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The Energy Factor, Part III
             ETP vs $/barrel
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The cost of producing petroleum can be determined from the energy required to produce it. This statement has several implications that are not generally recognized. It indicates that the quantity of petroleum that remains to be extracted is not just a property of the volume of the resource that remains in the ground, but that it is effected by the quantity that has already been removed. The total quantity of extractable petroleum is a specific value determined by the properties of the fluid, and the rate of entropy production in the system. This is equivalent to stating that the price will continue to increase until the product becomes unaffordable to the end consumer. The ETP equation gives a means to determine when that point will be reached.

To extract petroleum, and to produce its products requires energy. As the extraction process progresses the energy required per unit increases. This occurs because the petroleum industry is always first removing the highest value oil available. This can also be shown from the entropy production that must accompany any process for it to go forward. The fact that the energy to produce energy increases with time is a thermodynamic certainty. It is assured by the Second Law. As energy is a necessary component of the economy (nothing can be accomplished without it) acquiring it comes at an increasing cost, and that includes the energy industry.

The ETP function gives a measurement of the energy needed to produce (extract, process, and distribute) a gallon of petroleum at a point in time. The energy cost to produce petroleum must be reflected in its monetary price. Graph# 9 is a plot of the cost of petroleum (WTI) against its ETP value for the years 1960 through 2011. The best fit curve to the set of points generated is an exponential curve (curve fitting is done using the Levenberg-Marquardt algorithm). As the energy to produce petroleum increases, its dollar cost of production is also increasing.

The ETP model is an equation derived from a Second Law statement; therefore it is a Second Law statement. The input to the the equation comes from the EIA 1960 to 2009 cumulative production report. The hypothesis that the cost of petroleum is driven by the energy needed to produce it is tested in Graph# 9. As the price of petroleum is historically the only data set available relating to petroleum that we can be certain is almost 100% accurate, and the ETP equation is a Second Law statement a correlation coefficient of 0.956 leaves little doubt that petroleum prices are controlled by its production energy requirements.

As the energy to produce petroleum increases, its cost to the consumer must also increase. While the energy to produce petroleum is increasing, the energy being delivered to the consumer per unit is declining. This occurs because the energy content (exergy) for a specific fraction of petroleum is a constant. A point will be reached were the energy delivered can no longer be justified by its cost; that will be the point when the product becomes unaffordable. This implies that the amount of resource remaining to be extracted is controlled by the amount that has already been removed, not the amount remaining in the ground. A portion of the remaining resource will be left in the ground because it will no longer be affordable to the consumer, nor would it be profitable for the industry to extract it! That will also be the point were the energy remaining for delivery to the consumer approaches zero. The zero energy point is a calculable value, and is fully discussed in the report.
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