Peak Oil News: 10/01/2006 - 11/01/2006

Tuesday, October 31, 2006

Grain Drain: Get Ready for Peak Grain

Grain Drain: Get Ready for Peak Grain

by Wayne Roberts

How Long Can the World Feed Itself?...

Now’s the time to brace yourself for major price hikes in food, as peak grains join the lineup of lifestyle-changing events along with peak oil and peak water.

Unless this year’s harvest is unexpectedly different from six out of the last seven years, the world’s ever-decreasing number of farmers do not produce enough staple grains to feed the world’s ever-increasing number of people. That’s been a crisis of quiet desperation over the past decade for the 15,000 people who die each day from hunger-related causes. It’s about to cause a problem for people who assumed that the sheer unavailability of food basics, usually seen as a problem of dire poverty, would never cause a problem for them.

Whenever there’s a shortfall in the amount of food produced in any given year, it’s possible to dip into an international cupboard or “reserve” of grains (wheat, rice and corn, for example) left over from previous years of good harvests. Tabs have been kept on the size of that reserve by the U.S. Department of Agriculture since the end of World War 11. Few people looked at these tables until Lester Brown cried the alarm a few months ago, a short while after Darin Qualman, brilliant researcher with Canada’s National Farmers Union, one of the few farm organizations which thinks agriculture policy should be about feeding people, not finding new ways to raise commodity prices by getting rid of farm surplus.

The world’s grain reserve has been dipped into for six of the last seven years, and is now at its lowest point since the early 1970s. There’s enough in the cupboard to keep people alive on basic grains for 57 days. Two months of survival foods is all that separates mass starvation from drought, plagues of locusts and other pests, or wars and violence that disrupt farming, all of which are more plentiful than food.

To put the 57 days into geopolitical perspective, China’s shortfall in wheat is greater than the entire wheat production of Canada, one of the world’s breadbaskets. Since the World Trade Organization prohibits government intervention that keeps any items off the free trade ledger, there’s no law that says that Canadians, or any other people, get first dibs on their own food production.

To put the 57 days in historical perspective, the world price for wheat went up six-fold in 1973, the last time reserves were this low. Wheat prices ricocheted through the food supply chain in many ways, from higher prices for cereal and breads eaten directly by humans, to the cost for milk and meat produced from livestock fed a grain-based diet. If such a chain reaction happens this year, wheat could fetch $21 a bushel, again about six times its current price. It might fetch even more, given that there are two other pressing demands for grains that were not as forceful during the 1970s. Those happy days pre-dated modern fads such as using grains as a feedstock for ethanol, now touted as an alternative to petroleum fuels for cars, and pre-dated factory barns that bring grains to an animal’s stall, thereby eliminating farm workers who tended livestock while they grazed in fields on pasture grasses.

Look forward to two new questions at the supermarket cash register: Will that be cash or chargex? Will that be for food basics, meat or car fuel? University ethics classes and church elders can also ponder the moral dilemmas imposed on the wealthy when they choose fuel and meat while others starve.

Historians will also recall that 1970s food prices went up alongside price hikes for oil, contributing to the runaway inflation that defined the decade’s economic challenge. The 1970s experience shows that seemingly small blips in food reserves and availability can lead to major shocks in the economy and society. Probably because the food marketplace brings together two unorganized and relatively desperate forces -- at one end, about two billion basically unorganized food producers who don’t want to postpone selling in case they get stuck holding a bag of perishable food, and at the other end, about six billion unorganized consumers who don’t want to go hungry until food prices come down – reactions to changes in food availability and price are volatile, and have high impact.

The 1970s drop in world food reserves was accompanied by many eventful trends from which the world has yet to fully recover. Traumatic famines across Africa, Afghanistan and Bangladesh, the emergence of hard-right politics in conventional parties as governments prepared for a crackdown on unions that were blamed for the inflationary spiral, and tight money policies that doubled unemployment levels are among the legacies of this decline of food reserves. The modern international food movement, coming on the heels of the world environment movement of the 1960s, also emerged out of the food crisis of those years.

Even modest price changes can carry a big wallop this time too, especially in a world that’s already suffering from crisis-overload. For a third of the world’s people who subsist on less than two dollars a day, pennies can make a life and death difference. There’ll be an echo of that desperation in wealthy North America, where about ten per cent of the population – mostly single-parent families and recent immigrants – faces some form of food insecurity. About half of the people in this group can’t afford today’s food prices and rely on friends or foodbanks when they run out of money, which is at least once a month. People in this group may start running out of food twice a month. People in the second group, who now make ends meet without relying on charity by using budget tricks that rely on cheap foods, will find they can’t get by without at least one trip to the foodbank. That means demand on foodbanks, frequently at the breaking point today, will triple. This is the stuff of food riots, which were also commonplace during the 1970s.

If looming food shortages – quite a shift from obsessing about obesity, isn’t it – make it on the radar of government officials charged with safeguarding public health, a raft of new policy issues will need to be addressed. A big question mark has to be put on ethanol fuels, except those made from crop wastes.

Food sovereignty, the right of a people to set their own food policies, emerges as a precondition of food security, and should put the world free trade agenda on hold. Planning measures that prohibit urban sprawl onto good farmland – Ontario’s greenbelt is an excellent example – become axiomatic. So do government-guaranteed minimal prices for farmers producing basic foods, the same kinds of guarantees now provided all self-regulating professions such as doctors and lawyers, as well as apprenticed tradesmen and tax-drivers, all of whom would have problems working if they didn’t eat. And so do measures that promote food production in cities, not just as a healthy hobby but as a public health essential. A garden on top of every garage, a veggie stew in every pot… we will see this and more in the years ahead.


Friday, October 27, 2006

Shell Oil on Peak Oil Crisis (An Amazing Infomercial!)

City Club Portland Oregon

Editor’s note: The City Club of Portland, Oregon hosts an amazing infomercial like lecture on peak oil, how Shell could work many amazing miracles for the USA, if only it were not for the environmentals blocking them. See if you can count how many times he says, “But wait! There’s more!!”

"Ensuring the U.S. Energy Supply for the Future" with John Hofmeister, President Shell Oil Company. October 27, 2006.

Click here to play MP3 file.


Thursday, October 26, 2006

World oil production may have peaked

Reuters.com

By Scott Malone

World production of crude oil may have already peaked, setting the stage for declining output that could lag demand, a top advocate of the "peak oil" theory said on Thursday.

Matthew Simmons, chairman of Simmons & Co. International, a Houston-based investment banking firm specializing in the energy sector, said U.S. government data showed that the world oil supply has declined through the first half of this year.

Energy Information Administration data showed world supply of crude oil has declined to 83.98 million barrels per day in the second quarter after hitting 84.35 million bpd in the fourth quarter of 2005.

"If you basically have another six to ten months of that decline lasting, then I think for certain we would look back and say, 'Guess what? We actually reached a sustainable peak in crude oil production in December 2005,'" Simmons said at a meeting of the United States of the the Association for the Study of Peak Oil and Gas.

The peak oil theory has detractors, who note technology can help extend the life of the world's oil reserves.

Simmons acknowledged his call may be premature, saying, "If that number turns around, that will be wrong."

TEMPERED VIEW

Other speakers at the conference took a more tempered view of the world's oil capacity, arguing that peak production is still a few years out.

"Conventional oil production is going to increase by a few million barrels a day between now and the period between 2010 and 2015," when it may peak, said Mike Rodgers, a partner at PFC Energy, an energy industry consulting company.

Advocates of the peak oil theory, however, said a decline in high oil prices was likely to lead to less pressure for oil companies to invest in production.

Rising demand for oil, stoked by the rapid economic development of China and India, have helped to drive oil prices to record highs. U.S. oil futures peaked above $78 in July, but have since eased to about $61 per barrel.

"If the supply and demand are such that we see declining oil prices, and given that the economy functioned pretty well through a period of high oil prices, the question is -- are policymakers going to lose focus on this problem?" Rodgers asked. "I would argue that they probably will."

It's hard to determine just how much oil is left in the world, since companies in different countries use varying standards to calculate their oil reserves, speakers said.

Major oil companies haven't raised the specter of peak supply with their shareholders.

One speaker said that could suggest their oil reserves are richer than many executives disclose, as a result of strict U.S. regulations on how public companies may estimate their reserves.

"We don't have data which allows us to study in detail the depletion of oil fields," said Jeremy Gilbert, managing director of Barrelmore Ltd. and a former top engineer at BP Plc. <BP.L>. "The industry itself does know more about the way things are behaving, wells are producing and it may be that if we had access to that data, we might refine some of our estimates."


Wednesday, October 18, 2006

Has 'Peak Oil' Peaked Too Soon?

Energy Tribune

By Mac Johnson

Disaster struck “Peak Oil” cheerleaders this month as Chevron announced the discovery of massive new oil reserves in the deep water of the Gulf of Mexico. “Dang it!” one expert was overheard shouting while being shepherded from MSNBC’s greenroom. “We’ve been predicting the end of oil for a century now, and it finally looked like we were right. Why won’t people just give up looking for a better future so we can all feel prophetic and important for once?”

Okay, I made up that part about MSNBC. Peak oil naysayers would never admit they were wrong or admit that the Chevron discovery is a major blow to their theory. To an optimist, the glass is half full. To a pessimist, the glass is half empty. To a peak oil theorist, the glass is hidden in the next room, but he’s sure it’s damn near empty.

Together, these twin problems – the reluctance of humans to passively accept doom and the fact that we never quite know what we don’t know – are the bane of predicting peak oil production. Which doesn’t mean that oil will never peak – it will. It just means that we won’t know that the peak has occurred until well after it has passed, and (due to pesky human ingenuity) we may not even notice it that much when it does actually peak. We’ll be too busy exploiting some new advance in energy. Dang.

For some reason – perhaps because it is so vital to modernity – the energy industry attracts more than its share of prophets of doom. As I’ve written before on these fine glossy pages, which are more than worth the subscription price, the idea that one actually lives at the end of days is very satisfying, egotistically. I mean, I’m significant – so big things will happen while I’m here, right?

But even if oil were to peak on cue (eventually someone will successfully predict it just through persistence alone), why do so many believe that economic disaster will follow? I’m sure whale oil supplies have long since peaked, despite the deep water exploration efforts of Captain Ahab, yet we do not live in the dark for lack of rendered blubber to fuel our lamps.

Alternatives were found and the truly critical supply – of energy, not whale oil – has risen meteorically since the barely noticed peak in whale oil of the 1800s.

That is how it will likely be with crude oil. The supply will be extended as long as possible, and then gradually replaced by another fuel. Mankind did not get this far by sticking to nuts and berries, or grass, or wood, or coal, or any other single energy source – however vital it seemed in its peak age. Predictions of doom surrounding the eventual peak of oil ignore this history. The passive, withering world envisioned by some peak oil prophets simply doesn’t exist.

As a matter of fact, the aura of doom that eternally surrounds energy reminds me of nothing so much as the absolutely atrocious 1979 film, “Quintet.” This movie was BAD – so bad that the memory of it has lurked suppressed in my mind for 20 years, waiting to be awakened by current events. I was pretty sure that, like most bad movies, it starred Michael Caine, but looking it up I was surprised that it was actually Paul Newman. THAT is how bad it was. My mind had systematically imagined Michael Caine into every scene in an effort to spare Paul Newman.

In this gauze-filtered disaster, matched only by Kevin Costner’s “Waterworld” (which may have starred Michael Caine), the future is a huge Ice Age – that being the climate change people fretted about most in 1979. And in this glacial future, people just scurry around living off the residual firewood, food, and fashion of the pre-Ice Age world – wasting away, betting their declining resources in a stupid suicide game (a nice metaphor for the zero-sum conception of markets), and in general not being very creative or industrious at all. They just wait to freeze to death when the fuel runs out. And that is why the movie is so bad. People just don’t act like that.

Chronic predictions of disaster surrounding declining energy supplies are the economic equivalent of “Quintet” – unrealistic fantasy, divorced from the dynamism of human nature. And like “Quintet,” they are best forgotten – or at least blamed on Michael Caine.


Peak Oil: The Clock Is Ticking

countercurrents.org

By Peter Goodchild

Perhaps the most common response to the peak-oil problem is: "The oil isn't going to disappear overnight. We have a century to prepare." Unfortunately, the fact that the decline in oil is a curve, not a vertical line, makes it difficult to comprehend. What matters is that the serious damage will be done long before we get to those tiny remaining drops a century or so from now. If we look at the forecasts of Petroconsultants Corp., which produces the "bible" of oil data, we can see that in the year 2000 there were five barrels of oil per person per year, but that by 2025 there will only be about two barrels, not five. That's not an "on/off" situation, but at that point the human race should probably wave goodbye to the Oil Economy. The year 2025 is far less than a century from now.

The same statement, "We have a century to prepare," also raises the question: Who is the "we" here? All human beings? A small group of dedicated survivalists? If the answer is the former, then the statement is false: humanity, as a whole, never makes any decisions. The human race, taken in its entirety, simply does not behave in such a sophisticated manner; the human race much prefers ignorance, superstition, cruelty, and intolerance. Robert D. Kaplan's book The Ends of the Earth is one of many texts that elucidate the harsh reality of human nature.

It is not only oil, but in fact the entire economy that has followed a bell curve. The year 1970 was the Peak, the Big Peak of Everything, especially for Americans. Backward or forward on that bell curve, one sees a dirty, noisy, crowded world. Right on that Peak, one sees the Golden Age - Beatlemania, "sex, drugs, and rock 'n' roll," Easy Street. As Dickens might say, "It was the best of times, it was the worst of times." The gap between the rich and the poor was not so bad in those days, whereas according to the U.S. Census Bureau's "Historical Income Tables - Families," the mean income of the richest five percent of American families more than doubled (in adjusted dollars) from 1966 to 2000. (For all other American families, there was little change over those 35 years.) In the year 1968, there was the Tet offensive, the turning point of the Vietnam War. In the year 1969, there was the first moon landing.

On the domestic scene, the bad news about oil was that U.S. production in 1970 began a permanent decline. On the international scene, the good news was that even though oil production was not reaching its maximum in an absolute sense, it was nevertheless heading towards that aforementioned ratio of five barrels of oil per person per year; it would stay at that ratio until the early twenty-first century.

What about the coming several decades? Of course, a great deal depends on which time period one is discussing: the world of 2100 will be very different from the world of 2020. The question of slow versus fast collapse will also have a big effect on future scenarios. But if we look at tangible events of the last hundred years - the Great Depression of the 1930s, the Soviet collapse of the 1990s, the Argentine collapse of 2001 - two possible conceptions of the future stand out most clearly. These have best been illustrated by novelists (although not with peak oil as the setting) rather than by sociologists.

The first is that of a slow slide into an impoverished police state (George Orwell, 1984). In this scenario, government and banks do not disappear. They are here to curse us forever. We may be poor and living in chaos, but we will live in relentless drudgery, paying taxes and trying to support our mortgages. This is roughly the same scenario as that of the Great Depression of the 1930s - no matter how bad daily life became, the bank was always ready to take away people's houses and farms.

The second is that of a thermonuclear war that throws humanity back into a quasi-medieval world (Walter M. Miller, Jr., A Canticle for Leibowitz). In the fight for the last drops of oil, civilization is largely destroyed. With Bush's Iran activities, such a scenario is quite plausible. The good news is that governments and banks would be destroyed at the same time. The bad news is that we would be eating a lot of grass soup.

From a Darwinian perspective, civilizations are rather brief interludes in the story of mankind. Humans and humanlike beings have existed for about a million years, but civilizations have existed for only about 5,000 years. Humanity's "uncivilized" past, therefore, is greater than its "civilized" phase by the enormous ratio of 200:1. Considering the brevity of the latter, it might almost be said that civilization is merely an experiment, the results of which are still uncertain.

All civilizations grow too large to support themselves, and their leaders have little foresight. These civilizations then collapse and are buried in the mud. The same will happen to America, but human shortsightedness prevents us from seeing America as only one among many civilizations. America, in other words, is seen as "civilization" in a generic sense, not as merely one single civilization in a quantifiable sense.

Partly because Rome was the most recent civilization before that of America, it serves to a large extent as a mirror of modern times. The fall of the Roman Empire has been ascribed to various factors, from laziness to lead poisoning. The impoverishment of the soil, and the consequent lack of food, may have played a large part. No doubt it was also a combined military and economic problem: there wasn't enough money to pay for all the soldiers guarding the frontiers. Pestilence may have been another significant factor. Perhaps a more correct answer would actually be a more general one: the empire was too big, and it was poorly led.

The main difference between America and previous civilizations, however, is that from now on the cycle of "civilization" cannot be repeated. Oil is not the only mineral that will be in short supply in the 21st century. Industrial civilization has always been dependent on metals, but hematite, for example, is no longer sufficiently common, and mining companies now look for other sources of iron, which can be processed only with modern machinery.

The machines of one century built the machines of the next. The machines of the past - the hammer, anvil, forge, and bellows of the ancient blacksmith - made it possible for later generations to extract the low-grade ores of the present. Very low-grade iron ores can now be worked, but only because there were once better, more accessible ores. This "mechanical evolution" is, of course, liable to collapse: when Rome fell, so did literacy, education, technology. But after many centuries, the Classical world returned. The western world experienced its Renaissance, its rebirth, after the Dark Ages because the natural world was fundamentally unchanged.

In the future, however, after the collapse of the present civilization, the necessary fuels and ores will not be available for such a gradual rebuilding of technology. The loss of both petroleum and accessible ores means that history will no longer be a cycle of empires, contrary to the descriptions of Spengler and Toynbee.


BIOGRAPHICAL NOTE: Chicago Review Press has published Peter Goodchild's Survival Skills of the North American Indians, The Spark in the Stone, and Raven Tales. He can be reached at: peter.goodchild@sympatico.ca


The Truth About Hydrogen - Popular Mechanics

Popular Mechanics

When assessing the State of the Union in 2003, President Bush declared it was time to take a crucial step toward protecting our environment. He announced a $1.2 billion initiative to begin developing a national hydrogen infrastructure: a coast-to-coast network of facilities that would produce and distribute the hydrogen for powering hundreds of millions of fuel cell vehicles. Backed by a national commitment, he said, "our scientists and engineers will overcome obstacles to taking these cars from laboratory to showroom, so that the first car driven by a child born today could be powered by hydrogen, and pollution-free." With two years to go on the first, $720 million phase of the plan, PM asks that perennial question of every automotive journey: Are we almost there?

And the inevitable answer from the front seat: No.

Click to read the full article

Excerpts:

At present, 95 percent of America's hydrogen is produced from natural gas. (...) And there's the rub: Using dirty energy to make clean energy doesn't solve the pollution problem-it just moves it around.

Chilled to near absolute zero, hydrogen gas turns into a liquid containing one-quarter the energy in an equivalent volume of gasoline. (...) The cooling process requires a lot of energy, though-roughly a third of the amount held in the hydrogen.

Some hydrogen-powered vehicles use tanks of room-temperature hydrogen compressed to an astounding 10,000 psi. The Sequel, which GM unveiled in January 2005, carries 8 kilograms of compressed hydrogen this way-enough to power the vehicle for 300 miles. Refueling with compressed hydrogen is relatively fast and simple. But even compressed, hydrogen requires large- volume tanks. They take up four to five times as much space as a gas tank with an equivalent mileage range.

Currently, most hydrogen is transported either in liquid form by tankers or as compressed gas in cylinders by trailers. Both methods are inefficient. Trucking compressed hydrogen 150 miles, for instance, burns diesel equivalent to 11 percent of the energy the hydrogen stores. It also requires a lot of round trips: A 44-ton vehicle that can carry enough gasoline to refuel 800 cars could only carry enough hydrogen to fuel 80 vehicles.


Sunday, October 15, 2006

Oil, Smoke and Mirrors! - Black Hills South Dakota News & Information Underground on Black Hills

blackhillsportal.com

Black Hills Today was recently informed of this video by MyPeakOil.org. MyPeakOil.org is designed to be interactive center for current information regarding the peak in global energy supply. They publish news and research concerning:

# The current situation and trajectory, such as oil & gas production data, economic or societal clues to decline profiles, and relevant institutional pronouncements.
# Innovations or partial solutions to this crisis, such as renewable energy generation capacity and research, alternative financial systems, or post-carbon urban agriculture.
# Any other issues which assist our understanding of the broader implications of the peak.

A complete understanding of just what is meant by "Peak Oil" is explained in this video. You must watch this in an effort to become more informed about our National & World situation. The views expressed on this video are not necessarily the views of Black Hills Today, but we do believe this to be important for you to make informed decisions about your life.


 
Click for large format version

What is Peak Oil?

Peak Oil is the simplest label for the problem of energy resource depletion, or more specifically, the peak in global oil production. Oil is a finite, non-renewable resource, one that has powered phenomenal economic and population growth over the last century and a half. The rate of oil 'production,' meaning extraction and refining (currently about 84 million barrels/day), has grown in most years over the last century, but once we go through the halfway point of all reserves, production becomes ever more likely to decline, hence 'peak'. Peak Oil means not 'running out of oil', but 'running out of cheap oil'. For societies leveraged on ever increasing amounts of cheap oil, the consequences may be dire. Without significant successful cultural reform, economic and social decline seems inevitable.

Why does oil peak?

Oil companies have, extracted the easier-to-reach, cheap oil first. The oil pumped first was on land, near the surface, under pressure, light and 'sweet' (meaning low sulfur content) and therefore easy to refine into gasoline. The remaining oil, sometimes off shore, far from markets, in smaller fields, or of lesser quality, takes ever more money and energy to extract and refine. Under these conditions, the rate of extraction inevitably drops. Furthermore, all oil fields eventually reach a point where they become economically, and energetically, no longer viable. If it takes the energy of a barrel of oil to extract a barrel of oil, then further extraction is pointless.

Who came up with the idea of Peak Oil?
M. King Hubbert

In the 1950s a U.S. geologist working for Shell, M. King Hubbert, noticed that oil discoveries graphed over time, tended to follow a bell shape curve. He posited that the rate of oil production would follow a similar curve, now known as the Hubbert Curve (see figure). In 1956 Hubbert predicted that production from the US lower 48 states would peak between 1965 and 1970. Shell tried to pressure Hubbert into not making his projections public, but the notoriously stubborn Hubbert went ahead and released them. In anycase, most people inside and outside the industry quickly dismissed Hubbert's predictions. In 1970 US oil producers had never produced as much, and Hubbert's predictions were a fading memory. But Hubbert was right, US continental oil production did peak in 1970, although it was not widely recognized for several years, and only with the benefit of hindsight.

No oil producing region fits the bell shaped curve exactly because production is dependent on various geological, economic and political factors, but the Hubbert Curve remains a powerful predictive tool.

Although it passed by largely unnoticed, the U.S. oil peak was arguably the most significant geopolitical event of the mid to late 20th Century, creating the conditions for the energy crises of the 1970s, leading to far greater U.S. strategic emphasis on controling foreign sources of oil, and spelling the begining of the end of the status of the U.S as the world's major creditor nation. The U.S. of course was able to import oil from elsewhere, and life continued there with only minimal interuption. When global oil production peaks however, the implications will be far greater.

So when will oil peak globally?

Hubbert went on to predict a global oil peak between 1995 and 2000. He may have been close to the mark except that the oil shocks of the 1970s slowed our use of oil. As the following figure shows, global oil discovery peaked in the late 1960s. Since the mid-1980s, oil companies have been finding less oil than we have been consuming.


The Deathwatch for Cheap Oil

New York Times

The Deathwatch for Cheap Oil

By Paul B. Brown

Those falling prices at the gasoline pump may only be temporary. Indeed, they could signal the start of an era in which, forecasters say, “the death of cheap, abundant crude might unleash war and plunge the world into a second Great Depression.”

“Peak oil is a reality,” says Willem Kadijk, a hedge fund adviser quoted by Bloomberg Markets magazine. He is just one of many who believe that global oil production is now at or near its peak, and the only place to go is down.

“Once the flow crests and starts to decline, and some geologists say it already has, oil will no longer be able to slake the world’s growing thirst for energy,” Deepak Gopinath writes in summarizing the argument. “The result will be the oil shock to end all oil shocks.”

The price of a barrel of crude oil, which closed yesterday at $58.68, “will spiral to $200 — and keep rising,” he writes.

Representative Roscoe G. Bartlett, a Maryland Republican, has formed the Congressional Peak Oil Caucus to draw attention to the issue. “The world has never faced a problem like this,” he told the magazine.

The nation’s oil companies dispute the assertions. An Exxon Mobil spokesman says the company’s geologists expect global oil production to keep rising for at least the next two decades.

ON SECOND THOUGHT If you think ethanol is a simple answer to solving our gasoline needs, think again, argues Consumer Reports in this month’s cover article, “The Ethanol Myth.”

“Despite the avid support of the Bush administration and major American car companies,” E85 — a commonly used blend of 85 percent ethanol and 15 percent gasoline — “is unlikely to fill more than a small percentage of U.S. energy needs,” the magazine says.

Reasons for the pessimism are that ethanol costs more, is hard to find outside the Midwest — only about 800 gas stations out of 176,000 nationwide sell E85 — and provides fewer miles to the gallon. The magazine tested ethanol on a Chevrolet Tahoe and found that the fuel economy dropped “27 percent when running on E85 compared with gasoline, from an already low 14 m.p.g.”

At the time of the test, the average retail price of E85 was $2.91 a gallon, which meant the 27 percent fuel-economy penalty would have caused drivers to pay “$3.99 for the energy equivalent of a gallon of gasoline.”

A FAR BIGGER BANG The Rolling Stones, fronted by their 63-year-old lead singer, Mick Jagger, are heading into the home stretch of what will be the most commercially successful rock tour of all time, Rolling Stone reports.

By the time the tour ends in Hawaii next month, the band will have sold nearly two million tickets for a total of $256 million in revenue, according to the magazine, which cited figures compiled by Pollstar.

The “Bigger Bang” tour, which began last year, set a record during its 2005 leg when it recorded $162 million in 43 dates, “so this fall’s tour ... could be considered a victory lap,” Brian Hiatt writes.

“We’re kind of looking at it like we’re Lewis and Clark — we’re playing the Wyomings and Montanas,” said Keith Richards, the guitarist.

Michael Cohl, a promoter, said the tour could continue next year, although no dates are scheduled.

In case you were wondering, U2’s 2005 “Vertigo” tour is the second-highest-grossing tour ($138.9 million); the Stones own third place with the “Voodoo Lounge” tour in 1994 ($121.2 million); Bruce Springsteen and the E Street Band grossed $115.9 million in their 2003 tour; and U2 rounds out the top five with $109.7 million in 2001 during its “Elevation” tour.

FINAL TAKE Even assuming that the growing number of companies devoted to space travel are successful, becoming a rocketman (or woman) is going to cost you at least $200,000. However, Popular Mechanics reports that for $295 “you can launch a photo of yourself — or some other keepsake — into space on Bigelow Aerospace’s Genesis II spacecraft, due to launch early next year.” Not surprisingly, the company plans to sell space for corporate advertising as well. Can orbiting billboards be far behind? PAUL B. BROWN

Complete links are at nytimes.com/business. E-mail: whatsonline@nytimes.com.


Thursday, October 12, 2006

Suspicion Surrounds Retreat In Gas Prices, Poll Finds

washingtonpost.com

By Steven Mufson

Gasoline prices are down about 75 cents in two months, but whether motorists will see further declines at the pump depends in part on whether the Organization of the Petroleum Exporting Countries can agree to cut production.

Members of the oil cartel have been negotiating to cut the group's output by 1 million barrels a day -- a move that could drive up oil prices and reverse the trend at the pumps. But most oil traders and experts doubt OPEC can achieve more than half the proposed reduction. A failure to cut output could keep supplies strong and oil and gas prices soft.

Pump prices -- now at a national average of $2.28 a gallon for regular unleaded -- already have fallen because of a slowdown in U.S. demand, a buildup in crude oil and gasoline inventories, the end of the summer driving season, a collapse in profit margins at oil refineries and a $17-a-barrel drop in crude oil prices since August.

"The supply was coming back, and I think consumers cut back on use," said Philip K. Verleger, an oil consultant. "The question is how far down it goes."

Though half a dozen countries have talked about production cuts, highly populated countries such as Iran, Nigeria and Venezuela are already producing well below capacity and their old quota levels, and face pressure to produce more because of heavy domestic-spending demands. Kuwait has not cut production since 1998. Saudi Arabia is reluctant to play the role of sole swing producer and has already trimmed output.

"We do not expect any significant production cuts by OPEC at prices above $45 a barrel, the new target price," Fadel Gheit, oil analyst at Oppenheimer & Co., said in a report to investors. Oil markets seemed to agree. The price of crude oil on the New York Mercantile Exchange closed yesterday at $59.96, up 20 cents.

While motorists have welcomed the drop in gasoline prices, a Washington Post-ABC News poll released yesterday showed that many Americans remain suspicious about the reasons for the recent decline and skeptical about whether it will last.

Three out of 10 Americans think the recent fall in gasoline prices is a result of domestic political factors, including White House and Republican Party efforts to influence the November elections. That's nearly as many as the 35 percent who attribute the recent price decline to market forces or supply and demand, according to the poll of 1,204 adults conducted from Thursday to Sunday.

The survey also showed that suspicions about the steep drop in gasoline prices over the past two months aren't limited to the nation's liberal strongholds. Sixteen percent of people who identified themselves as conservative Republicans, 26 percent of white evangelical Protestants and 29 percent of Southern residents think the plunge in prices is linked to the coming election or other political reasons.

Those beliefs may be blunting the positive impact President Bush and the GOP hoped to get from falling fuel prices. "I think the president's party is lowering the gas prices until the people think the economy is settling down, and then they will raise the price again, blaming it on the Arabs for raising the price on barrels of oil," one respondent said.

"As you may know, gasoline prices have fallen recently in many parts of the country," the survey said before asking: "What do you think is the main reason gas prices have gone down?" The top four answers: increased supply, Bush/GOP efforts to affect the November election, the "upcoming election" and "market forces."

A large number of people interviewed pointed to the absence of disruptive hurricanes or simply "supply and demand," while one respondent said prices were falling "because the gasoline companies got what they wanted, the big bucks; and if they continue there will probably be an investigation."

Gasoline experts said there were some signs that prices were stabilizing. The pace of declines in the prices charged by wholesalers was slowing, and there were some tiny wholesale price increases late last week in the Gulf of Mexico region, said Trilby Lundberg, editor of the Lundberg Survey.

Lundberg warned that the sharp drop in prices could spur a resumption of increases in U.S. gasoline consumption. She also said that the closure of refineries for maintenance, not unusual at this time of year, could lead to a decline in inventories.

"Some analysts expect to see a fairly large amount of refinery maintenance this month, which could lead to product inventories being drawn down a little bit more than normal," said last week's report by the Energy Department's Energy Information Administration. "Large volumes of product inventories are one of the many reasons cited for declining prices in recent weeks, and should they begin to be drawn down significantly, this could stop prices from falling further."

But Verleger said he expected prices to remain weak through Thanksgiving or longer. He said that much of the increase in gasoline prices this year was the result of logistical problems oil companies encountered in adapting new government regulations. The companies have had to reduce sulfur content in diesel fuels and begin to mix gasoline with ethanol instead of methyl tertiary butyl ether, an additive that once made up about 3 percent of the content of gasoline.


Monday, October 09, 2006

Lower gas prices won't last, say UC-Davis professors

State Hornet Online

By E. Ashley Wright

Although consumers may be pleased with the price breaks they have recently received at the gas pumps, oil-consumption experts warn that the long-term effects of depletion may result in higher prices in the near future. Several explanations for the lower prices, down $0.077 per gallon since last week and $0.290 since October, 2005, have been given since costs dipped below $3 per gallon, one of which is political.

With the mid-term elections approaching, Democratic Party candidates and critics have speculated that the Republican administration is manipulating prices to offset criticism of the party's stringent energy platform.

However, according to David Osleger, a member of the University of California at Davis geology department and former geologist for the Gulf Oil Corporation, the price of oil-per-barrel is constantly fluctuating and cannot be accounted for by any particular factor.

"The thing about oil prices is that it is so utterly unpredictable," he said. "There is no real grand scheme of setting the price of gas at the pump. It is all a reaction to global events and the rapidity of changes regarding issues in the Middle East, the repairing of pipelines in Alaska, Venzuela's president and numerous other things."

Osleger added that he feels gas prices could not realistically be affected by political motivations.

"There are so many variables that go into prices at the pump that I cannot conceive a way that the Republican administration could manipulate price," he said.

John Theobald, chairperson of the University of California's Oil Forum and professor at UC Davis, said politics are often involved in petroleum-based energy issues.

"That may be a factor, but not an important one," he said. "I would concede that some political manipulation of price is possible, but the important point is that prices will be rising in the long run."

According to Theobald, the expectation of a long-term increase in gas prices does not equate to Americans paying less right now.

"We can expect a lot of fluctuation because markets don't go up or down in a straight line," he said. "But consumers should expect the price of oil products to increase significantly in the coming years regardless of short-term drops in price."

Regardless of oil prices, experts contend that the future of worldwide energy consumption will be in conservation and alternative fuels. Research efforts such as those at UC Davis hope to be at the forefront of such discoveries.

Theobald said that while oil is the most convenient fuel in terms of its form at room-temperature and usability, alternative energies are crucial to fulfilling future energy needs.

"It's important people understand the importance of finding alternatives to oil," he said. "We need several long-range alternatives, not just one or two viable options. It is also about conservation. We need to study a range of different subject areas."

Osleger said Americans that have expressed frustration with the price of gas may not realize that costs are comparatively low.

"The prices we pay are extraordinarily low relative to a comparable amount of any other fluid, like water or orange juice," Osleger said. "The reality is we still pay a very reasonable amount. If gas kept pace with inflation and the amount of oil left in the ground, then we would actually be paying a lot more."

Osleger added that the United States will reach the point of peak oil in the near future and will have to consider its options.

"We could save enormous amounts of energy if we could get higher miles-per-hour in our vehicles, better hybrid cars and electric cars to improve our travel," he said. "And as we look at ways to conserve, we can look toward alternative energy. The inevitable is switching over from hydrocarbons to alternative forms."


Sunday, October 08, 2006

US Democracy Under Threat

Raise the Hammer

The global economy is set to start shrinking as the supply of oil goes into decline. Big business will fight ruthlessly to protect their share of the pie.

By Ryan McGreal

I've long been concerned with developments south of the border, but in the past I consoled myself that America has flirted with domestic fascism before and eventually righted itself.

This time it may be different: for the first time, the long global trajectory of economic growth is on the cusp of a permanent reversal.

A Century of Progress

Even during the darkest days of WWI, the Great Depression, WWII, and the Cold War, the world was getting richer, the total global production and consumption of energy was increasing, and "Progress" (with a capital P) still seemed the order of the day. These crises were seen as the last great lurches of a dying imperial order that had run its course and grown unstable.

Even the Great Depression was seen mainly as a misguided overreaction to the bursting of a vast financial bubble that had not yet been subjected to the sophisticated regulatory tools that today allow people like US Federal Reserve Chairman Ben Bernanke to wield godlike powers.

Through all this, global economic output grew steadily as the net flow of usable energy increased at around two or three percent a year. It was easy to struggle for universal civil rights when there was enough energy to go around and you didn't need slaves, serfs, or sharecroppers anymore.

It was comparatively easy to struggle for social justice. For the first time in history, there was plenty to go around. Poor, unbearable shanties in the rural South suddenly became livable, thanks to air conditioners and motor vehicles, all powered by cheap, abundant fossil fuels. Rotting northern industrial cities emptied into their hinterlands, levelled and paved and bristling with new single houses.

The movement to universalize the basic trappings of modern life gained traction, and with the infrastructure of Roosevelt's New Deal in place, corporate America signed onto a bargain in which industry reluctantly accepted full employment policies and high wages in exchange for steady growth.

Backlash

Then, starting in the 1970s with the OPEC oil shocks, North American industries and their lobbying groups and think tank "institutes" went on the offensive, fighting back against egalitarianism and steadily clawing away at the gains the social justice movement had achieved.

Over the next three decades, big business pressure slashed corporate taxes, froze minimum wages, rolled back unionization, and cut budgets for education, health care, and public infrastructure.

In that period, nearly all the wealth increases have gone to the top ten percent of Americans, of whom the top one percent has taken the largest share. Executive salaries have soared, while the size of the poor underclass has grown, eating into the middle class while median incomes have stalled and declined.

Today, cities are crumbling, public schools struggle with inadequate resources, and in the US, some 47 million people have no comprehensive health care coverage. When the next big recession hits, the basic protections built up over half a century will no longer exist.

At the same time, elections have turned into hundred million dollar extravaganzas of public manipulation. What used to be considered influence peddling has been normalized in the US Congress, with "registered" lobbyists and overt corruption.

Illusory Growth

Since 2000, if you exclude the booming health care industry, the net change in employment in the private sector has been strongly negative.

The boom in home construction, fueled by the housing bubble that grew out of Alan Greenspan's rock-bottom interest rates early in the decade, has produced some low-skilled construction jobs. However, that has not been enough to counteract the net decline in manufacturing work.

Even the much-ballyhooed "information economy", which was supposed to replace manufacturing jobs with a new generation of high-skilled tech jobs, has generated almost zero net jobs since the tech bubble burst in 2000.

The US federal government is hemorrhaging around three hundred billion dollars a year, plus deficits at the state and municipal level. This year, the US economy will import close to $800 billion more in goods and services than it exports.

In an ominous echo of the 1998 collapse of Long Term Capital Management, another hedge fund has just failed. Amaranth Advisors, Inc. pulled the plug after a month-long collapse, losing $6 billion dollars. Banks are scrambling to insulate themselves from the fallout, but this is another sign of growing volatility.

Ironically, Amaranth collapsed because a trader bet that natural gas futures for March-April 2007 would continue to rise. Instead the futures share price dropped by four-fifths on the strength of a mild hurricane season and reports of a warm winter.

A Geological Date with Destiny

In the context of this volatile political milieu, consider the effects of peak oil, the period at which half the world's conventional petroleum reserves have been consumed. After the peak, total oil production goes into an inexorable decline.

Many geologists believe the peak is happening now, and point as early evidence to the fact that this year's total global oil production has fallen compared to last year's, for the first time since the 1970s.

While the earlier production declines were political - the first because OPEC cut production, and the second because Iran overthrew its government and stopped oil production - today's decline is geological.

When the total output of oil is growing, we can trust market forces to allocate that oil more or less fairly. When the total output is shrinking but the world's largest buyer refuses to pay the scarcity premium or consume less, then it must circumvent the market and secure a steady supply by force - and to hell with the rest of the world.

Oil Price Volatility

The price of oil has risen steadily since its 1999 low of $18 per barrel to a high of $75 per barrel in mid-2006 because demand has grown steadily but production could not increase to match it. Reserve margins in the oil industry fell to zero over this time, and even Saudi Arabia, the world's oil producing powerhouse, admits it has passed its production peak.

Lately, high prices have destroyed some of the demand for oil, particularly in poorer countries, and investors fear that the US will go into a recession next year, so the price has fallen near $60 per barrel, which feels like a break today but is still over three times higher than in 1999.

Cornucopian economists will point to today's falling prices as proof that there's no oil shortage and that the market works just fine, thank you very much. However, peak oil theory actually predicts several years of exactly this kind of price volatility as the production ceiling repeatedly destroys demand via high prices.

When the demand drops, the price falls; the lower price, in turn, restores a demand that the physical capacity of the oil industry cannot meet. Each time demand bounces off the global peak in production, the new baseline of wealth will be a little lower than before, the security of the middle class less certain, the desperation of the poor more acute.

Bad Times Ahead

This bodes very badly for struggling people the world over. If big business fought back fiercely against public spending when economic growth merely slowed, how fierce and unrelenting will they be once the economy actually starts to shrink in real terms?

How hard will they push the government to repress and resist the social justice movement when that pie starts shrinking?

We already face attempts to tie the social justice and environemental movements to the so-called War on Terrorism. If domestic resistance to US policy escalates beyond timid protests, apolitical unions, and "free speech zones", will the US government be able to resist characterizing protests as terrorist acts?

When there's plenty of food to go around, enough is left to toss some scraps to the hounds to keep them happy. But when there's not so much to go around and there are no scraps, you have to beat the dogs to keep them quiet. Once they become too desperate and unruly to silence with threats and repression, you have to kill them.

I fear we're in for ugly times ahead.


Thursday, October 05, 2006

The Peak Oil Crisis: Election 2008

Falls Church News-Press

By Tom Whipple

Last week they took a poll here in Virginia on how the race for US Senate was shaping up. The poll showed the candidates in a dead heat, but the issues section of the story caught my eye. Twenty-three percent said the most important issue was Iraq, followed by terrorism at 19 percent; the economy, 16 percent; health care, 10 percent; immigration, 9 percent; taxes, 9 percent; moral and family values, 8 percent; and dead last was gasoline prices and energy, 1 percent. So much for voter concern about gasoline prices.

A lot has happened since last winter when President Bush pronounced us addicted to oil and Congress was falling all over itself introducing bills to lower our gas prices and reduce our dependence on the Middle East. What a difference a 60-cent drop in the price of gasoline makes these days.

Unless there is a major disaster in the next few weeks, it is unlikely oil depletion will have much impact on the 2006 mid-term elections. People may have nagging doubts about dependence on foreign oil, but it is doubtful that many candidates are going out on the limb and starting to talk about conservation, sacrifice, life style changes and all that will come with peak oil. It’s too depressing and still a great way to lose an election. This is too bad because even if it turns out that we have the resources to make it through to a post oil-age world and into some semblance of life-as-we-know it, it is going to take 20 or more years of severe economic hardships. The sooner the debate begins, the better.

Since the 2006 election seems like a lost opportunity to debate oil depletion, what about 2008? From the vantage point of 25 months away, there is obviously much about the 2008 political landscape that, as yet, we haven't a clue. Which party will be controlling which house of Congress? What will the status of US involvement with Iraq and perhaps other Middle Eastern countries be? What will crude be selling for and what will be the price of gasoline? Where will the Dow-Jones be? Will the housing bubble have burst? Will it be obvious or murky that worldwide oil depletion has started or is near at hand?

There are, however, some parameters of 2008 that seem reasonably certain. On the first Tuesday after the first Monday in November we will be electing a new President of the United States. No matter how much oil is currently left in the ground, there will be 62 billion barrels less of it when we get around to voting. We can also be sure that US reliance on foreign oil and products, which is currently about 66 percent of our consumption, will increase a bit as US oil supplies continue to deplete.

The experience of the last year and the lesson of the poll referred to above is that voters will only be moved by high gas prices. All of the logical arguments, trend lines, statistics and speeches in the world won't persuade a critical mass that there is serious trouble ahead until it is driven home by the sign over the gas pumps.

From a geological standpoint, several of the world's largest exporters contributing significantly to US oil supplies are suspected of being in or very close to going into depletion. Mexico, Kuwait, the UK and perhaps even Saudi Arabia, are almost certain to export less oil two years from now. Should any of these exporters go into rapid depletion the consequence is likely to be the higher gas prices voters understand.

The impact of political instability on gas prices two years from now is much harder to foresee. Unless some miracle intervenes, Iraq is in a death spiral and the likelihood of Baghdad continuing to export oil at current levels is not good. The spread of the Sunni-Shiite hostilities to other Gulf States in the next two years is possible.

Nigeria has to get through its Presidential elections in 2007 and tensions are already building in the country. Whether Nigeria will be producing oil at projected, or even current levels, in 2008 is a very open question.

There is little doubt that as oil supplies become tighter, nationalism will grow, as oil producers want a bigger share of the pie at the expense of the International Oil Companies (IOCs). Currently Venezuela and Russia are the most active in bringing their petroleum resources firmly under state control just as the Middle East did 20-30 years ago. The problem is that, as oil gets harder to produce, it is the IOCs that are the only organization with the resources and technical expertise to find and produce oil under difficult conditions. Continuing friction between the IOCs and host states could easily result in significant delays in the development of new projects.

What does all this tell us about the possible impact of high oil prices on the 2008 Presidential election? There are many situations shaping up in the world today that potentially could reduce oil production. These range from major civil wars in Iraq and Nigeria to Hurricanes and sudden drops in production from aging reservoirs. Considering the range of possible problems and the tightness of world oil supplies, it is difficult to imagine that one or more will not start putting pressure on US's ability to import oil during the next 24 months.

The most pessimistic of the analysts trying to calculate the balance among new oil supplies, world demand, and oil depletion talk about 2008 as the earliest serious shortages could develop. A fair guess would put the chances at about 50-50 that high gasoline prices will be playing a major in the 2008 elections.

There are simply too many variables to speculate in a meaningful manner about the parameters of a 2008 energy debate. A major stoppage of production or imports in the next two years could force the current administration to take drastic measures —forced conservation, rationing— in spite of itself. Alternatively, a gradual increase of gasoline prices to new highs could bring out renewed waves of demagoguery — "lower taxes," "forget air quality," "hydrogen cars"— that we saw earlier this summer.

Even if all goes well and oil production manages to keep up with demand during the next two years, oil depletion does not stop. By the 2012 election the world will have gone through another 180 billion or so barrels of oil and the odds are very good that world oil production will have peaked. Whoever we elect president the next time around is likely to be facing problems fully equivalent to those faced during the Great Depression, the Civil War and the American Revolution.


Wednesday, October 04, 2006

Lessons Of The Gas Pump

ZNet

by Michael Klare

What the hell is going on here? Just six weeks ago, gasoline prices at the pump were hovering at the $3 per gallon mark; today, they're inching down toward $2--and some analysts predict even lower numbers before the November elections. The sharp drop in gas prices has been good news for consumers, who now have more money in their pockets to spend on food and other necessities--and for President Bush, who has witnessed a sudden lift in his approval ratings.

Is this the result of some hidden conspiracy between the White House and Big Oil to help the Republican cause in the elections, as some are already suggesting? How does a possible war with Iran fit into the gas-price equation? And what do falling gasoline prices tell us about "peak-oil" theory, which predicts that we have reached our energy limits on the planet?

Since gasoline prices began their sharp decline in mid-August, many pundits have attempted to account for the drop, but none have offered a completely convincing explanation, lending some plausibility to claims that the Bush administration and its long-term allies in the oil industry are manipulating prices behind the scenes. In my view, however, the most significant factor in the downturn in prices has simply been a sharp easing of the "fear factor" --the worry that crude oil prices would rise to $100 or more a barrel due to spreading war in the Middle East, a Bush administration strike at Iranian nuclear facilities, and possible Katrina-scale hurricanes blowing through the Gulf of Mexico, severely damaging offshore oil rigs.

As the summer commenced and oil prices began a steep upward climb, many industry analysts were predicting a late summer or early fall clash between the United States and Iran (roughly coinciding with a predicted intense hurricane season). This led oil merchants and refiners to fill their storage facilities to capacity with $70-80 per barrel oil. They expected to have a considerable backlog to sell at a substantial profit if supplies from the Middle East were cut off and/or storms wracked the Gulf of Mexico.

Then came the war in Lebanon. At first, the fighting seemed to confirm such predictions, only increasing fears of a region-wide conflict, possibly involving Iran. The price of crude oil approached record heights. In the early days of the war, the Bush administration tacitly seconded Israeli actions in Lebanon, which, it was widely assumed, would lay the groundwork for a similar campaign against military targets in Iran. But Hezbollah's success in holding off the Israeli military combined with horrific television images of civilian casualties forced leaders in the United States and Europe to intercede and bring the fighting to a halt.

We may never know exactly what led the White House to shift course on Lebanon, but high oil prices--and expectations of worse to come--were surely a factor in administration calculations. When it became clear that the Israelis were facing far stiffer resistance than expected, and that the Iranians were capable of fomenting all manner of mischief (including, potentially, total havoc in the global oil market), wiser heads in the corporate wing of the Republican Party undoubtedly concluded that any further escalation or regionalization of the war would immediately push crude prices over $100 per barrel.

Prices at the gas pump would then have been driven into the $4-5 per gallon range, virtually ensuring a Republican defeat in the mid-term elections. This was still early in the summer, of course, well before peak hurricane season; mix just one Katrina-strength storm in the Gulf of Mexico into this already unfolding nightmare scenario and the fate of the Republicans would have been sealed.

In any case, President Bush did allow Secretary of State Condoleezza Rice to work with the Europeans to stop the Lebanon fighting and has since refrained from any overt talk about a possible assault on Iran.

Careful never explicitly to rule out the military option when it comes to Iran's nuclear enrichment facilities, since June he has nonetheless steadfastly insisted that diplomacy must be given a chance to work. Meanwhile, we have made it most of the way through this year's hurricane season without a single catastrophic storm hitting the U.S.

For all these reasons, immediate fears about a clash with Iran, a possible spreading of war to other oil regions in the Middle East, and Gulf of Mexico hurricanes have dissipated, and the price of crude has plummeted. On top of this, there appears to be a perceptible slowing of the world economy--precipitated, in part, by the rising prices of raw materials--leading to a drop in oil demand. The result? Retailers have abundant supplies of gasoline on hand and the laws of supply and demand dictate a decline in prices.

How long will this combination of factors prevail?

Best guess: The slowdown in global economic growth will continue for a time, further lowering prices at the pump. This is likely to help retailers in time for the Christmas shopping season, projected to be marginally better this year than last precisely because of those lower gas prices.

Once the election season is past, however, President Bush will have less incentive to muzzle his rhetoric on Iran and we may experience a sharp increase in Ahmadinejad-bashing. If no progress has been made by year's end on the diplomatic front, expect an acceleration of the preparations for war already underway in the Persian Gulf area (similar to the military buildup witnessed in late 2002 and early 2003 prior to the U.S. invasion of Iraq). This will naturally lead to an intensification of fears and a reversal of the downward spiral of gas prices, though from a level that, by then, may be well below $2 per gallon.

Now that we've come this far, does the recent drop in gasoline prices and the seemingly sudden abundance of petroleum reveal a flaw in the argument for this as a peak-oil moment? Peak-oil theory, which had been getting ever more attention until the price at the pump began to fall, contends that the amount of oil in the world is finite; that once we've used up about half of the original global supply, production will attain a maximum or "peak" level, after which daily output will fall, no matter how much more is spent on exploration and enhanced extraction technology.

Most industry analysts now agree that global oil output will eventually reach a peak level, but there is considerable debate as to exactly when that moment will arise. Recently, a growing number of specialists--many joined under the banner of the Association for the Study of Peak Oil --are claiming that we have already consumed approximately half the world's original inheritance of 2 trillion barrels of conventional (i.e., liquid) petroleum, and so are at, or very near, the peak-oil moment and can expect an imminent contraction in supplies.

In the fall of 2005, as if in confirmation of this assessment, the CEO of Chevron, David O'Reilly, blanketed U.S. newspapers and magazines with an advertisement stating, "One thing is clear: the era of easy oil is over ... Demand is soaring like never before ... At the same time, many of the world's oil and gas fields are maturing. And new energy discoveries are mainly occurring in places where resources are difficult to extract, physically, economically, and even politically. When growing demand meets tighter supplies, the result is more competition for the same resources."

But this is not, of course, what we are now seeing.

Petroleum supplies are more abundant than they were six months ago. There have even been some promising discoveries of new oil and gas fields in the Gulf of Mexico, while--modestly adding to global stockpiles--several foreign fields and pipelines have come on line in the last few months, including the $4 billion Baku-Tbilisi-Ceyhan (BTC) pipeline from the Caspian Sea to Turkey's Mediterranean coast, which will bring new supplies to world markets. Does this indicate that peak-oil theory is headed for the dustbin of history or, at least, that the peak moment is still safely in our future?

As it happens, nothing in the current situation should lead us to conclude that peak-oil theory is wrong. Far from it. As suggested by Chevron's O'Reilly, remaining energy supplies on the planet are mainly to be found "in places where resources are difficult to extract, physically, economically, and even politically." This is exactly what we are seeing today.

For example, the much-heralded new discovery in the Gulf of Mexico, Chevron's Jack No. 2 Well , lies beneath five miles of water and rock some 175 miles south of New Orleans in an area where, in recent years, hurricanes Ivan, Katrina, and Rita have attained their maximum strength and inflicted their greatest damage on offshore oil facilities. It is naive to assume that, however promising Jack No. 2 may seem in oil-industry publicity releases, it will not be exposed to Category 5 hurricanes in the years ahead, especially as global warming heats the Gulf and generates ever more potent storms. Obviously, Chevron would not be investing billions of dollars in costly technology to develop such a precarious energy resource if there were better opportunities on land or closer to shore--but so many of those easy-to-get-at places have now been exhausted, leaving the company little choice in the matter.

Or take the equally ballyhooed BTC pipeline, which shipped its first oil in July, with top U.S. officials in attendance . This conduit stretches 1,040 miles from Baku in Azerbaijan to the Turkish Mediterranean port of Ceyhan, passing no less than six active or potential war zones along the way: the Armenian enclave of Nagorno-Karabakh in Azerbaijan; Chechnya and Dagestan in Russia; the Muslim separatist enclaves of South Ossetia and Abkhazia in Georgia; and the Kurdish regions of Turkey. Is this where anyone in their right mind would build a pipeline? Not unless you were desperate for oil, and safer locations had already been used up.

In fact, virtually all of the other new fields being developed or considered by U.S. and foreign energy firms--ANWR in Alaska, the jungles of Colombia, northern Siberia, Uganda, Chad, Sakhalin Island in Russia's Far East--are located in areas that are hard to reach, environmentally sensitive, or just plain dangerous. Most of these fields will be developed, and they will yield additional supplies of oil, but the fact that we are being forced to rely on them suggests that the peak-oil moment has indeed arrived and that the general direction of the price of oil, despite period drops, will tend to be upwards as the cost of production in these out-of-the-way and dangerous places continues to climb.

Some peak-oil theorists have, however, done us all a disservice by suggesting, for rhetorical purposes, that the peak-oil moment is ... well, a sharp peak. They paint a picture of a simple, steep, upward production slope leading to a pinnacle, followed by a similarly neat and steep decline. Perhaps looking back from 500 years hence, this moment will have that appearance on global oil production charts. But for those of us living now, the "peak" is more likely to feel like a plateau--lasting for perhaps a decade or more--in which global oil production will experience occasional ups and downs without rising substantially (as predicted by those who dismiss peak-oil theory), nor falling precipitously (as predicted by its most ardent proponents).

During this interim period, particular events--a hurricane, an outbreak of conflict in an oil region--will temporarily tighten supplies, raising gasoline prices, while the opening of a new field or pipeline, or simply (as now) the alleviation of immediate fears and a temporary boost in supplies will lower prices. Eventually, of course, we will reach the plateau's end and the decline predicted by the theory will commence in earnest.

In the meantime, for better or worse, we live on that plateau today. If this year's hurricane season ends with no major storms, and we get through the next few months without a major blowup in the Middle East, we are likely to start 2007 with lower gasoline prices than we've seen in a while. This is not, however, evidence of a major trend. Because global oil supplies are never likely to be truly abundant again, it would only take one major storm or one major crisis in the Middle East to push crude prices back up near or over $80 a barrel. This is the world we now inhabit, and it will never get truly better until we develop an entirely new energy system based on petroleum alternatives and renewable fuels.

Michael T. Klare is a professor of peace and world security studies at Hampshire College in Amherst, Massachusetts and the author of Blood and Oil: The Dangers and Consequences of America's Growing Dependency on Imported Petroleum . This piece originally appeared in TomDispatch.