How to push the oil levers in the wrong direction
By now, it should be clear to everybody that we are facing some problem with oil production. Facing a problem, the normal reaction is to do something about it. If crude oil is becoming scarce, the first reaction often is, "where can we find more of it?"
We find a good example of this reaction in a recent a paper by Tony Megg titled, “The third trillion barrels of oil: the three steps to finding them”. Megg recognizes that there is a problem even though he doesn't mention "peak oil". He says that we have already extracted approximately one trillion barrels of oil. Another trillion forms the remaining known reserves. But we can find more; a third trillion barrels. Megg says:
So where do we look for the third trillion?
I think there are three main areas:
- We can get more out of what we have already discovered.
- We can find more of what we have already got, and
- We can diversify the sources of supply by using different feedstocks.
What Tony Megg is telling us, basically, is “let’s not lose our time with vague theories such as peak oil. Instead, let’s be practical: what can we do to find more oil?” It sounds like a good idea; but is it, really? Actually, Megg may be providing us with a good example of "pushing the levers in the wrong direction". Seeking for more oil may not be the right answer to the problem
Let me explain with an example that goes back to long ago; to American whaling in 19th century. Whales, unlike crude oil, are a renewable resource but if they are hunted too fast they don’t have time to reproduce and behave as a non renewable resource. For this reason, the hunting of right whales and sperm whales in 19th cenyury is one of the best known cases of a Hubbert curve for a worldwide resource, as you see in the figure below (bardi 2005). The production of whale oil went up to a peak in 1845 then declined to nearly zero around the end of the century.
We have a contemporay account of those times written in 1878 by Alexander Starbuck in his “History of the American Whale Fisheries”. It is still fascinating for us to read of how people were reacting to a situation which is so similar to what we are facing now for crude oil.
Starbuck correctly attributed the decline of whaling to the “scarcity and shyness of whales, requiring longer and more expensive voyages”. But he lists also other causes, one of which is “extravagance in fitting out and refitting” of the whaling ships. Starbuck thinks that this is a cause of the decline of whaling, but we can better interpret it as an effect of it. Ship owners and captains, apparently, had taken an approach that we can summarize as: “let us not worry about vague theories about how many whales are left in the ocean. Instead, let’s be practical: what can we do to find more of them?” For this purpose, they outfitted their ships with the best equipment available, no matter how costly.
Needless to say, it didn’t work as planned. Those ships may have been very efficient if it was possible to exterminate right whales to the point that, according to some studies, only 50 females were left in the whole ocean. But, eventually, every increase in efficiency was more than offset by a decrease in the number of whales. More efficient whaling had only worsened the problem.
Obviously, the answer to the problem of the scarcity of whales was not to catch more whales. It was to catch less of them. That would have lowered costs and given a fair share of the catch to everyone. Keeping the number of whales captured to a sustainable level would also have given the whale stocks the time to reform. But that wasn’t understood at that time and the result was the complete destruction of the 19th century whaling industry. Whaling was to restart only later in the 20th century; when new techniques were developed for hunting different species of whales. The right whales, those mainly hunted in 19th century, never recovered from their losses.
The story of whaling in 19th century is a perfect example of how people tend to "push the levers in the wrong direction"; that is choose solutions that worsen the problem. It is such a common case that it has been recognized and studied as part of the field called “system dynamics”.
Jay Forrester, the creator of system dynamics, observed that “People know intuitively where leverage points are. Time after time I've done an analysis of a company, and I've figured out a leverage point. Then I've gone to the company and discovered that everyone is pushing it in the wrong direction!” There are many examples of this behavior that you can read in Donella Meadows’s paper “Leverage Points - Places To Intervene In A System.” Whalers of 19th century understood that the scarcity of whales was a leverage point of the whaling system. But they pushed the levers in the wrong direction; making whales even scarcer.
Now, let’s go back to crude oil. The problem we face is, under many respects, the same as that of whalers in 19th century. We all know that oil is getting scarcer and that for this reason it is becoming more expensive to find, extract and process. That is, clearly, a critical point of the system, one of these “leverage points” that can be acted on. What we see proposed most often, as in Tony Megg's paper, is to find ways to produce more oil. But, if we invest money into extracting/finding/creating more oil we’ll deplete the resources faster and, in the end, we’ll face a worse problem.
The opposite approach, that of pushing the lever in the good direction, is the oil protocol, proposed first by Colin Campbell. The oil protocoll calls for gradually reducing the amount of oil produced. Of course, unlike the case of whales, there is no “sustainable” level for the extraction of crude oil. But reducing the oil production will preserve the resource for a long time and will give us more time to switch to sustainable energy sources.
Unfortunately, Jay Forrester was right (as he was so often) when he said that people tend to push the levers of the system in the wrong direction. Of the two ways to push the leverage point of crude oil production; extract more or extract less, guess which one is more popular!
Here is the link to the article of Tony Megg "The Third Trillion Barrels of Oil". (You need to register to access the paper, but registration is free)
A discussion on 19th century whaling in relation to Hubbert's model can be found in Ugo Bardi's article titled " Energy Prices and Resource Depletion: Lessons from the Case of Whaling in 19th Century"". A full version of the same article is also in press in "Energy Resources B."
Starbuck's 1878 book "History of the American Whale Fishery" has been reprinted in 1989 and is available from Castle books, Sacaucus, NJ.
About the oil protocol, see the "oildepletionprotocol" site.
Here is the link to Donella Meadows' discussion about leverage points.