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EROEI


Those that study the phenomenon of peak oil will be aware that finding energy increasingly is becoming more expensive, not only from a dollar and cents point of view but also when calculating energy returned over energy invested. The common example offered suggests that in the early days of oil production, a well might return 100 barrels of oil for every 1 barrel of oil invested to find and extract it. During the 1970’s that number had fallen to 30 returned over 1 invested. Now the number is said to be about 3 to 1.

Hence the frenetic activity in South Texas as the Eagle Ford Shale project continues full bore. Roads have become crowded with arrays of massive hunks of steel: pumps and rigs and tanks and other devices used to frack wells and semi-trucks carrying joints of pipe in endless queues. Near Gonzales a monstrosity of a gathering station has formed in what just a couple of years ago was a cow pasture; multiple parallel rails usher tanker cars into filling facilities looking like nuclear reactors with doors in the side. A nearby pipe yard covers land measured in square miles instead of acres.

For what it’s worth, I am convinced the money fostering this activity is one step removed from the now smoking printing press of the Federal Reserve, and comes with the seal of approval of the United States Government. No company on the face of this earth has the money to do this without the subsidization and backing of world banks and governments.

Make no mistake: there is oil in this shale. It’s light and sweet and it’s being produced in a big way. But it’s costing more than ever to extract. The nature of shale is that it produces short lived wells so the only way to keep up production is to continue drilling, fracking and building additional production facilities.

There comes a point when the return is not worth the investment. And you can’t accurately determine that point on cost projections, for things often cost more in hindsight than anticipated beforehand. Those issuing positive forecasts tend to have vested interests; they are being paid well in a time when jobs are hard to find, as are those that own the land on which this activity takes place.

I am beginning to see an agricultural equivalent as the cost of energy continues to rise. People think the cost of food is high, but the cost of fuel, parts and supplies necessary to carry an industrial farm double at astounding rates. Commodity prices that would have been considered over the top just a couple of years ago now barely pay the bills. Truth is, modern farming now survives on subsidies not unlike those that power modern oil companies. Left to our own devices, we'd all be broke.

I read the other day that in Afghanistan, it costs the US military between $400 and $1,000 for a gallon of gasoline.

I wonder how long that equation works?


Don December 5, 2011 - 5:31pm
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( categories: Miscellany )

The growth

is amazing. A friend of mine has vending machines in Cotulla. He was going to pick them up and move them elsewhere before the boom. Now he's glad he was too lazy to do it. I go with him occasionally and it's crazy to see how the empty fields have turned into yards filled with pipe and machinery. Two of the nice little mom and pop restaurants we frequent when down there have become ridiculously busy. Good for the locals now...but what happens if/when it goes bust?
_____________________________________________________
May we have the clarity to see what is required of us, the courage to accept it, and the capacity to discharge it.
Robert Fripp

OldLakeRat December 5, 2011 - 6:37pm
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DNK

"I wonder how long that equation works?"

Maybe it has something to do with the hotel rates in Seguin.

BTSOOM

http://mauberly.blogspot.com/

mauberly December 6, 2011 - 10:16pm
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Been Wanting to Comment All Week...,

on this piece Don. To your question of "how long"..., I was going to say something like, "Well, at $100 a barrel oil..., quite a while it seems". But gas prices have dropped 30-40 cents a gallon and crude is still $100 a barrel. What the hell?

John Michael Greer explains it here..., What Peak Oil Looks Like

Great piece..., he sums it up thus:

Among the few businesses that do promise a decent return on investment are the ones involved in fossil fuel extraction, and so companies drilling for oil and natural gas in shale deposits—the latest fad in the fossil fuel field—have more capital than they know what to do with. The oil boomtowns in North Dakota and the fracking projects stirring up controversy in various corners of the Northeast are among the results. Elsewhere in the American economy, however, good investments are increasingly scarce. For decades now, profits from the financial industry and speculation have eclipsed profits from the manufacture of goods—before the 2008 crash, it bears remembering, General Motors made far more profit from its financing arm than it did from building cars—and that reshaping of the economy seems to be approaching its logical endpoint, the point at which it’s no longer profitable for the industrial economy to manufacture anything at all.

I have begun to suspect that this will turn out to be one of the most crucial downsides of the arrival of peak oil. If the industrial economy, as I’ve suggested, was basically an arbitrage scheme profiting off the difference in cost between energy from fossil fuels and energy from human laborers, the rising cost of fossil fuels and other inputs needed to run an industrial economy will sooner or later collide with the declining cost of labor in an impoverished and overcrowded society. As we get closer to that point, it seems to me that we may begin to see the entire industrial project unravel, as the profits needed to make industrialism make sense dry up. If that’s the unspoken subtext behind the widening spiral of economic dysfunction that seems to be gripping so much of the industrial world today, then what we’ve seen so far of what peak oil looks like may be a prologue to a series of wrenching economic transformations that will leave few lives untouched.

Oh..., I was also going to ask you if you feel like you are living on Easter Island?

Scott R. December 10, 2011 - 2:15am
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