculated that some of the past mega-extinctions were due to hypercanes. It is believed that sea surface temperatures high enough to create hypercanes can be generated only by exceptional circumstances, such as by asteroidal impacts. However, it is not impossible that a combination of factors related to global warming could generate larger and larger storms. Now, already in the present conditions, hurricanes are a major destructive force on human-built structures, imagine something much bigger and even more destructive..... The damage would be mostly local, unless we manage to unchain a true hyperncane which would create worldwide havoc by destroying the world's ozone layer.

4. "The great ring of ice disaster". The melting of the Northern ice sheets generates earthquakes and tsunamis. The "ring of ice" is a region which encompasses a number of geological faults in the Northern Hemisphere. This is already a volcanic active region, but the melting and the Greenland ice sheet would generate further instabilities. Greenland "floats" over the underlying semi-fluid mantle and would rise up when freed of the mass of ice that covers it (this is called "isostatic rebound"). The result would be the destabilization of the geological faults in the area: an increase in volcanism, earthquakes, large coastal landslides, and perhaps the sudden release of large amounts of methane from frozen hydrates. The most disastrous results would be Atlantic tsunamis, a phenomenon which so far has been very rare, but that would be enhanced and made more common by climate change. Tsunamis originating in Greenland could hit especially hard Scotland, Norway, and Ireland, but also the Northwestern continental European coast (Holland, in particular) disrupting or destroying an industrial and commercial hub fundamental for the whole Europe. That would surely have worldwide repercussions.

5. "The Big Freeze" (or: "the Younger Dryas reloaded"). A rapid cooling, something of the order of −5 °C (23 °F) of the Northern hemisphereThe tumbling into t. he ocean of the Greenland ice sheet could shut down the North-Atlantithermoalic ne circulation. As we have seen in the movie "The day after tomorrow," that would generate a rapid cooling of the Northern hemisphere. It is believed that something similar has already occurred during the period called the "Younger Dryas", around 12,000 years ago; probably  caused by the sudden release into the Atlantic of the cold water of a lake ("Lake Agassiz") when the ice dam that kept it locked in place gave way. (yes, it is the plot of the second film of "the ice age" series, the one titled "The Meltdown"). In the case of the Younger Dryas, the freeze appears to have taken place in a few years. Imagine if something similar were to happen today: the consequences would be, well, unimaginable, even if we were to assume that they would affect only the Northern Hemisphere.

6. "The great sea onrush" The sea rise generated by the rapid melting of the Greenland and West Antarctic ice sheets wipes out most of the coastal cities and infrastructures. The disappearance of the ice sheets of Greenland and of Antarctica is not so much a hypothesis as a virtual certainty, given the present trends. That would lead to a sea level rise of some 7 meters (24 feet) from Greenland alone, plus about 3 meters from West Antarctica, and further contribution from the slower melting of other ice sheets. However, it is normally believed that this event would unfold in centuries or millennia and that humans would have time to adapt (perhaps). After all, as it is often said, what is affected by the sea rise "is only real estate". But let's imagine that the process were much, much faster - taking place in a few decades or even less at least for one of the two most unstable ice sheets in the world: Greenland and West Antarctica. You would not see the onrush of giant waves submerging coastal cities, as in the "2012" movie, but the sea rise would still be so fast that there would be no time to build levees or to relocate buildings and facilities inland. The result would be a frantic rush inland, while vital industrial and transportation infrastructure would have to be abandoned. A true global disaster.

7. "Tickling the tail of the dragon" (or: "Shooting yourself with the clatrhate gun"). A giant, human caused methane release and the consequent rapid rise in temperature. Let's imagine that some well intentioned people try to solve the energy crisis by extracting methane from buried hydrates (or clathrates) at the bottom of the ocean. Now, imagine that by drilling inside these clathrate reservoirs triggers a self-reinforcing release phenomenon. Just like BP didn't know how to stop the Macondo well leakage, the companies drilling - say - in the Arctic ocean, would discover that they don't know how to plug the hole they have drilled and that, even if they could, more and more holes are appearing by themselves. The result is a massive release of methane in the atmosphere, a greenhouse gas much more powerful than carbon dioxide. As a consequence, the "worst case" IPCC scenarios unfold in a few years instead of a century. The results? Well, possibly all the four previous scenarios: collapse of the ice sheets, oceanic thermohaline shutdown and all the dire consequences. But also extensive climate disruption and the desertification of temperate region. You wouldn't speak anymore of "drought in California" for the same reasons why you don't normally speak of "drought in the Sahara desert". California would become like the Sahara desert (and not just California). Totally global disaster.

8. "Goldilock's disasters" or "The great climate rebound". Geoengineering can backfire. We can imagine multiple disasters arising from well intentioned but ill conceived efforts to reduce global warming. Spraying particulate in the upper atmosphere, or maybe putting giant mirrors in orbit, would cool the earth, but we don't know how it would affect the weather patterns. For instance, it could weaken the Indian Ocean monsoon and condemn at least a billion of people to starvation. Or, one could go too far in the opposite direction and cool the planet too much, (too much of a good thing) with effects similar to those of a nuclear winter. Finally, imagine that a major economic crisis defunds the geoengineering effort. Or, imagine that a major spin campaign convinces people that it was a hoax or useless (that's possibly the most realistic element of this scenario). Then, as the sunscreens fall, the earth returns to warming with a vengeance, as it would do after a nuclear winter and temperatures shot up so fast that, before screening can be resumed, it is too late. And that's truly global!

9. "The world as a giant gas chamber". What if CO2 turns out to be not so harmless as it is commonly believed? CO2 is often defined as "plant food" and it is believed that it cannot negatively affect human health until it reaches concentrations over at least 10 times the present values. However, it is also true that our species evolved in conditions of CO2 atmospheric concentrations below 300 ppm and that the present concentrations of 400 ppm have never been experienced by our ancestors. As the concentration of atmospheric CO2 keeps building up, we could reach concentrations four of five times larger than those which have been the rule for the past million years or so. CO2 is a reactive molecule which, among other things, would affect the blood pH and it has been argued that concentrations over 425 ppm would already have negative effects on human health; to say nothing of much higher values. So, if we discover that we have transformed the planet into a giant gas chamber, what would we do? 

10 "Venus, the ultimate disaster."  Temperatures could go up high enough to kill everything. The "Venus Scenario" is an extreme version of the "runaway greenhouse" effect. As temperatures go up, more and more water vapor is pumped into the atmosphere. Since water vapor is a greenhouse gas, it causes further warming of the atmosphere. At its extreme limit, the process could self-reinforce to the point that the oceans would completely evaporate. Temperatures could become so high that carbonates in the crust would be decomposed and that would create a dense atmosphere saturated with CO2. Add some sulfuric acid generated by volcanoes and you have transformed Earth into something very similar to Venus. Temperatures would reach several hundred degrees C at the surface; no liquid water, no life. Right now, the solar radiation arriving on the earth is believed to be not high enough to generate the kind of feedback that would transform earth into a twin of Venus. But there are always uncertainties in these calculations and the "Venus scenario" cannot be completely ruled out. The only escape from the Venus catastrophe would be leaving Earth for another planet, supposing that humans were able to build spaceships early enough. This is, clearly, the ultimate catastrophe: the sterilization of the whole planet.

It is fiction, it is only fiction, but........

See also another list of climate disasters. Also the source of the above image