Shell declares an end to cheap oil

Shell has been an increasingly vocal supporter of the need to plan for peak oil. Shell’s future energy scenarios paint a stark future – one where we plan for the demise of cheap oil and one where we scramble incoherently and nature decides for us. This week, in the Wall Street Journal, Shell’s CEO Peter Voser spoke more words in direct support of the peak oil camp:

When asked about the theory of “peak” oil in the world and whether that theory was now dead, Mr. Voser said “I think what is dead is cheap oil.”

You need more technology, innovation and will find oil further away from markets, Mr. Voser said. More will be spent to get oil and consumers will pay, both for oil and gas.

Mr. Voser also said oil price volatility is here to stay. More money is flowing into commodities and there are more players in the market.

This is, of course, what I think, as I have been talking about the end of cheap oil and extreme oil price volatility for years now.

The article also mentions the rise of electric cars. they are not a solution to the predicament of peak oil, which cannot be ‘solved’. (That’s the definition of a predicament.) However, cars we will always have with us, just like we still have the print media despite the rise of radio, TV and the internet. Electric cars will be a huge step in the right direction. Pity they will be predominantly the domain of the rich and of delivery businesses.

31 Comments Posted

  1. The Shell scenarios are supposed to be taken skeptically – they are just possible futures out of many possible futures.

    Because of competition amongst oil companies, waving the threat of peak oil isn’t going to boost pump prices. What will boost prices is demand, which is locked in when people buy vehicles – threaten them with peak oil and they might opt not to buy a new vehicle or might buy a smaller vehicle. Hence Exxon-Mobil’s campaigns.

    The report mentions some problems with nuclear power, not just a brief mention in passing. It doesn’t dismiss it totally but I don’t see nuclear power being a major contributor without a significant technological development.

    Solar thermal doesn’t require the same level of backup as wind or solar photovoltaic generation.


  2. I would have thought that bloggers here would have been suspicious of Shell’s motives in this report.
    After all, oil companies are normally presumed to totally driven by self interest and other great sins.

    We have to recognise that promoting the end of Peak Oil helps lift oil prices and makes it easier to justify higher oil prices. The price of petrol at the pump goes up and when challenged the oil companies say “Well we are coming to the end of cheap oil so get used to it.” Or “Well it is getting more and more expensive to find oil so we have to charge more”.

    My own skeptical position is reinforced by the fact that this report refers to nuclear power as an alternative source only twice – and just in passing. Instead it focuses on the alternatives that require oil or gas fired stations as back up.

    I wonder why?

  3. Another renewable resource which can be used when we want to (rather than use it or lose it) omass, e.g. wood fired cogeneration. This could be a good option for dealing with dry years (years of low hydro generation) in winter and spring, when the heat output of a cogeneration system would also be useful.


  4. Solar thermal can generate at night. The sun is concentrated onto a heat absorber, and the heat stored during the day. When the power is needed, the heat is used to vapourise a liquid (e.g. water to steam) which turns turbines as in a conventional thermal plant.

    The backup for renewable power can be pumped hydro storage, although there are only a few easily suitable sites. Demand management can also help, such as using lower cost power (i.e. when the wind is blowing or the tide is running) to freeze water, which is then used to cool air conditioning systems when power prices rise (i.e. when the wind dies away and the tide turns) rather than running the heat pumps.


  5. Yes, ken got that 50% wrong. The ten percent is the correct figure. Mind you 10% is a lot of loss.

    The problem with the renewables (with the exception of geothermal and hydro) is that you need back up for when the sun does not shine (every night) when the wind does not blow, and when the tide is turning.

  6. There are plenty of potential problems with nuclear, if its use gets ramped up (or is planned to get ramped up). But look around. There is no country anywhere that is doing anything significant to address the problems and predicaments we face. The only thing that really matters to governments, and to the populace, is economic growth. Nothing must stand in the way of that. So you have every reason to be a doom and gloomer, bigblukiwi.

  7. Apparently in Heinberg’s view, the long lead time required for Nuclear means it will not cut the mustard, not to mention the other drawbacks of the Nuclear Option, such as shortage of fuel material etc. In any case, as we as a species are still arguing about whether any real action is necessary, it hardly seems likely that any proposed solution will be acted upon soon enough to get us out of trouble. Or is this just me being a Doom & Gloomer ?

  8. What makes you think half of the South Island hydro power is lost in transmission lines? It is closer to 10%.

    Australia doesn’t need nuclear – it can use photovoltaic and solar thermal supplemented by wind and wave.



    March 5, 2010
    The man called the ”godfather of climate change” has urged Australia to adopt nuclear power to secure its energy future.

    James Hansen, director of NASA’s Goddard Institute for Space Studies, told a packed Melbourne Town Hall last night that nuclear power’s affordability offered a safe and affordable alternative to damaging fossil fuels.

    Speaking at an IQ2 debate titled ”Australia should embrace nuclear power”, he said fossil-fuel pollution killed 1 million people a year and that the planet was doomed if carbon emissions were not addressed.

    ”Renewable energy and nuclear power together can solve the air and water problem, as well as the climate problem,” he said.

    Meanwhile the government dare not mention the nuclear option for Auckland, instead one half the precious carbon free S. Island hydro power is lost in transmission over great distance, and under Cook Strait – with ugly pylons running straight up the beautiful Waikato – all because of misguided beliefs about nuclear dangers ….. ken

  10. Tony. Just to clarify, I was referring to achieving a human population that the planet can sustain.

    Just to be mischevious, note that only the worker’s children will be worked to death. Shareholder’s children will, of course, continue to attend their elite schools and survive to adulthood. Once the world has been rid of the working class then, of course, the shareholder class will learn the real value of an economic system based on maximising shareholder wealth.

  11. Even imaginable things may not be possible, kahikatea.

    Katie, my comment wasn’t a blanket “nobody is doing anything” statement. But when we see greens (yes, there are some here) apparently not understanding sustainability and when even the Green Party proposes policies that appear to be wide of the mark, then there really isn’t much reason to hope for a good outcome.

  12. Kevyn wrote: “The fact is cars have been with us since Roman times, albeit as a preserve of the wealthy until just a few decades ago. That suggests that it is a given that cars will always be with us.”

    The Romans didn’t have ‘cars’ as I understand the term. I think what you mean is that wheeled vehicles of some sort, that use roads, will always be with us, in greater or lesser numbers, unless someone invents some better alternative that we can’t even imagine yet.

  13. Tony wrote:

    I see no evidence at all that humans are clever enough. Look at this blog for a clear example. Not that I’m saying greens are stupid but look at how many think that we can pick off each symptom (as a problem) but still retain, more or less, the lifestyles and societal structures that we have.

    Please don’t assume that all who post here are Greens!
    A very few of us post to counter extreme opinions given by trolls who constantly try to present their ideas as having any currency within green thinking, or attacking ideas which actually do have any green currency.

    Back to sustainablility –

    Many of us who are interested in sustainability have changed aspects of our lives since Green policy campaigns first targeted Climate Change about five years ago.
    I would hardly expect anyone else to change their habits with regard to private transport if I wasn’t prepared to first change myself.
    My personal solution is to take public transport, cycle or walk; mostly, I walk downhill and bus back up these days.

    I did give up owning a private vehicle two and a half years ago, and have actually discovered a lot of freedom I wasn’t expecting, plus reduced my input costs substantially. It takes a bit of self-organisation, but since I’m not a huge consumer (in either sense of the phrase…) I manage reasonably well. There’s an occasional taxi ride when the load is heavy, but mostly I do fine without personally owning a vehicle.

    Other habits I have developed to reduce my dependancy on petrol/oil-based products, are to grow vegetables and fruit organically (no petro-chemical based pesticides or fertilisers) and to reduce my use of shopping bags by carrying fabric ones to the shops – these are just little things, easy for anyone to do with a bit of willpower, but it reduces a lot of waste and toxic load.

  14. Frogs comment did not refer to personal private transport for the very wealthy, so it’s not a given that cars will always be with us.

    Your ultimate solution for sustainability is not sustainable. If no child reached breeding age then no population level is sustainable, regardless of consumption levels.

    I know … you meant it as a joke. Unfortunately, unsustainable lifestyles are no joke. Most people who give this just a passing thought, probably hope it is some future generation that has to pick up the pieces.

  15. Tony wrote “Frog wrote, “However, cars we will always have with us”. I would say, prove it. I don’t think that is a given at all.”

    The fact is cars have been with us since Roman times, albeit as a preserve of the wealthy until just a few decades ago. That suggests that it is a given that cars will always be with us.

    What is not a given is that we will continue to live in low enough densities to allow freedom of individual movement to continue. Cities in India and China had appalling traffic chaos when their citizens could only afford to walk or cycle and India’s municipal railways have an appalling safety record due to overcrowding.

    Penultimately the only form of sustainable travel is to frogmarch workers from their barracks to adjacent factories, and to do likewise with schoolchildren between their dormitories and their classrooms. But ultimately, of course, the only truly sustainable solution is to frogmarch children from their dormitoies to factories and then work them so hard that they never reach breeding age, thus achieving a truly sustainable population that will maintain the emporer and senators in the manner in which all great people are entitled to due their superior breeding!!!!

  16. bigblukiwi wrote, “The large question is, is mankind wise or proactive or clever enough to overcome all these predicaments occuring at more or less the same time ?”

    I see no evidence at all that humans are clever enough. Look at this blog for a clear example. Not that I’m saying greens are stupid but look at how many think that we can pick off each symptom (as a problem) but still retain, more or less, the lifestyles and societal structures that we have.

    An example is the Green’s “New Deal” campaign. Almost the first sentence is, “It’s a plan to stimulate the economy and create the jobs we need, while putting in place the infrastructure to build a fairer and more sustainable country.” So the Greens want to stimulate the economy and build a more sustainable country. So, they want economic growth and they aren’t aiming for sustainability. Of course, it sounds great and is a lot better than the alternatives offered by the major parties, but it’s not a plan for a sustainable society. It wants to build more homes. It wants more efficient transportation (with more choice). It wants to protect the 100% Pure brand (the only reason would be to support exports and tourism). None of this is a plan for sustainability.

    Despite the fact that the end of cheap oil has been known about for well over a decade (at least, more like half a century), we’ve become more reliant on oil and petro-chemicals, not less, with depleting oil resources being just one symptom of our predicament. And yet we’ve seen no significant moves to even address that one symptom. The markets will provide or more oil will be found to put off the fateful day, apparently.

    When people like Heinberg have thrown in the towel on avoiding collapse (except, perhaps, just possibly, at a local community level), then you know there is very little hope of that (avoiding collapse).

    Good post, by the way.

  17. Trevor – I believe that some of the main reasons Telecommuting has not caught on are the trust angle as you state, although this could be easily overcome by electronic supervision, but the basic human need to be with others in the work place, & the interaction this produces thus giving more than the sum of it’s parts as it were. This can never be replaced by electronic means & therefore in my mind the idea of us all working ‘from home’ is just a fantasy. ( apart from the fact that many jobs require a physical presence for the function to be achieved).

    Tony – yes correct, and also please remember that Peak Oil is just one of the many predicaments we face in the very near future – Ref. ‘The end of the Line’ documentary, destruction of fish stocks, sea level rise, climate change, pollution, endocrinatic disruptiuon by man made chemicals in the environment, water shortagees, energy crunch, mass migration, population excess, political gridlock in the face of these issues, – need I go on?

    The large question is, is mankind wise or proactive or clever enough to overcome all these predicaments occuring at more or less the same time ?

    Another issue regarding internal combustion vehicle replacement by electric is the sheer scale of the energy required to do this in a short enough time (apart from the technical issues yet to be solved). My feeling is that true sustainability does not have room for each of us to have a personal transportation vehicle, far from it, or many mass transit ones for that matter. After the collapse which is surely coming, we will largely be a localised animal & will communicate mainly by electronic means not physical – and there will be far fewer of us !

  18. Electric cars coule well be part of the solution to both peak oil and AGW, providing we build renewable electricity generation such as solar, wind, wave, tidal flow, geothermal or hydro. There is no reason why the key components of an electric car can’t be recycle (batteries, magnets, wiring, etc) and the small number of moving parts and lack of reciprocal motion should give a long lifespan of many of these parts anyway.

    If the batteries in electric cars can also be used as short-term storage for our electricity networks, then they might contribute to using more renewable energy resources as well.


  19. Frog wrote, “However, cars we will always have with us”. I would say, prove it. I don’t think that is a given at all. If we don’t choose a sustainable path then collapse will ensure that, for most people, cars will be a distant memory. If we do chose a sustainable path, then it’s hard to see why communities living sustainably will have much use for private motor vehicles.

    So, you need to show either that collapse won’t happen or that sustainable communities will have a need for cars and can meet that need sustainably.

    We need more vision, rather than just assuming that the stuff we’re familiar with will always be around

    A1kmm wrote, “electric cars could well be part of the solution”. The solution to what? Not only, as frog stated, do we have a peak oil predicament (to which there is no solution), we have an unsustainability predicament, where tweaking this or that aspect of our unsustainable behaviour, will not provide a solution. We need to change our ways, fundamentally, not just try to change the mix a little. The idea of recycling our way to a slightly different business as usual is wishful thinking.

  20. One of the obstacles to telecommuting isn’t technical. Instead trust that a telecommuting employee is in fact working as hard at home as they would at work is an issue. Of course some telecommuting employees will actually be working more effectively at home with fewer interruptions and able to spend more time working without the commuting time.


  21. I suspect that long-term, electric cars (fully electric, not hybrid) could well be part of the solution. However, they won’t be able to be delivered on the right timeframe (especially not to avoid major sea level rises, for which we now need to be actively removing carbon from the air). The key will be to make them purely from abundant and sustainably recyclable materials. The combination of reduced travel, solar and wind power, and electric cars seems like a feasible long term solution. If done right, there is no reason why this should be unaffordable to the masses.

    In the short-term, the only viable solution is really reduced travel, a move towards walking and cycling. We are there technology-wise on all of these things (people can live close to work now, people can cycle now, teleconferencing and telecommuting is possible now – and will be even more feasible as local bandwidth availability improves), it is just that there is a lack of will to implement them due to the short-sighted nature of actors in a laissez faire economy, and cheap oil.

  22. Indeed, the Shell-game, Greenfly. I think you’ll find they have always warned that the end of cheap oil would be coming. We have never been at war with Eurasia.

  23. What I find disturbing is an apparently serious questioner thinking that “Peak Oil” is dead.

    What is only a little less disturbing is that although Peter Voser believes in peak oil, he also believes that by 2050, the number of automobiles will double and 40% will be electric, so that despite peak oil, the number of non-electric vehicles will grow by 20%. What does he think will power them?


  24. Cheap oil is not a new concept……………..that concept is 100 years old. Peak Oil IS a new concept. It’s merely a question of supply and demand. If you demand less the price will be less. Demand more and the price will rocket as the cost of finding more oil esculates.

  25. Now there’s a new Concept – “Cheap Oil”.
    The source of that old Furphy of Peak Oil is revealed – the people who have nicked it want more money….

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