/* Added by TWP, 10/12/2012 */ /* End of addition */

One of the live oaks that bless my home

Saturday, December 29, 2012

Oil in the Arctic

Picture a vast gray ocean that dissolves into gray sky pregnant with heavy dark clouds, and a gray flat sandy shore that slowly oozes up from the Chukchi Sea.  This is what our Ocean Energy Advisory Committee saw from the Coast Guard C130 plane, chartered by BSEE's Director, Admiral James Watson.

Click on this image to see it in full resolution and hit Esc to go back. This gray vastness is surrounding our C-130 plane, flying the BSEE Advisory Committee to the Burger Prospect in the Chukchi Sea and to Point Barrow in Alaska.
In summer, the Arctic ocean is dotted with white ice floes. In winter all is frozen.

Our incredibly young and competent Coast Guard pilots are gradually descending to 500 ft above water.

On August 30, 2012, we flew close to the Burger Prospect at 500 ft above the sea level.  This is the area where one day Shell will drill their first wells.  The sea was dotted with ice floes, some very large.  Similar floes stopped all arctic drilling by Shell in late October 2012.

A Shell support barge that was to be used by Shell to drill the first well.

This vast empty space is the neighborhood of Point Barrow, the settlement closest to the Burger Prospect in the Chukchi Sea. Here, Shell will attempt again to drill their first wells in 2013.  Despite Shell's valiant efforts in 2012, and hundreds of millions of dollars spent on preparations, not a single well was drilled and completed.

Point Barrow emerges from the sea.  This is the entire onshore infrastructure in the radius of over 100 miles.  There are no roads and only a tiny airport links this settlement with the outside world.
We have landed in Point Barrow.  Our plane also brought extra gasoline supplies to be used by the Coast Guard crew stationed at Point Barrow. Gasoline is very expensive in Point Barrow.
This Coast Guard crew stayed at Point Barrow for three weeks.  They fly search-and-rescue helicopters, help with teaching Inupiat children, and are a part of the command-and-control network established by the Coast Guard to oversee the vast offshore areas.  We are standing on permafrost.  The back-wall of this hangar is not properly insulated and is buckling into the slowly melting soil.

An impromptu gathering with the local officials.  Admiral James Watson is standing on the right, and Don Jacobsen, who will be running Shell's drilling operations in Alaska in 2013,  on the left. The North Slope Borough Mayor, Charlotte Brower, is standing next to Admiral Watson.  It was refreshing for me to hear the local people praising the Coast Guard and Federal Government for providing help and protection.

Alaska with some of the offshore oil and gas prospects.  Point Barrow is the most northward settlement in the United States.  The Shell Burger prospect is in the Chukchi Sea, 140 miles NW from Point Barrow.  No roads leave Point Barrow because  it is in the middle of a vast nowhere.  To link the Burger Prospect with the Trans-Alaska pipeline, would take roughly 150 miles of sub-seafloor pipeline to shore, and another 200-250 miles of a new pipeline east to Prudhoe Bay.

Here are some of the difficulties with drilling and operating offshore oil and gas wells in the Arctic, west and north of Alaska: 
  1. Gas vs. oil. Natural gas is not oil.  Gas price and remoteness of the Arctic make offshore gas production and transport unprofitable. Let's hope that most of the hydrocarbons discovered in the Arctic are oil, not natural gas.
  2. Long distances and no infrastructure.  Literally everything one needs to drill, complete and produce a well must be brought from Portland, Seattle, or Vancouver.  This means that dozens of extra supply and support ships and barges must be deployed in the Arctic.  Because of the long distances, weather, and lack of airport and storage infrastructure, little or nothing can be flown to drill ships on helicopters.
  3. Fragility of supply chains. Long and complicated supply chains are costly to maintain and vulnerable to extreme weather and physical failure. When a few elements in a long chain fail, they cannot be repaired quickly and easily.  Germans discovered this fact by 1942, when their invasion of the Soviet Union started to falter not because of lack of military superiority, but because of difficulties with supplies during the long and cold Russian winters. Americans have discovered similar problems with military supplies in Afghanistan.
  4. Ice at water surface and on seafloor. The Arctic wells will be drilled in relatively shallow water, 150 ft or so.  Sea water can freeze all the way to the bottom through the sinking of very salty, cold brine that forms the downward racing "brinicles." This BBC documentary shows sea water freezing rather nicely.  Therefore, wellheads, BOPs, pipes and other seafloor infrastructure must all be dug into the seafloor and hidden from ice scraping it from above. They still may be enveloped in ice generated by the cold brine raining down from the surface ice cover. Wellheads and BOPs in pits may make it difficult or impossible to access them with ROVs and capping stacks if something goes wrong.
  5. Oil transport. When the offshore wells are successfully completed and produce oil through the sufficiently sturdy production platforms that can withstand waves, wind and ice floes year around, how will the produced oil be exported year-around?  (Actually, in 180 ft of water, all production facilities would have to be sub-seafloor, or in heavy bunkers on seafloor. Only very shallow water will allow for gravel islands.) Transport by tanker will be difficult, and probably impossible through winter, late fall, and early spring.  Laying 150 miles of pipeline beneath the sea bottom, followed by another 200 plus miles of pipeline onshore to attach to the trans-Alaska pipeline will be exceedingly costly and difficult.
  6. Cost and time. Since 2008, Shell has spent nearly US $3.5 billion dollars on plans to explore for oil in the Beaufort and Chukchi Seas on three proposed drill sites: three blocks in the Burger prospect, and one block each in the Crackerjack and the Shoebill prospects. In the four years that ensued, no wells were drilled (only two topholes were spudded) and no permanent infrastructure was built.  Shell probably pays 1/4 of a billion dollars per year to maintain its ability to operate in the Arctic. Some 30 offshore wells were drilled in the U.S. part of the Beaufort Sea in the 1980s and early '90s, and five in the Chukchi.  None of the wells previously drilled far from the coast produced oil or gas, because there was no cheap way to maintain and export their production. 
  7. Environmental risks. The Arctic Ocean is no Gulf of Mexico with its strong loop current dispersing spills and lots of active bacteria eating hydrocarbons year-around.  The delicate Arctic Ocean is home to about 240 fish species. There are 12 species of marine mammals that inhabit the Arctic: 4 species of whales, the polar bear, the walrus, and 6 species of ice-associated seals. Several additional species (e.g. Sperm Whales, Blue Whales, Fin Whales, Humpback Whales, Killer Whales, and Harbor Porpoise) are spotted either occasionally or regularly within marginal waters of the Arctic. There are 64 species of seabirds that breed in the Arctic. About 50 million seabirds nest on Alaska's coast each summer, nesting in more than 1600 seabird colonies along the coast. 
  8. Accidents. If a serious well-control accident occurs in September, oil may continue spilling into the ocean for another 8 months, endangering most of sea life within the spill domain. In bad weather and rough sea, ships can break down, collide, sink, or run ashore.  The more support ships are involved, the higher the risk.  Probability of a serious ship mishap is much higher than that of a drilling accident. Please remember that historically most of the largest marine spills have been caused by ship accidents, not by drilling.
  9. Repairs and spare parts. The Arctic supply chains will have to make provisions for all key spare parts to be stored on support barges next to drill sites. Otherwise, these parts would be unavailable for prolonged periods of time, stopping all work. One could introduce multiple redundancies of all important systems.  For example, one could have "two of each," thus doubling or tripling operational costs and increasing risks of ship breakdowns and collisions. "Two of each" would require 2 times more people for 24/7 operations in 12-hour shifts. If, because of exposure, shifts are shorter, the number of personnel will increase correspondingly.  Locals do not work shifts longer than 8 hours.
  10. Lack of appropriate people.  There are about 4700 native inhabitants of the North Slope Borough, including women, children, and elders. They cannot all work on offshore drilling and production. Many lack sufficient technical skills. New workers, imported from the south, are likely to be unprepared for the severe conditions in the Arctic. Also, most older experienced people of all ranks have retired by now from the oil industry. Their replacements of sufficient quality simply do not exist in necessary quantity. For example, at Shell, who will replace Charlie Williams or Ken Arnold or Richard Sears? Or so many experienced technicians and deck hands?
The Noble Discoverer operating in the Chukchi Sea in the summer of 2012.  Image source: Shell.
In summary, drilling for oil, and producing and transporting oil in the Arctic require a complex system with the compounding fragilities of many elements of the system. Such compounded fragility makes this system unstable to disturbances. Some of the disturbances can be relatively small, but still can cause large disruptions. For example, an electrical system failure on just one support barge can cause all drilling work to stop.

We, engineers, have dealt with complex, fragile systems for decades, but - I submit - the Arctic drilling/production/transportation system presents qualitatively new challenges, because of its finely interlocked elements. At best, most small failures of parts of this complex system will grind the whole operation to a halt. At worst, corners will be cut and accidents will happen.

As Mr. Taleb has taught us, a small disturbance in a fragile, complex system may result in a catastrophic loss of integrity of that system.  Such catastrophic events will have frequencies that are much higher than those predicted with standard risk management tools.  We used to call these events "Black Swans," but today we know better.  The highly disruptive catastrophic events are one of the basic features of every fragile complex system.

Are we ready to proceed in the Arctic with this knowledge? 

P.S.  Here are the cumulative reports on offshore projects.

P.S.P.S.  Here is a 12/27/2012, LA Times article about safety issues with the Noble Discoverer drilling ship.

On 12/30/2012, as if to illustrate my Points 8 and 9, this report appeared:
A Coast Guard HC-130 Hercules aircraft from Air Station Kodiak overflies the tugs Aiviq and Nanuq tandem towing the mobile drilling unit Kulluk 116 miles southwest of Kodiak City, Alaska, Sunday, Dec. 30, 2012. The tug Alert from Prince William Sound and the Coast Guard Cutter Alex Haley from Kodiak are en route to assist.
On 12/31/2012:
Anchorage, Alaska – The Unified Command reports that Kulluk grounded at approximately 9 p.m., Alaska time on the southeast side of Sitkalidak Island. The crew of the tug Alert was ordered to separate from the Kulluk at 8:15 p.m. to maintain the safety of the nine crew members aboard the vessel. “The extreme weather conditions and high seas continue to be a challenge. We have more than 250 people actively involved in the response efforts,” said Susan Childs, Incident Commander, Shell. “Our priority right now is maintaining the safety of our response personnel and evaluating next steps.”
There were no personnel aboard the Kulluk at the time of grounding, and no injuries have been reported. There is reportedly up to 150,000 gallons of ultra-low sulpher diesel on board the Kulluk and roughly 12,000 gallons of combined lube oil and hydraulic fluid. The condition of the vessel has not yet been confirmed and overflights are scheduled pending weather conditions. Unified Command, using a U.S. Coast Guard aircraft, plans to conduct a survey to assess the situation at first light. A response team will be deployed when it is safe to do so.
Now, please reread this blog written over Christmas, and published on 12/29/2012.

Tuesday, December 25, 2012

When Denial of Reality Fails

To my relief, Dr. Paul Krugman has published yet another sermon, When Prophecy Fails.  For months, I have been fascinated by Dr. Krugman's blithe, unwavering insistence on the superiority of his arguments over those of differently clueless economists.  Today, I decided to compose my reply.

Back in the old days, in Poland, I often listened to a lovely satirical radio program on an FM station with a short range and not much attention from censors.  Among others, each week brought an installment of a philosophical discourse, entitled "On the Superiority of Easter over Christmas." The author, Jan Tadeusz Stanisławski, a self-proclaimed Professor of Applied Presumptology, would explain in short, exquisitely absurd monologs the utter stupidity of the various pseudo-scientific arguments about economics and society. This episode, "Greed for Gold," is as good as any.  It ends with the following summary:
Why are we talking about gold, someone might ask? They also ask about things hundred times simpler, showing an astounding lack of understanding of almost anything. So why are we talking about it?  Applied presumptology gives the only correct, universal answer. I quote: "The question, 'Why?' should always be answered because in general a smart person will understand and stupid people might reflect at least once in their lifetimes."
Jan Tadeusz Stanisławski, born January 26, 1936, in
Włodzimierz Wołyński, died in Warsaw, on April 21, 2007.
Since Dr. Krugman is a very smart person, I presume he is capable of a reflection at least once in his lifetime. Supposing that my presumptive assumption is correct, Dr. Krugman should perhaps think more about the root causes of the unceasing global recession that - according to him - would be over if all central banks printed enough paper money.  Professor Jan Tadeusz Stanisławski would no doubt advise Dr. Krugman to think about those reasons for the recession Dr. Krugman could not possibly comprehend as an economist, just as they are misunderstood by the economists Dr. Krugman criticizes so fervently.

As Nassim Nicholas Taleb writes in his monumental book, "Antifragile: Things that gain from disorder," the governing Soviet-Harvard model of global economy presumes that smart people can always tell the present and future behavior of complex systems. Of course they never do, but this fact does not discourage them from making incessant prophecies they call "scientific predictions."  Now wait a second, wasn't Dr. Krugman objecting to the lesser prophecies by other, alternatively clueless economists?

Very briefly, so that Professor Jan Tadeusz Stanisławski would approve of my argument, here it is:  
The current global economic crisis is not over and will not go away until the fragile global economic system that created this crisis falls apart and gives birth to a simpler, noisier, and antifragile system of small and local economies. These messy smaller economies will not be centrally managed by the super smart puppeteers, ventriloquists and magicians from Harvard, IMF, the World Bank, the EU, UN, and the Council on Foreign Relations. Why?  Because smart as they are, they have already failed.

There are many, many reasons why the current centrally-planned system must fail. Some of the reasons are that this system is inherently unstable, unreformable, and will keep on propping itself up until it implodes.  Even more importantly, the physics and finite resources of the finite, spherical planet Earth are seriously interfering with the Soviet-Harvard model of the flat infinite Earth under the New World Order. That's it. And the Soviet part of the Soviet-Harvard model has already imploded. That's a fact.
P.S. Perhaps you are wondering why do I bother to write about so many unpopular issues? I have to. The spirits of my parents, Professor Jan Tadeusz Stanisławski, and Bokonon are consistently framing my yet unformed thoughts. The rest is simple.

P.S.P.S. The last link in this post is a short simple song, which immortalized Professor Jan Tadeusz Stanisławski.  He sang this song alone on a huge stage at the last Festival of Solidarity before the martial law in Poland in December 1981. Imagine a diminutive man with an acoustic guitar, singing this against the tanks and armored personnel carriers that for a while enforced in Poland the Soviet part of the still governing model:
"Do not fear assholes, taught me Mommy Dear.  An asshole is an asshole, and he lives in fear.  My Mother educated me to be a history's witness..."
Given this advice, the first Minister of Finance of the newly independent Poland, Leszek Balcerowicz, stopped listening to the expeditionary economic brigade led by Professor Jeffrey Sachs and the Harvard Schools of Public Policy and Business, and saved the budding Polish economy from collapsing.  Similar brigades were sent to all eastern European countries and Russia, in a blatant attempt to reshape them according to the Harvard-Soviet model, with the Soviet part deemphasized. The year was 1990, but repeated attempts at subjugating the East European countries were made through the years 2000-2004. Those other countries were not as lucky as Poland.

Wednesday, November 21, 2012

The Global Oil Peak or a Plateau?

I am about to cover a very serious subject, so please forgive my somewhat formal and unduly precise language.  Since I am talking here about the future of our crude oil-powered civilization, I do not feel too guilty. Besides, you can always stop reading...

The six categories of liquid and solid hydrocarbons in Figure 1 are lumped together into three different combinations in the reports of global liquid fuel production maintained by the Energy Information Administration (EIA).
Figure 1: Click on the image above to see its full screen version. All liquid and solid hydrocarbons and alcohols are grouped into six categories that exhaust the classification of liquids used by the U.S. DOE Energy Information Administration (EIA) in their reports of global fossil fuel production. Note that depending whether heavy oil flows or not at the initial reservoir conditions, it is classified as either a transitional crude or unconventional crude. Solid tar sand bitumen is mined and liquified in surface plants. Kerogen in oil shale is a solid that is either mined and liquified in surface reactors, or liquified in situ using heat.  This figure was drafted by Mr. Erik Zumalt of UT Austin.
These combinations are:
  1. Natural gas plant liquids (NGPLs). NGPLs are those hydrocarbons in natural gas that are separated as liquids at natural gas processing plants, fractionating and cycling plants, and in some instances, field facilities. Lease condensate is excluded. Products obtained include liquefied petroleum gases (ethane, propane, and butanes), pentanes plus, and isopentane.
  2. Lease condensate and crude oil. Lease condensate is a mixture consisting primarily of hydrocarbons heavier than pentanes that is recovered as a liquid from natural gas in lease separation facilities. Lease condensate is lumped together with several types of crude oil that are also classified as Easy Oils, Transitional Oils, and Unconventional Oils. Starting from the second column on the left, these crude oils are the light conventional crude oils, heavy oils, ultra-deep water oils, Arctic oils, tight mudstone ("shale'') oils, ultra-heavy oils, as well as tar sand bitumens and kerogen from oil shales. The ultra-heavy oils are recovered in situ by heat injection, mostly as steam. The bitumens and kerogen must be liquified either at upgraders/refineries or in situ. All of these liquids together make the "Crude oil + lease condensate" curves in Figures 2 and 3.
  3. Other liquids. These liquids lump gas-to-liquids (GTLs), coal-to-liquids (CTLs), ethanol from corn and sugarcane, biodiesel from palm oil and soybeans, and any other liquids that might be used as fuel, i.e., methanol, butanol, etc.
The classification of liquid and solid hydrocarbons is shown in Figure 1, and their production rates are plotted in Figures 2 (by volume) and 3 (by mass translated into energy). Note that if liquid hydrocarbons are reported by mass (the only correct reporting), refinery gains disappear, because they only add volume by decreasing the liquid product density, but they do not change the product mass. 
Figure 2: The rate of global production of liquid fuels by volume in millions of barrels per day. The natural gas plant liquids (NGPLs) plus "other liquids'' (CTL, GTL, biodiesel, methanol, etc., but mostly ethanol from corn and sugarcane) are on top of the crude oil and lease condensate curve. The "Crude oil and lease condensate'' term includes all naturally occurring liquid and solid hydrocarbons shown in Figure 1. Note that the average NGPL density is at most 65% of the average density of 0.84 g/cc of the crudes produced around the world. Thus, volume-based plots are misleading when it comes to the specific energy content of a fuel (energy per unit mass). Simply put, a gallon of one liquid fuel has a different energy content than a gallon of another fuel. All other factors being equal, only the specific energy counts when it comes to driving. Refinery gains of up to two million barrels per day are not shown, because they are a volumetric illusion that does not contribute to fuel energy, see Figure 3. Note that the rate of global production of crude oil and lease condensate has remained unchanged since 2004. Depending on your favorite time scale (years vs. decades) this constant production rate is either a "plateau" of crude oil and lease condensate production or an "oil peak,'' or -- more accurately -- a "crude oil and lease condensate peak.'' Volume data source: EIA's database, accessed on 11/18/2012.
Figure 3: The mass rate (volume rate x density) of global production of liquid fuels, converted into an equivalent energy rate in exajoules (EJ) per year. 1 EJ = 10^18 joules ≈ 10^15 BTUs or quads. The higher heating values (HHVs) of all fuels were used for the conversion from mass rate to energy rate. The natural gas plant liquids (NGPL) and "other liquids'' are now equivalent to the crude oil and lease condensate, because all volume rates have been converted to mass rates and, subsequently, energy rates. The refinery gains disappear altogether, because they do not add energy by mass, but only volume. In fact, refinery gains cost external energy dissipated by thermal cracking and hydrogenation and, thus, diminish the total energy available as fuels. Volume data source: EIA's database, accessed on 11/18/2012. The liquid densities and HHVs are from several sources.
In contrast to the EIA classification described above, both the International Energy Agency (IEA) and BP report different combinations of the liquids and solids classified in Figure 1. In particular, IEA splits all natural hydrocarbon mixtures into conventional and unconventional oils using their own definitions, and BP lumps all natural liquid fuels together, see Figure 4. These different classifications, plus general ignorance of the public and popular media, lead to endless problems and differing interpretations of the same data. Even the names of the respective agencies (EIA vs IEA) are confused and used interchangeably.
Figure 4: The BP oil production data were downloaded from BP's statistics website, as millions of metric tons of oil equivalent (toe, accessed on 11/21/2012). This mass rate of global production was converted into HHV by multiplying it by 41.868 x 10^9 GJ/toe x 1.07 to convert from the standard lower heating value of 1 toe to its HHV, because only HHV can be used to compare fuels with different hydrogen contents. The EIA curve represents lease condensate plus crude oil plus NGPLs, all converted from volumes to HHV using the procedure described in the caption of Figure 3. Notice excellent agreement between these two curves. The IEA data could be purchased for a lot of money, but were not.
If one recognizes that the U.S. EIA's "crude oil and lease condensate'' curve lumps literally every natural hydrocarbon that is not natural gas plant liquids nor synthetic fuels or biofuels, one must conclude that the global production rate of natural hydrocarbons has stalled at the level seen already in 2004, or 8 years ago. Daniel Yergin and IHS CERA call this phenomenon an "undulating plateau of production rate'' others call it an "oil peak.'' The two sides enter into endless debates about whose interpretation is better, but the empirical fact remains: The global rate of liquid and solid hydrocarbon production has stopped growing since 2004. Call this empirical observation by whatever name that better suits your taste, but first please look at Figure 5.
Figure 5: I set up this model of global oil production probably in 1995, or so, and never changed its parameters.  I have only updated the blue data curve, which is a superposition of the old historic data from a variety of sources and the EIA data. By a lucky coincidence, or the Central Limit Theorem, or both, the world production of crude oil and lease condensate has been quite predictable for the last 17 years or so.  I want to point out that there will be future small Hubbert curves for the new Iraqi oil, GOM oil, the Arctic oil, etc., but the fundamentals will not change, just as they are unchanged for the Norwegian sector of the North Sea shown in my earlier post. At the time scale of this chart, the global oil production plateau surely looks like a peak.

Interestingly, to meet global oil demand between 2010 and 2035, IEA reported in 2011 that $10 trillion would be needed, with the upstream sector accounting for 85% of this amount.  IHS CERA reported in 2012, that the upstream costs more than doubled in 2011, relative to the year 2000.  This trend is expected to continue because higher demand for raw materials, equipment, and specialized labor will create shortages.  Most importantly, the global oil and gas industry is moving away from the easy oil to the transitional and unconventional oils, and this means a continuous increase of cost and complexity of the future upstream operations.  In human language, we will have to run ever faster to stand still.  This is yet another definition of peak capacity to maintain oil production at the current level.  In their 2012 Energy Outlook, IEA predicts that in the year 2035, global petroleum production will be 4,000 Mtoe (mega tons of oil equivalent) vs. 3,600 Mtoe produced in 2010.  The global peak oil plateau, anyone?

Friday, November 16, 2012

Delusions of Grandeur

In the last few days, two top newspapers in the U.S., The New York times on the left and The Wall Street Journal on the right, have come up with unusual predictions of the future oil might of our fair United States of America.  I tried to link to the "Report Predicts U.S. as No. 1 Oil Producer in a Few Years," by Elisabeth Rosenthal, published on page B1 of The New York Times on 11/13/2012, but this link did not exist. I guess, Ms. Rosenthal's article belongs to the category of All News Fit to Sweep Under the Rug. The unsigned agitprop piece in The Wall Street Journal: "Saudi America - The U.S. will be the world's leading energy producer, if we allow it,"  dated 11/12/2012, still adorns the Web.

At best, the authors of these two articles have shown a lack of rudimentary understanding of what is needed to increase oil production in the U.S. to the short-term levels implied by their narratives. At worst, they purposefully misled readers. Even the already biased sources both these journalists quoted were misunderstood and misquoted.

I do not mean to suggest here that reasonable and thoughtful journalists do not report on crude oil-related issues. They do, as you can see here, for example.  In another example, Leonardo Maugeri's unfortunate "Harvard Report," twice parroted by the New York Times, was nicely picked apart by Mr. Olivier Rech, an experienced analyst. Based on my own calculations, I agree with Mr. Rech; so does the Deutsche Bank.

Why so much wishful thinking pouring out with such intensity? The reasons could be many, one more bizarre and counter-productive than another. My previous blog sheds some light on the empty idols driving this delusional behavior. The sad part is that I had to endure dozens of emails from excellent but disoriented specialists, who desperately tried to make sense out of this nonsense and could not.

And what about the generally clueless, but misled-again public? They might get really upset when the price of gasoline reaches new highs. After all, that's all the U.S. public cares about, forget the subtleties of supply and demand, global markets, local gasoline markets, imperial propaganda, and the environment.

P.S. The unusually opportunistic and servile (I know it from the insiders) journal, Nature, just published an interesting commentary by Jeremy Grantham, who is the co-founder and chief investment strategist for GMO, a company richly invested in oil and gas ventures.  The commentary and the readers' comments nicely dovetail with this post. If Nature can think independently, so can you.

Saturday, November 10, 2012

Sir Francis Bacon's Warnings

In 1620, in his Novum Organum,  Sir Francis Bacon classified the intellectual fallacies of the human kind as idols of the Tribe,  the Cave,  the Marketplace and  the Theater. An idol is a mental image which receives veneration but is devoid of substance. Bacon did not regard idols as symbols, but rather as human fixations.  His model of human perceptions is as true today as it was in the 17th century. Some things never change but - because of the mindless and loud media drumbeat - consequences of the common human fallacies are far more damaging today. 

Idols of the Tribe are deceptive beliefs inherent in the minds of all humans. They are abstractions of error arising from common human tendencies of exaggeration, distortion, and disproportion. Thus people gazing at the production of crude oil over the last century perceive endless growth, and are not content merely to contemplate or record that which is seen. They extend their opinions, investing oil fields with innumerable imaginary qualities. In a short time these imaginings gain dignity and are mingled with the facts until the truth and fiction become inseparable. This statement would describe much of the current public debate about energy.

Idols of the Cave are those which arise within the mind of an individual. Man's mind is symbolically a cavern. The thoughts of the individual roam about in this dark cave and are modified by temperament, education, habit, environment and accident. Thus an individual who dedicates his mind to some particular branch of learning becomes possessed by his own peculiar interest, and interprets all other learning according to the colors of his own devotion. The chemist sees chemistry in all things and the businessman sees profits where there aren't any. 

Idols of the Marketplace are errors arising from the false significance bestowed upon words. People mold their thoughts into words in order to communicate with others. The words carelessly used without attention to their true meaning condition our understanding and breed fallacies. Thus, refinery gains and corn ethanol become crude oil. Words often betray their own purpose, obscuring the very thoughts they are designed to express.

Idols of the Theater are those which follow from the paradigm of the moment and false learning. These idols are built up in theology, philosophy, social sciences, and natural science. They are defended by learned groups and accepted without question by the masses. When false philosophies have been cultivated and gained wide dominance in the world of the intellect they are no longer questioned. False superstructures are raised on false foundations, and in the end systems barren of merit parade their grandeur on the stage of the world. This statement might describe most of the current popular beliefs about energy production and sources, or climate change, or healthcare, or education, or agriculture, or so many other important but misunderstood issues that will punish us, clueless Earthlings, with vengeance.
Parts of this text were adapted  by Tad Patzek from 4 Idols by Manly P. Hall and from Encyclopedia Britannica.

P.S.  The Dallas Times Herald clipping below was sent to me by Roger Baker, my ASPO friend. He found this clipping in an old book on micropaleontology loaned to him by a son of Bob Schroeder, a Shell Oil geologist aware of peak oil. This 1980 warning was issued by none other than Sheik Ahmed Zaki Yamani, the Saudi Oil Minister, also famous for saying 20 years later: "The Stone Age did not come to an end because we had a lack of stones, and the oil age will not come to an end because we have a lack of oil."
Click on the image to see it in full size.  Source: Roger Baker's ASPO email, 11/10/2012.
P.S.P.S. An opposing view is presented by The New York Times, where a journalist repeats that the world is awash in oil, quoting an expert from Harvard.

Sunday, November 4, 2012

Peak, What Peak?

Before I discuss the logic behind negating a peak of production of anything, let me sum up where we are in the U.S. in terms of crude oil production.  According to the Energy Information Administration (EIA):
The United States consumed 18.8 million barrels per day (MMbd) of petroleum products during 2011, making us the world's largest petroleum consumer. The United States was third in crude oil production at 5.7 MMbd. But crude oil alone does not constitute all U.S. petroleum supplies. Significant gains occur, because crude oil expands in the refining process, liquid fuel is captured in the processing of natural gas, and we have other sources of liquid fuel, including biofuels. These additional supplies totaled 4.6 MMbd in 2011.
Let me parse this quote.  First, let's look at the history of oil production in the U.S., shown in the chart below.  The vertical axis is scaled with a unit of power, exajoules (EJ) per year, very close to quadrillion BTUs (quads) per year.  To convert from EJ/year to millions of barrels of crude oil per day (MMbopd), divide the vertical axis by roughly two, so 20 EJ/year is roughly equal to 10 MMbopd.
Historic production of crude oil and lease condensate in the U.S. is resolved into several Hubbert curves.  The tallest one is the original Hubbert curve published in 1956.  The smaller curves starting from 1960 were generated by producing shallow, deep and ultra-deep Gulf of Mexico, Alaska (mostly Prudhoe Bay), and then everything else that was not in the original curve: large waterflood projects, thermal and carbon dioxide enhanced oil recovery (EOR) projects, horizontal wells, hydrofractured wells, etc.  The broad curve peaking in 2002 was introduced in late 2002, and the model represented fairly well the U.S. crude oil production until 2010.  The last small green curve on the right was introduced last month to describe the Bakken and Eagle Ford shales, as well as the increased production of crude oil from the Permian Basin near Midland, TX.  The right-most black curve depicts a hypothetical production of 7 billion barrels of oil from the Arctic Natural Wildlife Refuge (ANWR) in Alaska.  The last point on the blue step-line represents 5.7 MMbopd produced in the U.S. in 2011. This rate is predicted by EIA to grow to over 6 MMbopd in 2012.

Now, let's look at the refinery gains in the second chart. These gains arise because petroleum products are usually less dense than the crudes they are made from. Therefore, refinery gains are not really a replacement of imported crude oil, and demonstrate only that since 1993, the U.S. refining has been moving towards heavier crude oil feedstocks.
Oil refinery gains reported by EIA since 1993 hover around 1 million barrels of all petroleum products per day.  These gains arise because the densities of petroleum products (gasoline, kerosene, diesel fuel, jet fuel, heating oil, etc.) are less than the density of crude oil they were made from.  It is like making a low calorie butter or cheese from a normal butter or cheese by puffing them up with bubbles of air.  Through refinery gains, we have not created new energy. Instead, we have just puffed up the crude oil feedstock by cracking heavier hydrocarbons and hydrogenation, both requiring considerable energy inputs. Thus, refinery gains do not really count as a new source of energy, but only as a source of an increased volume of petroleum products.

Corn ethanol comes next.  I described the ethanol story completely in 2004, in my most popular paper ever. There was nothing new I would add in the intervening 8 years. Basically, ethanol is obtained from burning methane, coal, diesel fuel, gasoline, corn kernels, soil and the environment. We destroy perhaps as many as 7 units of free energy in the environment and human economy to produce 1 unit of free energy as corn ethanol, and make a few clueless environmentalists happier and a few super rich corporations richer. The story is even worse for switchgrass ethanol. Finally, your mileage would drop by 33% if you were to use pure ethanol as a fuel for your car.
Production of corn ethanol in the U.S.  Because ethanol has a lower heating value, its volume would be much lower when converted to equivalent crude oil. 
Production of soybean biodiesel in the U.S. is too low to get excited.
Production of soybean biodiesel in the U.S. is almost irrelevant, but also highly environmentally damaging. Since most of the obliteration of the irreplaceable biota occurs in the tropics, in Brazil, Argentina, Africa, and Asia Pacific, we really don't care.  Either way, the rate of biodiesel production in the U.S. is too low to write home about it.

In summary, of the 4.6 million barrels of the other "oil"  produced in 2011, 1.1 MMbopd were refinery gains, and another 0.6 MMbopd was the equivalent volume of oil corresponding to the production of roughly 0.9 MMbpd of ethanol.  Biodiesel production was in the noise. I fear that EIA simply added volumes of the various fuels without converting them to oil equivalents based on a common oil density and heating value. The rest of the other "oil", 2.9 or 2.6 million barrels of oil equivalent (again I do not know how EIA made their conversions) were natural gas plant liquids.  All of these liquids are significantly less dense than crude oil, and a proper conversion lowers their volume contribution by 35 percent.

Needless to say, refinery gains do not inject new energy into the U.S. economy, just add volume. Also, propane and butane are not crude oil, and ethanol is not a hydrocarbon. The only hard number here, 5.7 MMbopd of crude oil production is something to write home about.  This level of production requires an incredible amount of new technology and technical skills that are available only in the U.S. My department graduates each year about 150 petroleum engineers of all levels, who make this huge effort such a smashing success. Their starting salaries are in excess of three-four times the national average for college graduates. And they all have jobs.

In conclusion, Russia is using similar technology to increase their rate of crude oil production to over 11 MMbopd, and Saudi Arabia is barely hanging in at 9-10 MMbopd.  Both these countries also produce large volumes of lease condensates and natural gas plant liquids. The rate of U.S. crude oil production is a little more than 1/2 of either of these two rates, and we are no Russia or Saudi Arabia when it comes to producing oil per unit time. But this is just fine, so let's stop deluding ourselves with such tenacity.

In the next blog, I will talk about the various techniques of denying existence of peak oil (or climate change, or anything else we fear or do not like).

P.S.  So, did I miss anything in my discussion of the EIA quote at the top of this blog?  Think carefully... Yes, I did.

In 2011, we consumed 18.8 MMbpd of petroleum products, less by 1.6 MMbpd than our consumption of petroleum products in 2005.  With less cash in pocket, less driving, and more efficient cars, we have destroyed demand for almost as much of real crude oil as all other imaginary "oils" quoted by EIA and dutifully propagated through the clueless mediadom.

Why isn't this achievement front-page news?  We finally use less crude oil!  We are more efficient! This incredible news is evidently not as sexy as making up imaginary "oil" to be on par with the Saudis. Have we gone mad?!  I take it back: Have we stumbled even deeper into the destructive imperial madness that has infected us for the last 11 years?

And, you, corn ethanol lovers, read this and fear the future.

P.S.P.S.  Five years after my well-researched plea to the EU Ministers of Environment and Transportation, EU is considering limiting use of biofuels:

The European Commission intends to limit the use of biofuels derived from food crops to 5% for transport fuel. This would be a substantial change to its present biofuels policy. According to the EU’s climate-change and energy commissioners, Europe wants to cap the share of energy in the transport sector from food crop-based biofuels at current levels. The proposal, a draft of which was reported by Dow Jones Newswires, clashes with the target of having 10% of the energy used in transport coming from renewable sources by 2020. This goal was set by the EU three years ago because food crop-based biofuels account for most biofuels available in volumes at the moment. New types of alternative fuels are being developed, but they are mostly at the laboratory stage. At the same time, biofuels are expected to be the main renewable energy source used in transport in 2020.
Despite the obvious insanity of the last sentence, I say: Better late than never, dear Europe, and much better than the U.S.A., which seems to have a policy of accepting campaign donations from mega agricultural companies and all kinds of other companies, rather than having an energy policy.

(P.S.)-cubed on 11/13/2012. The Wall Street Journal insists on an alternative reality view of EIA reporting, by stating in a Review&Outlook piece, "Saudi America," that:
The U.S. will increase its production to about 23 million barrels a day in 10 years from about 18 million barrels a day now, the IEA predicts.
I have no idea what IEA predicts, but I surely know that this number is incorrect, if it implies current production of liquid hydrocarbons in the U.S.A.

Tuesday, October 9, 2012

Education Reform and All That Noise

This blog follows two closely related posts that are 15 months old:
Now that I am a little more knowledgeable on the subject of secondary and higher education, a few more remarks are in order.

First, Church and Academia (read Universities) are the only two institutions that span over 2000 years of history of our Roman and Catholic civilization.  As I focus on education, I will leave Church alone.  I will also omit the epochal contributions of the early Arab Caliphate universities and Indian schools.  Both contributed invaluably to the rise of Academia in Europe. In particular, Arab schools preserved most of what we know today about ancient Greek philosophy, mathematics and medicine, and greatly added to this knowledge.

Empires, states, emperors, kings, princes, presidents, and governors came and disappeared into the mist of history, but Academia has remained, storing knowledge and preserving intellectual continuity of Europe and - later - all other continents on the Earth.

Forty three European universities had been in continuous operation for up to five centuries predating Columbus; thus, some existed for close to 1,000 years.  The majority of European countries, including Poland, had universities by the year 1500. After 1500, universities began to spread to other countries all over the world.

In comparison, this United States of America dates back to September 17, 1787, or 225 years; the Soviet Union lasted for 70 years; and the Third Reich for 12 years. Texas joined the United States as the 28th state in 1845, only to declare secession from the United States in early 1861. The slave owners and Texas lost, and The University of Texas at Austin was founded in 1883, in the United States again. UT Austin became the fifth-largest single-campus in the nation as of fall 2010, with over 50,000 undergraduate and graduate students and over 24,000 faculty and staff.

Given longevity of Academia, politicians and the various impatient reformers of education operate on much shorter time scales, even when measured with the yardstick of an unbelievably young United States of America.  By the year 1500, the Jagiellonian University in Krakow was as old as UT Austin is today.  And this was 142 years before Galileo died and Shakespeare was born.

So, the short-term reformers of Academia - all of you, who offer such snapshot perspectives - beware!  You can go on and reform ephemeral corporations for better or worse, but Academia is a different beast altogether.   For those of you who think otherwise, Ozymandias by Percy Bysshe Shelley (1818) may serve as a reminder of your own transience:

I met a traveller from an antique land
Who said: -Two vast and trunkless legs of stone
Stand in the desert. Near them on the sand,
Half sunk, a shatter'd visage lies, whose frown
And wrinkled lip and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamp'd on these lifeless things,
The hand that mock'd them and the heart that fed.
And on the pedestal these words appear:
"My name is Ozymandias, king of kings:
Look on my works, ye mighty, and despair!"
Nothing beside remains: round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.

Ozymandias represents a transliteration into Greek of a part of Ramesses' throne name, User-maat-re Setep-en-re. This sonnet paraphrases the inscription on the base of the throne, given by Diodorus Siculus in his Bibliotheca historica, as "King of Kings am I, Osymandias. If anyone would know how great I am and where I lie, let him surpass one of my works."

Please forgive me for this lengthy historical perspective.  Most Americans lack a historical perspective on anything and operate through a series of snapshot decisions.  Snapshots are good, but they miss most details.  And in education the devil is in the details, as Prof. Michael Marder of UT Austin has taught me.

Let me start from the here-and-now, as we are accustomed to in America.  The chart below, added one week after publishing the original blog, shows the 5-year growth of Gross Domestic Product (GDP) and employment in fourteen developed countries.  Please keep in mind the economic ranking of these countries when we talk about their educational rankings.

The five-year estimates of GDP changes (left) and employment changes (right) in 14 developed countries.  Please note that the high-tax rate, high income redistribution economies that also emphasize education and welfare of children have done significantly better than the Unites States.  Poland is not listed on this chart, but it has been among the fastest growing economies in Europe, if not the fastest one.  This factual observation contradicts the most popular economic views in the United States, and in Texas in particular.  Thank God, Texas' economy has been saved by abundant production of oil and gas. Image source: "Economic Health? It’s Relative," by Eduardo Porter, The New York Times. Published: October 16, 2012

For each of the fourteen countries shown above, growth of employment corresponds almost one-to-one to academic achievement of teenagers, the future leaders of each country's economy.  Note that employment performance in the U.S. falls between those of Italy, Spain and Greece, and corresponds exactly to the overall academic scores in these four countries.  The difference between a semi-decent GDP growth in the U.S. and the poor job creation here is caused by the new jobs going to other, better educated countries, and to the most educated and over-employed people in the U.S.: people like me.  While I make a lot more money in real terms than I did in 1983, I now have effectively two full-time jobs (I work for UT Austin 80 hours per week or more).  When I account for the amount of work I do, my income gain does not look nearly as impressive.  Almost all recent income gains went to a tiny group of people who live off of dividends, not work.

Math test scores of the 15-years old students in several countries with significantly different per capita incomes. When lumped together, the U.S. teenagers place on the 24th - 25th place, among well-ff and low-income peers in other countries.  Image source: Professor Michael Marder, UT Austin, October 8, 2012.

Most everyone knows that in math the U.S. teenagers place 24 - 25th, when compared with peer groups in other generally developed countries.  The prevailing conclusion is that the K-12 school system does not work in the U.S., teachers must be replaced, and more "choices" be given to the youngsters and their parents.  But when one disaggregates the test data by poverty level in school districts, the U.S. students place as well as the comparably affluent peers in the highest-scoring countries.
Poverty determines math test scores more than any other factor. The international math test scores with the U.S. data disaggregated by percentage of free lunch recipients in school districts.   The most affluent Americans (0-10% of free lunch recipients) score as high as their peers in Finland, where the rate of poverty is comparable.  The second group of U.S. teenagers (10-25% of free lunch recipients), scores as well as Germans.   The third U.S. group (25-50% of free lunch recipients) overlays Portugal.  The last two groups of U.S. teenagers (50-75% and 75-100%  of free lunch recipients) are only comparable with those in the poorly-developed countries. Image source: Professor Michael Marder, UT Austin, October 8, 2012.

It now becomes clear that poverty, rather than teacher skills, is the biggest factor in test achievements.  The most affluent American teenagers do as well as Finns or Germans, the two high-scoring countries, where the overall poverty rate is as much as poverty rate in the top 25 percent of U.S. households with teenage children.  The overall math score for the U.S. overlays Portugal and is close to national scores of Italy and Spain.  The bottom half of U.S. teenagers may as well live in the less developed regions of Turkey or Mexico.

One can also disaggregate the U.S. test scores by schools with unionized or non-unionized teachers (no difference), charter or public schools (most charter schools do much worse than comparable public schools), and the quality of school lunch programs for poor children (Texas and Massachusetts, the two extremes of U.S. political system, do best, and the District of Columbia does a little worse than the well-meaning but incompetent California).

Therefore, poverty rate is the only remaining predictor of test performance, and not the teachers or school districts.  The U.S. society is divided into an upper half that bests Portugal and the lower half that does not even live in a developed country.  Such is the sad truth about the U.S. A.D. 2012, but the self-anointed reformers of our schools see anything but poverty as their favorite reasons to disrupt what teachers do.  This ideology-driven selective blindness is our national tragedy. 

In Slaughterhouse-Five or The Children's Crusade: A Duty-Dance with Death, Kurt Vonnegut has taught us that poverty in the U.S. is generally regarded as something shameful, an infliction that most would deny in public, and a major factor in segregating conscripts in the WWII U.S. army.  Poverty was the root cause of lack of cohesiveness in some army units as in: "Why do I need to risk my life to save that poor bastard?".  The year was 1945.  Has much changed since then, except that denial grew stronger?  Has similar denial caused a recent presidential candidate to discard 47% of U.S. population as poor, dependent and generally useless?

Now you are ready for my last point: The public universities in the U.S. still regard themselves as catering to a first-world society.  In fact, the top public universities - UT Austin included - cater overwhelmingly to the most affluent families in the U.S. society, minus those who send their children to the Ivy League schools for one reason or another.  If implemented, the idea of a Chevy-like, $10,000 dollar bachelor education in public universities would permanently segregate the U.S. society into the inner-party members and "prols," so aptly described by George Orwell in 1984.  This would be a solution in which I certainly could not participate, as much  - I hope - as most other professors at public universities.

By the way, $10,000 pays for roughly 80 days of tuition and fees in an Ivy League school.  Why don't we ask them to charge 20 times less per student and thus become as "efficient" as some want public schools to be?

I hope that you are not surprised that we want to keep public universities alive, and K-12 children well-fed and watching "Sesame Street." Just imagine what would happen if only the Ivy League graduates ruled our country and brought us yet another Vietnam, Iraq, Afghanistan, bank deregulation and crash, The World Bank, wholesale job outsourcing, corporation "harvesting," elimination of industrial research centers, and other careless destruction of the world around us.

Oh, I forgot, the same Ivy Leaguers run the Harvard School of Business. What does Harvard School of Business say about 1/2 of the U.S. society already living in a de facto third world country? Also, what will we tell the grieving families of our brave soldiers, who died or were wounded fighting for all Americans, but lived and were educated in the third- and fourth-tier America designed and implemented by those who never visit such foreign countries?

P.S. Here is a 9/29/2012 remark by Professor Marder:
Finland is not prosperous compared to the U.S. It is simply a country where after taxes and transfers child poverty is at a low level. One has to trust that the computation has been done correctly. Note that the U.S. is not very anomalous for its level of poverty, but among rich countries it is anomalous for its level of child poverty. Also note that the threshold for poverty in the U.S. is higher in dollar terms than in other countries (poverty is defined as a fraction of average income). I think this can be defended.

When it comes to the long view of history Greece is a contender. Greeks often seem to feel that Europeans have to treat them well because European civilization began there. The Greeks are mistaken. Their history buys them little when Germany wants repayment. Let the universities be warned. Yes, we may have come up with all the ideas that led to all of modern technology and constitute all modern thought. But what have we done LATELY?
My general questions remain:  Is prosperity best defined by the number of dollars we earn? How can a society prosper, when so many of its children live in poverty?   How can we educate these children to their full potential, when they are hungry, often sick, and with little or no family support? To what extent can we blame poverty on the poor?  Do we really want to lump roughly 1/2 of all Americans (47% according to some sources) as poor losers and discard them?  Kurt Vonnegut must be laughing loudly at us from his circle of Heaven.

Saturday, September 29, 2012

The Discrete Charm of Drilling in America

This blog is a companion to "The Discrete Charm of Living at the Peak."

If you follow national media, you are probably convinced by now that in 10-15 years from today, the United States will be producing enough oil to become independent of foreign oil suppliers.  (In most predictions of energy independence, Canada and Mexico are treated as the almost domestic oil suppliers.)

So can the United States of America be dependent only on domestic crude oil production and imports from Canada augmented by Mexico? This scenario is not as nonsensical as it may sound, if (1) the United States continues to destroy demand for petroleum just as it has in the last four years; and (2) crude oil imports from Canada increase dramatically, because Mexico will not be able to export much crude oil in 5-10 years from now.  Since 2008, the U.S. has destroyed demand for 2 million barrels of crude oil per day, which translates into an average annual destruction rate of about 0.5 million barrels of oil per day.

If each year of the next decade the US petroleum demand diminished by 0.5 million barrels of crude oil per day, we would be consuming only 19-5=14 millions barrels of oil per day in 2022.  If we also imported 4 million barrels of oil per day from Canada (1.6 million barrels more than the current 2.4 million barrels of per day), only 10 million barrels per day of demand would be left.  The domestic production of crude oil might increase to 7 - 7.5 million barrels of oil per day from the current rate of 6 - 6.5 million barrels of oil per day, but this increase will be difficult to achieve.  The remaining demand for 2.5 - 3 million barrels of oil per day might be satisfied by switching to domestic natural gas and natural gas liquids.

Sun sets on the Suncor Millennium open pit tar sand mine in Fort McMurray, Alberta, Canada. Source: Robert Kunzig, The Canadian Oil Boom, National Geographic, March 2009.
An increase of 1.6 million barrels of oil  per day in US imports would require Canadians to double current production from the tar sands in Alberta.  Given the dire environmental impacts of such doubling, my proposed Canadian imports solution is iffy at best.
Click on this chart to see it in high resolution.  The US DOE EIA data for crude oil production and active rotary rigs have been put into an Excel spreadsheet by Mr. Dave Room of the US Association for the Study of Peak Oil (ASPO), and plotted in a similar form.
The chart above shows monthly production of crude oil in the United States versus the number of active rigs drilling for oil.  I have assumed that on average a newly drilled well starts producing after a six-month delay. In the chart, the monthly oil production rates are color-coded as deep red for the oldest data, and follow rainbow colors up to deep purple for the newest data.

The monthly oil production and the number of active rigs decreased almost monotonically each year between 1987 and 2000.  The years 2000 and 2001 (hues of blue), showed the largest scatter and a reversal of direction.  Between 2001 and 2012, oil production increased a little with a six fold increase of active oil rigs.

We could assume that going backward in time from the year 2000 to 1987, would result in a substantial increase of oil production with the increasing number of active rigs: the production would increase about 60 percent with the number of rigs quadrupling. Not so between the years 2001 and 2012: the oil production increased less than 20 percent, while the number of rigs grew six-fold.  But reality is even more unsettling.  The newer rigs are 2 - 4 times more efficient than the old ones, so the relative effort of maintaining oil production in the US has increased not just 7 times, but perhaps as much as 14 - 28 times!
Barrels of oil produced in the US per month per active rig vs time.  It is assumed that production from each rig lags by 6 months on the average.  Rig productivity peaked in the year 2000, and has declined with an average exponential rate of 17 percent per year. Data source: Mr. Dave Room of ASPO.
Another way of looking at the same data is shown in the chart above as 25 years of oil rig productivity in the Unites States.  The plot is semi-logarithmic to show exponential decline of rig productivity at the rate of 17 percent per year.  Thus, to maintain or increase our domestic production over the last decade, we have entered the classical Red Queen's race.

The Red Queen's Hypothesis, or "Red Queen Effect"  is taken from the Red Queen's race in Lewis Carroll's Through the Looking-Glass. In Chapter II, the Red Queen said, "It takes all the running you can do, to keep in the same place." The Red Queen Principle can be stated thus: "For an evolutionary system, continuing development is needed just in order to maintain its fitness relative to the systems it is co-evolving with."
'Well, in OUR country,' said Alice, still panting a little, 'you'd generally get to somewhere else—if you ran very fast for a long time, as we've been doing.'
'A slow sort of country!' said the Queen. 'Now, HERE, you see, it takes all the running YOU can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!'
'I'd rather not try, please!' said Alice. 'I'm quite content to stay here—only I AM so hot and thirsty!'

Lewis Carol, Through the Looking Glass, Chapter II. The Garden of Live Flowers.

Well, in OUR country, we run faster and faster to maintain oil production, and we are getting hot and thirsty in North Dakota's Bakken oil play, or in Texas' Eagle Ford Shale and the Permian Basin.  In the mean time, it is also increasingly more difficult to maintain ultra deep offshore production in the Gulf of Mexico, and Shell's foray into the Arctic is proving far more difficult and expensive than expected.

As oil well drilling and completions get faster and more robust, the reservoirs these wells penetrate become less accessible,  less permeable, and less rich in oil at equal speed.  Thus, travel on the road to the future oil independence of these United States feels like Alice trying to outrun the Red Queen.

P.S.  The same trend holds for Texas and natural gas.  The chart below plots the history of average gas well productivity in Texas.  If nothing is done to make future wells more productive (and a lot is being done), an average gas well in Texas will cease production 30 years from now.
Average gas production per well in Texas.  This plot was obtained by dividing the total gas production reported by the Texas Railroad Commission through the number of active gas wells.  Source: Texas Railroad Commission website, accessed on 08/05/2012.
It is obvious that employment in the oil and gas industry must increase dramatically to staff the new difficult and well-intensive projects.  This new increased employment is no longer a boom-or-bust proposition, but is necessary to keep hydrocarbons flowing in the US and elsewhere in the world.