Peak Oil News: 04/01/2005 - 05/01/2005

Saturday, April 30, 2005

UK Citizens call on government to act on 'Peak Oil'

PowerSwitch.org.uk

A new petition entitled "Peak Oil Production & Decline - Raising awareness and discussion of the consequences and solutions" has officially been launched (Thursday 28th April 2005) by Powerswitch.org.uk to call on UK government to prepare for the serious economic, social and cultural adjustment of the twenty first century caused by global oil depletion.

The petition, which can be found at http://www.petitiononline.com/PeakOil/petition.html, lays clear the reasons why global oil production is likely to enter terminal decline within the decade while demanding serious action from the UK government. The petition calls for action such as recognising importance of oil and gas in agriculture and therefore addressing how food will be grown and distributed in the future as well as preparing a full, honest and major public awareness campaign on the future economic and lifestyle consequences of oil depletion.

“ People have to know,” explained James Howard of PowerSwitch.org.uk. “ It is only right that people should be given full knowledge of the likely economic future so that they can begin making preparations now. It is a lot to ask any government to give out what will be seen as bad news, but equally it cannot shirk from these responsibilities, which is essentially the future well-being of the United Kingdom. Whether the peak of production is now or ten years time, the important thing is to use the time and resources we have now with foresight, wisdom and urgency.”

The petition was based originally on Early Day Motion 199 from the 3rd December 2003, put forward by MP David Chaytor. Entitled ‘Oil depletion, energy self-sufficiency and the low carbon economy’ the Early Day Motion picked up a total of 55 MP signatures, including those of Peter Bottomley, Gerald Kaufman and Peter Ainsworth. “It is a source of hope that these MPs are prepared to go public and I hope they all get back into Parliament to raise this issue,” said James Howard.

The timing of this official launch means it coincides with an outbreak of publicity of this issue brought about by the recent Peak Oil conference on April 25th 2005. The topic has been covered recently in The Guardian, The Independent, The Scotsman and on Radio 4 and awareness and discussion of this topic is also reaching bankers and scientists. However, it is the general public that need to be talking about the problem and the solutions.

“ Global oil depletion is going to bring about a lot of challenges for all societies and it is going to take big decisions to take us through the transition,” explained James Howard. “ But a lot of these decisions will be hard, unpopular ones. The public needs to make such decisions easier for politicians to make and for that they need to be aware, and that is where the petition comes in, as part of our awareness raising campaign.”


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(1) PowerSwitch.org.uk is a UK-wide independent grassroots campaign raising awareness and discussion of oil depletion and can be found at www.PowerSwitch.org.uk. It has a membership of over 200 with representatives in every region of Britain.
(2) For further information about the global peak in oil production contact Oil Depletion Analysis Centre (www.odac-info.org) or The Association for the Study of Peak Oil & Gas (www.peakoil.net)
(3) A global petition can be found at www.copad.org (The Citizens Committee on Oil Peak & Decline)
(4) Early Day Motion 199 can be found at http://edm.ais.co.uk/weblink/html/motion.html/EDMI_SES=03/ref=199


Agriculture and Peak Oil: Will We Have Enough to Eat?

ArriveNet

The Pioneer Valley Post Carbon Council (PVPCC), an Outpost of the Post Carbon Institute, will be hosting a talk about the local and regional effects of Peak Oil on agriculture by Al MacIntire. The talk will be held on May 5th at 7pm at Greenfield Community College, Room E125. There is no cost, but donations will be welcome.

Al MacIntire is a part of the Diemand Egg Farm family. He works on facilities improvement for the farm. He also operates his own business as an expert on RF Shielding. Mr. MacIntire has been leading the Diemand Farm's effort, along with Donald Campbell Associates and Solar Design Associates, to install a major photovoltaic facility which will offset up to 50% of the farms annual electrical load.

"Many people, for honest reasons, do not understand how dependent our food system is on cheap fuels," says Mr. MacIntire. "Right now, approximately 85% of the food in Massachusetts comes from out of state. If, as James Howard Kunstler says, the days of the 3,000 mile Caesar Salad are over, how do we replace the food that is now traveling an average of 1500 miles to get to the grocery store?"

"This region has some fabulous strengths that can help us face the coming energy shortfalls in a robust and resilient way," says Don Campbell, Executive Director of PVPCC. "The agricultural base present in our area, right now, is one of these strengths and it is extremely important to protect these local and regional food sources as we move into a lower energy future."

Steven Strong, an energy expert from Harvard, Massachusetts has said, "On top of the direct uses for transportation, agriculture and industry, our region has the highest consumption of oil per capita for heating and electrical generation of any in the country."

The Pioneer Valley Post Carbon Council is a think tank and action group that subscribes to the principles of the Post Carbon Institute. Regionally based, we support the efforts that so many are already making to address the energy transition we are facing. We also develop specific projects of our own to strengthen our regional response.

Post Carbon Institute is a think and action tank that explores in theory and practice what cultures, civilization, governance & economies might look like without the use of (non-renewable) hydrocarbons as energy and chemical feedstocks. Post Carbon Institute advocates global relocalization as an essential response to peak oil, resource conflicts, climate change and other ecological problems. Their "Outpost" program is designed to start the relocalization process by mobilizing community groups to experiment on how to meet their essential needs within walking distance. http://www.postcarbon.org

We hope you will join us.

For more information, please call Don Campbell at (413) 498-0027.


Interesting and Real Premonition

CourierOnline

Justin Chapman, Contributing Writer

There is a bombshell of a problem on its way. It is going to affect each and every one of us and change our very way of life. People will have to start growing their own food, stores will have to be closer and more centralized in suburbs, and transportation will have to be reinvented. That problem is Peak Oil, or energy resource depletion.

Cheap oil is a finite, non-renewable energy source that accounts for 90 percent of the world's transportation energy and 40 percent of its commercial energy. Different studies have predicted different times for the global oil peak, ranging from 'already peaked' to the wishful 2035. Several independent studies have been conducted, most notably Colin Campbell and the Association for the Study of Peak Oil and Gas (ASPO). Their latest 2004 model suggests a peak of conventional oil in 2005, and all oil and gas liquids in 2008. The United States peaked in the 1970s and now produces less and less oil each year.

The consequences of inaction in the face of this global crisis are enormous. Geopolitics, lifestyle, agriculture, and economic stability are all at risk. As energy prices skyrocket in the coming years, the people of suburbia need to react by demanding their government work on solutions to this problem so they can prevent the collapse of their dream of living in a peaceful society or they will become the slums of tomorrow.

Our national leaders are not at all uninformed about this subject. Their solution is to stabilize and control the part of the world that contains two-thirds of the world's remaining oil supplies. Too bad that part of the world hates our guts. George Bush's desperate attempt to turn Iraq into a huge American police station in the Middle East is proving more expensive and difficult than he thought. Once we invade Iran, which we will, the result will exhaust and bankrupt us. We will be no match to China or India, both of which are growing at alarming rates and will soon surpass America economically and militarily. The New York Times has reported in the past couple of weeks that we may see a shift in economic power between China and America now that the dollar is declining.

Researching and implementing alternative energy sources will require decades of investment. Cheap energy is already on the decline, and we haven't begun to seriously consider a solution. Even if we started right now, it wouldn't be possible to gather the amount of energy we are used to from renewable s ources. We will have to learn to live with far less than we are used to, and so will our children and grandchildren.

On March 16 the Senate voted by a razor-thin margin to open the Arctic National Wildlife Refuge to oil drilling by sneaking a measure into the budget bill. The huge issue of Peak Oil and climate change were ignored in this debate.

M. King Hubbert, a U.S. geologist working for Shell in the 1950s, was the first to predict that an oil peak would occur in 1970. His ideas, which were made public in 1956, were ignored by the oil industry. But it turns out he was right. Last month, the Department of Energy released a report that officially acknowledged this crisis for the first time.

So if you think the estimated $3 a gallon this summer is going to be bad, just wait until oil is on a steady decline in the coming years. Enjoy it while it's here, because if somebody doesn't do something about this crisis soon, we're all going to be experiencing problems much worse than inflating gas prices.


Bush Wrong: House Passed Energy Bill Threatens Economic and National Security

eMediaWire.com

President Bush wrongly praised the energy bill passed by the U S House of Representatives last week. The bill brings national insecurity and threatens to deplete America’s dwindling oil reserves and leave our nation, our freedoms and liberties prostrate before the world’s corporate oil barons and the dictators that control OPEC. But a Senate bill that stops stifiling undepletable energy devopment and levels the policy playing field between undepletable fuels and depeltables may be able to rescue America from the dangers of rapidly approching peak oil.

Bridgeport, CT (PRWEB) April 30, 2005 -- The energy bill passed by the U S House of Representatives last week threatens to deplete America's dwindling oil reserves and leave our nation, our freedoms and liberties prostrate before the world's corporate oil barons and the dictators that control OPEC, according to CleanPeace, a non profit organization dedicated to building a clean, peaceful, undepletable, energy future for America.

"President Bush's praise for House passed energy bill at his news conference was wrong and misguided at best; the bill extends and enhances the very policies that brought America to the brink of a severe and lasting energy crisis." said Bill Garrett, Co-President of CleanPeace.

Garrett continued, ”Geological assessments by independent groups including the science oriented Association for the Study of Peak Oil and Gas (ASPO) assess United States oil reserves at less than 3% of remaining world oil and the OPEC reserves at 61%.”

America consumes about 25% of world oil and imports roughly 60% of it and becomes more dependent on OPEC supplies oil reserves and extraction rates of the world’s developed democracies continue shrinking. The OPEC syndicate gains more control of world oil supplies as this trend continues and world oil extraction approaches its peak.

“The House energy bill should be renamed the “National Insecurity Act”. It subsidizes a dash to depletion of America's vital oil resources and enhances the huge profits of big oil at a time when national security and pure horse sense demand replacement of oil with new, undepletable fuels.” said Garrett.

Oil peaks when conventional oil extraction reaches its maximum and starts a permanent decline in output of about 2% to 3% per year. After peaking, oil will no longer meet world demand and must be replaced by new energy sources to prevent shrinking the world economy. ASPO scientists predict oil’s peak next year and most other independent assessments within ten years or less.

Worse yet, a recent consultant's report to the U. S. Department of Energy concludes that a crash program to replace conventional oil would have to be initiated 20 years prior to oil's peaking to make a transition to a replacement fuel without massive economic disruptions. It also states, “World oil peaking represents a problem like none other. The political, economic, and social stakes are enormous [and… demands urgent attention and early action.”

“By failing to address this reality the House passed energy bill fosters energy insecurity and creates a system that drains the wealth of America's middle class into the pockets of big oil, the coffers of OPEC dictators and the terrorists to whom they pay tribute.” Garrett said.

“Every tax dollar the House bill gives to the highly profitable, oil, gas and nuclear giants, chokes off competition from new, undepletable fuels capable of economically replacing oil and nuclear energy. But for sustainable fuels to be deployed in time to avoid the disaster that looms from peak oil, Congress must provide a level playing field with oil, coal, gas, and radioactive fuels.” said Roy McAlister, President of the American Hydrogen Association and Co-President of CleanPeace.

McAlister, a scientist, engineer, educator and world authority on hydrogen and its production from undepletable resources said, “As a long term researcher, I can assure the American public that the proven technologies to produce, transport, and safely utilize hydrogen from undepletable resources are available today and can be utilized by rapid conversion of existing internal combustion engines and other equipment.”

As a graduate student at the University of Kansas, McAlister converted his first car, a 1937 Hudson Teraplane, to hydrogen fuel. Today he holds numerous patents on proven hydrogen technologies, teaches undepletable energy at universities around the world and recently published The Solar Hydrogen Civilization, a comprehensive book on hydrogen and a sustainable economy.

China and India hold a third of the world's population and their fast growing economies demand more oil and intensify competition for remaining supplies. The U S Energy Information Administration reports that China's oil demand increased by over one million barrels per day last year.

According to the U. S. China Economic and Security Review Commission, China is pursuing long term oil and gas contracts with Iran, Russia, and Venezuela while its diplomats are improving relations with other oil rich nations.

As competition for oil continues to intensify, the OPEC dictators who control it will decide who gets enough oil and maintains a healthy economy and who goes without adequate supplies and moves into recession, hardship and conflict.

“The threat of peak oil requires responsible leaders to plan now to mitigate its impact and prepare for the tsunami of change it forces. Leaders must also counter plots by oil rich nations to exploit oil shortages and abuse the increased geopolitical power that comes to them from a scarcity of oil. The House passed energy bill fails to do either” said Garrett

“It's the Steven Jobses, Bill Gateses Henry Fords and Thomas Edisons of the world that bring change and progress to humanity. Today's innovators have the technology and the will to reinvent the energy world for sustainability and prosperity. Its time for Congress to stop stifling their progress with big oil subsidies and help unleash their solutions on the energy crisis before it’s too late,” said McAlister.

He continued, “At a bare minimum any new energy legislation should include a policy for creating undepletable energy supplies that are equally subsidized with depletable energy by:

1. Leveling the tax and policy playing fields with depletable fuels.

2. Providing tax incentives for the production and use of hydrogen made from undepletable resources as the replacement for fossil fuels now used in internal combustions engines and combustion turbines.

3. Providing for construction of a hydrogen collection, transportation, distribution and delivery infrastructure including pipelines beneath the interstate highway system (the “Hydrogen Hyway”) and funding this progress from existing fossil fuel taxes.

“Current tax policies allow oil and gas drillers to offer their investors as much as 95% of their investment back in tax advantages even if the well they drill is dry. Large scale nuclear, oil, natural gas and coal projects get purchase guarantees, publicly subsidized bond financing and other advantages. Undepletable energy projects will need the same encouragement if we want to mitigate the impact of peak oil on Americans and the world.” asserted McAlister.


Friday, April 29, 2005

Is there fraud in the house of Saud?

MSN Money

By Jim Jubak

On April 22, Saudi Arabia made what appeared, on the surface at least, to be a dramatic announcement. Forget quotas, the Saudis proclaimed. They would pump all the oil consumers wanted up to its current capacity of 11 million barrels a day. And, to make sure that the world would have enough supply in the long term, Saudi Arabia would spend $50 billion over five years to increase oil production capacity to 12.5 million barrels a day by the end of 2009.

In the short term, the announcement isn't anywhere nearly as dramatic as it seems. The Saudis are already producing more than 9.5 million barrels a day. By long-standing policy, the country has kept a cushion of 1.5 million to 2 million barrels a day in idle excess capacity as a buffer against unexpected demand spikes. All the Saudis have really promised to do is to produce to full capacity.

But what about the long-term promise of increased capacity? Here, too, not everything is as it seems. To understand why, you've got a take a closer look at the structure of the Saudi oil fields and at the truly abysmal state of global energy-demand prediction.

New oil fields add to capacity

Saudi Arabia produces oil and gas from more than 80 fields, but 50% of its current reserves are locked up in just eight fields. Those include the Ghawar field, the world's largest, with remaining reserves of 70 billion barrels by official Saudi oil-industry count.

In 2004, the Saudis started production from two new fields yielding about 800,000 barrels of oil a day. That brought daily oil production capacity to around 10.8 million barrels. And in March, the Saudis announced contracts to foreign firms for $8 billion to develop new fields that would start production between 2006 and 2009. Those fields would add 2.7 to 3.1 million barrels a day to production. Add it all together and the goal of reaching 12.5 million in production by 2009 seems an easy reach. (For more on the Saudi oil industry, read this study from the Center for Strategic and International Studies.)

But, as I said, everything is not what it seems. Some of the Saudi fields, Ghawar, for example, are old and while reserves remain huge, production rates are declining as it gets harder and harder to extract the oil. Everyone agrees that happens as natural pressure declines, bigger pools are exhausted, and easily accessible deposits are tapped.

Saudi's rate of depletion in dispute

What the Saudi state oil company, Aramco, and outside oil critics don't agree on is the rate of depletion.

Matthew Simmons, a member of Vice President Richard Cheney's 2001 energy task force, and organizations such as the Association for the Study of Peak Oil and Gas (ASPO) contend that the Saudis are hiding the rate at which they are depleting their current oil fields and that the country will have a hard time keeping oil production at current levels, let alone increasing it.

In his book, "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," Simmons argues that once 50% of the reserves have been withdrawn from a field, production begins to decline. The common approach, and one that Aramco readily admits it has applied to older fields such as Ghawar, is to pump water into the rock where the oil is trapped to increase the pressure on the oil and get more of it to the well.

According to Simmons, the more water you pump into a field, the less oil you can pump out. This is especially true, he writes, when water has been pumped in rapidly in an effort to get more oil out fast. Eventually, the field has to be abandoned with much of the oil still in the ground.

This, Simmons claims, is exactly what happened in several huge Saudi fields to push depletion rates up to a point where all the extra production will do no more than balance the shortfall from existing fields. Saudi Arabia, he concludes, may have already reached peak sustainable production. (You can read more of his work at the Simmons & Co. Web site.)

Simmons' work builds on that of M. King Hubbert, a true iconoclast in the U.S. oil industry. In 1956, while working for the Shell Development Co., Hubbert predicted that U.S. oil production would peak in 1970. That idea seemed laughable to his audience at a 1956 Texas meeting of the American Petroleum Institute, but his model turned out to be remarkably accurate.

Global peak in 2008?

Now other geologists and geophysicists updating his work find that the model shows global oil production hitting a peak -- now called Hubbert's peak -- around 2008. (For more on this model and the evidence for a peak in global production as well as links to sites giving you a packing list for surviving the coming collapse of our oil-based civilization, check out ASOP's site.

You'll notice that while U.S. oil production may have peaked in 1970, the U.S. oil industry is still pumping oil today. Hubbert's work predicted a quick and steep run to the peak and then, not a quick collapse in production, but a very gradual but inexorable decline. Even after Hubbert's peak, new oil fields will be discovered and new technology will extract more oil. But the rate of new production will be insufficient to cover the depletion of existing reserves, and production will slide. The downward slope may indeed be so gentle that no one notices it at the time. The age of oil, according to Hubbert, is more likely to end with a whimper than a bang.

Higher oil prices as production gradually declines are one factor that makes the slope so gentle. At $50 a barrel, it pays to put more expensive technology to work extracting oil from fields that were regarded as played out. That makes oil companies such as Apache (APA, news, msgs) that specialize in "exhausted" fields a good buy now if you believe Hubbert's peak is near.

Higher oil prices, of course, also encourage consumers to turn to alternative sources of energy, such as coal or wind, and work to increase the supply of those alternatives as companies find investing in non-oil energy projects more attractive. That's why I've recommended Peabody Energy (BTU, news, msgs), a coal company recently.

After all of this I'd like to be able to tell you what the price of oil will be in 2009 or how many years the world has to get ready for the descent from Hubbert's peak, but I can't. That's because the art of predicting the growth in global oil demand has been completely outstripped by events. Oh, it's not that there aren't lots and lots of projections. It's just that all of them are based on oil prices that have been left in the dust by the current market. And that's important because at some point for some consumers higher oil prices cut into consumption. For example, the top price that the Energy Information Agency uses in projecting the global demand for oil out to 2025 is $37 a barrel. All we know about economics says that demand is likely to be lower if oil sells for $50 a barrel than for $37. But not only don't we know how much lower, we haven't even put the higher price into the models yet.

From the investor's point of view

So where does that leave you as an investor? Caught between Saudi optimism and peak oil pessimism, I'm inclined toward the darker end of the scale. I know the Saudi's have motivation for painting an optimistic picture, since any forecast of steady or lower oil prices in the future due to extra capacity inhibits others from developing some source of non-oil energy. The longer the world believes that the Saudis can provide the oil it needs, the longer the Saudis remain at the center of the world's geopolitical stage. And we do have enough anecdotal evidence -- reserves in Oman, for example, are showing damage from the use of water to extract oil -- to believe that Saudi depletion estimates might be on the low side.

But if we take Hubbert's peak seriously as a model, as investors we should also realize that the oil-based global economy still has decades of life and that, on average, rising oil prices, and, until extraction costs get really out of hand, rising oil company profits, will be with us for a while. Investors don't have to make a killing on oil stocks this month or even this year.

That's not bad to remember at a time like this when oil shares are taking their lumps.


Thursday, April 28, 2005

Peaking of World Oil Production: Impacts, Mitigation, & Risk Management

Click to download and read entire paper

Robert L. Hirsch, SAIC, Project Leader
Roger Bezdek, MISI
Robert Wendling, MISI

A Study for the US Department of Energy

Executive Summary:

The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantialimpact, they must be initiated more than a decade in advance of peaking.

In 2003, the world consumed just under 80 million barrels per day (MM bpd) of oil. U.S. consumption was almost 20 MM bpd, two-thirds of which was in the transportation sector. The U.S. has a fleet of about 210 million automobiles and light trucks (vans, pick-ups, and SUVs). The average age of U.S. automobiles is nine years. Under normal conditions, replacement of only half the automobile fleet will require 10-15 years. The average age of light trucks is seven years.
Under normal conditions, replacement of one-half of the stock of light trucks will require 9-14 years. While significant improvements in fuel efficiency are possible in automobiles and light trucks, any affordable approach to upgrading will be inherently time-consuming, requiring more than a decade to achieve significant overall fuel efficiency improvement.

Besides further oil exploration, there are commercial options for increasing world oil supply and for the production of substitute liquid fuels: 1) Improved Oil Recovery (IOR) can marginally increase production from existing reservoirs; one of the largest of the IOR opportunities is Enhanced Oil Recovery (EOR), which can help moderate oil production declines from reservoirs that are past their peak production: 2) Heavy oil / oil sands represents a large resource of lower grade oils, now primarily produced in Canada and Venezuela; those resources are capable of significant production increases;. 3) Coal liquefaction is a wellestablished technique for producing clean substitute fuels from the world’s abundant coal reserves; and finally, 4) Clean substitute fuels can be produced
from remotely located natural gas, but exploitation must compete with the world’s growing demand for liquefied natural gas. However, world-scale contributions from these options will require 10-20 years of accelerated effort.


Dealing with world oil production peaking will be extremely complex, involve literally trillions of dollars and require many years of intense effort. To explore these complexities, three alternative mitigation scenarios were analyzed:
• Scenario I assumed that action is not initiated until peaking occurs.
• Scenario II assumed that action is initiated 10 years before peaking.
• Scenario III assumed action is initiated 20 years before peaking.

For this analysis estimates of the possible contributions of each mitigation option were developed, based on an assumed crash program rate of implementation. Our approach was simplified in order to provide transparency and promote understanding. Our estimates are approximate, but the mitigation envelope that results is believed to be directionally indicative of the realities of such an enormous undertaking. The inescapable conclusion is that more than a decade will be required for the collective contributions to produce results that significantlyimpact world supply and demand for liquid fuels.

Important observations and conclusions from this study are as follows:
1. When world oil peaking will occur is not known with certainty. A fundamental problem in predicting oil peaking is the poor quality of and possible political
biases in world oil reserves data. Some experts believe peaking may occur soon.
This study indicates that “soon” is within 20 years.
2. The problems associated with world oil production peaking will not be temporary, and past “energy crisis” experience will provide relatively little guidance. The challenge of oil peaking deserves immediate, serious attention, if risks are to be fully understood and mitigation begun on a timely basis.
3. Oil peaking will create a severe liquid fuels problem for the transportation sector, not an “energy crisis” in the usual sense that term has been used.
4. Peaking will result in dramatically higher oil prices, which will cause protracted economic hardship in the United States and the world. However, the problems are not insoluble. Timely, aggressive mitigation initiatives addressing both the supply and the demand sides of the issue will be required.
5. In the developed nations, the problems will be especially serious. In the developing nations peaking problems have the potential to be much worse.
6. Mitigation will require a minimum of a decade of intense, expensive effort, because the scale of liquid fuels mitigation is inherently extremely large.
7. While greater end-use efficiency is essential, increased efficiency alone will be neither sufficient nor timely enough to solve the problem. Production of large amounts of substitute liquid fuels will be required. A number of commercial or near-commercial substitute fuel production technologies are currently available for deployment, so the production of vast amounts of substitute liquid fuels is feasible with existing technology.
8. Intervention by governments will be required, because the economic and social implications of oil peaking would otherwise be chaotic. The experiences of the 1970s and 1980s offer important guides as to government actions that are desirable and those that are undesirable, but the process will not be easy.

Mitigating the peaking of world conventional oil production presents a classic risk management problem:
• Mitigation initiated earlier than required may turn out to be premature, if peaking is long delayed.
• If peaking is imminent, failure to initiate timely mitigation could be extremely damaging. Prudent risk management requires the planning and implementation of mitigation well before peaking. Early mitigation will almost certainly be less expensive than delayed mitigation. A unique aspect of the world oil peaking problem is that its timing is uncertain, because of inadequate and potentially biased reserves data from elsewhere around the world. In addition, the onset of peaking may be obscured by the volatile nature of oil prices. Since the potential economic impact of peaking is immense and the uncertainties relating to all facets of the problem are large, detailed quantitative studies to address the uncertainties and to
explore mitigation strategies are a critical need.

The purpose of this analysis was to identify the critical issues surrounding the occurrence and mitigation of world oil production peaking. We simplified many of the complexities in an effort to provide a transparent analysis. Nevertheless, our study is neither simple nor brief. We recognize that when oil prices escalate dramatically, there will be demand and economic impacts that will alter our simplified assumptions. Consideration of those feedbacks will be a daunting taskbut one that should be undertaken.

Our study required that we make a number of assumptions and estimates. We well recognize that in-depth analyses may yield different numbers. Nevertheless, this analysis clearly demonstrates that the key to mitigation of world oil production peaking will be the construction a large number of substitute fuel production facilities, coupled to significant increases in transportation fuel efficiency. The time required to mitigate world oil production peaking is measured on a decade time-scale. Related production facility size is large and capital intensive. How and when governments decide to address these challenges is
yet to be determined.

Our focus on existing commercial and near-commercial mitigation technologies illustrates that a number of technologies are currently ready for immediate and extensive implementation. Our analysis was not meant to be limiting. We believe that future research will provide additional mitigation options, some possibly superior to those we considered. Indeed, it would be appropriate to greatly accelerate public and private oil peaking mitigation research. However, the reader must recognize that doing the research required to bring new technologies to commercial readiness takes time under the best of circumstances. Thereafter, more than a decade of intense implementation will be required for world scale impact, because of the inherently large scale of worldoil consumption.

In summary, the problem of the peaking of world conventional oil production is unlike any yet faced by modern industrial society. The challenges and uncertainties need to be much better understood. Technologies exist to mitigatethe problem. Timely, aggressive risk management will be essential.


Running out of puff?

Economist.com

At the World Bank/IMF spring meetings, held at the weekend, officials agreed that the size and growth of global imbalances—particularly America’s twin deficits—are reason to worry. But so far, no agreement has emerged on a course of action

SPRING in Washington means the arrival of cherry blossom and, less colourfully, the world’s central bankers and finance ministers, for meetings of the World Bank and the International Monetary Fund. As the officials gathered at the weekend, their mood was considerably more sombre than the season. Top of their list of worries is the thought that high oil prices might be pushing the world economy into trouble.

Although oil prices have tumbled recently, back below $50 a barrel on Monday, the policymakers’ concern is understandable. Oil prices are still 70% higher in real terms than they were two years ago. Granted, that pales against the great leaps of 1974, when prices jumped by 185% in real terms, and 1978-79, when they rose by 158%; but it is quite some climb nonetheless.

Lately, official worries have been publicly vented. On April 7th economists at the IMF caused a stir when they suggested the world needed to get used to a “permanent oil shock”. Thanks to strong demand and tight supply, they argued, oil prices would be substantially higher in future than they had been in the 1990s. Jean-Claude Trichet, president of the European Central Bank, recently pointed to the rise in oil prices as an “unwelcome” risk to global economic growth. In a comment reminiscent of the 1970s, he urged consumers to become “good energy savers”.

His remark is not surprising, given that the economies in Europe are stumbling. Unemployment in the euro area is 8.9%; in Germany, France and Spain it is in double digits. Manufacturing in the single-currency zone has stalled. In its latest World Economic Outlook, published last week, the IMF, like other forecasters before it, slashed its forecast for euro-area GDP growth this year, to 1.6%. The world economy’s other weak link, Japan, faltered half-way through 2004 and despite the odd spark has not yet sputtered into life again. High oil prices have helped neither of these giant weaklings.

Even in America, where the strength of the expansion has consistently surprised economists, there are nascent signs of slowdown and worries about oil. With job growth scarcely topping 100,000, the March employment report was much weaker than expected. Retail sales grew by only 0.3% (month-on-month) in March, less than half of what analysts had expected, suggesting that record petrol prices were wearing holes in consumers’ pockets.

No wonder that oil was high on the agenda in Washington last weekend. In the World Economic Outlook, the IMF reckons that global growth in 2005 will be 0.8 percentage points lower than last year. It ascribes around a third of the reduction to higher oil prices. Even that forecast was based on prices slightly lower than they are now. More worrying, economists think that oil prices do not have a linear impact on output. Beyond some point (trouble is, no one knows what) they begin to hit harder.

So far, however, it is perhaps remarkable how little impact rising oil prices have had. Last year, after all, global GDP grew by 5.1%, the fastest rate in a generation. There are several reasons for this. The world economy is much less oil-intensive than it used to be. In contrast to the supply shocks of the 1970s, much of the recent run-up in prices has been caused by rapidly rising demand: oil is dear in part because some economies, especially America’s and China’s, have been growing vigorously. Central banks’ strong reputations for fighting inflation have stopped the translation of higher oil prices into wage-price spirals. These fortuitous conditions may not last, but for now they are good reasons not to be too pessimistic.

High oil prices do, however, exacerbate the real weakness in the world economy: the imbalanced nature of global growth. Behind the robust overall performance lies a stark dichotomy between the robust (America and China, in particular) and the wheezing (Japan and continental Europe). Even though all these countries are oil importers, they have reacted very differently to higher prices. America and China have, so far, shrugged them off, while weaker economies have seen domestic demand shrivel further. This has exaggerated already gaping external imbalances, particularly America’s soaring trade and current-account deficits.


According to statistics released on April 12th, America’s monthly trade deficit reached a record $61 billion in February (see chart). The climb in oil prices may mean another record in March—although much of February’s increase reflected sharp growth in non-oil imports, which were 16% higher than in February 2004.

Brad Setser, a former Treasury official who is now at Roubini Global Economics, an economic-analysis firm, reckons that if non-oil import growth continues at its recent pace and the oil price stays over $50 a barrel, America’s annual trade deficit would reach nearly $800 billion by the end of the year. That said, the figure may not get that high, because $50 oil ought to dampen American consumer demand and hence import growth.

Be happy, it’s spring

It is possible to be sanguine about America’s ever more colossal deficits, just as it is about oil. Certainly, the doomsday scenarios of a dollar crash or a hard landing for the American economy are not in sight. America has had little trouble attracting the necessary capital to fund its soaring deficits. Though Asia’s central banks are still big purchasers, they are not the only ones. Thanks to soaring prices, oil exporters have been building up their surpluses. Russia’s foreign-exchange reserves, for instance, are now over $130 billion. Many of these oil exporters are choosing dollar assets. The dollar has strengthened since the beginning of 2005 and long-term interest rates remain remarkably low.

This calm may explain why the world’s finance ministers have done so little to wean themselves off their addiction to American-led growth and why they spent so much of their time in Washington fretting about oil. That is a pity, for while the oil price seems to be the most imminent risk, the size and rate of growth of the global imbalances are the real reason to worry. And as Rodrigo Rato, the head of the IMF, warned at the weekend, the time to address these imbalances is now, when good economic conditions—in America, and globally—can ease the pain of the transition.

But while everyone seems to agree that there is a real problem, there seems to be little political will to make the necessary changes. Many governments are more than willing to warn others that they need to take action, but no one has yet outlined plans to set their own economic house in order. As long as this stalemate continues, the global imbalances are likely to increase. And you do not need to be a Cassandra to predict that, eventually, they will create a nasty problem.


Let's talk about oil, bay-be

saintbryan

(An entertaining, irreverent, histrionic, and useful piece.)

SUMMARY: It has been brought to my attention that this post is very long, and most of you are too fucking lazy to read long posts.

Well, fuck you, you lazy sons of bitches. If you're not aware of peak oil (or if you think it's a bunch of horse shit), this post may be one of the most important posts you'll ever read. But nevertheless, I will sum up it's entirety right here. If you plan on reading this entire post, you may skip this summary. There's nothing new here.

Peak Oil is an issue that refers to the point at which world oil production peaks and declines. This decline causes oil to become increasingly expensive and scarce will be a time punctuated with war, famine, and lots of death.

Many countries' productions have already peaked and it is merely a matter of time before total world production does. It's not "if" but "when".

We are not going to discover any new oil wells that will hold the peak off for very long. Predictions for when the peak is coming range from 2006-2025. The majority are sooner than later.

Relying on the market to save us from this is not going to work. Waiting until the actual peak before we start to invest heavily in alternative fuels is not going to work either.

There are many alternatives, but only if we combine them will it do us any good. And any useful alternatives would take at least 15 years to come online. So, we must get to work on them 15-20 years BEFORE oil peaks. That means now. it is possible that we may be too late to avert a disaster. If oil peaks before 2010, our civilization may be fucked forever.

I say if you're prepared for the worst, you're prepared for anything. The absolute worst that could happen, as nature and history shows, is a 90% die off of the human population within one generation (ours).

So, here's how to prepare: research, research, educate, change your lifestyle to a less oil/economy dependent one, begin accepting death, chill.

Now, as a warning, I will not tolerate anybody commenting on this entry saying "well I heard we have so and so fuel alternatives" or "well the oil in the arctic/caspian sea will save us" unless you have

A) read my ENTIRE ARTICLE, and
B) have your sources of information ready to give me.


Happy reading! ;)


Petition - Call for U.S. Government and All in Leadership Positions to Address the Coming Energy Crisis Petition

Click to read and sign Petition

Call for U.S. Government and All in Leadership Positions to Address the Coming Energy Crisis

A plea to federal, state, and local U.S. government officials, As well as industry leaders, community leaders, scientists, inventors, food production experts, transportation experts, financial experts, urban planners, medical experts, and all others with expertise to bring to bear on the problem detailed below.

As all of you know, our current economy is based on the availability of cheap oil. Cheap oil is
the basis for our food production (fertilizer and machinery), food distribution, transportation, heating, our other energy needs, and underpins most of the functions of our economy.

The crisis we are facing is that oil is rapidly becoming more expensive in the face of both growing world demand for oil and shrinking supply, due to the lack of new reserves discovered in recent years and the new information becoming available on previous over-estimation of the capacity of current reserves.

In addition, as the oil that is easiest to extract is depleted, future oil extracted will be the oil that is harder and more expensive to extract, which will also affect oil prices.

WE, THE UNDERSIGNED, CALL FOR A FULL-SCALE EFFORT TO BEGIN NOW TO
ADDRESS THE PROBLEM OF THE DAYS OF CHEAP OIL COMING TO AN END.


ANWR - Oil and Politics On Alaska's North Slope

Click to view video at E&ETV

Is the world running out of oil? How promising are new sources of petroleum? What risks do volatile oil prices pose for the world's economies? Rep. Roscoe Bartlett (R-Md.) and Roger Diwan, oil markets expert at PFC Energy, join OnPoint to discuss the current and future state of the world oil market and its economic implications.


IEA wants brakes on fuel consumption

Aljazeera.net

by Adam Porter in Perpignan, France

Vehicular fuel accounts for a big chunk of global oil consumption

The International Energy Agency (IEA) is to propose drastic cutbacks in car use to halt continuing oil-supply problems. Those cutbacks include anything from car-pooling to outright police-enforced driving bans for citizens.

Fuel "emergency supply disruptions and price shocks" - in other words, shortages - could be met by governments. Not only can governments save fuel by implementing some of the measures suggested, but in doing so they can also shortcut market economics.

An advance briefing of the report, titled Saving Oil in a Hurry: Measures for Rapid Demand Restraint in Transport, states this succinctly.

"Why should governments intervene to cut oil demand during a supply disruption or price surge? One obvious reason is to conserve fuel that might be in short supply.

"But perhaps more importantly, a rapid demand response [especially if coordinated across IEA countries] can send a strong market signal."

The report goes on to suggest a whole series of measures that could be used to cut back on fuel consumption. They are cutting public-transport costs by a certain amount to increase its usage while simultaneously dissuading car use.

Sweeping proposals

Then more radically the idea of going further and cutting public-transport costs by 100%, making them free to use. Car-pooling, telecommuting and even corrections to tyre pressures are also suggested.

But the most hardline emergency proposals come in the form of drastic speed restrictions and compulsory driving bans. Bans could be one day in every 10 (10%) or more stringently on cars with odd or even number plates. They would be banned from the roads on corresponding odd or even days of the month (50%).

In forming its conclusions the IEA tacitly admits that extra police would be needed in these circumstances to stop citizens breaking the bans. Even the cost of those extra patrols are part of the IEA's study.

"Policing costs are more substantial and may consist of overtime payments for existing police or traffic officers or increases in policing staff. We assume this cost at one officer per 100 000 employed people."

As an example that means that the US workforce, currently around 138 million people, would need an extra 1380 officers to help enforce the bans. It may seem an optimistic figure. But even if this were so, the IEA is not put off.

"If our policing cost estimates are relatively low ... results clearly show that even a doubling of our estimate would make (bans) a cost-effective policy. The more stringent odd/even (day) policy is also more cost-effective than a one-day-in-ten ban, as the costs are the same ... maintaining enforcement is critical."

Tough love

Yet despite these measures, that many citizens would find quite draconian, the IEA concludes that tough love is better than none at all.

"Our main conclusion finds that those policies that are more restrictive tend to be most effective in gaining larger reductions in fuel consumption. In particular, driving restrictions give the largest estimated reductions in fuel consumption."

Here, however, they do strike a word of warning for governments and those in power.

"Restrictive policies such as this can be relatively difficult to implement and thus may come at higher political costs."

According to the IEA's little-known emergency treaty, the Agreement on an International Energy Programme (IEP), "measures to achieve demand restraint fall into three main classes - persuasion and public information, administrative and compulsory measures, and finally, allocation and rationing schemes".

This would mean that countries who signed up to the treaty, including the five biggest economies of the world - US, Japan, Germany, UK and France - would all have to institute cuts.

"In the event of an activation of IEP emergency response measures, each IEA Member country will be expected to immediately implement demand restraint measures sufficient to reduce oil consumption by 7% of normal demand levels. In a more severe disruption, this could be raised to 10%."

Effective ban?

There are some interesting asides in the report. As Americans have the most cars, the driving bans could be got around by having one car with an odd, and one car with an even number plate.

Proportionately it makes the ban less effective than in other countries.

As well as this older cars may be kept in service longer if they have "useful" number plates which the IEA admits is "counter-productive from an air-pollution reduction perspective, as older vehicles would tend to pollute more".

However, curtailing the working week and home working would be more effective in the US as more people travel to work alone in their cars.

As would correct tyre pressures. In Japan speed reductions are less effective as there are less motorways on which to travel fast.

Families with only one car would also be hit harder than their richer friends as "bans may have some additional costs in terms of reduced accessibility and mobility options particularly for single-vehicle households with limited access to alternative modes".

Without doubt this report signifies that the IEA is searching for new ways to maintain supply security in a volatile oil market. Whether it can achieve its aims with this radical report is another matter.


Peak Notes

Green Car Congress

It’s a busy time with respect to the discussion of Peak Oil.

Maryland Congressman Roscoe Bartlett goes back before Congress tonight (27 April) in his third Special Order presentation to the body on Peak Oil.

Depletion Scotland, an organization that works closely with the Oil Depletion Analysis Center (ODAC), just held a one-day conference on Peak Oil featuring Colin Campbell, founder of ASPO; Matthew Simmons, chairman of Simmons & Co; Brian Wilson, former UK Energy Minister and others.

These are some of original and loudest energy industry voices (Campbell a geologist, Simmons an investment banker) warning of the imminence of peak production. Simmons again hit on his theme of the need for transparency in reserve numbers, and of the possibility that Saudi production is close to—if not already past—the point of peak production.

As a counterpoint, Saudi Aramco a few days earlier at a meeting in Paris had outlined large projects recently completed or under way in Saudi Arabia representing production capacity of 3 million bpd of crude oil. (O&GJ)

Saudi Petroleum and Mineral Resources Minister Ali I. al-Naimie estimated his country’s proved, probable, and possible reserves at 361 billion barrels, with additional undiscovered resource potential of at least 200 billion barrels of oil in place—80+ years worth at current production rates.

Simmons’ new book, Twilight in the Desert, which analyzes Saudi production and reserves, is due out in May.

In addition to the work done by the associations and organizations focused on peak oil, there are (at least) two valuable news and analysis resources.

The first is Energy Bulletin, a news portal. The second is The Oil Drum, a new blog co-written by two professors, one in energy production, the other in the social sciences.


Are We Running Out of Oil?

NCPA.org

 

Scaremongers are fond of reminding us that the total amount of oil in the Earth is finite and cannot be replaced during the span of human life. This is true; yet estimates of the world’s total oil endowment have grown faster than humanity can pump petroleum out of the ground.

The Growing Endowment of Oil.

* In May 1920, the U.S. Geological Survey announced that the world’s total endowment of oil amounted to 60 billion barrels.
* In 1950, geologists estimated the world’s total oil endowment at around 600 billion barrels.
* From 1970 through 1990, their estimates increased to between 1,500 and 2,000 billion barrels.
* In 1994, the U.S. Geological Survey raised the estimate to 2,400 billion barrels, and their most recent estimate (2000) was of a 3,000-billion-barrel endowment.

By the year 2000, a total of 900 billion barrels of oil had been produced. Total world oil production in 2000 was 25 billion barrels. If world oil consumption continues to increase at an average rate of 1.4 percent a year, and no further resources are discovered, the world’s oil supply will not be exhausted until the year 2056.

"Oil shales may hold another 14,000 billion barrels -- a 500 year supply."
Additional Petroleum Resources.

The estimates above do not include unconventional oil resources. Conventional oil refers to oil that is pumped out of the ground with minimal processing; unconventional oil resources consist largely of tar sands and oil shales that require processing to extract liquid petroleum. Unconventional oil resources are very large. In the future, new technologies that allow extraction of these unconventional resources likely will increase the world’s reserves.

* Oil production from tar sands in Canada and South America would add about 600 billion barrels to the world’s supply.
* Rocks found in the three western states of Colorado, Utah and Wyoming alone contain 1,500 billion barrels of oil.
* Worldwide, the oil-shale resource base could easily be as large as 14,000 billion barrels — more than 500 years of oil supply at year 2000 production rates.

Unconventional oil resources are more expensive to extract and produce, but we can expect production costs to drop with time as improved technologies increase efficiency.

The Role of Technology
With every passing year it becomes possible to exploit oil resources that could not have been recovered with old technologies. The first American oil well drilled in 1859 by Colonel Edwin Drake in Titusville, Pa. — which was actually drilled by a local blacksmith known as Uncle Billy Smith — reached a total depth of 69 feet (21 meters).

* Today’s drilling technology allows the completion of wells up to 30,000 feet (9,144 meters) deep.
* The vast petroleum resources of the world’s submerged continental margins are accessible from offshore platforms that allow drilling in water depths to 9,000 feet (2,743 meters).
* The amount of oil recoverable from a single well has greatly increased because new technologies allow the boring of multiple horizontal shafts from a single vertical shaft.
* Four-dimensional seismic imaging enables engineers and geologists to see a subsurface petroleum reservoir drain over months to years, allowing them to increase the efficiency of its recovery.

New techniques and new technology have increased the efficiency of oil exploration. The success rate for exploratory petroleum wells has increased 50 percent over the past decade, according to energy economist Michael C. Lynch.

Hubbert’s Prediction of Declining Production
Despite these facts, some environmentalists claim that declining oil production is inevitable, based on the so-called Hubbert model of energy production. They ignore the inaccuracy of Hubbert’s projections.

Problems with Hubbert’s Model.

In March 1956, M. King Hubbert, a research scientist for Shell Oil, predicted that oil production from the 48 contiguous United States would peak between 1965 and 1970. Hubbert’s prediction was initially called “utterly ridiculous.” But when U.S. oil production peaked in 1970, he became an instant celebrity and living legend.

"Environmentalists now tie their predictions of declining energy supplies to M. King Hubbert's model of energy production -- which has been consistently inaccurate."
Hubbert based his estimate on a mathematical model that assumes the production of a resource follows a bell-shaped curve — one that rises rapidly to a peak and declines just as quickly. In the case of petroleum, the model requires an accurate estimate of the size of the total oil endowment. His best estimate of the size of petroleum resources in the lower 48 states was 150 billion barrels. His high estimate, which he considered an exaggeration, was 200 billion barrels.

Based on these numbers, Hubbert produced two curves showing a “best” estimate of U.S. oil production and a “high” estimate. The claimed accuracy of Hubbert’s predictions are largely based on the upper curve — his absolute upper limit.

* Hubbert set the absolute upper limit for peak U.S. oil production at roughly 3 billion barrels a year, and his best or lower estimate of peak future U.S. crude oil production was closer to 2.5 billion barrels.
* As early as 1970, actual U.S. crude oil production exceeded Hubbert’s upper limit by 13 percent.
* By the year 2000, actual U.S. oil production from the lower 48 states was 2.5 times higher than Hubbert’s 1956 “best” prediction.

Production in the 48 contiguous states peaked, but at much higher levels than Hubbert predicted. From about 1975 through 1995, Hubbert’s upper curve was a fairly good match to actual U.S. production data. But in recent years, U.S. crude oil production has been consistently higher than Hubbert considered possible.

"U.S. oil production has been higher than Hubbert thought possile."
Hubbert’s 1980 prediction of U.S. oil production, his last, was substantially less accurate than his 1956 “high” estimate. In the year 2000, actual U.S. oil production from the lower 48 states was 1.7 times higher than his 1980 revised prediction.

In light of this, it is strange that Hubbert’s predictions have been characterized as remarkably successful. While production in the United States is declining, as Hubbert predicted, it is doing so at a much slower rate. Furthermore, lower production does not necessarily indicate the looming exhaustion of U.S. oil resources. It shows instead that at current prices and with current technology, less of the remaining petroleum is economically recoverable.

Hubbert’s Prediction for Natural Gas.

In 1998, Peter McCabe of the U.S. Geological Survey showed that energy resources do not necessarily follow Hubbert-type curves, and even if they do a decline in production may not be due to exhaustion of the resource.

For example, Hubbert also predicted future U.S. natural gas production. This prediction turned out to be grossly wrong. As of 2000, U.S. natural gas production was 2.4 times higher than Hubbert had predicted in 1956.


Wednesday, April 27, 2005

Experts highlight oil supply problems

Aljazeera.net

Adam Porter in Perpignan, France

Opec says member states are pumping oil at full capacity

A conference on oil supply difficulties just held in Edinburgh, Scotland, witnessed a lively a debate about supply and demand in energy markets.

Titled Depletion Scotland, the conference examined some of the realities facing energy producers and consumers today.

Energy expert and American investment banker Matthew Simmons spoke about the need for greater transparency in the data offered by both producer countries and the giant oil companies or "oil majors".

He scrutinised the conventional notion that extra investment in oil capacity will satisfy future demand.

"Many oil experts assume the world will easily be able to grow its use of oil by as much as 40% over the next three decades while bringing down prices.

"Embedded in this thinking is a concept that higher prices will soon induce vast amounts of new supplies and spur technical advances that recover far greater amounts of original oil in place and make the use of non-conventional oil easier.

Lack of data

Simmons said: "This case is an illusion ... the current tightness in global oil markets is likely to be a permanent feature."

He went on to say that at the core of high energy prices is a lack of current data over how much oil really lies underground; a lack of data that creates uncertainty and volatility in the market place.

Simmons proposed a system of third-party auditing that "would allow serious energy analysts to finally calculate well productivity and decline rates ... along with field-by-field reserve data".

"This system would shed valuable light on how close the world is to 'peak oil' and whether this issue is still years away," he said.

"New reporting standards need to be made mandatory, every [producer] who resists should be branded, a 10-person study team can analyse the top 100 fields within a month. Those resisting data transparency have something to hide."

When pressed by Aljazeera.net on whether countries such as Saudi Arabia, the subject of his forthcoming book Twilight in the Desert, would really open their fields up to outside audits, Simmons replied: "I think they will be forced to, yes, I think that will happen."

Despite this outlook the investment banker was also keen to stress that he was "an optimist" on the future of energy.

Renewable energy

Also at the conference, eco-businessmen Jeremy Leggett of Solarcentury and David Spaven of Transform spoke on the needs to implement renewable energy and coordinated transport policies respectively.

David Spaven said "the era of cheap fuel is coming to an end and we now have the unenviable task of unravelling the myriad overdependencies on oil which underpin the transportation of people and freight".

He went on to say that the world needs to put "in place more energy-efficient modes of transport as well as reconstructing our land-use and development-planning processes to create sustainable patters of living and working which can survive oil depletion".

Spaven said: "The lifestyle changes implicit in the reduction of demand for transport will require serious political will and wide public acceptance of the need for change.

"We require politicians with vision, a rare commodity these days."

Economic trauma

For his part, Jeremy Leggett said "the shortfall between current expectation of oil supply and actual availability will be such that neither gas, nor renewables, nor liquids from gas and coal, nor nuclear, nor any combination thereof will be able to plug the gap in time to head off economic trauma.

"If more than a small fraction of the world's remaining coal is burned ... the enhanced greenhouse will destroy economies and ecosystems"

"The oil topping point will be reached in the window of 2006-2010 and the market realisation of this will cause severe economic dislocation," he said.

Leggett went on to point out that renewable energy may well end up competing with an increased use of coal to generate electricity if oil becomes more scarce and costly. This he said could exacerbate climate change.

"If more than a small fraction of the world's remaining coal is burned ... the enhanced greenhouse will destroy economies and ecosystems. Oil depletion and global warming will conflate as many (governments) try to turn to coal in extremis," Leggett said.

He spoke gloomily of his experiences with governments. "For ten years I have watched them ... fail to address the problem. Naively I thought the best, but now I am less hopeful."


Tuesday, April 26, 2005

The rainforest Chernobyl

San Francisco Bay Guardian News

Amazonians threatened with extinction address ChevronTexaco shareholders in San Ramon – and illustrate how the quest for dwindling oil reserves poses a global threat.

By Camille T. Taiara

CHEVRONTEXACO INVESTORS ARE in for an unsettling interlude when they gather for the annual shareholders' meeting at company headquarters in San Ramon April 27. Two indigenous Amazonian leaders, as well as numerous concerned local citizens, are set to interrupt the drab, predictable corporate discourse with testimonials about Texaco's toxic legacy in Ecuador.

Humberto Piaguaje, who's lost two family members to different strains of cancer, will be among them. Another relative – a nephew – recently contracted the disease, and the family lacks the money to pay for the chemotherapy he needs, Piaguaje told the Bay Guardian.

"Crude Reflections: ChevronTexaco's Rainforest Legacy," an exhibit of 50 photographs taken by Bay Area photographers Lou Dematteis and Kayana Szymczak and documenting what some experts say is the worst environmental devastation caused by an oil company in the history of the planet, opened at a nearby restaurant April 25 and will help reinforce the Ecuadorans' case.

"We've taken delegations of investors to the region" to show them firsthand the devastation caused by Texaco's oil development projects over the two decades ending in 1992, Amazon Watch associate director Shannon Wright told us. Now, with the photo exhibit, which will tour several cities, they're bringing the story to the American public.

The activity surrounding ChevronTexaco's shareholders' meeting indicates an important maturation of the global struggle against the human and environmental devastation caused by fossil fuel development abroad.

That's the good news.

But increasingly, oil industry analysts are pointing to an impending crisis that's likely to result in a surge of these kinds of offenses around the globe, as oil companies vie for a dwindling supply of the black gold that fuels our economy.

The analysts refer to the phenomenon as "peak oil," a term coined in the 1950s by M. King Hubbert, a geologist working for Shell, to indicate the point at which humans have extracted half of the earth's oil reserves. Hubbert correctly predicted that the United States' oil supply would peak in 1970.

"The idea of peak oil is that oil's finite, and once you've reached the halfway point of a particular field, it's progressively harder to keep your daily production [rate] the same," Paul Roberts, Harper's magazine contributor and author of The End of Oil: On the Edge of a Perilous New World, told us. As we reach the global peak, oil becomes harder to extract and prices begin to climb – with dire consequences for economies predicated on oil for everything from manufacturing to heating and air conditioning, transportation, and "defense."

And as it gets harder and harder to extract oil from below the earth, companies will go to greater and greater lengths – with the potential for even further environmental disaster and human tragedy – to find those last few drops.
Not just nuts

Analysts disagree about when the world will have reached the oil peak: some say the time has already come, and others believe we've still got a few decades to go.

"It's clear that the oil that was the easiest to get at is becoming harder to find," Roberts explained. "Production rates in a lot of different countries are slowing or even flattening and declining.... Shell, for example, reported that it only found one barrel for every two that it was selling last year. And the industry in general is reporting similar numbers."

In fact, energy policy experts have been warning about an impending energy crisis since before George W. Bush took office in 2000. Nonetheless, the term "peak oil" was largely relegated to the realm of left-wing nuts and doomsday diviners until recently. Now the phrase has begun popping up in mainstream news accounts.

San Francisco Chronicle business columnist David Lazarus referenced the peak-oil phenomenon in an April 8 article looking at ChevronTexaco's recent $16.4 billion acquisition of Unocal.

"It's clear that in the industry, companies have taken to acquiring smaller companies as a way to find oil because it's easier than drilling for it," Roberts said.

Iraq – with oil reserves rivaling, or possibly exceeding, those of Saudi Arabia – is obviously in the eye of the storm. "But even if you look at Colombia, the U.S. is indirectly getting drawn into the conflict there, by providing money and to some extent personnel to guard oil export pipelines," Michael Renner, senior researcher at Worldwatch Institute, told us. "There are now a whole number of either permanent or temporary U.S. military bases that have come into place after 9/11 in the name of the war on terror."

What we're seeing, he said, is "a militarization of energy policy."
Facing extinction

Of course, a related crisis – infinitely graver than the one felt by whiny SUV drivers at U.S. gas stations – has already walloped northern Ecuador's Amazon region, where, advocates say, at least five indigenous groups face possible extinction thanks to millions, and possibly billions, of gallons of toxic sludge left in Texaco's wake.

Piaguaje was born one year after Texaco (the company merged with Chevron in 2000) arrived in Ecuador in 1964. He remembers first seeing oil company workers enter his community's ancestral lands when he was about five years old. Back then, the Secoya – the tribe to which he belongs – enjoyed a population of about 2,000 in both Ecuador and Peru, he said. About 250 remained on Ecuador's side of the border. But that number dwindled to "less than 100" at one point, due, he said, to widespread disease and death as the result of Texaco's pollution of local rivers and streams. The nearby Cofán dropped from 4,000 or 5,000 to a mere 700. And the Siona – also of the same region – lost almost half of their 340 members.

Local indigenous communities and subsistence farmers eventually joined forces and filed suit against Texaco in U.S. federal court in Manhattan 12 years ago. Although the court held that it lacked jurisdiction to hear the case, it nonetheless ruled that it would hold Texaco to whatever penalties an Ecuadoran court imposed on the company.

"The U.S. court decision was critical in that it forced Texaco to stipulate that it would submit to an Ecuadoran court's ruling," said Steven Donziger, an attorney representing the plaintiffs since they first brought their case against Texaco in 1993.

Ecuador – where just last week President Lucio Gutierrez, a staunch supporter of "free" trade and market liberalization, was forced to resign and flee the country in the face of mass protest – nets 40 percent of its export earnings and one-third of its tax revenues from oil sales, primarily to the United States.

In May 2003, it became the first Latin American country to try a foreign oil company in its courts: more than 30,000 residents of Ecuador's rainforest filed suit against ChevronTexaco for dumping what they say amounts to 30 times the amount of crude oil spilled during the Exxon Valdez disaster. Inspections continue at 122 sites. One study, conducted at the town of San Carlos, found cancer rates 30 times the norm. Another uncovered spontaneous abortion rates 50 percent higher than normal and child mortality rates three times higher than the national average.

"Some soil samples show levels of carcinogens at more than 1,000 times higher than the maximum levels permitted by Ecuadorian law, which is permissive to corporations compared to U.S. law," Donziger reported.

Judith Kimerling, an environmental attorney working with a federation of local indigenous communities in 1991, wrote that Texaco's operations resulted in the burning of more than 235 billion cubic feet of natural gas, the dumping of 19 billion gallons of toxic waste, and the deforestation of 1 million hectares of rainforest.

Advocates for Ecuador's Amazonians refer to the catastrophe as "ChevronTexaco's rainforest Chernobyl."

And the devastation continues. "When Texaco left in 1992, it left behind an antiquated pumping system that routinely dumps toxic waste water," Amazon Watch's Wright explained. The lawsuit seeks damages for all the harm that's resulted from the faulty system – not just the mess left behind when Texaco ended its operations.

Some shareholders have accused Chevron of disclosing only the projected profitability of its acquisitions, and not the associated liabilities, as a result of activists' efforts, Wright said. And now, with ChevronTexaco's recent acquisition of Unocal, investors have inherited yet another hefty price tag: several lawsuits alleging the company tacitly sanctioned human rights abuses by the Burmese military – including subjecting villagers to slave labor, murder, rape, torture, and forced relocation – during the construction of the Yadana gas pipeline were settled out of court in March. The settlement terms are confidential, but they amount to enough to compensate villagers and "develop programs to improve living conditions, health care, and education, and protect the rights of people from the pipeline region," according to the Center for Constitutional Rights, which represented the plaintiffs.

Meanwhile, this will be Piaguaje's sixth visit to the United States to talk about Texaco's impact in Ecuador, and the second time in two years that delegates from his region of the Amazon address ChevronTexaco investors at the company's annual shareholders meeting.

He traveled by foot, canoe, car, and plane to get here. He's seen San Ramon's beautiful greenery, it's orderliness – and everyone driving cars.

Texaco "never even acknowledged us as human beings," he told us. "There's been no help.... They went [to the Amazon] to extract its riches and left only suffering for us. For us to be counted as human beings is what I hope to get out of coming here.

"Something has to change. Because otherwise, we're finished."


Analyst fears global oil crisis in three years

Guardian Unlimited

John Vidal

One of the world's leading energy analysts yesterday called for an independent assessment of global oil reserves because he believed that Middle Eastern countries may have far less than officially stated and that oil prices could double to more than $100 a barrel within three years, triggering economic collapse.

Matthew Simmons, an adviser to President George Bush and chairman of the Wall Street energy investment company Simmons, said that "peak oil" - when global oil production rises to its highest point before declining irreversibly - was rapidly approaching even as demand was increasing.

"This is a new era," Mr Simmons told a conference of oil industry analysts, government officials and academics in Edinburgh. "There is a big chance that Saudi Arabia actually peaked production in 1981. We have no reliable data. Our data collection system for oil is rubbish. I suspect that if we had, we would find that we are over-producing in most of our major fields and that we should be throttling back. We may have passed that point."

Mr Simmons told the meeting that it was inevitable that the price of oil would soar above $100 as supplies failed to meet demand. "Demand is pulling away from supply...and we have to ask whether we have the resources that we think we do. It could be catastrophic if we do not anticipate when peak oil comes."

The precise arrival of peak oil is hotly debated by academics and geologists, but analysts increasingly say that official US Geological Survey estimates that it will not happen for 35 years are over-optimistic.

According to the International Energy Agency, which collates data from all oil producing countries, peak oil will arrive "sometime between 2013 and 2037", with production thereafter expected to decline by about 3% a year.

While oil from conventional sources is expected to decline, more and more is expected to come from "unconventional" supplies found in oil-rich rocks, especially in the US and in deposits of tar found in Venezuela.

The former UK energy minister Brian Wilson, a supporter of both nuclear power and renewables, said that Britain would be unwise to rely completely on importing gas from politically sensitive countries as North Sea reserves declined.

"Seventy percent of our electricity by 2020 will come from gas and 90% of that gas will be imported...We should be planning for an indigenous energy future," he said.

But he added that global reserves were not overestimated. "The concept of peak oil needs to be taken very seriously indeed, [but] my working assumption is that both global oil and gas reserves continue to be significantly underestimated."

But other oil analysts argued strongly that a major financial crisis could occur as soon as 2008. Chris Skrebowski, of the Energy Institute in London, which monitors all major oil discoveries and developments, said depletion of global conventional oil reserves was running at about 5% a year, according to Exxon figures.

"Norway, Venezuela, the UK and Indonesia and many others are all declining production. I expect Denmark, Malaysia, China, Mexico and Brunei to peak within three years...I estimate that we have, at best, 32 months before [the crisis] hits.

Mr Skrebowski predicted, using UK government figures, that production from the British sector of the North Sea would halve within 10 years. "We have a congenital bias to optimism...12 fields in the North Sea basin are seeing rising production, but they are mostly small. Overall, production peaked in 1999. It fell 10% last year and 8.5% the year before," he said.

"Oil will not run out for many years," said Colin Campbell, former vice-president of Fina and chief geologist of the oil giant Amoco. "The information governments give is grossly unreliable. Oil companies report less than they discover for pragmatic reasons, but Opec countries have overestimated what they think their reserves are."

He said many Middle Eastern Opec countries, including Iraq, Saudi Arabia and Kuwait, had all significantly lifted their estimated reserves in the late 1980s to benefit from larger quotas, but they had not discovered new fields or changed their estimates since then.

"The real issue is not the actual date of peak production - which I believe is next year - but what happens during the decline of production.

"I think we are in for an extended period of restricted economic activity. I do not think that we will adjust very smoothly," he said.


Monday, April 25, 2005

'Peak Oil' Gathering Sees $100 Crude This Decade

Reuters

By Neil Chatterjee

EDINBURGH (Reuters) - Fresh oil shocks may send prices over $100 a barrel and trigger worldwide recession by the end of the decade, a conference on the theory that oil supplies have almost peaked heard on Monday.

Speakers said oil production by major companies is set to peak in coming years while the huge reserves of OPEC producers are overstated, meaning declining output will not be able to meet rising world demand.

"The current tightness in global oil markets is likely to be a permanent feature as the world nears peak output," said Matthew Simmons, chairman of energy investment group Simmons & Company International.

"Prices are going to go way higher -- $100 isn't very expensive," he told Reuters on the sidelines of the Peak Oil UK conference in Edinburgh.

The theory of peak oil -- that describes when global production will peak followed by a decline -- attracted an unlikely alliance of oil geologists, greens, nuclear power advocates and bankers to the conference in Scotland, where North Sea oil production has already peaked.

The International Energy Agency, which advises industrialized countries on energy policy, says world oil output should not peak before 2030.

But it says about $3 trillion in investment may be needed to meet an expected 60 percent surge in consumption. Despite record profits, energy companies are spending cautiously on new projects since a price crash in 1998-1999.

Company reserves came under the spotlight after Shell made a series of downgrades last year, scaring investors.

"Oil companies are moving from denial to confession," said former oil geologist Colin Campbell. "Every beer drinker knows the quicker he drinks the sooner it is gone, and the bar shuts at 11 -- the same applies to oil."

SAUDI ARABIA

Oil's surge this year to record peaks above $58 a barrel has convinced some analysts that prices have moved structurally higher, as rising demand led by China strains supplies.

The world's top exporter Saudi Arabia said last week it is ready to increase its output capacity to 15 million barrels per day, from around 11 million now, and sustain that level for 50 years.

"There's no proof," said Simmons. "Those resisting data transparency have something to hide. New reporting standards need to be made mandatory," he said, calling for standardized data on oil field production and third party verification of oil reserves.

President Bush will meet Saudi Crown Prince Abdullah in Texas on Monday, to seek the OPEC linchpin country's help in countering the economic threat caused by high oil prices.

"There's definitely a role for government intervention -- I don't think the markets can take care of it," said Jim Meyer, of the Oil Depletion Analysis Center (ODAC). "Oil is not running out, but growth in oil is, and we need to talk about it."

Higher oil prices are expected to spur technologies to extract more oil, such as recovering heavy oil from shale or tar sands, as well as renewables such as solar that do not yet compete.

"While decline is inevitable, the pace of that decline will be slower than predicted. Globally there will exploration and discovery in ever-deeper waters while the tar sands resource of Canada remains virtually untouched," Brian Wilson, former UK energy minister, told the conference.


Global energy demand and capacity building in the petroleum sector

The Daily Star - Business Articles - Global energy demand and capacity building in the petroleum sector

By Anthony H. Cordesman

Current estimates indicate that the Middle East and North Africa have some 63 percent of all of the world's proven oil resources, and some 37 percent of its gas. In 2003, Saudi Arabia alone was estimated to have roughly 26 percent of the world's proven oil resources and 4 percent of its gas, Saudi Arabia also provided 12.55 percent of the entire world's oil production, the Gulf provided 28.72 percent, and the entire MENA region provided approximately 34 percent.

The Energy Information Agency (EIA) and the U.S. Geological Survey estimate that Saudi Arabia now has the capacity to produce a maximum of 11.2 million barrels per day of crude (with a sustained capacity of 10.6-10.8). The EIA estimates that these high oil reserves, and low incremental production costs, will ensure that Saudi Arabia and the Gulf region will dominate increases in oil production through at least 2015.

The EIA estimates that Saudi Arabia alone will account for 4.2 million bpd of the total increase, Iraq for 1.6 million bpd, Kuwait for 1.3 million bpd, and the U.A.E. for 1.2 million bpd by 2015 in its reference case projection. These four countries will account for 8.3 million bpd out of a worldwide total of 17.9 (46 percent). To put these figures in perspective, Russia will account for an increase of only 1.3 million bpd.

The International Energy Agency (IEA) estimates that total conventional and nonconventional oil production will increase from 77 million bpd in 2002 to 121.3 million bpd in 2030. This is a total increase of 44.3 million bpd worldwide. The Middle East will account for 30.7 million bpd, or 69 percent of this total. The IEA also estimates that the rate of dependence on the Middle East will increase steadily after 2010 as other fields are depleted in areas where new resources cannot be brought on line. It estimates that 29 million bpd, or 94 percent of the total 31 million bpd increase in OPEC production between 2010 and 2030 will come from Middle Eastern members of OPEC.

In these estimates, and virtually every other major forecast, Saudi Arabia is a key petroleum exporter and central to a steadily more interdependent global economy. Saudi Arabia is also the only oil producer that has consistently sought to maintain surplus oil production capacity, with a nominal goal of 2 million bpd. This situation will not change in the foreseeable future.

There are, however, serious uncertainties in virtually every aspect of such estimates. For example, the claims MENA and Gulf countries make regarding their "proven reserves" have become highly political over the last few decades and may well be exaggerated. Nevertheless, the issue is not whether Saudi Arabia and the Gulf will play a critical role in world energy supplies it is rather how much petroleum capacity they can develop and export.

The kingdom has roughly 80 oil and gas fields and more than 1,000 oil wells; however, more than 50 percent of the kingdom's reserves are in only eight fields. Most estimates indicate that Saudi Arabia holds roughly one-quarter of the world's proven oil reserves, with a nominal figure of 261.90 billion barrels.

Saudi sources have recently gone much higher. On December 27, 2004, Saudi Oil Minister Ali al-Naimi stated that the country's proven reserves can go up to 461 billion barrels in the next few years. He reiterated this point on April 8, 2005. He was quoted as saying "There is a possibility that the kingdom will increase its reserves by around 200 billion barrels, either through new finds or by increasing what it produces from existing fields. ... These reserves enable the kingdom to remain a major oil producer for between 70 and 100 years, even if it raises its production capacity to 15 million bpd, which may well happen during the next 15 years."

Increasing oil reserves by 200 billion barrels, however, continues to be an unverifiable possibility.

There are no certainties here on Saudi capacity and world demand. Matthew Simmons, an outside analyst, has argued that the kingdom's reserves are overestimated by Saudi Aramco. Saudi Aramco claims that the total depletion rate of its oil fields, so far has been approximately 28-30 percent. Mr. Simmons argues that Saudi Aramco is underestimating the depletion rates of the oil fields including, Ghawar, the largest in the world, and that Saudi oil fields have a higher water cut than is reported by Saudi Aramco. The EIA forecasts that Saudi oil production capacity could reach 18.2 million bpd by 2020 and 22.5 million bpd by 2025.

In brief, Mr. Simmons bases his conclusions on the following points:

A large portion of the kingdom's production is based on a small number of giant and super-giant oil fields. All of the giant and super-giant Saudi oil fields, but two, have been discovered a long time ago. Ghawar, for example, accounted for 50-65 percent of Saudi output in 2003.

Saudi giant and super-giant oil fields have matured, which means that they have peaked and are on the decline. The depletion rates of the giant and super-giant oil fields are higher than Saudi Aramco is reporting.

Saudi Aramco has used intense water management to keep reservoir pressures high and postpone the natural depletion on the five large Saudi fields.

Data from Aramco, OPEC, the EIA, and the IEA contradict each other, and have proved to have many holes in them.

The "easy oil" era is over. Vertical wells in Saudi Arabia appear to be obsolete. Maximum recovery contract horizontal wells anchor future production.

Saudi Aramco has explored the kingdom thoroughly, and it is unlikely that future exploration will discover any new giant or super-giant oil fields to take the place of the aging fields.

These points are more a thesis, based on an analytic "chain of negatives" than a definitive proof. They pull together a chain of negative indicators and possibilities that deserve serious consideration. However, much of their validity depends on the Saudi managers Saudi Aramco being wrong or covering up massive risks and development problems, and virtually all of the other analysts examining world oil reserves and production potential being wrong about both the size of the world's oil reserves and the ability of modern technology to provide future significant gains in ultimate recovery.

His analysis also does not fully explore the extent to which technology gain can increase production (an area of considerable uncertainly) or the extent to which sustained high prices would lead to more efficient exploration, production and recovery.

At the same time Simmons does raise a host of legitimate questions and uncertainties in an area where there is little international transparency. Moreover, any other analysis of Saudi Arabia's capacity to sustain and increase production must be based, to a high degree, on what the country's experts and officials say. There is no way to independently validate such projections and claims.

More generally, grave flaws exist in most official estimates of future increases in global demand for oil and the way Saudi Arabia and other exporting states will respond. It is all too clear that the modeling the EIA, IEA, and OPEC use in the global petroleum supply and demand forecasting is still driven by estimating global demand at comparatively low oil prices (the reference case is $25 to $27 per barrel), and does not make a serious effort to explicitly model supply tracks with national plans.

The costs of new production in the MENA area are generally assumed to be extraordinarily low, and there is no explicit analysis of the capability of Saudi Arabia or any other major exporter and supplier to actually produce the amount of oil estimated in the model.

Such models and forecasts also include a host of uncertain assumptions about price-driven elasticity in conservation, efficiency, and alternative/substitute fuels that make every aspect of their forecasts progressively less credible. As a result, the forecasts of EIA, IEA, and OPEC must be regarded as to be at best illustrative of what might happen in a world where virtually everything goes right from the importer's view, where Saudi Arabian and other export capacity automatically responds to need and political and military risk have no impact.


Experts hear oil depletion fear

BBC NEWS

 The world's oil reserves are running out much faster than industry and governments are admitting, a conference in Edinburgh has been told.

Experts refer to "peak oil", the time when oil extraction reaches its highest point and then starts to decline.

Many industry experts believe it will not occur until 2030 - but some analysts have stated publicly that it could happen by 2008 or even sooner.

About 200 people from various sectors attended the event.

Dr Jeremy Leggett, a member of the UK government's Renewables Advisory Board, predicted: "Most of us who are worried about this issue would say definitely it will happen some time this decade.

"2008 might be the best guess, plus or minus two years. It's certainly a lot earlier than almost all the world is assuming at the moment.

"Oil reserves in many countries are state secrets. The biggest oil companies in the world are owned by governments.

"They have no requirement to report. There are many worrying indications that things they have been reporting are inaccurate."

Dr Leggett, a former oil geologist and Greenpeace campaigner, went on: "Modern life depends on growing supplies of cheap oil and the world economy is predicated on the assumption that that is going to continue for another couple of decades and it is not.

'Profound shock'

"There is going to be a profound economic shock and we will not be able to bring in renewable energy in time to repair the damage.

"It's just not on radar screens. It's difficult to find people talking about it anywhere. I find it very bewildering because I think the evidence is clear on this one.

"We need to take this issue as seriously as we take the war on terrorism - more so.

"It's much more dangerous, much more of a threat to our economic well-being. We need to rush through programmes to get alternative fields to save energy."

'Ripe for review'

Delegates to the conference, organised by Depletion Scotland and the Oil Depletion Analysis Centre (ODAC), also heard from ex-energy minister and former MP for Cunninghame North, Brian Wilson.

He said that Britain's current energy policy was "ripe for review" and should be a major issue in the election campaign.

Mr Wilson, who is not standing as an election candidate, said the UK was set to become a net importer of oil and gas in the next few years.

He called for a balanced and indigenous energy future for Britain, embracing energy alternatives as well as conservation.

But Mr Wilson said the biggest global challenge in energy terms was persuading the United States to reduce its own oil consumption.

He attacked America's "ever-increasing and ever-more profligate application."