How long will the petroleum industry be profitable?

[iwantcalculus]

As we can see now, oil prices are falling pretty forcefully, and it seems like they are heading for $30.

Now of course a lot of people ask: "when will petroleum collapse?"

And they usually mean due to renewable, sustainable, and nuclear energy for electricity and cars.
The "more knowledgeable" people tell them that petroleum is used for many things other than transportation and power such as plastics and petrochemicals and a bunch of other stuff I don't know about.

Yes, that's true, but when petroleum becomes USELESS in terms of transportation/energy, won't the prices plummet really hard? I don't think an oil barrel will cost $20 if oil is no longer used by cars, factories, and huge ships that transport stuff around. It would most probably be like $15. And even if the petroleum industry continues, it will only be like in Saudi Arabia where the easy oil is and it won't even be THAT profitable.
Another thing that worries me is that the oil barrel prices are "Artificial", that is, countries like Saudi Arabia need to artificially NOT sell their barrels so that the price stays high, and if they just continue their normal processes, the oil prices will go down to the mud in no time. Is aluminum like that? do aluminum companies artificially cut their production so that aluminum prices go down? I don't really think so, and this makes me pretty paranoid about how weak the bases of the oil industry are built on.So my question is, how long will the petroleum industry be PROFITABLE? And by profitable I mean oil barrel prices will be around $40-$60.

How long will it take till the effects of renewable energy will be clearly seen in the prices of oil barrels?The reason I'm so paranoid is that I want to start a Bachelor's in an oil-industry related study after 1 year and work in the oil industry afterwards. I want to stay in the oil industry for around 10 years or so.

Will the oil barrel prices be around $50+ at 2020-2030 ?

Scared to see the oil industry collapse right on my graduation day...

 

[phinds]

So my question is, how long will the petroleum industry be PROFITABLE? And by profitable I mean oil barrel prices will be around $40-$60.

I'd guess at least another 20 to 30 years, probably more like 50

 

[jack476]

I'd say for quite a while, even long after it's no longer economical as fuel.

Petroleum products are still used quite a bit in the manufacturing and chemical industries. Plastics, for instance. So it's going to be useful for a long time, if maybe a bit smaller than it is now. Plus, even if the industry does collapse, there are other places you'd be able to use similar skills, chemical engineering and mining/extraction engineering for instance.

 

[Bystander]

How long will it take till the effects of renewable energy will be clearly seen in the prices of oil barrels?

"Renewables?" Competitive with living in caves? Let alone oil, coal, gas? Never.

 

[Doug Huffman]

Think of the price of a barrel of oil as a valuation of the currency, rather than vice versa, and particularly when comparing the price of oil in diverse locations and currencies as a comparison of the value of those currencies.

 

[RonL]

I think you will be surprised at the small percentage of production that goes to transportation, :)ps. Perhaps I'll be the one surprised I can't seem to find the context of what I remember seeing. I did find some things that I need to consider in regard to where the oil comes from and what happens with each barrel of production, it looks close to 50% fuel and 50% other use.

 

[mheslep]

"Renewables?" Competitive with living in caves? Let alone oil, coal, gas? Never.

Pretty sure you mean intermittent renewables? Canada has been majority hydroelectric for years. Iceland electricity has been 96% hydro and geothermal for years.

 

[Vanadium 50]

Yes, but the total population of Iceland is less than the population of St. Louis.

 

[Bystander]

Geothermal and hydro? It's going to be a bit crowded jamming seven billion people around the half-dozen to dozen useful hot spots and along major rivers.

 

[russ_watters]

... but when petroleum becomes USELESS in terms of transportation/energy, won't the prices plummet really hard? I don't think an oil barrel will cost $20 if oil is no longer used by cars, factories, and huge ships that transport stuff around. It would most probably be like $15...

Those forces are acting in opposite directions. Cheaper oil means it will be used more in cars, factories and ships, not less.

 

[Vanadium 50]

And, the idea that because oil prices have fallen over the last few months that this is somehow the new natural state of affairs, um, remains to be seen.

 

[mheslep]

Geothermal and hydro? It's going to be a bit crowded jamming seven billion people around the half-dozen to dozen useful hot spots and along major rivers.

Not everywhere clearly. I'm just making the point that where it's available, it does compete with hydrocarbons day and night.

 

[Bystander]

it does compete

Beats fossil fuels hollow for fixed plants. And loses big time as far as portability. No one bothered to constrain the discussion to fixed sources versus sources at point of use. You saw one, and I was focused on the other.

 

[Nikitin]

Just for clarification: The current oil plunge has nothing to do with renewables. It's, probably, a result of the exploding supply vs shrinking demand situation.

 

[SteamKing]

I don't care how many windmills you build, you still need lubricants to run machinery, and, synthetics aside, petroleum-based lubricants are still pretty cost-effective.

The influence that OPEC had on the price of oil was due to the concentration of proven reserves under the control of the member countries. But petroleum production has changed markedly since OPEC played such a huge role in setting oil prices in the 1970s. When OPEC countries set their oil prices relatively high, it made economic sense to explore production in other areas, like offshore fields, which had been too costly hitherto to exploit. Also, newer technologies, like fracking, were developed to extract additional oil from already producing fields which was not recoverable by conventional means. Regions outside of the Middle East containing oil shale could until recently produce large quantities of oil cheaper than the price set by OPEC. With the collapse of the Soviet Union, Russian oil and gas began to be traded on the world market, as these resources brought hard currency which was needed to modernize the former Soviet bloc economies.

Some commodities, like aluminum and other minerals, are too widely dispersed around the globe for anyone country or group of countries to set up a cartel to control production. Other minerals necessary for modern industry are found in only a few countries and thus are susceptible to cartelization.

 

[Ryan_m_b]

The reasons for the big drop in oil price last year are still argued but the Economist hits the main points in this article:

Four things are now affecting the picture. Demand is low because of weak economic activity, increased efficiency, and a growing switch away from oil to other fuels. Second, turmoil in Iraq and Libya—two big oil producers with nearly 4m barrels a day combined—has not affected their output. The market is more sanguine about geopolitical risk. Thirdly, America has become the world’s largest oil producer. Though it does not export crude oil, it now imports much less, creating a lot of spare supply. Finally, the Saudis and their Gulf allies have decided not to sacrifice their own market share to restore the price. They could curb production sharply, but the main benefits would go to countries they detest such as Iran and Russia. Saudi Arabia can tolerate lower oil prices quite easily. It has $900 billion in reserves. Its own oil costs very little (around $5-6 per barrel) to get out of the ground.

How long this trend will continue for is a matter of debate but I find it unlikely that oil will stay low for any significant (decades) length of time. In either case I don't think the question as it's phrased tackles the issue. A more interesting question for me is how long until increases in crude oil costs and increases in relevant technologies make synthetic oils more competitive than natural ones. There's a lot of interest heading towards projects like the EU SOLAR-JET and institutes like the US JCAP. Both of these aim to create a form of efficient artificial photosynthesis that would allow solar energy to be used to drive chemical reactions to produce oils from water and carbon dioxide. I once heard that synthetic oils nowadays using no fossil fuels are made for $200-$300 per barrel. I've looked around for a source but most of what I've found uses a bit of coal or natural gas in the process. In any case it would be interesting to find any research looking at cost estimates for this technology over time. It might never get as cheap as oil, but if it could get down to $100-$200 per barrel it could outcompete fossil fuels in the long term.

 

[Bystander]

I once heard that synthetic oils nowadays using no fossil fuels are made for $200-$300 per barrel. I've looked around for a source but most of what I've found uses a bit of coal or natural gas in the process.

"A bit." The $200-$300 was in the days of $100 plus a barrel and reflected the oil, coal, or natural gas equivalent cost for the energy going into the process. The product has a natural carbon-14 signature, but involves burning more fossil fuel than it replaces.

 

[Ryan_m_b]

"A bit." The $200-$300 was in the days of $100 plus a barrel and reflected the oil, coal, or natural gas equivalent cost for the energy going into the process. The product has a natural carbon-14 signature, but involves burning more fossil fuel than it replaces.

Which product? I was under the impression that there were synthetic fuels that did not require any fossil fuels. I'd be interested in any links people have to these, particularly with economic predictions.

 

[Bystander]

Which product?

Sec. of Navy "signed" agreement to buy "synthetic" kerosene/JP at 21$/gal (or 17, or 23) for x years a couple years ago. Fischer-Tropsch was patented 80 years ago. Pyrolysis of plant material yields the same CO-H₂ "feedstock" as the water-gas shift going into the front end of the Fischer-Tropsch process plus odd hydrocarbons depending on lignins and other oils available in the raw plant material being used. Bottom line on Fischer-Tropsch to date is that you burn two to three barrel of oil equivalents in whatever fuel you use to fire the plant for every barrel of liquid hydrocarbon produced. This is not stating absolutely that there is NOT a "sweet spot" somewhere in P, T, X space that has not been found for the process, but in 80 years the only application pursued on a major scale was during WWII when the Luftwaffe and Wehrmacht were unable to develop coal-fired aircraft and tank engines. Yes, agricultural waste, or switch grass, or miscanthus, or pulp forest "slash" can be converted to liquid hydrocarbons; the conversion efficiency energy wise is that 10-20% of the heating value from direct burning of the organic feedstock is recovered as a liquid fuel heating value.

 

[Ryan_m_b]

Bottom line on Fischer-Tropsch to date is that you burn two to three barrel of oil equivalents in whatever fuel you use to fire the plant for every barrel of liquid hydrocarbon produced.

When you say "fire the plant" do you mean provide power or a carbon monoxide source? In the case of power as I understand it studies into developing artificial photosynthesis are looking to use solar power to generate synthetic hydrocarbons. As the price of solar is plummeting I'm very interested to see if something along the lines of solar farms powering Fischer-Tropsch reactions or similar could be commercially competitive.

 

[Bystander]

"fire the plant"

Whatever energy source is being used to "push" cellulose up the energetic hill from 15 MJ/kg heating value to the 30-40 MJ/kg heating value of useful liquid fuels.
"Artificial photosynthesis?" Have not been keeping up to date at all on the topic. As of 20-25 years ago, it was looking about as promising as controlled fusion, and I quit holding my breath. Energy requirements for materials handling could be the limiting factor on such efforts, but I haven't really looked at it all that much.

 

[MathAmateur]

"Renewables?" Competitive with living in caves? Let alone oil, coal, gas? Never.

Never? You are assuming that fossil fuels will never run out. Not a very good assumption for a non-renewable resource. The reality is that Texas already is generating about 10 percent of its electricity from wind. This is a red, fossil fuel state. They are not doing it because of political reasons. They are doing it because it is cheap.

 

[Bystander]

They are doing it because it is cheap.

People who are less than honest are doing it for the subsidy money.

 

[MathAmateur]

People who are less than honest are doing it for the subsidy money.

Fossil fuels have pretty good subsidies also. They are actually quite a bit higher than for renewable energy sources (with the exception of the silly corn ethanol subsidy, which is ridiculously high). If you look here: http://en.wikipedia.org/wiki/Cost_of_electricity_by_source, wind does fairly well compared to everything except Natural Gas. With the advent of cheap organic flow batteries: http://www.seas.harvard.edu/news/20...ry-promises-breakthrough-for-renewable-energy, wind will become much more reliable and useable in the electric network.

The real advantage of wind is that it will not go up in the future. Instead, after 20 years (assuming that length of capital payoff), it becomes really cheap (just the cost of maintenance). With natural gas or coal, you keep on paying and you really don't know how the price will go.

 

[russ_watters]

People who are less than honest are doing it for the subsidy money.

I'm not really sure what you mean by that, but subsidies exist for the purpose of making the thing that is being subsidized more attractive. So I don't see how it can be dishonest to do the thing for the subsidy that the subsidy was designed to get people to do.

 

[Bystander]

The real advantage of wind is that it will not go up in the future.

after 20 years (assuming that length of capital payoff),

"The twenty year capital payoff?"
Initial energy investment is around 60 MJ/W. Run for two years to recover that. Oops, average only 1/3 of installed capacity due to wind variability. Okay, six years. Oops again, the gear boxes have to be replaced every five years at about one quarter of original installation cost, and four gearboxes in twenty years doubles the six years to twelve (This is where Boeing bailed out in the 70s). We have yet to erect and maintain transmission lines from our wind farm to our customers, or to install and maintain gas turbine backup plants to service a customer base that is not going to settle for intermittent power. We've not done any of the washing, painting, and whatever other chores are involved in routine maintenance. Casualty losses from runaways due to failed governors, bird strikes, and ice storms add how much more to the energy overhead before we actually deliver power to customers? Another three or four years? A wind utility using 75% of its output just to operate makes for an awkward business model, ~ $8 per deliverable watt to the customer. Over twenty years is $.40 a year, or a nickel per kwh just in the "up front" hardware cost.

"It'll be competitive once the storage problem is licked to turn it into a "demand" rather than intermittent source." How much storage? How long does an average blizzard or hurricane or dust storm shut things down? A day? Time enough to reroute through a "smart" distribution network? Day's output from a one MW turbine operating at 1/3 output is eight thousand kwh. I can buy a Diehard for ~ $15/kWh. Utilities should be able to buy them in bulk for $5, times three for replacements over the twenty year life of the installation, is $120k for storage, plus a heated building (don't want to leave batteries to the mercy of the elements), plus inverters, plus switchgear. Closing in on running twenty years just to cover the energy requirement to manufacture and install the turbine and associated hardware yet? Now we've got an operating wind farm that reproduces itself and delivers essentially nothing to end users.

I'm not really sure what you mean by that,

"That" being the crack about "less than honest" people, who slap a coat of "green paint" on a scam, and aggressively ignore questions about associated costs in terms of money or energy. Wyoming wind is about to the point where "Billy Joe and Bobby Sue" are going to live up to the song's lyrics; ranchers who took money up front for leases have been having checks bounce. SW Kansas --- don't know --- local governments have been suckers for every revenue bond scheme for fifty years, and there's still "gold in them there farm communities."

 

[mheslep]

Initial energy investment is around 60 MJ/W. Run for two years to recover that.

That appears to be high.

I imagine the steel in a turbine must contain the majority of embodied energy; the average 1.5 MW turbine seems to have 220 tons. Energy for http://www.epa.gov/sectors/pdf/energy/ch3-6.pdf , so energy recovery of the steel alone at 100% turbine usage is two and half weeks, seven weeks at 30%. Liberally doubling the energy for the remaining blade fiber glass and winding copper and the turbine still breaks even in 3-4 months.

This paper from Kubiszewski et al (behind a pay wall) concludes an EROI for wind of 25.

"maintain gas turbine backup plants"

This is indeed a cost driver for a combined gas (or coal or hydro) plus wind system. But the energy required to build the gas plant belongs in the payback column of the gas plant, not the wind turbine.

 

[mheslep]

The real advantage of wind is that it will not go up in the future

Perhaps, but the cost of wind is not just the cost of wind, not to the consumer. Wind generation requires a conventional thermal (gas,coal,biomass,nuclear) or hydro source that can be dispatched when the wind's not available. When some small percentage of the conventional fleet is tasked, as it is now in the US, to run as low usage peaking plant, that plant's production is expensive, but the overall system cost not so. The problem with a theoretical high percentage wind or solar system is that it requires almost the entire conventional fleet to be maintained as the few peaking plants are now. Very little of it can be retired, not without the introduction of some other yet to be proven technology (e.g. inexpensive long term energy storage, enhanced geothermal, power-to-gas, etc).

Germany is an example. Germany has an average electric load of 60-70 GWe. Over the last dozen years they've built some 70 GWe nameplate of solar and wind. Despite this, the entire conventional fleet sits in place at around ~100 GWe. They've closed a few nuclear plants, but continued to build more coal and wood burning plants (some of which comes from the US). Scanning the daily power national output shows why: frequently for hours, sometimes for days, and occasionally for many days, nearly all power in Germany is provided by the conventional power fleet as wind and solar are unavailable. The consequence is an enormously expensive power system, which is essentially two systems sitting side by side that run at different times.

http://www.ise.fraunhofer.de/en/dow...ction-from-solar-and-wind-in-germany-2014.pdf

 

[Bystander]

That appears to be high?

According to my spies in DoE, by inference from lack of argument to the contrary, "No." Absence of argument does not imply agreement. The 10¹⁰ J/ton is probably taken from enthalpy or free energy of formation of iron oxide (too close to be coincidence). Might be heat capacity to m.p. for remelting scrap, about the same. Materials handling from scrapyard or mine to mill, and mill to end use location, 10^7-8 J/t. Rolling and fabrication? Another 10¹⁰. Fiberglass and resins for blades? Easily times ten. Chemistry gets expensive. The 60 MJ/W was giving the concrete footing, steel for the tower, and electrical guts away for free.

Edit: Added note
Materials handling may have to be increased by a factor of ten. I was thinking in terms of domestic (U.S.) steel production. Best of my knowledge, all the steel for wind farms is coming in from China.

 

[mheslep]

My steel energy intensity figure came from the EPA reference (above); it in turn references DOE and others. http://www.epa.gov/sectors/pdf/energy/ch3-6.pdf

Different studies of energy use in the iron and steel industry often employ somewhat different assumptions and boundary conditions which may lead to slightly different energy intensity measurements (energy use per ton of production). Industry data from 2004 establish an average energy intensity of 18.99 million Btu per ton (MBtu/ton) for integrated steelmaking and 5.01 MBtu/ton for EAF steelmaking, with an industry-wide intensity of 11.8 MBtu/ton (based on EAF steelmaking at a 53 percent market share).[166] A 2005 DOE study estimates the average energy intensity of integrated steelmaking at 16.5 MBtu/ton, and EAF steelmaking at 5.7 MBtu/ton.[167]

To get some idea for comparison I used 10 MBtu/ton from the above.

he 10¹⁰ J/ton is probably taken from enthalpy or free energy of formation of iron oxide (too close to be coincidence). Might be heat capacity to m.p. for remelting scrap, about the same. Materials handling from scrapyard or mine to mill, and mill to end use location, 107-8 J/t. Rolling and fabrication? Another 10^10.

Ok, so you have steel at 2*10¹⁰ J/ton for steel production? Fiberglass and resin may be ten times as energy intensive but the blades are also a tenth the mass of the tower/nacell steel.

Gas plants or whatever backup should count towards system cost, but the energy intensity for the gas plant and its fuel infrastructure belong in the column of the gas plant, not the wind turbine.

 

[Bystander]

To get some idea for comparison I used 10 MBtu/ton from the above.

Now you've got me doubting myself. From Energy Information Administration, Manufacturing Energy Consumption Survey, 2006, "10⁸ ton/a, and 10¹⁵ BTU/a," or, 10⁷ BTU/ton, or, 10¹⁰ J/ton. That's the energy audit on the steel industry. Just for reference, 5 x 10SUP]8[/SUP] J/ton melting scrap, and 1.7 x 10⁹ for C reduction of hematite. Rolling billet to plate? O(3 x10⁸ J/ton for 50% reduction in thickness (I would recommend a livestock salt block rather than grain of salt with that number). "Slip casting" may have made that number irrelevant.
Just spent about eight hours running into pay walls, consultant ads, IT pay walls, and irrelevant drivel trying to chase down an energy audit for the chemical process industry, and succeeded only in establishing enormous doubts in my mind regarding any energy audit figures. Annual U.S. consumption in J, 10¹⁹, 3 x 10¹⁹, and 10²⁰. The first two are nominally electrical energy, and the third total. Relevance here is that audits assign 5-6% consumption to the steel industry, 3% (?!) to the chemical process industry (which may be compared to 30% for India, and 18% for UK).
A little chemistry and a number or two for you to ponder, while I ponder what little I've been able to come up with so far: epoxy resin synthesis for anything that's going to handle the environmental conditions (UV, weather) begins with H₂O₂ at ~ 50 kJ/mol, to make t-BuOOH, to whatever epoxide is desired. That's it for energy accounting so far. How many epoxide groups per mole of monomer, or kilogram of resin? At this point, I'm going to have to take a break and think about what else to search for as far as finding slightly more substantial numbers. And I thought some of the Earth science numbers were "soft." This is an uglier bit of bookkeeping than I would have thought given emphasis on energy use since the embargo forty years ago.

 

[zoki85]

As concerns "wind" see this proposal:
http://vortexengine.ca/index.shtml
Haha, some ideas are more desperate than others.

 

[RonL]

As concerns "wind" see this proposal:
http://vortexengine.ca/index.shtml
Haha, some ideas are more desperate than others.

Can anyone be far off-base when this is on their front page ?:D ( Tesla, my hero)

 

[zoki85]

Can anyone be far off-base when this is on their front page ?:D ( Tesla, my hero)

I would say it is enough to be slightly off-base for concept like this to generate more troubles than electrical power as things scale up...
But, at least they are trying something. Tesla would be proud of them ;):D

 

[Bystander]

This is an uglier bit of bookkeeping than I would have thought given emphasis on energy use since the embargo forty years ago.

For those who wonder how my "60 MJ/W_Installed" is derived, it's a fifty year old rule of thumb, "sell it for twice what the utility company bills you for making it." ∴, half of "$2/W_Installed," a common figure, is one buck, divided by a nickel (big users get big price breaks per kWh) is 20 kWh.
Trying to audit this within the somewhat "fuzzy" framework of existing "global" energy audits may not be possible. I have not abandoned pursuit of an answer to mheslep's question. It's just going to take longer than I originally thought it should.