Peak Oil News: 09/01/2004 - 10/01/2004

Thursday, September 30, 2004

The man who foresaw skyrocketing oil prices

Aljazeera.Net

"No one can restrain the price any more. For example, everyone thought that it would be OPEC who could manage demand. But that is now in the past.

Now it is really peak oil that is behind the wheel of the car. Peak oil is driving the rise in price and demand is not the real question. We are entering a new era, but we are only at the very beginning of it."

Repeated attacks on refineries in Iraq have added to market woes The idea behind "peak oil" is this. That, as the planet reaches the halfway point of consuming all its available oil, then a combination of bullish demand, slowing fields and insurmountable supply bottlenecks will create brutal price shocks. Almost certainly slicing the head clean off the world economy in the process.

This peak in oil supply will act as an economic guillotine. Yet the thread suspending the blade above our heads will be released without warning.

Politicians, producer countries, major oil companies and consumer states are not about to announce their own demise. It would not be good for business, or re-election, or both.


Oh, no! Has the world reached 'peak oil'?

Philstar.com

$60-per-barrel oil is still affordable by western standards, but surely debilitating for growing economies. More so for the Philippines which imports all its oil. Adjusting for inflation, $60 would still be three-fourths of the peak in 1980, when the oil crunch thrust the world into recession.

But what if it hits $80 again, or even $100 by estimates of pessimists? The shock would lead to mass layoffs. Companies would shut down. Lights will go out. The elderly would die of cold up north and heat in the equator. To be hit worst are the poor, for food prices would fly with inflation.

That scenario has long been mulled in at least three books on a phenomenon called "peak oil." Simply put, peak oil is the stage when world oil production hits its peak while demand continues to surge. At that point, pump prices would soar sky-high.

The authors believe peak oil is inevitable. Oil is a finite commodity. It will surely run out, sooner or later. Truth is, the discovery of oil already peaked in the '0s. The new finds in Russia were at first billed to be almost as vast as Saudi Arabia's, the world's largest reserve. But now analysts are doubtful. The tar belt in Venezuela's eastern and central grasslands, once tapped, is expected to yield 2.5 million barrels a day of super-heavy crude. But that's a drop in the bucket of present world demand of 82 million bpd. With exploration already having reached its peak, the next to peak will be production. Peak oil theorists say that the production curve will take the shape of a bell, with stocks declining after oil producers have mined half of their reserves.


Mike Ruppert's Peak Oil Scam

Conspiracy Planet

Exactly twenty years late, 1984 arrived in America with a vengeance on this month's third anniversary of the 9/11 attack. Billing themselves as the "9/11 Truth Movement," a group which has been aggressively spamming on the Internet for several years held a press conference in New York City on the third anniversary of the attack.

The cast of characters involved ranges from uniquely out of place former employees of George Bush to an ex-L.A. cop-turned-Internet Pontificator receiving funding and endorsing an 'off-shore' organization which numerous published reports said is run by convicted financial swindlers, to a Canadian talk chat host whose deep thoughts about deception and 9/11 are about to be brought to the world courtesy of Saudi-backed producers of such beloved infomercials as "TRADE YOUR WAY TO RICHES and 'The Millionaire Mind.'

It is the latest indignity in an Orwellian nightmare that would make Orwell himself retire to Sedona.


Wednesday, September 29, 2004

The Price of Oil and Economic Growth

Scoop

Given almost any realistic analysis it is difficult to continue to hold “growth as usual” scenarios as oil is certain to continue to display extreme price spikes over the coming years. Peak oil is all but dismissed by the IEA, OECD and UN as well as the New Zealand Government. However this claim stands in stark contrast to rapidly depleting fields in the UK, US and Norway (the 3 largest OECD oil producers) where almost a million barrels per day of production was lost between June 2003-June 2004.

If no action is taken to transition to a non-oil energy economy by 2007 we are likely to see many aspects of our economy in the process of extreme break down, double-digit interest rates, hyper-inflation, wholesale collapse of the property market, a high rate of business failure, high unemployment, economic, political and social instability – a forthcoming recession from which there will be no escape.


Monday, September 27, 2004

Not if, but when: Oil production peak will bring hard transition

The Register-Guard

World demand for oil currently totals 82 million barrels per day, and is growing at a rate of just over 2 percent a year. The Paris-based International Energy Agency predicts that demand will reach 120 million barrels per day by 2030 - an increase that would fuel economic growth in the United States and the rest of the world for the next quarter of a century. Such an increase in demand can be satisfied only if the world's oil basins are capable of producing that much more than they're producing today. If Laherrère and Campbell are right, production capacity will soon bump up against its limit.

The notion that the oil production peak is near is still a minority view. The prevailing ideology among governments and the oil industry is that technology will permit ever-more-efficient oil extraction, so that reserves will grow even if no new massive oil fields are discovered. In addition, when demand exceeds supply, prices will rise, spurring further exploration and technological improvements. That's what happened after the oil shocks of the 1970s, when higher prices resulted in a surge of non-OPEC production.

Both prices and technology have important roles to play, Laherrère says - but the oil-supply picture is governed by geology, not economics. (Youngquist jokes that oil companies should fire their geologists and hire economists instead, since economists are so much better at finding oil.) Higher prices and technological innovations will both be required to extract harder-to-get oil reserves, but neither can magically bring new supplies into being.

Moreover, given finite supplies, the peak of oil production is a logical certainty - the only question is the date. The U.S. Department of Energy's Energy Information Administration analyzed U.S. Geological Survey data to estimate the date of the peak. Its analysis assumed that new discoveries and technological improvements would significantly increase recoverable world oil reserves. The administration's mid-range estimate shows that if oil consumption grows at a 2 percent rate, the peak in production will occur in 2037.

That's 33 years in the future, which sounds like a long time. Yet, the Arab oil embargo occurred 31 years ago, and little has been done since then to insulate the United States against the many costs of imported oil. Still less has been done to prepare the entire world's economies for an era of declining oil production - indeed, China and the developing world are giving oil-fueled growth an enthusiastic embrace.

The country and the world will have to adjust to declining oil supplies by switching to other energy sources and pursuing efficiency. The sooner that transition occurs, the less wrenching it will be. Instead, oil consumers are driving toward a cliff with their foot on the accelerator, with Americans in the lead.


Sunday, September 26, 2004

Oil: The beginning of the end?

The Sun News

As he sat last month in his book-lined study, Colin Campbell got a phone call that made him shriek with joy.
"Holy Mother!" he yelped after he put down the receiver. "The good ol' moment's arrived!"

The call had brought word that the price of crude oil was shooting up - a climb that, in the days that followed, would take it to near $50 a barrel. To Campbell, a 73-year-old retired oil-industry geologist who lives in this coastal Irish village, this was sweet vindication. It meant that the "moment" he had been predicting for about 15 years - the beginning of the end of the age of oil - might finally be at hand.

Campbell is at the center of a small but suddenly influential band of contrarians known as the peak-oil movement. They see cause for alarm in the fact that since the early 1980s the world has been pumping more oil out of the ground than it's been finding. By as early as next year, they say, humanity will have reached a point of reckoning: It will have extracted half the oil it will ever get. Once that "peak" is reached, Campbell says, global oil production will start falling, never to rise again.

The peak would mark the end of cheap oil. Although people would probably keep using oil for another century or so, prices would steadily rise. To maintain economic growth, the world would have to become radically more energy-efficient, shifting quickly to alternatives such as solar and nuclear power. If the switch isn't fast enough - an outcome Campbell thinks more likely - the global economy would screech to a halt.

"The perception of this decline changes the entire world we know," says Campbell, whose wife affectionately calls him Mr. Doomsday. "Up till now we've been living in a world with the assumption of growth driven by oil. Now we have to face the other side of the mountain."

People have been incorrectly predicting oil's demise since the industry's early days, and the peak-oil movement has yet to make a serious dent in the energy policies of the United States and other developed nations. But the debate is flaring up with new intensity because of some powerful forces changing the geopolitics of oil, among them the rise of an oil-guzzling China and persistent instability in the Middle East and Russia.


Saturday, September 25, 2004

Economy restructuring and peak oil

VHeadline.com

VHeadline.com oil industry commentarist Andrew McKillop writes: World oil demand is increasing at a probable new long term rate of about 2.8%-3.3% annual, close to two times the average annual rate during the long ‘cheap oil interval’ of 1986-99.

At the present trend rate of demand growth we get to 88-90 million barrels/day (Mbd) as total world production capacity by 2007-2008.

According to an increasing number of oil analysts and experts this may be an effective and absolute ceiling of world production capacity. This effective peak is due on one hand to increasing rates of capacity loss from depletion (around 1.25-1.5 million barrels/day lost each year).

On the other it is also brought closer by decreasing rates of new or expanded capacity being added, for a variety reasons including generally higher capital costs and much smaller average field sizes. In addition, world discoveries trail far behind world consumption on a yearly base (annual consumption is on average far above yearly discoveries, and is running at about 30 billion barrels consumed for 7.5 billion found).

Under any hypothesis, increasing amounts of so-called ‘tertiary, synthetic or extreme environment’ oil production will be needed, at much higher cost and longer lead times, reinforcing the effective limit on peak capacity to around 90 Mbd.

The so-called ‘financial community’ and notably the presidents of the US, European and Japanese central banks claim that high or ‘extreme’ oil prices can only depress economic growth, which would lead to a fall in world oil demand growth, or even to zero growth (or a fall) of world oil demand.

In fact the real world, real economy does not operate this way. Increasing oil prices in fact tend to reinforce and increase economic growth at the world level, leading to further oil demand growth. This process will continue until oil prices greatly exceed US$75/barrel, which in constant dollar terms (corrected for inflation and world purchasing power of the dollar) is far below the most recent peak price attained in 1979-1980.


Thursday, September 23, 2004

Oil Has Peaked

Times Argus

For 15 years, retired geologist Colin Campbell has warned of the approaching end of the age of oil and the dire consequences for the world should that happen. Although experts hotly debate the issue, it has drawn little attention from the average consumer.

But now, with the price of oil reaching $50 a barrel, Campbell believes his warnings should finally gain credence.

The editors of The Wall Street Journal regard Campbell's views as so newsworthy that they published a lengthy article about him and the controversy surrounding him in Wednesday's edition.

"Dr. Campbell is at the center of a small but suddenly influential band of contrarians known as the peak-oil movement," the newspaper reported. "They see cause for alarm in the fact that since the early 1980s the world has been pumping more oil out of the ground than it's been finding. By as early as next year, they say, humanity will have reached a point of reckoning: It will have extracted half the oil it will ever get. Once that 'peak' is reached, Dr. Campbell says, global oil production will start falling, never to rise again."

And that, the report continues, would mean the end of cheap oil. Consumers might continue to use oil for another century or so, but oil prices would steadily rise, forcing the world "to become radically more energy-efficient, shifting quickly to alternatives such as solar and nuclear power. If the switch wasn't fast enough – an outcome Dr. Campbell thinks more likely – the global economy would screech to a halt."


Can technology help find oil fast enough?

MSNBC

Technology is expanding the definition of oil. Vast deposits of oil shale and tar sands –- formations of oil-saturated rock and sand –- have until recently been uneconomic to produce. But as recovery methods improve, and oil prices rise, production of this so-called “synthetic” oil has increased. New technologies are also being developed to extract natural gas from coal -– which remains plentiful in the U.S.

Still, even the most ardent proponents of technology say there’s no guarantee that advances will come fast enough and be applied quickly enough to head off the possibility of oil shortages in the future. But they note that most of the major increases in discovery and production in this century have been associated with major breakthroughs that open up new supplies.

“What we saw as a limitation 20 years ago is no longer a limitation now,” said Sare. “So who’s to say in 20 years whether our current limitations will be relevant?”


Monday, September 20, 2004

Quest for Energy is Race Against Time

Renewable Energy News

There are two reasons why society has to get out of oil, and at first sight, they seem contradictory. Firstly, oil is running out. Secondly, we cannot afford to burn it all. Oil is running out because it is a finite resource. Optimists, like the US Department of Energy and the oil companies, estimate that around 2,600 bn barrels are left in known deposits and predictable future discoveries. Pessimists, like the Association for the Study of Peak Oil and Gas, reckon on more like 1,000bn barrels.

In a society that has allowed its economies to become geared almost inextricably to growing supplies of cheap oil, the difference is seismic. If there are 2,600bn barrels left, the topping out point - or the so-called peak of depletion - lies far away in the 2030s.

If we want to abate this threat, and the other horrors of global warming, we have to stop burning oil, or more exactly back out of it and the other fossil fuels, and move into hydrogen fuel and other renewable forms of energy such as wind and solar power.


Andrew McKillop: Demographic oil demand and peak oil

VHeadline.com

Forecasts by the US DoE, US EIA and the OECD’s IEA projecting world oil output at 110 or 120 Mbd by 2020 are simply based on assumptions that very large, so-far undiscovered reserves will be found, proven and developed, especially in deep offshore ‘provinces’ or regions. In addition, vast increases in production and exports from the Middle East are assumed to be sure and certain. What we can note, in these ‘official’ projections running up to 120 Mbd is that they already include a much higher long-term growth rate trend than the so-called ‘long-term trend rate’ of 1.4% annual.

The EIA and IEA forecasts give annual increases of world oil demand that extend beyond 2.75 Mbd by the 2010-2015 period, the problem being that already in 2004 we are experiencing annual growth trends of around 2.5 Mbd/year!

Taking account of depletion, these trends easily generate targets for the world oil industry to find, prove, produce or increase existing production by as much as 4.25 Mbd each year, after about 2010. In other words, "a new Saudi Arabia every 2 years."


Sunday, September 19, 2004

Crude dudes

TheStar.com

Selling the modern world's most indispensable commodity has never been a bad business to be in — particularly for the small group of companies that straddle the top of this privileged world. But never more so than now.
"Profit-wise, things could not have been better," says Gheit, "In the last three years, they died and went to heaven .... They are all sitting on the largest piles of cash in their history."

But to stay rich they have to keep finding new reserves, and that's getting tougher. Increasingly it means cutting through permafrost or drilling deep underwater, at tremendous cost. "The cheap oil has already been found and developed and produced and consumed," says Gheit. "The low-hanging fruit has already been picked."
Well, not all the low-hanging fruit has been picked.

Nestled into the heart of the area of heaviest oil concentration in the world is Iraq, overflowing with low-hanging fruit. No permafrost, no deep water. Just giant pools of oil, right beneath the warm ground. This is fruit sagging so low, as it were, that it practically touches the ground under the weight of its ripeness.

Not only does Iraq have vast quantities of easily accessible oil, but its oil is almost untouched. "Think of Iraq as virgin territory .... This is bigger than anything Exxon is involved in currently .... It is the superstar of the future," says Gheit, "That's why Iraq becomes the most sought-after real estate on the face of the earth."

Gheit just smiles at the notion that oil wasn't a factor in the U.S. invasion of Iraq. He compares Iraq to Russia, which also has large undeveloped oil reserves. But Russia has nuclear weapons. "We can't just go over and ... occupy (Russian) oil fields," says Gheit. "It's a different ballgame." Iraq, however, was defenceless, utterly lacking, ironically, in weapons of mass destruction. And its location, nestled in between Saudi Arabia and Iran, made it an ideal place for an ongoing military presence, from which the U.S. would be able to control the entire Gulf region. Gheit smiles again: "Think of Iraq as a military base with a very large oil reserve underneath .... You can't ask for better than that."


Wednesday, September 15, 2004

Oil expert sees us running on empty

OrlandoSentinel.com

Thanks to Charley, Frances and probably Ivan, people across Florida are getting an idea of what it's like to be in the midst of a gas shortage.

The search for an open station.

The bags covering empty pumps.

The 30-minute waits just to fill the tank.

Yet these recent annoyances may be giving us just a glimpse of the future.

Anyone who follows oil knows that there's only so much left. And some folks think we'll be out sooner than others do.

One of them is Kenneth Deffeyes, a professor emeritus in Princeton University's Geosciences Department and a well-known expert on matters of black gold.

In Beyond Oil, his book due out next year, Deffeyes claims that the peak of oil production will occur Thanksgiving Day 2005 -- give or take a few weeks. After that, production across the globe will decline.


Tuesday, September 14, 2004

Peak Oil: Suburbia's looming fire-sale

Scoop

One of the reasons a great many people, policy makers and leaders find it impossible to face the issue of peak oil is because it challenges the very beliefs that we argue are a priori truths about industrialised western societies, without requirement for justification, our fundamental birth-rights.

These beliefs, that the society our children will inherit will somehow be richer, more open and peaceful and economically more prosperous. That technology and coming generations will solve the collective global problems we face. We truly believe in the fallacy of endless substitution. That we will discover and liberate energy sources cheaper and more productive as existing ones run out. In New Zealand many of us favour leaving such issues to the market to sort out. After all, the stone-age didn't end because we ran out of stone.

An acute understanding of the fundamentals of energy and its intrinsic relationship with society instructs us differently however. The post-globalist, post-cheap-oil age will seriously challenge our deeply seated assumptions. We don't have to run out of oil for life to be up-ended. We merely need to experience a supply squeeze and a reasonable price spike for all the mechanisms that support our modern life to be seriously destabilised. This situation is quickly approaching. The world is currently experiencing growth in oil use that is stretching available supply to the absolute limit. This is occurring when the global production of oil is about to move over its all time peak, after which it will be in permanent and increasing decline.


Sunday, September 12, 2004

OPEC can do little to help oil production, costs

HoustonChronicle.com

Ministers for the Organization of the Petroleum Exporting Countries are gathering in Vienna on Wednesday to grapple with whipsawing prices and the world's seemingly insatiable demand for oil. But unlike past sessions, when market-makers anxiously awaited the cartel's decisions, the Sept. 15 meeting is getting little more than shoulder shrugs from analysts.

That's because OPEC faces a Hobson's choice.

The group could officially raise its production quotas even though virtually every country in the cartel — from Saudi Arabia to Nigeria — already is producing all the oil it can. Members have ignored production quotas for months, so adjusting the allotments would be largely symbolic and do little to curb oil prices.

Or the cartel can raise its price band — OPEC's target set in 2000 for how much one barrel of oil should sell for — from the current $22 to $28 range to a higher $26 to $34 range that is still substantially lower than where the market values oil today.


Saturday, September 11, 2004

peak oil - running on empty

ammocity.com

i have a car driving friend that would never refuel until the reserve light had been on for a while and the fuel gauge needle was resting at the bottom. she told me that she couldn’t stand filling up and also enjoyed the thrill of wondering whether she would make it to the gas station without the car coming to a spluttering halt. “don’t worry” she’d tell me “it hasn’t happened yet, i think i have an automotive guardian angel”. this was until we were on a service station free stretch of the m25 when the unthinkable happened and i was volunteered to get fuel in the empty emergency canister. empty since the last time she’d run out and had emptied its contents.

you see she’d fibbed. she had run out before but this time she hadn’t taken the precaution of a backup plan which, by default, was now me. the moral of the story, don’t take lift’s from drivers with fuel denial otherwise you’ll eventually end up walking.


Friday, September 10, 2004

Election calls for US oil independence a pipe dream

Reuters AlertNet

Cutting U.S. foreign oil dependence is a "silly notion for politicians," said Herman Franssen, president of the International Energy Associates, Inc. "It's like saying when you're obese that you should stop importing foreign food," he told a Hudson Institute oil panel earlier this week.

"You need to reduce your dependence on (all) oil," Franssen said. "Not foreign oil. Oil."
Democratic contender John Kerry has explicitly attacked what he says is the Bush administration's too-cozy relationship with Saudi Arabia, which is consistently a top U.S. supplier.

"George W. Bush's energy policy is to trust the big oil companies and the Saudis," Kerry said in prepared remarks in Cincinnati this week. "I want an America that relies on its own ingenuity and innovation, not the Saudi royal family."
Both candidates have called for more conservation, renewable supplies and drilling in some offshore Gulf of Mexico fields. Bush has called for drilling in the Arctic National Wildlife Refuge in Alaska, which Kerry opposes.

Some polls show that such statements have traction with voters, who saw gasoline prices soar over $2 per gallon this year and crude oil prices flirt with $50 per barrel.


"Never has there been more support for self-reliance than there is today," said pollster Frank Luntz.
An August Luntz poll of 800 potential voters showed that 50 percent of respondents want more renewable energy sources, while only 6 percent want closer U.S.-Saudi ties.


Kerry's Democratic convention remarks that America rely on "innovation, not the Saudi royal family" for energy was "the best statement in the entire convention," Luntz said. The statement had support of 74 percent of poll respondents.


The Energy Crunch

Freezerbox

THE IMPLICATIONS OF the global oil peak could not be more profound. As increasing demand exceeds supplies, oil prices will rise substantially and international competition for reserves will grow ever more rancorous. The impact will be felt throughout the global economy and in every American's wallet.

As the changes come down upon us, Americans may have a difficult time understanding what is happening and why. As we're already seeing in this year's simplistic and demagogic presidential- campaign discussion of gas prices, political leaders may find it easier to focus more on whom to blame rather than how to come together to address the fundamental problem.

"Many Americans will draw the conclusion that they're being somehow cheated by the oil companies or that there's some kind of corporate conspiracy that's causing all this trouble and they're going to militate to do something about it and, of course, that won't really be the problem. The problem is geological--about what's in the ground and where it's at and how much of it there is. I think that we'll elect maniacs to try to turn back the clock and bring back the 1990s," Kunstler says.

"It's going to be very painful and there are going to be a lot of losers created in this process. They're going to be angry."


Thursday, September 09, 2004

Note on the weird characters

Posting excerpts from other news sites is mostly a cut and paste chore. For some reason that I have yet to figure out what looks good going in comes out with strange characters replacing apostrophes. Sometimes I re-edit these out, sometimes not.

If anyone knows what this is about and how to fix it for good, please click the Comment link below.


How long will the world's oil last?

MSNBC

When the modern oil industry was born 145 years ago in Titusville, Pa., few people worried about just how long petroleum would keep flowing out of the ground. But since production peaked in the United States in 1970, a growing number of geologists, economists and industry analysts have been pondering the question of just how long worldwidesupplies will keep up with growing demand. And some are predicting that global production may peak as soon as next year.

The outlook is muddied by the data. Estimating oil reserves — how much is left in the ground — is a notoriously perilous endeavor. The task is complicated by the secrecy of OPEC producers, who are reluctant to dislose just how much oil they’ve found. 

This year, global demand for oil — currently at more than 80 million barrels per day and climbing — has come closer than ever to exceeding the world’s known production capacity. Disruptions in oil supply — due to wars or market forces like OPEC embargoes — are nothing new. But with producers pumping as fast as they can, there is little cushion for temporary supply interruptions or heightened demand from industrializing countries like China and India.

“We really are close enough to the edge to have no excess capacity. Demand growth shows no sign of slowing and now it seems to be accelerating,” said Matt Simmons, a Houston-based investment banker. “It’s really important to know what the real story is — as bad as it may be.”

No more 'cheap' oil
Oil industry officials say there are still promising regions that have not been fully developed, including areas of Alaska and the Atlantic and Pacific coasts of the U.S. that are currently off limits. But they generally agree that the days of major new finds of cheap oil are over.

“There is lots of oil out there,” said Karl Kurz, vice president of marketing and minerals for Anadarko Petroleum.  “But it’s a finite resource; we can’t get around that. Eventually, you’re going to get to the point where there’s not any more to find.”

There are skeptics to the production peak theory. Morry Adelman, an MIT economics professor, says there is plenty of oil around as long consumers are willing to pay the price to produce it.

"There are a lot of prospects that were not worth developing before which are worth developing now. And there are a whole lot of prospects which were not found before which are worth looking for and worth developing today.”

A lot depends, of course, on just how much oil remains underground. Many of those who fear a production peak is imminent base their forecast on estimates of what geologists call the “ultimate recoverable resource” of about 2 trillion barrels of oil. But there’s disagreement among geologists on that number. A comprehensive study by the U.S. Geological Survey in 2000 estimated that some 3 trillion barrels of oil will ultimately be produced. Adelman argues that the amount of oil left to be produced is “unknowable.”

Regardless of how much oil remains in the ground, says Deffeyes, the critical bottleneck is production capacity. “I can’t drive into the filling station and say fill her up with reserves.”

Deffeyes argues that production capacity has grown more slowly than demand – based on production figures that are a lot more reliable than reserve data.

“Production is a pretty firm number,” he said. “Oil gets counted twice: once when it gets produced and once when it goes into the refinery. So we pretty much know how much is produced, and my Thanksgiving Day prediction is entirely based on production.”

In theory, higher oil prices should expand supplies, by bringing on line oil that just isn’t profitable to produce at lower prices. But the recent surge in prices and continued growth in demand haven’t been matched by a major boost in oil industry capital spending on exploration and production.

'Hard' landing or 'soft'?
The debate over oil reserve estimates and demand-production trends is not just academic; at stake is nothing less than the economic well-being of the world over the next few decades. There are numerous scenarios describing the transition from a global economy based on fossil fuels to whatever energy sources ultimately replace them. The most extreme pessimists – found on Web sites like dieoff.com – foresee a kind of global return to the Stone Age as a world deprived of energy is beset by anarchy and starvation. 

And even the most optimistic scientists who believe oil production will soon peak warn that the transition to a post-petroleum world will require an enormous undertaking involving breakthrough technologies and massive amounts of capital.

“If I’m right about the time scale we’ve got a problem,” said Deffeyes.  “I don’t think you could reverse the decline. In an ideal world you might stretch the time decline of the curve out about five years. “

In the meantime, many scientists are looking for those alternatives sources. Some have suggested that technologies promoting cleaner-burning coal -– still in plentiful supply in the U.S. -– will help bridge the oil gap. Others have suggested that nuclear power will become more attractive if oil production declines too rapidly. Wind power, more widely used outside the U.S., has a proven track record. More advanced technologies -– like the conversion of coal to hydrogen –- also show promise, but are years from commercial production.

Some are already beginning to sketch out what the world’s energy infrastructure will look like later in this century. The so-called “hydrogen” economy has been widely touted because it relied on an energy source that produces no carbon or other pollutants when burned.  But hydrogen requires massive amounts of electricity to produce; it’s also difficult to transport and store in small quantities for use in, say, the family automobile.


Wednesday, September 08, 2004

Oil flow peaks as demand builds

Oil flow peaks as demand builds

Oil prices have backed down slightly from this summer's record levels, giving commuters and airline stockholders hope for relief from high fuel bills.

But any price declines won't last long, many energy experts say, and Americans may have to get used to higher prices for everything from gasoline to groceries.

If oil were to become as scarce and expensive as it was during the energy crisis of the late 1970s, a gallon of gas could rise to about $3, the American Petroleum Institute estimates.

That would increase the cost of driving, damage the auto industry — which last week reported that sales of popular sport utility vehicle models slipped more than 30 percent — and also drain money that consumers might otherwise spend on other goods and services.

And, higher materials and transport costs would push up the prices of everything from fresh vegetables to plastic garbage bags.

The biggest impact might be on the airlines, which predict fares would have to jump to keep pace with rising oil prices.

Oil production is failing to grow, experts say, just as demand for fuel is expanding rapidly in China, India and other developing nations. No major oil fields have been discovered in nearly three decades. And despite record revenues, oil companies are barely increasing their production capacity.

The result in coming years: fuel prices far higher than anything Americans have seen.

"The world is entering a period of runaway growth in demand for fossil fuels," said Matthew Simmons, founder of a Houston-based investment bank specializing in the oil industry.

For oil companies, "it's the end of growth — that's what peaking is all about," Simmons said. "A production decline doesn't mean you're out of oil, but it means that by 2010, maybe you are producing 75 million barrels a day, and the world demand is maybe 90 to 100 million. It's that gap that creates chaos."

For many airlines, chaos already has arrived. The Air Transport Association, an industry trade group, estimates that for U.S. airlines to simply break even, oil prices must stay below $31 a barrel. From 1992 to 2001, the median price was $20, allowing airlines to flourish.

On Aug. 19, the market peaked at a record of nearly $49 per barrel. Though prices have receded, they remain high enough to guarantee losses for airlines.

If airlines raise fares to cover the steeper costs, customers stay home. But if the carriers hold fares in check, they lose money.

"This is just untenable for us," said John Heimlich, the ATA's chief economist.

Already, inflation has been pushed up and consumer spending held down by a jump in gasoline prices that the Labor Department measured at 26.5 percent in urban areas for the year ended in July.

But oil is also used for heating and in plastics, fertilizers, ink, adhesives and many other goods. That means that oil price increases reverberate throughout the economy, further pushing up inflation and interest rates.

Still, the gas pump will provide Americans with the most visible signs. It may be of little consolation to them that motorists in other developed nations pay far more for gasoline than they do.

Last winter, when the U.S. price for premium unleaded fuel was about $1.85 a gallon, the price was $5.31 in Britain, $4.81 in France and $3.34 in Japan. However, that difference lies not in the price of oil, but in the fact that foreign nations levy taxes on gasoline that are up to six times higher than those imposed by the U.S. and state governments.

More expensive oil might push pump prices up worldwide, but it's not clear they would close the gap between the United States and other industrial countries.

Then there is the question of whether oil production can catch up to demand.

End of an era

This year, two books have argued that the age of cheap oil is wrapping up: "The End of Oil: On the Edge of a Perilous New World," by Paul Roberts, and "Out of Gas: The End of the Age of Oil," by physics professor David Goodstein of the California Institute of Technology.

One authority on oil, Kenneth Deffeyes, a Princeton geology professor emeritus, is writing a book due next year called "Beyond Oil." To underscore the urgency, he pinpoints Thanksgiving Day 2005 as the date world oil production will peak.

The notion that oil production from proven fields can fall off sharply is embodied in a concept called "Hubbert's curve."
In 1956, geophysicist M. King Hubbert noted that oil fields do not produce evenly. After about half the oil has been sucked from the ground, the second half becomes more difficult and more expensive to extract. When production falls off enough, the oil company abandons the field.

That means a typical field's production is represented by a curve that slowly rises to a peak and then falls sharply.
Using his model, Hubbert predicted that oil production in the continental United States would peak around 1971. It did, and has been declining ever since.

The solution has always been to move on to the next hole. But many geologists say that now, the entire planet is approaching the peak of Hubbert's curve.

Other experts say the pessimists go too far, noting that the end of oil supplies has been predicted since derricks first rose up in 19th century Pennsylvania.

After the Arab embargo of the 1970s drove oil prices to nearly $80 a barrel in today's dollars by 1980, companies became more motivated to produce oil. They drilled so vigorously that an oil glut caused prices to plummet after the mid-1980s.

"I've always been skeptical about this idea that we're moving into a new era and that we'll have to get used to high prices," said Fareed Mohamedi, chief economist for PFC Energy, a Washington consulting firm. "I believe in cycles for oil prices, that's all we've seen over the last 75 years."

Specific tie-ins

Optimists believe this year's price hikes have been tied to specific, short-term events: continued fighting in Iraq, an attempt to recall the president of Venezuela, the threat of terrorist attacks in Saudi Arabia and a dispute between the Russian government and its largest oil exporter, Yukos.

Other world events could cause short-term prices to spike again, Mohamedi said. "If we bomb Iran, I can assure you that would put an extra $10 premium on a barrel," he said, but such events are not related to long-term peaking.

The experts who believe demand will permanently outstrip supply say Americans must learn to conserve energy and develop new fuel sources.

There are other sources of oil, such as tar sands and oil shale. But getting the oil out would be costly.
Relying more on other energy sources — liquefied natural gas, coal and nuclear — will require overcoming environmental concerns.

And other sources — hydrogen fuel cells, wind, solar and the like — face technological hurdles before they can provide significant sources of energy at anything like the low cost of oil.

Simmons said no one should expect a breakthrough tomorrow.

"It's interesting that in the 20th century, the only new form of energy we invented was nuclear power, and we took 50 years to do it," he said. "This isn't like creating a new generation of computers."


When it comes to reserves, Gulf not running on empty

HoustonChronicle.com

Q: There's a brewing debate surrounding the "peak oil" theory. The idea is that global oil production will hit its high this decade — maybe even in the next year or two — and begin an irrevocable fall that will leave oil-intensive countries in the lurch. Do you believe oil is peaking?

A: First of all, we in the oil industry have a hard time with predictions — particularly oil prices. There is a debate about peak oil, but the really important issues are the supply-demand balance and the impact crude prices are having on our economy and global economies. Regardless of whether those theories are correct, it highlights the need for exploration. It's important to us to access and assess all the acreage we can.


Noam Chomsky On Peak Oil Theory

The official weblog of Noam Chomsky

The basic theory is incontrovertible. The only questions have to do with timing and cost. ...

The date can be pushed back much farther if more costly (or maybe some to-be-discovered improved) technology is used. As for the estimates of cost, by reasonable standards one could argue that oil is far under-priced. In real terms, it's not particularly high now as compared with other commodities, from some reasonable base line. And low-priced oil leads to heavier use and less effort to create sustainable alternatives.

That I think is a far more serious problem than production peaking. In fact, one could argue that the earlier production peaks, the better off the human species (and a lot more) is, because of the effects of unconstrained use of hydrocarbons on the environment.

Talk about "shrinking our economies" is pretty meaningless. Our economies would shrink substantially if we got rid of huge expenditures for the military, for incarceration, and other highly destructive activities. Sustainable economies might lead to highly improved quality of life.


Monday, September 06, 2004

Maui Gas: Experience the Depletion Cliff.

Scoop

When the question of oil and gas depletion is raised the flat earth fraternity often can’t help themselves laughing whilst pointing out ''but we’ve never produced more than we are today, the world is awash in oil and gas''. A sobering lesson is to be learnt by looking at the current depletion rates in the Maui natural gas field.

Production this year was 21.6% less than the 2003. Production in 2003 was 33.5% less than in 2002. In 2002 the Maui natural gas field produced a volume of gas higher than it ever had in its past. This illustrates the depletion issue with such clarity that even a flat-earther should recognise it. The volume of gas produced in the June 2004 year was the lowest level recorded for a year since 1986.

Maui gas production is in free fall. In peak oil terminology we are over the cliff. Within a year, maybe two tops, Maui gas will be gone. We are not the only nation facing natural gas depletion. The great Canadian natural gas fields, which power much of the United States, are on the production plateau. Major blackouts have already plagued the US over the last couple of years caused by peak surges in electricity consumption. As Canadian gas production hits the cliff it is almost certain that the US will experience severe and lasting electricity outages.


Peak Oil, 9/11, And The US Administration

(Your blog host prefers to keep politics out of the peak oil discussion, but it keeps re-surfacing and so here it is.)

Heinberg's "Last Man Standing" Hypothesis As Catastrophic Hallmark of Bush II

Media Monitors Network (MMN)

Richard Heinberg has a new book out that explores possibilities of societal reactions to the Peak Oil phenomenon, which has the potential to throw industrial society into chaos and even bring western technology based civilization to its natural conclusion (not to mention possible die off of the human species). All of this is discussed thoroughly in the two Heinberg books, "The Party's Over" and "Power Down", which are required reading for intelligent, conscious humans in our age.

One of the options discussed by Heinberg in his latest book is the "Last Man Standing" scenario, in which the powerful (most often the ultra-wealthy and politically connected within American society and societies of other nations) will use their assets to promote their own survival at the expense of everyone else.

How might a Bush/Cheney election in 2004 relate to this scenario, and possibly result in planned and integrated policies designed to divide and destroy the American society from within?

This may seem like a far-fetched and even ludicrous scenario to some, but recent events are bearing out reasons for grave concern. Just yesterday on the radio I heard an interview with a father in New York City who remarked how he NEVER would have imagined the possibility of himself leaving notes pinned on a fence in New York City to his missing son on where to locate the father after the son went missing at the hands of the State. This father had learned that his son had been illegally detained during peaceful, legal protests in New York City and had been hauled off to jail with a large group of protesters. The father had somehow obtained an "arrest number" with the case by NYC against his son, and went to the jail to obtain information about his son's anticipated release. The jailers asked the father how he got information on the arrest number, and subsequently erased that number and issued a second, secret number so the father could not effectively locate his son. This obviously well-educated, patriotic man felt he was now living in a situation comparable to South American "disappearances" of loved ones in which he was reduced to pinning notes on a fence for his son to read in case the son got out of jail. The father understood that the government had "disappeared" his son and was astonished that such a thing could happen in America.

We are seeing more and more cases of injustice within the American system of governance, including military governance. One soldier who criticized the Bush Administration was summarily reduced in rank and then expelled from the military after a trial in which he was refused to call witnesses or cross-examine his accusers. Fourteen years of exemplary military service were thrown out the window and this soldier was discharged. He came from a family with a long line of military service to the nation, and this soldier's family subsequently decided to never again recommend military service for any of their progeny.

But the very worst will surely lie ahead for America. The Patriot Acts and spirit of "fear of terrorism" in connection with the resource wars labeled as the "War on Terrorism" are directly related to the Peak Oil crisis. The increasing development of a police state in America and systemic disintegration of civil rights and due process frightens Americans who love the values this country was founded on.

If the past paradigm of freedom and liberty and protection of constitutional rights within American society gives way to a fascist, totalitarian state dominated by the John Ashcrofts of the world worsens, how long will it take for violent insurrection to appear right here within America? Will patriotic American citizens go quietly do their doom? And has not the Bush Administration I already demonstrated very clearly that it can and will trample on civil rights, illegally detain people without criminal charges for indefinite periods of time, illegally detain dissidents and defy court orders and otherwise make a mockery of the freedom and democracy they claim to support and protect?

A second Bush Administration promises to destroy the very fabric of American democracy and with it, the cohesion of American society. The resultant chaos could very easily mean the emergence of permanent martial law and even civil war. This could be an integrated plan, as surely the Bush/Cheney/Rove crew know that the past and recent American way of life is no longer sustainable ecologically or financially.

The Bush Administration in a second term may have a strategy for itself and its powered elite to be the "last man standing" while society disintegrates destroys itself.

This is certainly a worst case scenario, and hopefully would not happen. But the very fact that signs point in that direction and unthinkable things are happening as we speak mean that the American people would be well-advised to remove all possibility of this worst case by repudiating Bush/Cheney and all they stand for in the next election.

We will have to deal with Peak Oil inevitably. But there ARE other options than "last man standing". We can all stand together and fight for mutual survival, but not with a Bush Administration in the picture.


Global oil crisis lurking

Arizona Republic

With oil prices receding from this summer's records, motorists and airline stockholders are hoping for relief from high gasoline and jet fuel bills.

But many energy experts predict that not only won't the price decline last long, but Americans soon will have to say goodbye forever to plentiful, cheap oil.


Thursday, September 02, 2004

Peak Oil & 9/11 - Michael Ruppert Announces A New Book

EXCERPT FROM THE ADDRESS OF MICHAEL C. RUPPERT

FOR THE COMMONWEALTH CLUB – SAN FRANCISCO

TUESDAY AUGUST 31, 2004

OIL AND NATURAL GAS ARE INDISPENSABLE TO OUR WAY OF LIFE. THE WORLD CONSUMES TEN CALORIES OF HYDROCARBON ENERGY FOR EVERY CALORIE OF FOOD THAT IS EATEN. ALL COMMERCIAL FERTILIZERS ARE MADE FROM NATURAL GAS. ALL PESTICIDES ARE MADE FROM PETROLEUM. ALL IRRIGATION, PLOWING, HARVESTING 39 AND TRANSPORT IS ACCOMPLISHED BY EITHER OIL POWERED MACHINERY OR OIL OR NATURAL GAS GENERATED ELECTRICITY.  THERE ARE BETWEEN 600 AND 700 MILLION INTERNAL COMBUSTION POWERED VEHICLES ON THE PLANET AND THE DEMAND FOR THEM IS EXPLODING EXPONENTIALLY, ESPECIALLY IN CHINA WHERE GM’S SALES ROSE 300% IN ONE YEAR ALONE. ACCORDING TO THE NATIONAL GEOGRAPHIC THIS LAST JUNE THERE ARE SEVEN GALLONS OF OIL IN EVERY TIRE. WANT TO SUDDENLY BUILD 600 MILLION NEW VEHICLES THAT RUN ON SOMETHING ELSE, HYDROGEN PERHAPS? HOW MUCH OIL WILL BE REQUIRED TO DO THAT? TO MINE AND MELT THE ORE? TO TRANSPORT IT TO FACTORIES THAT DON’T EXIST, USING ELECTRICITY THAT ISN’T THERE? TO MAKE THE PAINTS, SOLVENTS AND ALL OF THE PLASTIC NEEDED? ALL PLASTIC IS MADE FROM OIL.  HYDROGEN IS A CRUEL JOKE THAT CREATES FALSE HOPE. A RECENT STUDY FROM EV MAGAZINE REPORTED THAT THE AVERAGE LIFE EXPECTANCY OF A VERY EXPENSIVE FUEL CELL ENGINE WAS JUST 200 HOURS. COMMERCIAL HYDROGEN IS NOW MADE FROM NATURAL GAS.  WE’RE NEARLY OUT OF THAT TOO.

CHINA’S ECONOMIC GROWTH HAS SEEN IT REPLACE JAPAN AS THE WORLD’S SECOND LARGEST IMPORTER OF OIL AND CHINA IS NOW COMING INTO DIRECT ECONOMIC AND POLITICAL COMPETITION WITH THE US FOR WHAT OIL REMAINS.

I HAVE ATTENDED TWO INTERNATIONAL CONFERENCES ON THE SUBJECT OF PEAK OIL AND ITS IMPLICATIONS FOR CIVILIZATION; ONE IN PARIS IN 2003 AND ONE IN BERLIN THIS YEAR. FOR ALMOST THE ENTIRE YEAR BETWEEN THE PARIS AND BERLIN CONFERENCES THE ICONS OF THE MAINSTREAM PRESS – THE ONES KNOWN AND EMPLOYED TO 40 MOLD PUBLIC AND BUSINESS PERCEPTION – HAVE BEEN ACKNOWLEDGING PEAK OIL’S REALITY, SOMETIMES RELUCTANTLY, SOMETIMES LESS THAN DIRECTLY, BUT ALSO SOMETIMES VERY BOLDLY. CNN, THE BBC, THE NEW YORK TIMES, THE ECONOMIST;

DOZENS OF MEDIA GIANTS HAD BEGUN TO RESPOND, LIKE A GIANT SHIP TURNING SLOWLY IN THE WATER. THE SHIP HAS CLEARLY CHANGED COURSE, BUT WAS IT ENOUGH? WAS IT IN TIME? I HAVE SAVED CLOSE TO 200 OF THESE STORIES.

LOOKING AT JUST A FEW OF THEM MAKES THE POINT WELL ENOUGH.

·        “THE END OF CHEAP OIL” – NATIONAL GEOGRAPHIC (COVER STORY) – JUNE 2004.

·        “WHAT TO USE WHEN THE OIL RUNS OUT” – BBC – APRIL 22, 2004

·        “ADIOS CHEAP OIL” – INTERPRESS NEWS AGENCY – APRIL 27, 2004

·        “G7: OIL PRICE THREATENS WORLD ECONOMY” – MOSCOW TIMES 4/26/04

·        “WORLD OIL CRISIS LOOMS” – JANE’S -- 4/21/04

·        “US PROCURING THE WORLD’S OIL” – FOREIGN POLICY IN FOCUS JANUARY 2004

·        “ARE WE RUNNING OUT OF OIL? SCIENTIST WARNS OF LOOMING CRISIS” – ABC NEWS.COM – 2/11/04

·        “BLOOD, MONEY, AND OIL” – US NEWS – 8/18/03

·        “SOARING GLOBAL DEMAND FOR OIL STRAINS PRODUCTION CAPACITY” – WALL STREET JOURNAL – 3/22/04

·        “CHECK THAT OIL” – WASHINGTON POST – 11/14/03

·        “CHINA’S DEMAND FOR FOREIGN OIL RISES AT BREAKNECK PACE” KNIGHT RIDDER –1/26/04

·        ’WORLD OIL AND GAS RUNNING OUT’ – CNN – 10/02/03

·        “DEBATE RAGES ON OIL OUTPUT BY SAUDIS IN FUTURE” – THE NEW YORK TIMES – 2/25/04

·        “FOSSIL-FUEL DEPENDENCY: DO OIL RESERVES FORETELL BLEAK FUTURE?” – SAN FRANCISCO CHRONICLE – 4/02/04

·        “THE END OF THE OIL AGE: WAYS TO BREAK THE TYRANNY OF OIL ARE COMING INTO VIEW. GOVERNMENTS NEED TO PROMOTE THEM” – THE ECONOMIST – 10/23/03

 

THE SUBJECT OF PEAK OIL IS ONE WHICH REQUIRES A LITTLE STUDY TO GET YOUR BRAIN AROUND. IT DOES NOT, HOWEVER, REQUIRE MUCH SCIENCE EXCEPT FOR BASIC ARITHMETIC.

DISCOVERIES OF LARGE OIL DEPOSITS HAVE BEEN IN STEEP DECLINE SINCE 1962. DEMAND, ON THE OTHER HAND, HAS BEEN SOARING.  TO QUOTE MY ENERGY EDITOR DALE ALLEN PFEIFFER, A GEOLOGIST:

IT APPEARS THAT THE YEAR 2007 WILL BE IMPORTANT. A NEW STUDY PUBLISHED IN PETROLEUM REVIEW SUGGESTS THAT PRODUCTION MIGHT NOT BE ABLE TO KEEP UP WITH DEMAND BY 2007. THE STUDY IS A SURVEY OF MEGA PROJECTS (THOSE WITH RESERVES OF OVER 500 MILLION BARRELS) AND THE POTENTIAL TO PRODUCE OVER 100,000 BARRELS PER DAY OF OIL). MEGA PROJECTS ARE IMPORTANT NOT ONLY BECAUSE THEY PROVIDE THE BULK OF WORLD OIL PRODUCTION, BUT ALSO BECAUSE THEY HAVE A BETTER NET ENERGY PROFILE THAN SMALLER PROJECTS, AND THEY PROVIDE A MORE SUBSTANTIAL PROFIT THAN SMALLER PROJECTS.

BEAR IN MIND THAT THE PLANET CONSUMES A BILLION BARRELS OF OIL (OR TWO MEGA FIELDS) EVERY ELEVEN AND ONE HALF DAYS.  THE DISCOVERY RATE FOR MEGA PROJECTS HAS DWINDLED TO ALMOST NOTHING. THIS CAN BE SEEN IN THE DATA FOR THE LAST FEW YEARS. IN 2000, THERE WERE 16 DISCOVERIES OF OVER 500 MB; IN 2001 THERE WERE ONLY 8 NEW DISCOVERIES, AND IN 2002 THERE WERE ONLY 3 SUCH DISCOVERIES. FROM FIRST DISCOVERY TO FIRST PRODUCTION GENERALLY TAKES ABOUT 6 YEARS. IF THE NEW PROJECT CAN MAKE USE OF EXISTING INFRASTRUCTURE, THEN THE START UP TIME MIGHT BE CUT TO 4 YEARS.  IN 2003 SEVEN NEW MEGA PROJECTS WERE BROUGHT ON STREAM.

2004 EXPECTS TO SEE ANOTHER 11 PROJECTS START PRODUCING.  2005 WILL BE THE PEAK YEAR FOR BRINGING NEW PROJECTS ON 42 STREAM, WITH 18 NEW PROJECTS EXPECTED TO BE BROUGHT ON STREAM IN THAT YEAR. IN 2006, THE PACE DROPS BACK TO 11 NEW PROJECTS. BUT IN 2007 THERE ARE ONLY 3 NEW PROJECTS SCHEDULED TO BEGIN PRODUCTION, FOLLOWED BY 3 MORE IN 2008.  THERE ARE NO NEW PROJECTS ON TRACK FOR 2009 OR 2010. AND ANY NEW MEGA PROJECT SANCTIONED NOW COULD NOT POSSIBLY COME ON STREAM ANY SOONER THAN 2008.

THE STUDY POINTS OUT THAT CURRENTLY ABOUT A THIRD OF THE WORLD’S OIL PRODUCTION COMES FROM DECLINING FIELDS, WITH A LIKELY OVERALL DECLINE RATE OF ABOUT 4%. AS A RESULT, GLOBAL PRODUCTION CAPACITY IS CONTRACTING BY OVER 1 MILLION BARRELS PER DAY EVERY YEAR. NEW PRODUCTION IS THE ONLY THING OFFSETTING THIS DECLINE.

OF COURSE RECENT EVENTS HAVE CLEARLY DEMONSTRATED THE FRAGILITY OF A GLOBAL PRODUCTION SYSTEM THAT IS OPERATING AT FULL TILT. SABOTAGE AN IRAQI PIPELINE ONE DAY THE PRICE GOES UP. ANNOUNCE THAT VLADIMIR PUTIN IS EASING UP ON RUSSIAN OIL GIANT YUKOS AND THE PRICE DROPS. ANNOUNCE THAT PUTIN IS MOVING TO SELL OF ITS ASSETS AND CONFISCATE ITS CASH, THE PRICE SOARS. WORRY THAT HUGO CHAVEZ OF VENEZUELA MIGHT BE OUSTED IN A VIOLENT COUP AND THE PRICE JUMPS. WATCH CHAVEZ –

WHO IS DESPISED BY THE BUSH ADMINISTRATION – WIN HIS SEVENTH ELECTION IN AS MANY YEARS AND THE PRICE DROPS.  BY THE WAY, THAT IS SEVEN MORE ELECTIONS THAN GEORGE BUSH HAS WON.

IN SPITE OF REPEATED ASSURANCES FROM THE SAUDI GOVERNMENT THAT THEY CAN AND ARE INCREASING PRODUCTION THE EVIDENCE IS GROWING THAT THEY CANNOT. FTW WAS THE FIRST TO REPORT, A 43 YEAR BEFORE THE NEW YORK TIMES DID, THAT SAUDI ARABIA MAY HAVE ACTUALLY PEAKED. NEW STUDIES ARE REPORTING THAT SAUDI WELLS IN THE MOTHER OF ALL OIL FIELDS GHAWAR ARE SHOWING 55% WATER CUT. THAT MEANS THAT 55% OF WHAT IS PUMPED OUT EVERY DAY IS THE SAME SEAWATER THAT WAS PUMPED IN TO PUSH THE OIL UP. EXPERIENCE HAS SHOWN THAT WHEN THE WATER CUT GETS TO BETWEEN 70 AND 80% THE FIELD COLLAPSES.  THE RUSH TO PRODUCE MORE OIL IS HASTENING THE DESTRUCTION OF FIELDS THAT COULD LAST LONGER OTHERWISE.  EVENTS THEN SEEM TO CONFIRM THESE WORRIES ABOUT SAUDI ARABIA. SAUDI REASSURANCES ARE NOW BEING CHUCKLED AT BY MAJOR FINANCIAL COMMENTATORS, AND SAUDI PLEDGES TO INCREASE PRODUCTION ARE HAVING LESS AND LESS EFFECT ON THE MARKETS.  GHAWAR, THE SUPER GIANT OF ALL FIELDS WAS DISCOVERED MORE THAN 60 YEARS AGO. IT HAD ESTIMATED RESERVES OF ALMOST 100 BILLION BARRELS OF OIL. PROFESSOR MICHAEL KLARE HAS TOLD US THAT, IN ORDER TO KEEP PACE WITH ACCELERATING OIL DEMAND, THE WORLD WILL HAVE TO DISCOVER THREE NEW GHAWARS IN THE NEXT 10 TO 15 YEARS JUST TO MEET DEMAND. THERE WAS ONLY ONE GHAWAR. THERE HASN’T BEEN ANOTHER ONE SINCE.  SO WHEN WE LOOK AT THE PALTRY AND RAPIDLY DIMINISHING RATE OF DISCOVERY FOR THE SO-CALLED MEGA FIELDS, THE PROSPECTS BECOME JUST A BIT MORE CHILLING. IN THE YEAR 2003, FOR THE FIRST TIME SINCE THE 1920s ACCORDING TO A LEADING PETROLEUM CONSULTING FIRM, NOT A SINGLE SO-CALLED MEGA FIELD – 500 MILLION BARRELS OR MORE – WAS DISCOVERED.

BY 2007, PRODUCTION CAPACITY WILL HAVE DECLINED BY 3-4MN B/D, YET THIS DECLINE WILL BE OFFSET BY 8MN B/D OF NEW CAPACITY.

DRAWN FROM THE MANY NEW PROJECTS EXPECTED TO COME ON STREAM OVER THE NEXT FEW YEARS. THIS LEAVES A SURPLUS OF 4MN B/D IN SPARE CAPACITY. YET GLOBAL DEMAND IS GROWING BY OVER 1 MBPD EACH YEAR. SO 3 YEARS OF DEMAND GROWTH WILL REDUCE OUR SPARE CAPACITY TO 1MN B/D BY THE START OF 2007. AS VERY LITTLE NEW CAPACITY IS SET TO COME ON STREAM IN 2007, THAT REMAINING 1 MBPD SPARE CAPACITY WILL LIKELY DISAPPEAR BEFORE 2008.

IN THE SHORT TERM OIL PRICES ARE GOVERNED BY MARKET FORCES RATHER THAN GEOLOGY WHICH WILL TELL US, AS OPPOSED TO INVESTMENT AND ECONOMICS, HOW MUCH OIL WE CAN ULTIMATELY EXTRACT. THE IRONY IS THAT WHEN THREE NEW MEGA FIELDS COME ONLINE ALL AT ONCE THE PRICES MAY ACTUALLY DROP. THAT WILL NOT CHANGE THE OUTCOME. SPECULATION AT PRESENT IS NOT A BIG A FACTOR AS IT COULD BE. I WHOLEHEARTEDLY AGREE WITH INVESTMENT BANKER MATTHEW SIMMONS THAT A MARGIN REQUIREMENT OF 50% SHOULD BE PLACED ON ALL OIL FUTURES TRADING WORLDWIDE.

THE UPSHOT OF ALL THIS IS THAT THE OIL SUPPLY APPEARS SUSTAINABLE, BARRING MAJOR WARS OR DESTRUCTION ON INFRASTRUCTURE UNTIL 2007. WITH SO MUCH NEW PRODUCTION COMING ON STREAM, THERE MAY EVEN BE PERIODS OF PRICE WEAKNESS. HOWEVER, IT IS LIKELY THAT WE WILL BEGIN SUFFERING OIL SHORTAGES AFTER 2007, ESPECIALLY IF ANYTHING HAPPENS TO DISRUPT A PORTION OF THE PRODUCTION. IF NEW PROJECTS ARE NOT FOUND, AND ONLINE BY 2008, THEN BY THE END OF THAT YEAR WE ARE CERTAIN TO SEE SEVERE SHORTAGES WITHOUT ANY CAUSE OTHER THAN RISING DEMAND.

BUT THERE IS ANOTHER FACTOR TO THIS OIL CALCULUS. SO MANY COMPLAINTS ARE BEING VOICED THAT A MAJOR PART OF THE PROBLEM WITH CURRENT OIL PRICES HAS TO DO WITH A LACK OF REFINERIES. PEOPLE POINT OUT THAT THERE ARE 18 DIFFERENT GRADES OF GASOLINE IN THIS COUNTRY MATCHING VARIOUS STATE LAWS. WHY, THEY DEMAND, ARE NO MORE REFINERIES BEING BUILT.  THE ANSWER IS SIMPLE AND IT IS A DIRECT AND IRREFUTABLE CONFIRMATION OF PEAK OIL. THE RETURN ON INVESTMENT – AS MATTHEW SIMMONS SAYS – IS UNCERTAIN. ACCORDING TO SIMMONS IT TAKES 5-7 YEARS AND ABOUT $150 MILLION TO BRING A COMPLEX REFINERY ONLINE. THE COST OF THE REFINERY IS PAID FOR BY THE SALE OF THE OIL.

THE REFINERIES ARE NOT BEING BUILT AND MASSIVE EXPENSIVE EXPLORATION PROJECTS ARE NOT BEING UNDERTAKEN BECAUSE THE OIL COMPANIES UNDERSTAND THAT THERE IS VERY LITTLE OIL LEFT TO FIND.

FINDING 10 NEW NORTH SEA FIELDS… SOMEWHERE

BY 2015, GLOBAL OIL DEMAND IS EXPECTED TO INCREASE BY OVER TWO-THIRDS, THAT IS 60 MBPD BEYOND CURRENT GLOBAL CONSUMPTION OF BETWEEN 75 AND 80 MBPD. TO MEET THAT DEMAND WE WILL HAVE TO FIND THE EQUIVALENT OF 10 NEW NORTH SEA OIL FIELDS WITHIN A DECADE. IN THE MEANTIME BRITAIN’S NORTH SEA, JUST LIKE ALASKA’S NORTH SLOPE DID A DECADE AGO, IS RUNNING DRY. RIGS ARE SHUTTING DOWN AND EMPLOYEES ARE BEING LAID OFF. YET WE ARE HARD PRESSED NOW TO DISCOVER EVEN ANOTHER MEGA-SIZED FIELD.

TO QUOTE FORMER BRITISH ENVIRONMENTAL MINISTER MICHAEL MEACHER, WE ARE FACING, “THE SHARPEST AND PERHAPS THE MOST VIOLENT DISLOCATION (OF SOCIETY) IN RECENT HISTORY.” I SHOULD ADD THE MEACHER, ALONG WITH FORMER GERMAN CABINET MINISTER AND FORMER PARLIAMENTARY SECRETARY ANDREAS VON BUELOW HAS STATED PUBLICLY AND IN WRITING THAT THE ATTACKS OF SEPTEMBER 11TH WERE PERPETRATED BY THE US GOVERNMENT.  THERE ARE MANY OUT THERE WHO JUST REFUSE TO BELIEVE THAT OIL AND NATURAL GAS ARE RUNNING OUT. SOME INSIST THAT OIL IS CREATED AUTOMATICALLY AND INFINITELY BY THE EARTH’S CORE, DISPUTING ALL KNOWN SCIENCE SHOWING OTHERWISE. THERE ARE THOSE WHO INSIST THAT ALTERNATIVE ENERGIES CAN BE SNAPPED INTO PLACE IMMEDIATELY TO ALLOW FOR INFINITE ECONOMIC AND POPULATION GROWTH.

ASIDE FROM LOOKING AT THE EVENTS SINCE 9/11 AND SEEING THAT THEY MATCH A WORLD OF DIMINISHING ENERGY LET’S TAKE A LOOK AT SOME RECENT DEVELOPMENTS AROUND THE WORLD AND SEE WHAT THEY TELL US.

BRITAIN’S LARGEST ELECTRICITY PROVIDER HAS ANNOUNCED THAT PRICES WILL SOAR AS MUCH AS 40% NEXT YEAR. WHOLESALE ENERGY PRICES HAVE DOUBLED IN THE LAST YEAR AS BLOOMBERG HAS ANNOUNCED THAT THE DECLINE IN NORTH SEA PRODUCTION IS CREATING A TRADE GAP WHICH IS NOW THREATENING TO CAUSE WIDESPREAD UNEMPLOYMENT.

IN MARCH REUTERS REPORTED THAT ARGENTINA, FACING ITS WORST ENERGY CRISIS IN15 YEARS, IS BECOMING UNSTABLE TO THE POINT OF THREATENING THE SECURITY OF THE ENTIRE REGION. IT HAS CUT ITS 47 NATURAL GAS EXPORTS TO CHILE BY 15%, WHICH IS THREATENING CHILEAN POWER GENERATION. ARGENTINA IS NOW MOVING INTO THE WORLD OIL MARKET IN SEARCH OF OIL FOR POWER GENERATION AND TRANSPORTATION AS ITS OWN DOMESTIC SUPPLIES HAVE DWINDLED.  THE BBC REPORTED RECENTLY THAT HIGH OIL PRICES ARE THREATENING MANY ASIAN ECONOMIES.

JUST TWO WEEKS AGO THE AUSTRALIAN GOVERNMENT ORDERED AN EMERGENCY FUEL REVIEW IN ANTICIPATION OF FUTURE CRISES. IN JUNE IT CONDUCTED A TEST TO SEE HOW THE GOVERNMENT AND COUNTRY WOULD RESPOND TO A “DISRUPTION” IN OIL SUPPLIES.  ON AUGUST 25TH IT WAS REPORTED THE BRAZIL WAS OPENING NEGOTIATIONS WITH ECUADOR TO REPLACE DIMINISHING OIL SUPPLIES.

CHINA, IN THE MIDST OF RAPIDLY DIMINISHING HARVESTS, A GROWING ECONOMY AND EXPANDING POPULATION IS FEARING A MAJOR FOOD CRISIS. THIS, EVEN AS HONG KONG, HANGZHOU, AND SHANGHAI ARE FACING MANDATORY BLACKOUTS WHICH ARE DISRUPTING MANUFACTURING, TRADE AND RETAIL ACTIVITY. CHINESE OIL IMPORTS HAVE INCREASED BY 15% IN JUST THE FIRST QUARTER OF 2004 ALONE.  GERMANY HAS MOVED TO INSTITUTE HOME ENERGY PASSPORTS, AND UNDERTAKEN SERIOUS AND WELL PLANNED EFFORTS TO REDUCE ENERGY CONSUMPTION. CHANCELLOR SCHROEDER, IN THE WAKE OF RECENT REVELATIONS THAT SHELL – WHICH DOWNWARDLY REVISED ITS RESERVE ESTIMATES FOUR TIMES IN ONE YEAR – CALLED UPON THE G8 NATIONS TO MOVE TO MANDATE TOTAL AND VERIFIABLE TRANSPARENCY IN ALL OIL RESERVE FIGURES.

INDIA, WHOSE OIL IMPORTS JUMPED 23% IN ONE MONTH, HAS MOVED TO CREATE A STRATEGIC PETROLEUM RESERVE.  INDONESIA, A MEMBER OF OPEC HAS ANNOUNCED THAT ITS OIL PRODUCTION WILL DROP SIGNIFICANTLY BY 2008.  JAPAN, IGNORING STIFF OPPOSITION FROM WASHINGTON, HAS SIGNED A MAJOR OIL CONTRACT WITH IRAN, AT THE SAME TIME THAT IT IS FEUDING WITH CHINA, VIETNAM AND THE PHILIPPINES OVER RELATIVELY SMALL OIL AND GAS DEPOSITS IN THE SPRATLY ISLANDS OF THE SOUTH CHINA SEA. IN ANTICIPATION OF PENDING MILITARY CONFLICT IN THE REGION CHINA HAS DECIDED TO BUILD A PIPELINE THROUGH BURMA TO THE INDIAN OCEAN SO THAT TANKERS SUPPLYING CHINA’S GROWING THIRST WILL NOT HAVE TO TRAVEL THROUGH A REGION THAT IS BECOMING INCREASINGLY DANGEROUS.  THREE BILLS HAVE BEEN INTRODUCED IN THE JAPANESE PARLIAMENT THAT WOULD SUSPEND ITS NON-VIOLENT CONSTITUTION AND PERMIT A FULL SCALE REARMAMENT.

RUSSIA, HAVING RECENTLY ADMITTED THAT ITS OIL RESERVES WERE FINITE AND THAT PRODUCTION MIGHT START TO DECLINE SHARPLY WITHIN THE NEXT FIVE YEARS HAS ANNOUNCED THAT IT WILL BUILD A PIPELINE FROM ITS SIBERIAN FIELDS TO THE PACIFIC PORTS OF VLADIVOSTOK AND SAKHALIN THUS AGREEING TO SELL ITS OIL TO JAPAN, KOREA AND THE PHILIPPINES. RUSSIA’S OTHER CHOICE WAS TO HAVE THE PIPELINE TERMINATE IN CENTRAL CHINA.  THIS WEEK IN PETROLEUM, AN INDUSTRY JOURNAL HAS REPORTED THAT NON OECD COUNTRIES HAVE BEGUN TO HOARD PETROLEUM AND 49 ARE BUYING ALL THEY CAN EVEN AT WHAT SOME ANALYSTS CALL “INFLATED” PRICES.

IN THAILAND, MANDATORY EVENING CURFEWS HAVE BEEN IMPOSED TWO NIGHTS A WEEK REQUIRING ALL BUSINESSES TO SHUT DOWN IN ORDER TO CONSERVE ENERGY.

ON AUGUST 24TH BRITAIN’S OIL DEPLETION ANALYSIS CENTER CONFIRMED, CITING DATA FROM PETROLEUM REVIEW THAT DAILY OIL DEPLETION IS NOW EXCEEDING ONE MILLION BARRELS PER DAY. IN OTHER WORDS, EVERY DAY, THE WORLD IS PRODUCING 1.14 MILLION BARRELS PER DAY LESS THAN IT DID THE DAY BEFORE. BY ANALYZING DATA FROM THE 18 LARGEST OIL PRODUCING NATIONS PETROLEUM REVIEW CALCULATED THAT PRODUCTION FROM THESE COUNTRIES PEAKED IN 1997 AT 24.7 MILLION BARRELS PER DAY AND THAT BY 2003 IT HAD FALLEN TO 22.1 MILLION BARRELS PER DAY.  ON AUGUST 21 THE HOUSTON CHRONICLE POSED A GREAT QUESTION.  IF OIL PRICES ARE SOARING AND THERE’S INSATIABLE DEMAND, WHY ISN’T THERE A BOOM IN HIRING AND CORPORATE EXPANSION? THE CHRONICLE, PAYING DUE HEED TO THE FINANCIAL MARKETS, OFFERED THE DUBIOUS EXPLANATION THAT THE OIL COMPANIES JUST DIDN’T WANT TO OVERDO THINGS AND LOOK GREEDY. IN FACT, ALL OVER THE WORLD OIL COMPANIES ARE DOWNSIZING, SELLING OFF ASSETS, LAYING OFF EMPLOYEES AND MERGING. JUST LAST WEEK IT WAS ANNOUNCED THAT FRENCH GIANT TOTAL WAS CONSIDERING A TENDER OFFER TO PURCHASE ROYAL DUTCH SHELL.  AND HERE IN THE UNITED STATES, RISING OIL PRICES HAVE FORCED MAJOR AIRLINES LIKE UNITED TO CONSIDER RAIDING CORPORATE 50 PENSION FUNDS IN ORDER TO OFFSET RISING OIL COSTS AS AN ALTERNATIVE TO BANKRUPTCY.

IN THE MEANTIME, IN THE WEST AFRICAN COUNTRY OF LIBERIA, THERE ARE REPORTS OF 10 YEAR-OLD MERCENARIES BEING RECRUITED TO FIGHT IN GUERILLA CONFLICTS IN NEIGHBORING COUNTRIES AND THERE IS NO SHORTAGE OF RECRUITS. I WONDER IF SENATOR CHUCK HAGEL OF NEBRASKA WILL SEE ANY OF THEM. HE JUST LEFT ON AN ENERGY “SAFARI” TO SCOUT WEST AFRICAN PROSPECTS, JUST ABOUT A YEAR AFTER NATO ANNOUNCED IT WAS SHIFTING ITS FOCUS TO WEST AFRICA AND THE US DELIVERED SIX OBSOLETE WARSHIPS TO THE NIGERIAN NAVY.

THIS, LADIES AND GENTLEMEN, IS JUST THE BEGINNING. AND NEITHER PRESIDENTIAL CANDIDATE HAS EVEN REMOTELY ADDRESSED THE REAL ISSUES OR DARED TO TELL THE AMERICAN PEOPLE THE WORST.  THE ONE OVERRIDING CONCERN I HAVE SEEN EXPRESSED EVERYWHERE IS “OH, NO. WE CAN’T DO THAT. IT WILL CRASH THE MARKETS.”

IS THAT THE SUM TOTAL OF HUMAN EXPRESSION AND ACHIEVEMENT? THE MARKETS?