Peak Oil News: 08/01/2008 - 09/01/2008

Sunday, August 31, 2008

Rep. Bartlett pursues lonely energy crusade

baltimoresun.com


Republican has often warned about oil dependence, but is anyone listening?

By Matthew Hay Brown

Charts at the ready, notes spread out before him, Rep. Roscoe G. Bartlett begins another address in the House of Representatives on the dangers of America's dependence on oil.

The Western Maryland Republican has given nearly 50 such speeches at the Capitol in the past three years, most of them variations on a theme: that a coming decline in petroleum production, coupled with growing demand for energy, will have a calamitous impact on the global economy.

"The world as a whole, and our country included, has appeared to behave as if these fossil fuels were inexhaustible," the former university professor lectures. "What we'll see shortly is that - as everyone will know, if you stop and think about it - that oil is finite."

This should be Bartlett's moment. With concerns growing about the impact of the use of fossil fuels on climate change, officials warning about the national security implications of relying on foreign oil, and the price of gasoline surpassing $4 a gallon, energy has become the nation's leading domestic political issue.

The 16-year House veteran has long prepared for the debate. A research scientist and inventor - he has a doctorate in human physiology and holds patents on breathing equipment used by astronauts, pilots and firefighters - he has spent years talking about, and getting ready for, a looming crisis.

As a developer, he has been building houses with passive solar energy since the 1980s. His farmhouse in Frederick is warmed by a combination of solar energy and a wood stove; a second home in West Virginia is off the grid entirely.

He became the first member of Congress to drive a hybrid when he bought a Toyota Prius in 2000. He founded the Congressional Peak Oil Caucus five years later to promote conservation and investment in alternative energy sources.

But on this afternoon, the House chamber is virtually empty. The legislative week is over, and Congress has left town. C-SPAN will record his presentation, but few, if any, of his colleagues will ever see it.

As the discussion around rising energy costs degenerates into a partisan debate over where to drill next, Bartlett is having trouble getting a hearing.

"It is a little disappointing to see the lack of interest in Roscoe's depth of knowledge on this issue," says Rep. Wayne T. Gilchrest, a fellow Maryland Republican. "He tries to educate the leadership on both sides, Democrats and Republicans. Unfortunately, they don't listen closely enough."

Bartlett is undeterred.

He refers frequently to reports commissioned by the federal government that predict dire consequences for failing to prepare for the moment when petroleum production begins to decline - a scenario known as peak oil.

The Government Accountability Office warned last year that a quick decline "would require sharp reductions in oil consumption, and the competition for increasingly scarce energy would drive up prices, possibly to unprecedented levels, causing severe economic damage. While these consequences would be felt globally, the United States, as the largest consumer of oil and one of the nations most heavily dependent on oil for transportation, may be especially vulnerable."

Bartlett believes that moment may now be arriving.

"You will never know that oil has peaked until you look back at it," he says. "This plateau [in global production] we've been on now for three years may in fact not be peaking. It may be a little plateau; there may be a pickup.

"I don't think there will be."

Bartlett is counseling "aggressive conservation," coupled with government-backed investment in renewable energy - a program he describes as requiring "the total commitment of World War II, the technology focus of putting a man on the moon and the urgency of the Manhattan Project."

The emphasis has put him out of step with many fellow Republicans. House Minority Leader John A. Boehner calls Bartlett "a tireless advocate for responsible energy policies."

But during the current debate, Boehner and other party leaders have focused not on using less or investing in alternatives, but on developing domestic oil production by opening the Arctic National Wildlife Refuge and the Outer Continental Shelf to drilling.

"I'm not really in sync with either side," Bartlett says. "Most of the Republicans, I can't get in their head, of course, but from what they say, I gather that they believe that the problem will go away if we drill and that we wouldn't even have the problem now if the Congress had done what they wanted to do 10 years ago and started drilling."

While his party talks about a multifaceted approach to energy, Bartlett says, members are paying only "passing lip service" to what he calls "the most urgent first step": conservation.

"I don't think the average Republican believes that there's any such thing as peak oil," he says.

It isn't the first time Bartlett, despite a lifetime American Conservative Union rating of 93 out of 100, has clashed with colleagues.

When former Vice President Al Gore appeared last year on Capitol Hill, Bartlett chided colleagues skeptical of climate change, saying that "it's possible to be a conservative without appearing to be an idiot."

When Gore's successor, Vice President Dick Cheney, asked Bartlett to vote in favor of exploring ANWR, Bartlett says, he responded with a question: "If you could drill in ANWR tomorrow, what would you do the day after tomorrow?"

"I don't know that very many of my colleagues are thinking about the day after tomorrow," Bartlett says. With 10 children, 16 grandchildren and two great grandchildren, he says, "I think a lot about the day after tomorrow."

Bartlett now has relented on drilling. He has signed on as a co-sponsor of bipartisan legislation that would open the Outer Continental Shelf to exploration - because, he says, it also includes a five-year extension in tax credits for investment in alternative energy.

That move has opened him to charges of inconsistency from Jennifer Dougherty, his Democratic opponent this fall in the 6th Congressional District.

"He has flipped his position and his votes, so you really don't know what he'll do if he gets elected for a ninth term," her campaign said in a recent release.

Bartlett says there is no inconsistency.

"I have always said that I would vote for drilling when we used the revenues we got from drilling to invest in alternatives, he says. "I have not changed. Other members have changed - they've come to where I've been all along."


Sunday, August 24, 2008

To be truly free is to be responsible

TwinCities.com


By Rod Dreher

Has the world already reached peak oil, a time of permanently high oil prices and shortages that will profoundly change our way of life? The answer, I think, is likely yes, but the proximity of this catastrophe is not the most important question to ask.

Oil is a finite natural resource; sooner or later, the supply will peak. Jeroen van der Veer, chief of Royal Dutch Shell, earlier this year predicted 2015 as the year the world reaches peak production. John Hess of Hess Corp. said: "An oil crisis is coming in the next 10 years. It's not a matter of demand. It's not a matter of supplies. It's both."

Whether peak oil is already here or on its way, we'll have to deal with it.

The more important question, then, is this: Are we ready for the inevitable? The answer, I'm convinced, is no. And our unreadiness is not for lack of information; it's moral and philosophical. Put plainly, it's because we Americans do not recognize limits. We live in a fantasyland whose borders go far beyond the oilfields, whose psychological geography is critical to map out a future our nation is blindly headed for.

Andrew Bacevich, the retired Army colonel and conservative academic, describes us this way in his forthcoming book "The Limits of Power":

If one were to choose a single word to characterize (what it means to be a 21st-century American), it would have to be more. For the majority of contemporary Americans, the essence of life, liberty and the pursuit of happiness centers on a relentless personal quest to acquire, to consume, to indulge and to shed whatever constraints might interfere with those endeavors.

Nowhere in the Bacevich analysis does the phrase "peak oil" appear. But oil dependence is key to our weakness, he argues. America's imperial military overstretch since the 1980 promulgation of the Carter Doctrine — which holds that the U.S. will defend vital interests in the Persian Gulf "by any means necessary" — is a natural consequence of that oil dependency. Our collective refusal to conserve oil, to learn to live more sensibly within our means, requires an ever-growing military commitment to the Middle East.

When the wells begin to peter out, the competition for the remaining petroleum resources will grow even fiercer. Are more than the 0.5 percent of Americans who now serve in the military willing to risk their lives fighting overseas so we can continue to live as we wish? Peak oil will force that question on us.

Our way of life depends not only on cheap, abundant oil but also on a seemingly endless line of credit. Within a single lifetime, the U.S. has gone from creditor nation to debtor nation. The current crisis in the mortgage industry, which threatens to derail the entire economy, derives from the conviction that desire is its own justification. That is, if you want something, you are entitled to it, no matter its cost — and anybody who tells you different is a knave. Politicians of both parties depend on telling this lie.

Technology has aided and abetted our false sense of freedom, leading us to believe that scientists, the sorcerers of a materialist age, will conjure new spells to extend man's mastery of an unruly natural world. The idea that human ingenuity might not be able to save us never seems to cross anybody's mind.

In the current issue of the New Yorker, Jerome Groopman writes of new antibiotic-resistant superbugs that defy medical science's abilities to combat. Part of the problem is the way we raise livestock in defiance of natural limits (that troublesome pre-modern concept again) to meet our ravenous appetite for cheap, abundant meat. Jacking up farm animals with antibiotics so they can live in filthy, crowded conditions exacts costs that don't show up in the supermarket line.

"The problem is that we have created the perfect environment in which to breed superbugs that are antibiotic-resistant," journalist Michael Pollan tells Groopman. "We've created a Petri dish in our factory farms for the evolution of dangerous pathogens."

Maybe we'll come up with a new wonder drug to fight the superbugs. Maybe we'll invent some new way to meet our power needs when oil can't be had cheaply, or at any price. Maybe Wall Street will come up with new financial instruments that will make us solvent again. It could happen.

But there are no guarantees. The thing is, we're living as if we are guaranteed to go onward and upward into a better and brighter future. Our nation's (relatively short) history encourages this fallacious thinking. Like spoiled children, we want freedom without responsibility. But that's impossible. You cannot defy the law of gravity forever.

To be truly free is to be responsible. To be responsible is to make choices today that demonstrate wise stewardship of our resources and our liberty. To be responsible is to see the world as it is, not as we would like it to be. To be responsible is to sacrifice now, as previous generations did, so as not to bind future generations to the tyranny of debt, poverty, foreign powers or their own appetites.

A famed U.S. military leader has warned that the fossil-fuel supply on which American civilization depends utterly will run out someday in the 21st century and that our nation cannot afford to place our hope in "the sentimental belief that the things we fear will never really happen."

"I suggest that this is a good time to think soberly about our responsibilities to our descendants — those who will ring out the Fossil Fuel Age," said Adm. Hyman G. Rickover, father of the nuclear Navy.

In 1957.

We've wasted a half-century of precious time, another nonrenewable resource. We probably don't have another one to spare.

Rod Dreher is a Dallas Morning News editorial columnist. Write to him at the Dallas Morning News, Communications Center, Dallas, TX 75265. Or by e-mail at rdreher@dallasnews.com.


This is what Peak Oil looks like

NJVoices


By Bill Wolfe


Demand growing. Supply shrinking - Get used to higher prices

Although I think they got the story wrong (i.e. by attributing the problem more to underinvestment in exploration and political restrictions on access to supplies, than to a decline in recoverable supply, or peak oil), according to the NY Times business page:

"In 1994, the top five oil companies spent 3 percent of their free cash on share buybacks and 15 percent on exploration. By 2007, they were spending 34 percent of their free cash on buybacks -- in effect, propping up their share prices -- and a mere 6 percent on exploration, according to figures compiled by a team led by Ms. Jaffe and Ronald Soligo of Rice University. As a result, some experts warn that supplies will fall short of the demand over the next decade, perhaps sending prices well above today's levels.

At a recent conference in Madrid, Christophe de Margerie, the chief executive of the French company Total, said the world would be hard-pressed to raise supplies beyond 95 million barrels a day by 2020. Only a few years ago, forecasters expected 120 million barrels a day by 2030, a level many analysts now view as unrealistic."


Thursday, August 21, 2008

As Oil Giants Lose Influence, Supply Drops

NYTimes.com


By Jad Mouawad

Oil production has begun falling at all of the major Western oil companies, and they are finding it harder than ever to find new prospects even though they are awash in profits and eager to expand.

Part of the reason is political. From the Caspian Sea to South America, Western oil companies are being squeezed out of resource-rich provinces. They are being forced to renegotiate contracts on less-favorable terms and are fighting losing battles with assertive state-owned oil companies.

And much of their production is in mature regions that are declining, like the North Sea.

The reality, experts say, is that the oil giants that once dominated the global market have lost much of their influence — and with it, their ability to increase supplies.

“This is an industry in crisis,” said Amy Myers Jaffe, the associate director of Rice University’s energy program in Houston. “It’s a crisis of leadership, a crisis of strategy and a crisis of what the future looks like for the supermajors,” a term often applied to the biggest oil companies. “They are like a deer caught in headlights. They know they have to move, but they can’t decide where to go.”

The sharp retreat in all of the commodities’ prices over the last month, about 20 percent, reflects slowing global growth and with it reduced demand for more oil in the short term. But over the next decade, the world will need more oil to satisfy developing Asian economies like China. The oil companies’ difficulties suggest that these much-needed future supplies may be hard to come by.

Oil production has failed to catch up with surging consumption in recent years, a disparity that propelled oil prices to records this year. Despite the recent decline, oil remains above $100 a barrel, unimaginable a few years ago, causing pain throughout the economy, like higher prices at the gas pump and automakers posting sizable losses.

The scope of the supply problem became more clear in the latest quarter when the five biggest publicly traded oil companies, including Exxon Mobil, said their oil output had declined by a total of 614,000 barrels a day, even as they posted $44 billion in profits. It was the steepest of five consecutive quarters of declines.

While that drop might not sound like much in a world that consumes 86 million barrels of oil each day, today’s markets are so tight that the slightest shortfalls can push up prices.

Along with mature fields, the companies have contracts with producing countries whose governments allocate fewer barrels to oil companies as prices rise.

“It has become really, really difficult to grow production,” said Paul Horsnell, an analyst at Barclays Capital. “International companies have a portfolio of assets in areas of significant decline and no frontier discoveries to make up for that.”

As a result of the industry’s troubles, energy experts do not expect oil supplies to grow this year in countries outside the Organization of the Petroleum Exporting Countries. Global demand for oil is expected to expand by 800,000 barrels a day, mostly because of rising demand in China and the Middle East, despite lower consumption in developing countries.

This imbalance between supplies and demand will be one thing that OPEC ministers will consider when they meet next month to decide whether or not to increase their production. OPEC has about 2 million barrels a day in untapped capacity that its members control.

The new oil order has been emerging for a few decades.

As late as the 1970s, Western corporations controlled well over half of the world’s oil production. These companies — Exxon Mobil, BP, Royal Dutch Shell, Chevron, ConocoPhillips, Total of France and Eni of Italy — now produce just 13 percent.

Today’s 10 largest holders of petroleum reserves are state-owned companies, like Russia’s Gazprom and Iran’s national oil company.

Sluggish supplies have prompted a cottage industry of doomsday predictions that the world’s oil production has reached a peak. But many energy experts say these “peak oil” theories are misplaced. They say the world is not running out of oil — rather, the companies that know the most about how to produce oil are running out of places to drill.

“There is still a lot of oil to develop out there, which is why we don’t call this geological peak oil, especially in places like Venezuela, Russia, Iran and Iraq,” said Arjun Murti, an energy analyst at Goldman Sachs. “What we have now is geopolitical peak oil.”

Western companies are far better than most national oil companies at finding and extracting petroleum, experts say. They have developed advanced exploration technologies and can muster significant financing to develop new fields. Many of the world’s exporting states, however, have spurned their expertise.

Oil company executives see a straightforward explanation: a trend known as resource nationalism. They contend that they have been shut out of promising regions by a rising assertiveness in the Middle East, in Russia, in South America and elsewhere by governments determined to keep full control of their oil.

Even in places where they are allowed to operate, the Western oil companies face growing problems. Countries like Russia, Algeria, Nigeria and Angola have recently sought to renegotiate their contracts with foreign investors to capture a bigger share of the profits.

“The problem with the supply side of the equation is a problem of accessing the resources in the ground so they can be explored and developed,” Rex W. Tillerson, the chairman of Exxon, said in a recent interview. “That’s a political question where governments have made choices.”

This sense of being hemmed in helps explain why the Western oil companies want more offshore drilling in the United States. They see it as one of their few options.

These companies have also tried to diversify. They have turned to natural gas as a profitable source of growth. They are tackling hydrocarbon resources, like deep-water reserves, heavy oil or tar sands. And some companies, like Shell and BP, are investing in renewable fuels.

Unquestionably, the oil companies could have done more. They failed to invest heavily in exploration after the oil-price collapse of the mid-1980s, which lasted through the 1990s.

In 1994, the top five oil companies spent 3 percent of their free cash on share buybacks and 15 percent on exploration. By 2007, they were spending 34 percent of their free cash on buybacks — in effect, propping up their share prices — and a mere 6 percent on exploration, according to figures compiled by a team led by Ms. Jaffe and Ronald Soligo of Rice University. As a result, some experts warn that supplies will fall short of the demand over the next decade, perhaps sending prices well above today’s levels.

At a recent conference in Madrid, Christophe de Margerie, the chief executive of the French company Total, said the world would be hard-pressed to raise supplies beyond 95 million barrels a day by 2020. Only a few years ago, forecasters expected 120 million barrels a day by 2030, a level many analysts now view as unrealistic.

The major companies picked up their capital spending around 2005, although much of the increase has been offset by the soaring cost of development. Exxon, for example, expects to spend about $25 billion annually for the next three years to expand its business, compared with $15 billion a year from 2002 through 2006.

“It’s amazing the difference from the 1970s, where a lot of money went into exploration, development and production of new resources,” said Paul Stevens, a senior research fellow at Chatham House, a London policy research organization. “It is happening a little bit now, but it is not going to be enough.”

As the power and clout of Western companies erode, the world may become increasingly dependent on government-controlled entities for oil.

While some may be up to the task, like Saudi Aramco, others, like Petróleos de Venezuela, suffer from bureaucratic inefficiencies and political interference.

“We are going to depend on the Venezuelan, the Nigerian or the Iranian oil companies for the future of our oil supplies,” said Bruce Bullock, the director of the energy institute at Southern Methodist University. “This is a troubling trend.”


Tuesday, August 19, 2008

Peak oil: Mayberry, not Mad Max - Crunchy Con

Crunchy Con


By Rod Dreher

Everybody go over to The American Conservative's site and read their new issue, all of which is available for free in PDF form. I want to draw attention to two articles of special note, neither of which is linkable, but both of which can be read on the PDF version of the magazine.

The first is an optimistic, hopeful take on peak oil and the Long Emergency. The author is Brian Kaller and his view is that peak oil need not be an apocalypse, but could easily turn out to be a return to an older, and in some ways better, way of life. Here's Kaller criticizing people who portray peak-oilers as wild-eyed lunatics:

The simpler truth is that peak-oil converts are often young people reviving the personal habits and self-sufficient skills of their grandparents' generation, thinking seriously about their tap water, transportation, income, food, heat, and electricity, and realizing how little would survive the end of fossil fuels. They anticipate that population trends, climate change, and other problems will compound the crisis, creating what Kunstler has called the Long Emergency. While others are preoccupied with the hot-button lifestyle issues of the moment, they are planting gardens, buying foreclosed farms, learning traditional crafts, taking crash courses in survival skills, and soberly preparing while silently counting down.

But Kaller also criticizes peak-oil proponents who prophesy a Mad Max world of anarchy and hardship, saying that their maximalist projections are unrealistic, and actually may make it harder for us to transition to a lifestyle more sustainable in The Long Emergency. Excerpt:

A critical mass of Americans who believe in an imminent zombie apocalypse runs the risk of making the future more difficult than it need be. Just as a Depression-era panic could crash a bank that would not otherwise have failed, so a widespread belief in a violent
and hopeless end could actually make Americans less likely to work together during the next outage or shortage.

In fact, Kaller said, peak oil is not going to be a sudden event, but a series of events slowly unfolding -- which gives people time to adapt, as we likely will. What this means is not a return to the 18th century, but a much shorter jump back in time:

Take one of the more pessimistic projections of the future, from the Association for the Study of Peak Oil, and assume that by 2030 the world will have only two-thirds as much energy per person. Little breakdowns can feed on each other, so crudely double that estimate. Say that, for some reason, solar power, wind turbines, nuclear plants, tidal power, hydroelectric dams, biofuels, and new technologies never take off. Say that Americans make only a third as much money, cut driving by two-thirds. Assume that extended families have to move in together to conserve resources and that we must cut our flying by 98 percent.

Many would consider that a fairly clear picture of collapse. But we have been there before, and recently. Those are the statistics of the 1950s--not remembered as a big time for cannibalism [as peak oiler Dmitri Orlov predicts as a possibility -- RD]. The world in 1950 used 10 million barrels of oil a day instead of our 85 million, and only a third of that increase is due to population growth. The rest is just us-- and it is mostly us in the West--driving, flying, buying, consuming, and discarding more in a month than our grandparents did in a year. The popular image of the '50s as an age of conspicuous consumption, suburban sprawl, and TV dinners misses the point. Those things were newsworthy then because they were new and unusual.

Go download the PDF at The American Conservative and read the whole thing. Also, Kaller blogs here, but unfortunately doesn't blog much.


Monday, August 18, 2008

Is Peak Oil a Myth?

gantdaily.com


By Bethany Parker


Unprecedented summer gasoline prices are squeezing Americans' wallets and also expanding their vocabularies, as terms like "peak oil" gain common usage.

Peak oil, economists say, is the point at which oil production maxes out: The easily available reserves are gone, and the cost of extracting and refining the remaining stuff exceeds the price it fetches on the open market. After the peak, the theory goes, production starts to fall.

Experts worry that if such a decline in production happens too rapidly, it could outpace the development of viable energy alternatives, resulting in a drastic spike in prices. Others believe that peak oil is a myth, that we could never drain the world's oil supply to the point of such a crisis.

Tim Considine, a former professor of natural resource economics at Penn State, falls somewhere in the middle.

"In any geographic area, it's a natural phenomenon for oil to peak at some point," Considine said. He pointed to the United States reaching its own oil peak in 1971. From the late 19th century until that year, the United States was the world's largest producer of crude oil, he noted. But in 1971, U.S. oil production peaked at 10 million barrels per day, and it has been dropping ever since, to a current level of 5 million barrels per day. "The peak oil theory looks at the U.S. experience and believes the world will peak also," explained Considine. "The biggest question is when."

Some economists predict the peak has already occurred; Princeton's Kenneth Deffeyes says it happened in 2005. Other experts, like Matthew Simmons, chairman of Simmons & Co. International, an energy investment company, estimate that the world is peaking right now. Exxon Mobil and other oil companies have projected a peak at 2030 or beyond.

According to Considine, the world's oil peak can be hastened or delayed by market forces and geopolitics. Lifting the U.S. ban on offshore drilling, producing oil from shale in the Green River Basin of Wyoming, allowing oil production in the Arctic National Wildlife Refuge, and coal-to-liquids production, he noted, could dramatically increase U.S. liquid fuel production, boosting it beyond the peak reached in 1971. But such a change is unlikely, he added, because a political consensus for aggressive energy production does not exist.

Today, with Saudi Arabia as the world's largest oil producer and a turbulent Middle East providing most of the world's oil, politics will undoubtedly play a role, as will economics. As rapidly developing giants like China and India require more energy to fuel their economies, the world demand for oil continues to outpace the growth in supply .

But that doesn’t necessarily mean we're going to run out of oil, Considine said. "Peak oil is a moving target," he notes. "As demand increases, prices increase. And when prices increase, companies develop and produce more oil, which can slow the peak. We're getting better at finding oil and more efficient at drilling it."

Peak oil prediction is also elusive, he added, because though oil producers announce how much oil they are putting onto the market, they don't announce when the supply from a given oil field is drying up.

When the peak hits, will a crisis ensue? Not necessarily, said Considine. "I don’t believe in the cataclysm. If you have a sharp drop in production and prices increase, you will get major substitutions in the demand for oil," he suggested.

The United States has already begun to see these substitutions, he noted, as American motorists scrap their SUVs for smaller cars in an attempt to cut down on their gasoline costs. But what would have still greater impact is a shift to energy sources beyond oil.

"The problem with the transportation sector is that oil supplies 97 percent of its energy, and there's no viable substitute -- unless the price of oil gets high enough. It's knocking at that door now, and we're starting to see tangible indicators of a switch," said Considine.

Unconventional sources of oil, such as Canadian tar sands, ultra-deep-water drilling and natural gas and coal-to-liquid plants, Considine suggested, also will help offset peak oil and help meet energy needs after the peak is hit. Among renewable energy sources, solar power, wind power, hydropower, biomass and geothermal also could lessen the world's need for oil and push the peak farther away.

No matter what alternatives emerge, he stressed, there will be an ever-increasing global demand for resources, which will impact the American lifestyle. "Americans are competing with Asia and the rest of the world not just for fuel, but for materials and food as well. That’s the world we're in," he noted.

With the world economy shifting and gasoline prices surging, Americans may find themselves asking, "when will peak oil hit, if it hasn’t already?"

"As was the case with the U.S. oil peak -- we won’t actually know until it is in our rearview mirror," said Considine


Friday, August 15, 2008

Peak Oil Reader: Where To Start Learning About Peak Oil

huffingtonpost.com


Peak oil is the point at which worldwide oil production is reached. Once the oil supply peaks, petroleum extraction will decline, prices will increase and oil will become unobtainable.


In 1956, M. King Hubbert, an American geophysicist employed by Shell Oil, predicted that the United States oil production would peak between 1965 and 1970 in his theory on peak oil.


Scientists have developed a myriad of peak oil forecasts. Some believe that the oil industry already peaked while others claim that it will happen within several decades. Currently, researchers struggle to find techniques to harvest oil from remote areas in order to prevent the peak oil crisis.



A selection of articles on peak oil:
* Benjamin Kunkel's article on the impending peak oil emergency for GQ.
* National Geographic article on the world oil market, "when will the peak hit?"
* National Geographic article, which discusses the surging oil demand's limit.
* Reuters article on how peak oil will obstruct world development.
* Financial Week author Patrick Mcveigh's opinion piece on how the slump in fuel demand will offset peak oil.
* Financial Times' preparation for the age of peak oil.
* Time Magazine's Lisa Abend reviews the OPEC World Petroleum Congress.
* Time Magazine's Justin Fox discusses the future of the oil industry.


Peak oil RSS:
* A compilation of recent peak oil news reports.
* A database of peak oil news, resources and articles.


Peak oil related links:
* The Association for the Study of Peak Oil offers news updates and analysis. Founder Colin Campbell is a leading authority on oil depletion.
* Wolf at the Door provides a beginner's guide to peak oil.
* Oildrum.com offers a peak oil media guide.


Huffington Post links:
* Blogger Gabriel Rotello writes about oil prices and the media: why the blackout on peak oil?
* Blogger Raymond J. Learsy discusses peak oil and its history in his blog "oil's big dirty secret as producers rake in hundreds of billions"
* Read more on peak oil at the Huffington Post Oil big news page


Probing Question: Is peak oil a myth?

physorg.com


By Bethany Parker


Unprecedented summer gasoline prices are squeezing Americans' wallets and also expanding their vocabularies, as terms like "peak oil" gain common usage.
Peak oil, economists say, is the point at which oil production maxes out: The easily available reserves are gone, and the cost of extracting and refining the remaining stuff exceeds the price it fetches on the open market. After the peak, the theory goes, production starts to fall.

Experts worry that if such a decline in production happens too rapidly, it could outpace the development of viable energy alternatives, resulting in a drastic spike in prices. Others believe that peak oil is a myth, that we could never drain the world's oil supply to the point of such a crisis.

Tim Considine, a former professor of natural resource economics at Penn State, falls somewhere in the middle.

"In any geographic area, it's a natural phenomenon for oil to peak at some point," Considine said. He pointed to the United States reaching its own oil peak in 1971. From the late 19th century until that year, the United States was the world's largest producer of crude oil, he noted. But in 1971, U.S. oil production peaked at 10 million barrels per day, and it has been dropping ever since, to a current level of 5 million barrels per day. "The peak oil theory looks at the U.S. experience and believes the world will peak also," explained Considine. "The biggest question is when."

Some economists predict the peak has already occurred; Princeton's Kenneth Deffeyes says it happened in 2005. Other experts, like Matthew Simmons, chairman of Simmons & Co. International, an energy investment company, estimate that the world is peaking right now. Exxon Mobil and other oil companies have projected a peak at 2030 or beyond.

According to Considine, the world's oil peak can be hastened or delayed by market forces and geopolitics. Lifting the U.S. ban on offshore drilling, producing oil from shale in the Green River Basin of Wyoming, allowing oil production in the Arctic National Wildlife Refuge, and coal-to-liquids production, he noted, could dramatically increase U.S. liquid fuel production, boosting it beyond the peak reached in 1971. But such a change is unlikely, he added, because a political consensus for aggressive energy production does not exist.

Today, with Saudi Arabia as the world's largest oil producer and a turbulent Middle East providing most of the world's oil, politics will undoubtedly play a role, as will economics. As rapidly developing giants like China and India require more energy to fuel their economies, the world demand for oil continues to outpace the growth in supply .

But that doesn’t necessarily mean we're going to run out of oil, Considine said. "Peak oil is a moving target," he notes. "As demand increases, prices increase. And when prices increase, companies develop and produce more oil, which can slow the peak. We're getting better at finding oil and more efficient at drilling it."

Peak oil prediction is also elusive, he added, because though oil producers announce how much oil they are putting onto the market, they don't announce when the supply from a given oil field is drying up.

When the peak hits, will a crisis ensue? Not necessarily, said Considine. "I don’t believe in the cataclysm. If you have a sharp drop in production and prices increase, you will get major substitutions in the demand for oil," he suggested.

The United States has already begun to see these substitutions, he noted, as American motorists scrap their SUVs for smaller cars in an attempt to cut down on their gasoline costs. But what would have still greater impact is a shift to energy sources beyond oil.

"The problem with the transportation sector is that oil supplies 97 percent of its energy, and there's no viable substitute -- unless the price of oil gets high enough. It's knocking at that door now, and we're starting to see tangible indicators of a switch," said Considine.

Unconventional sources of oil, such as Canadian tar sands, ultra-deep-water drilling and natural gas and coal-to-liquid plants, Considine suggested, also will help offset peak oil and help meet energy needs after the peak is hit. Among renewable energy sources, solar power, wind power, hydropower, biomass and geothermal also could lessen the world's need for oil and push the peak farther away.

No matter what alternatives emerge, he stressed, there will be an ever-increasing global demand for resources, which will impact the American lifestyle. "Americans are competing with Asia and the rest of the world not just for fuel, but for materials and food as well. That’s the world we're in," he noted.

With the world economy shifting and gasoline prices surging, Americans may find themselves asking, "when will peak oil hit, if it hasn’t already?"

"As was the case with the U.S. oil peak -- we won’t actually know until it is in our rearview mirror," said Considine.


Thursday, August 14, 2008

The Peak Oil Crisis: The Washington Post Meets Peak Oil Lite

Falls Church News-Press


By Tom Whipple

For those who aren't ready to buy into the concept of world oil production going into decline in the next few years, there is a less worrisome subset making the rounds known as "peak oil lite."

Those adopting this outlook have rightly noted that gasoline is selling for unheard of prices and don't subscribe to the idea that evil speculators, evil oil companies, or evil OPEC is the cause of this unfortunate happenstance. They also correctly recognize demand for oil, especially from China, India and oil producing states, has outstripped the ability of the oil industry to increase supplies fast enough.

Notably absent from peak oil lite, however, is the notion world oil production has not increased appreciably in the last 3 or 4 years and is poised to start dropping very soon. Thus "peak lite" believers readily acknowledge there is a supply/demand problem pushing up prices, but do not go so far as to internalize the serious consequences of declining world production.

A good example of peak lite appeared last month in a front-page Washington Post series on the current world oil situation. After many years of writing around the problem, the Post finally bit the bullet and tackled the coming storm head on by examining "the economic forces that have unhinged oil prices."

In the first story, entitled "This time it is different," the Post concludes that, unlike in the 1970s, the problem is "world demand increasing faster than supply." No argument so far.

For peak oil lite adherents who don't want to believe or at least not admit publicly that the world is reaching geological constraints on how much oil you can produce, you immediately point out the lack of adequate investment and political constraints.

You start by explaining that "low oil prices in the late 1990s dampened the impetus for finding new oil supplies." Then you say that "too few drilling rigs were built" and that "refineries weren't expanded or upgraded." This, of course, leaves the impression that if there were just enough money invested all would be well, not that the bottom of the barrels is in sight. To be fair, the Post does tell us that "investment slackened just as finding new supplies was becoming more difficult and costly. Most of the world's big, easy-to-tap fields have already been discovered and largely drained."

By paragraph 23, however, the Post's story does get to the heart of the issue - world oil production, and with it our economy, is about to go into decline. "Some analysts argue that peak oil production has already been reached. Others say the peak remains a ways off but perhaps not very far." This is indeed an artfully crafted sentence that marks a great breakthrough in the Post's coverage of the issue, for it not only mentions the words (peak oil); it leaves the reader with a slight, but not emphatic flavor of imminence.

The second Post story dissects a key factor in the course of oil prices - increasing Chinese demand. On reading the piece one is left with the impression that China's economy has built up such a head of steam it is not going to slow its oil consumption until it looks like America or there is no affordable oil left. As looking like America requires that Beijing increase its car fleet from 14 million to 900 million vehicles, it is not hard to predict which is coming first.

The next piece of the Post's series starts with a discussion of a depleted oil field in California and makes the point that US oil production peaked nearly 40 years ago and that we are now importing the bulk of our oil.

The story makes many points among the usual arguments for peaking world oil production - deep offshore oil is expensive and depletes rapidly, with the exception of Iraq most of the "easy" oil has been used up, Mexico is in decline, "the North Sea is plummeting," "Russian output is hitting a plateau," heavy oil from Canada and Venezuela is "expensive and energy-intensive to develop."

To this point in their series, the writers, researchers, and editors at the Post have done a fair job in laying out the current world oil situation. But there is one more step - connecting the dots by telling us what all this means and what is in store for us. Here is where the "lite" comes in, for there is no conclusion that fits the cited evidence.

For example, the Post cites the CEO of the French oil company, Total, that an "optimistic case" is for oil production to increase by another 14 million barrels per day (b/d) and peak around 100 million b/d in another seven or eight years. They then report that the International Energy Agency has just announced that it will take 3.5 million b/d of new production just to offset depletion at existing fields and keep the world oil production level.

Now, the obvious conclusion is that the world is going have to come up with 40 million b/d of new oil production in order to keep even and reach the "optimistic" 2015 projection of 100 million b/d. This would require the discovery of four new Saudi Arabia's. Nothing remotely close to this amount of new production can possibly start up in the next seven years.

The series concludes by citing peak oil evangelist Matthew Simmons of Houston, that world production has already peaked and that higher prices will be here shortly; Saudi Oil Minister Naimi, that "Saudi Arabia will be able to meet the world's rising demand for years to come"; and the inevitable expert-in-the-middle, who points out there will be a lot of problems in increasing production.

The Post is to be congratulated for a tour d'horizone that touches most of the bases relevant to peak oil. They acknowledge the problem, use the words "peak oil," discuss much of the evidence and cite the differences of opinion as to the imminence of a crippling problem.

Reading between the lines, one can sense an editorial debate, for the obvious conclusion is one no reader wants to hear. It is probably unrealistic to expect more at this time, for the series itself is a major step forward in spreading the word as to where we are all going. There is still much more to be told.


Sunday, August 10, 2008

Unconventional Crude

The New Yorker


By Elizabeth Kolbert


The town of Fort McMurray occupies a set of irregularly spaced hillsides on either side of the Athabasca River, in northern Alberta. It has a dozen check-cashing joints, a roughly equal number of hotels, and a gaming center called the Boomtown Casino. It also has a museum, which is devoted to the region’s most important resource, the Alberta tar sands. Exhibits include an eight-foot-long rotor, half of a hundred-and-fifty-ton truck, and a pump of Brobdingnagian proportions. Near the entrance to the museum sits a black mound covered by a clear plastic dome. A sign invites visitors to scratch around in the mound with a little retractable rake, then lift up a flap and take a sniff. Tar sands look like dirt and smell like diesel fuel.

The tar sands begin near the border of Saskatchewan, around the latitude of Edmonton, and extend, in three major deposits, north and west almost to British Columbia. All in all, they cover—or, more accurately, underlie—some fifty-seven thousand square miles, an area roughly the size of Florida. It is believed that they were pushed into their present location seventy million years ago by the uplift of the Rocky Mountains.

For the most part, the tar sands consist of quartzite, clay, and water. The other ingredient—the “tar”—is a mixture of very heavy hydrocarbons known as bitumen. Bitumen can be used as a sealant—supposedly the word “mummy” is derived from the term in ancient Persian—and as a paving material. With the right technology, it can also be converted into a form of petroleum known as synthetic crude.

There are two ways to assess the world’s oil supply. One is to consider only conventional reserves—the sort of oil that comes gushing out of the ground. Estimates of conventional reserves vary widely, but most analyses suggest that their output will begin to decline sometime in the next few decades (if it hasn’t already)—a development that so-called “peak oilers” predict will lead to a variety of gruesome consequences, including blackouts, food shortages, and general economic collapse. The second way is to look beyond conventional reserves to unconventional ones, like the tar sands.

It is estimated that there is enough bitumen in Alberta to yield 1.7 trillion barrels of synthetic crude. Assuming that only ten per cent of this is actually recoverable, it still represents the second-largest oil reserve in the world, after Saudi Arabia’s, and more oil than is contained in the reserves of Kuwait, Norway, and Russia put together. Unconventional crude can be found in many other parts of the globe besides Canada; these include eastern Venezuela, which is home to a huge tar-sandslike deposit called the Faja Petrolífera del Orinoco, and portions of Colorado, Utah, and Wyoming, where there’s a thick layer of oil shale known as the Green River Formation. Even coal can be converted into liquid fuel. During the Second World War, the Nazis employed a technique called the Fischer-Tropsch process; the same process is now in use in several countries, most notably South Africa, which invested heavily in coal-to-liquids technology during the apartheid era. Build enough coal-to-liquids plants and places like Montana and West Virginia could one day become major petroleum producers.

In Fort McMurray, what might be called the world’s first unconventional oil boom is already under way. Since 2002, Shell, ConocoPhillips, Chevron, and Imperial Oil, which is primarily owned by ExxonMobil, have all received approval to construct major projects in the tar sands; Total has announced its intention to follow suit. Over the next five years, investment in the Fort McMurray area is expected to amount to more than seventy-five billion dollars. Residents of the town have taken to calling it Fort McMoney.

Thanks in large part to what’s happening in the tar sands—output now tops a million barrels a day—Canada has become America’s No. 1 source of imported oil; the country supplies the United States with more petroleum than all of the nations of the Persian Gulf combined. (If you have bought gas recently in Colorado, Ohio, or Indiana—states where tar-sands oil is refined—you are probably driving around with a piece of northern Alberta in your tank.) By 2010, the tar sands’ yield is expected to double, and by 2015 to triple. Crude from the tar sands and other unconventional sources could keep oil flowing well into the middle of the century, and perhaps beyond. Depending on how you look at things, this is either a heartening prospect or a terrifying one.

The company that has been producing oil from the tar sands the longest is known as Suncor. (Suncor used to be a part of Sun Oil, now Sunoco, but today it is owned and operated independently.) One day this summer, I went to take a tour of its operations, which sprawl across several hundred square miles. I was picked up at the entrance to the site by a grandmotherly guide named Gloria Jackson, and together we went to fetch another Suncor official, named Darin Zandee. “There’s no blasts today, so that’s good,” Zandee said, referring to the charges that are periodically set off to loosen the sands. We drove up to a lookout, from which we could see, spread before us, Suncor’s newest mine, the Millennium. Rings of jet-black earthworks were scattered across an enormous pit, an arrangement that might have been based on a blueprint from the Inferno.

The Millennium Mine opened in 2002. Suncor expects to continue to pull tar sands out of it for the next twenty-five years. By then the pit, which is now roughly two miles in diameter, will be six miles across. We drove over the edge of the mine and slowly made our way down to the bottom. There a huge, Mike Mulligan-esque shovel was standing idle. Its bucket hung in midair, steel teeth glinting. Zandee said that to lift one of the teeth would require thirty men—“That gives you a sense of the scale.” A gargantuan truck rumbled by. Zandee estimated that it was carrying about three hundred tons. “That’s some of our smaller equipment,” he said. The largest truck in the mine—the Caterpillar 797B—can haul more than four hundred tons. It has twelve-foot-tall tires, and its cab sits twenty-one feet off the ground. Driving one, I was told, is like trying to steer a house while peering out the window of the upstairs bathroom.

At the Millennium, the tar sands start at a depth of roughly a hundred feet and extend down in a more or less continuous layer, known as the “feed,” for about a hundred and fifty feet. Before mining begins, everything above the feed—trees, bushes, grass, soil, rocks, wildlife—gets scooped up and carted away. (The material is delicately referred to as “overburden.”) Below the tar sands, there’s a thick layer of limestone, the remains of an ancient ocean that once covered Alberta. Suncor mines some of the limestone, too, and uses it to shore up the roads in the pit. What with the overburden and the tar sands and the limestone, Zandee said, “We try to move a million tons a day.” He pointed out a truck in the distance that was dumping a load of tar sands onto what looked like a large platform. The platform was actually a grate, through which the sands were being fed into a giant tank of hot water.

In any given load of sands, only about ten per cent is bitumen; to produce synthetic crude, the other ninety per cent has to be separated out. In the hot-water tank, the sands get spun around; the liberated bitumen is then siphoned off. For every barrel of synthetic crude that Suncor eventually produces, forty-five hundred pounds of tar sands have to be dug up and separated.

We made our way out of the pit and headed on, following the bitumen to its next stop, the upgrader. Along the way, we passed a murky expanse of water with oily scum on the surface. A few dozen scarecrow-like creatures, fixed to empty barrels, were bobbing on top. This, Gloria Jackson explained, was a tailings pond; it held water that had been used in the separation process and was too contaminated with mercury and other toxins to be released back into the Athabasca. (Suncor has nine such ponds, which collectively cover an area of eleven square miles.) The scarecrows, known as “bitumen,” were supposed to discourage birds from landing on the pond and poisoning themselves. Every minute or so, a dull boom filled the air. This was the sound of a propane cannon, another bird-intimidation device.

The primary difference between bitumen and ordinary crude is the size of the hydrocarbon molecules: in liquid oil, these molecules contain between five and twenty carbon atoms, while in bitumen they contain more than twenty. (At room temperature, pure bitumen is so viscous that it will not flow.) The main job of the upgrader is to break down the oversized hydrocarbons into smaller units. We drove along roads with names like Sulphur Street and Diesel Alley and pulled up to a huge refinery-like complex that covered several square blocks. There were dozens of smokestacks and tanks, and more pipes than could possibly be counted. Jackson explained that somewhere inside this maze the bitumen would be “cracked,” at a temperature of nearly nine hundred degrees. After that, in the form of synthetic crude, it would be piped to specially outfitted refineries, either in the United States or Canada, to be converted largely into transportation fuels—gasoline for cars, diesel for trucks, and jet fuel for planes. (Suncor owns a refinery near Denver that processes tar-sands oil.) I had told Jackson that I had twin boys at home, and at the end of the tour she handed me two yellow Matchbox-size versions of the 797B.

American accounts usually give the start of the oil age as 1859, the year that a former railroad conductor named Edwin L. Drake drilled his first successful well, near Titusville, Pennsylvania. Canadian accounts go back a year earlier, to 1858, when a businessman named James Miller Williams decided to dig a well for drinking water outside the town of Bear Creek, Ontario. Instead of water, he struck oil.

Efforts to extract oil from the tar sands soon followed. Entrepreneurs and con men sunk dozens of wells around Fort McMurray in the second half of the nineteenth century. (One enterprising German immigrant who claimed to have struck oil apparently poured the stuff down the hole himself.) Eventually, it became clear that there was no oil, and attention turned to mining the bitumen. In 1930, a former farmer named Robert Fitzsimmons set up the first commercial separation plant in the tar sands; in 1938, Fitzsimmons had to flee Canada to avoid his creditors.

In 1956, an American geologist, Manley Natland, came up with the idea of streamlining the process by using atom bombs. Natland reasoned that “thermal devices” could be lowered into the limestone beneath the tar sands and exploded. This would create cavities into which the bitumen, heated to more than a thousand degrees, would flow and from which it could then be collected. The idea was taken seriously at the highest levels in both Ottawa and Washington—the United States Atomic Energy Commission even agreed to supply a bomb to test Natland’s theory—but it was never implemented. (Beginning in the mid-nineteen-sixties, the Soviet Union actually tried the experiment, setting off half a dozen nuclear explosions to stimulate conventional oil production; production increased, but, unfortunately, much of the oil turned out to be radioactive.)

The technology for removing bitumen from the tar sands is probably still best described as a work in progress. Where the feed lies closest to the surface, as, for example, at the Suncor site, the bitumen is strip-mined and then separated. But most of the tar sands lie too deep to be mined profitably. In these zones, a method known as in-situ extraction is used. In-situ extraction is based on much the same principle as Natland’s scheme, minus the atom bombs. Typically, two horizontal wells are drilled into the sands, one above the other. High-pressure steam is injected into the top well; eventually, the tar sands grow hot enough—nearly four hundred degrees—that bitumen begins to flow into the bottom well. The technical name for this process is Steam Assisted Gravity Drainage, or SAGD (pronounced “sag-dee”).

Whichever method is used, a great deal of energy is required. To produce a barrel of synthetic crude through mining takes roughly eight hundred and ten megajoules, which is the energy content of about an eighth of a barrel of oil. To produce a barrel of synthetic crude through SAGD takes more than sixteen hundred megajoules, which is the energy content of more than a quarter of a barrel of oil. This means that, for every three barrels extracted via SAGD, one has, in effect, been consumed.

Tar-sands oil itself could, in principle, be used to power the operations; in fact, most of the energy used to generate the steam for SAGD, as well as to run all the upgraders and separators, now comes from natural gas. It is estimated that by 2012 tar-sands operations will consume two billion cubic feet of natural gas a day, or enough to heat all the homes in Canada. Such is the demand for natural gas around Fort McMurray that a consortium of companies, including Shell Canada and Imperial Oil, has proposed building a seven-hundred-and-fifty-mile pipeline from the Arctic Ocean through the largely undisturbed wilderness of the Mackenzie River Valley and down into northern Alberta. The proposal, which has been challenged by native and environmental groups, has yet to receive regulatory approval; meanwhile, a variety of other plans have been floated. As it happens, while I was visiting Fort McMurray a company called the Energy Alberta Corporation filed an application to build a pair of nuclear reactors four hundred miles west of town. Early reports stated that the company already had a “large industrial off-taker” lined up to buy nearly three-quarters of the twenty-two hundred megawatts that the reactors would generate. Energy Alberta would not disclose the identity of this “off-taker”; in the local press it seemed to be taken for granted that the power would be going to the tar sands.

There are several reasons that companies like Chevron and ExxonMobil are now rushing to develop the tar sands, the most obvious being that it’s increasingly profitable to do so. Converting the sands into synthetic crude costs around thirty dollars a barrel; last week, the price of a barrel of oil on the New York Mercantile Exchange was over ninety dollars. Other synthetic fuels require more elaborate processing, and are commensurately more costly to produce; converting coal into oil, for example, requires gasifying the coal under intense pressure and heat, then condensing it into a liquid. To extract oil from shale, meanwhile, involves basically rewriting geological history. (Shell has been experimenting with a process that involves baking the shale with electric heaters until it reaches a temperature of nearly seven hundred degrees while, at the same time, freezing the area around it.) If the price of oil remains above ninety dollars—many analysts expect it to hit a hundred dollars soon—then these and other unconventional forms of fuel can also be developed at a profit, and, all other things being equal, they will be.

No matter how it is carried out, oil extraction is a destructive business. Conventional oil wells require pipelines and drill pads and roads for heavy equipment; all of these fragment (or destroy) the landscape. The flaring of natural gas, which often accompanies oil production, produces an array of air pollutants, and leaks and spills release toxins ranging from volatile chemicals, like benzene (a known carcinogen), to much heavier compounds, like benzopyrene (another known carcinogen). With unconventional oil, the damage tends to be higher all around—more land gets disturbed, more pollutants are produced, and more opportunities arise for contamination. And then there are the greenhouse gases.

Alex Farrell is a professor in the Energy and Resources Group at the University of California at Berkeley who studies the impacts of unconventional oil. A few years ago, Farrell realized that all the major climate models were based on the same faulty premise: they assumed that in the future increased oil demand would be met with increased supplies of conventional crude. Together with a graduate student named Adam Brandt, Farrell decided to try to come up with projections that more accurately reflected reality. For their calculations, the two assumed that where there was a gap between demand and conventional supply it would be filled with synthetic fuels, first with tar-sands oil and later with oil from coal and shale. (According to high-end estimates, coal and oil shale could together yield some ten trillion barrels of unconventional crude.) They then calculated what the impact would be on global carbon-dioxide levels.

“All unconventional forms of oil are worse for greenhouse-gas emissions than petroleum,” Farrell told me. “And it’s pretty easy to understand why. It’s not so hard to turn liquid petroleum into liquid fuels. Turning a solid material like coal into a liquid—it sounds hard to do, and it is hard to do. And that extra effort shows up in higher energy consumption and higher water use and higher emissions.” In the case of tar-sands oil, total greenhouse-gas emissions per barrel—which is to say, the carbon dioxide produced in creating the oil and then burning it—are between fifteen and forty per cent higher than those from conventional oil. In the case of coal-to-liquids, or C.T.L., total emissions are almost two times as high as with conventional oil, and for oil shale they can be more than twice as high.

“Let’s take coal-to-liquids,” Farrell said. “You’re talking about nearly doubling the greenhouse-gas emissions. Think about this—we’re talking about a world in which over-all greenhouse-gas emissions should start to go down, and this is a technology that doubles emissions. They don’t go together too well, do they?” Farrell and Brandt found that the shift to unconventional oil could add somewhere between fifty and four hundred gigatons of carbon to the atmosphere by 2100.

“The environment and climate change are what are called ‘externalities,’ ” Farrell continued. “And at the moment we don’t have effective ways of including these externalities in market transactions of any sort. Until we do, the market won’t solve them, since by definition they’re external to the market. They’re a social good—government has to step up and say, ‘We’re going to take this into account.’ ”

One way that a government could take greenhouse-gas emissions into account would be to tax them. This would encourage producers of unconventional fuels to cut their emissions, by, for example, employing “carbon capture and storage” technologies. Ideally, it would also prompt entrepreneurs to develop alternatives to oil, like biofuels. Many analyses, though, suggest that, to have an appreciable effect on the oil sector, carbon taxes would have to be quite high—in the neighborhood of two dollars on a gallon of gasoline—precisely because today there are no readily available substitutes for gas or diesel or jet fuel. Farrell favors federal fuel standards, which would function somewhat like vehicle-efficiency standards, requiring oil companies to achieve a certain emissions target across all the products that they sell. (This target could be adjusted over time, much as auto-efficiency standards were ratcheted up during the seventies and eighties.) California is now in the process of drawing up such a plan—the California Low Carbon Fuel Standard is supposed to take effect on January 1, 2010—and several bills have been introduced in Congress that would impose such standards nationally.

At the same time, there is a great deal of support in Washington for measures that would, in effect, subsidize high-carbon fuels. One such measure, the Coal-to-Liquid Fuel Promotion Act, introduced earlier this year by Senators Jim Bunning, of Kentucky, and Barack Obama, of Illinois, would encourage companies to invest in C.T.L. plants by providing tax incentives and federal loan guarantees. (Although C.T.L. would be profitable at today’s oil prices, building the plants requires large capital investments, which are considered risky as long as there’s a chance that oil prices will fall.)

“If companies could lay off the risk of oil prices dropping below forty dollars a barrel, there would be enormous investment in this,” Farrell told me. “But, when policies are proposed to promote C.T.L., I think the question to ask is, Is this an industry we want to start now?”

The Athabasca River flows north, into Lake Athabasca, which spans the Alberta-Saskatchewan border. In the winter, it is possible to drive the hundred and fifty miles from Fort McMurray to the lake on an ice road. (Because of rising temperatures, the number of days that the road is passable has been steadily shrinking.) In the summer, the only way to make the trip is by boat or by prop plane. One day when I was visiting Alberta, I flew up to a village on the edge of the lake, Fort Chipewyan, in a six-seat Cessna. As the plane gained altitude, I could see the vast black pits of the tar-sands mines that surround Fort McMurray. Farther north, the pits gave way to regularly spaced square-shaped clearings in the trees—signs of preparation for in-situ operations. Finally, these, too, gave way, and below was nothing but the wild green of the boreal forest. (Spread over 1.4 billion acres, Canada’s boreal forest is considered one of the largest still intact ecosystems on the planet.)

Fort Chipewyan, which was founded in the seventeen-eighties as a trading post, is a native village; about half its twelve hundred or so residents are Mikisew Cree, and the other half are Athabasca Chipewyan. It has a few hundred houses, a post office, and two churches—one Anglican and one Catholic—both perched near the edge of the lake. To a certain extent, Fort Chip, as it is known locally, has shared in the tar-sands boom; many residents of the village work construction jobs in Fort McMurray and return home only on their days off. At the same time, there’s a good deal of concern in the village about what is happening. A peculiarly high number of cases of a rare cancer have been reported in town; this has prompted speculation that toxins from the tailings ponds are working their way downriver into the lake, which provides the village with drinking water as well as with staples like whitefish and pike. Meanwhile, both the Chipewyan and the Cree consider many of the tracts that the Alberta government has leased to oil companies to be their ancestral lands. The week before I visited Fort Chip, there was a rally at the local community center, calling for a moratorium on new projects.

“It’s sad to see this thing destroyed, you know,” Ray Ladouceur, a fisherman I met, said. We were standing by the lake, which is more than two hundred miles long. It was a still afternoon, and billowy white clouds were reflected in the water. “A lot of the fish are getting—I might as well say it—scabby.

“I don’t know what we have to do to try to prevent them from destroying any more,” he said, referring to the oil companies. “They try to say they can clean it. There’s no way. It’ll take a thousand years before it flushes itself out, and I think I’ll be too damn old for that.”

Over the past year or so, opposition to new tar-sands projects has been steadily growing. Around Fort McMurray, the emphasis is on local impacts; town officials have fought recent expansion proposals by several oil companies on the ground that there’s already a shortage of housing and hospital beds in the area. In the rest of Canada, the focus is on the destruction of the boreal forest and the implications for the climate. Canada, in contrast to the United States, was an early signatory to the Kyoto Protocol, but it will be all but impossible for the country to meet its CO2-reduction goals, in part because of the tar sands. (A recent Toronto Globe & Mail op-ed piece on emissions from the sands was titled “The Gassy Elephant in Our Living Room.”) The former Canadian Environment Minister Charles Caccia has compared the country’s position on greenhouse gases—pledging to reduce emissions on the one hand while increasing tar-sands production on the other—to “attempting to ride two horses galloping in opposite directions.”

Meanwhile, development in northern Alberta continues unabated. All the applications opposed by Fort McMurray officials were ultimately approved, and just a few months ago an American company, Hyperion Resources, announced plans to build the first new oil refinery in this country in thirty years, to handle increasing volumes of tar-sands crude. Stéphane Dion, the leader of Canada’s Liberal Party (which is currently out of power), has said, “There is no environmental minister on earth who can stop the oil from coming out of the sand, because the money is too big.”

When I first landed at Fort Chip’s tiny airport, the place was deserted. When I returned there for the flight back, I found a few dozen people standing on the tarmac. The crowd, I was told, was waiting for a corpse; a village elder had died the previous day in a hospital in Fort McMurray, and his body was being brought home. Everyone was quiet as the casket was carried out of the plane and then loaded onto the back of a pickup truck. As soon as the crowd dispersed, I and three other passengers climbed into the Cessna, and two minutes later we took off. Below was the wilderness, then the perfectly square clearings in the trees, and, finally, as we headed into Fort McMurray, the vast pits and the black ponds, with the bitumen bobbing on top. ?


Thursday, August 07, 2008

The Peak Oil Crisis: Masking the Peak

Falls Church News-Press


By Tom Whipple

As world oil production has never peaked before, there is no historical basis for making informed judgments as to what is going to happen.

All we know is that some six billion people, living in some 200 economies on this earth are soon going to be confronted with getting by on less than the 86 million barrels of oil per day (b/d) that we currently consume. The outcome of the interaction among all those people, all those countries and all that oil is too complex to foresee with any clarity.

It has long been recognized among those studying the peak oil phenomenon a severe, lengthy, worldwide economic setback could reduce the demand for oil to such an extent that peak production could be lost in the chaos.

Other scenarios involve oil prices rising to such level that demand drops significantly, which would be followed by a major drop in prices, followed by increased demand and rising prices, and the cycle continues.

In the last three weeks, world oil prices have dropped steadily so they are now nearly $30 a barrel below what they were in early July.

Now this decline could be the result of those pesky speculating hedge funds selling short the oil futures contracts. It could be the $4 gasoline keeping an increasing number of Americans off the roads, or even the Olympics, which forced Beijing into a two-month shutdown of a sizable piece of its economic activity in an effort to clean up the air.

Incidentally, China's imports of petroleum products, which grew rapidly in the first half of the year, look like they are going to drop precipitously in August.

If it turns out speculators, $4 gasoline or a lull in Chinese purchases are major factors behind the current weakness in oil prices, then the current declines are likely to reverse in a couple of months.

The speculators will change their positions, the summer discretionary driving season will be over and the Olympics will be in the history books so that China can go back to making its normal amount of air pollution.

If this is indeed what we are witnessing, then oil prices should rebound as the winter heating season approaches. The Organization of Economic Co-operation and Development (OECD) oil stocks are unusually low at the minute, and if the world remains in even middling economic conditions, demand from China should return.

At the minute, the Chinese are facing a serious electric power shortage stemming from a mismatch between the new coal fired generating plants they have built in recent years and their ability to mine and transport coal to these facilities.

Some are talking of a renewed surge of Chinese oil, coal and liquefied natural gas (LNG) imports if Beijing is to keep its factories humming on and continue to grow at the planned 10 percent a year.

However, suppose for a minute the pessimists are right and the world is on the brink of a major economic setback. The evidence for a setback abounds, starting with the credit and housing crises in the U.S. through rising unemployment, inflation and more.

Ditto for the E.U. and much of Asia. If U.S. imports shrink significantly, all sorts of economic ills will follow in the economies of our trading partners. The Chinese, however, still remain adamant that their surging economy will power right through a drop in Western demand for their exports.

Evidence is accumulating, however, that all is not well with China's economy. Exports are no longer growing, petroleum imports are dropping and outside economists are now saying that GDP may only grow by nine percent this year. All of this suggests China's imports of crude and petroleum products may slow markedly before the year is out rather than increase as some are suggesting.

Judging from what happened two years ago, OPEC is likely to cut production again should oil prices slip below $100 a barrel, which in turn would set off on another round of price increases. The course of all this will depend on just how the U.S., China's and the world's economies fare over the next year or so.

If things get really bad, the demand for oil, which will be expensive by historical standards no matter what happens, may drop precipitously. Then both production and prices are likely to fall amidst much volatility and suffering in the poorer countries that are already taking serious economic hits.

Falling demand for oil obviously is going to cut production so that a nominal "peak" in world oil output will occur. From there on, the situation has so many variables as to become unpredictable. Worldwide demand for oil could fall by hundreds of thousands or perhaps millions of barrels per day.

Oil consumption, however, is so deeply rooted in the sinews of the world's economy, it is difficult to image demand dropping by many millions of barrels from the current 86 million b/d. But then again, nobody can realistically foresee what is going to happen.

If worldwide economic problems should stretch out into years, then we would be in the midst of what most foresee will be the geologic/economic decline in world oil production.

If demand has already dropped due to bad economic times, then the geologic peak is likely to go undetected. For in our rearview mirror, world production would have been dropping for months or years simply because fewer have enough money to pay for the stuff.

The message is that there are many ways to perceive the coming years. Either the lack of enough oil due to geologic constraints will create unimaginable economic troubles, or economic troubles from some other cause can kill the demand for oil.

A major blow-up in the Middle East, for example, could create so much turmoil that world oil production would peak on the spot, never again to return to current levels of production.

It is getting very complicated out there, and none of us really know what is going to happen.

The only thing we can be sure of is that somewhere along the line, changes in our lifestyles are coming - perhaps faster than we think.


Wednesday, August 06, 2008

Oil Prices and the Media: Why the Blackout on Peak Oil

huffingtonpost.com


By Gabriel Rotello


Every once in a while history reaches a point of real cognitive dissonance.

I'm beginning to wonder if we are such a point right now. I'm referring to the astounding rise in the price of oil over the last couple of years, the concept of 'peak oil,' and the strange silence surrounding that concept in the media.

The 'peak oil' idea is pretty simple. Petroleum is a finite resource. Since the first well was drilled in 1859 we have been pumping it out of the ground in ever increasing amounts. According to the peak oil theorists, most of whom are oil geologists, at some point we will have pumped about half of all the oil on earth. At that point, the remaining half will become increasingly harder and more expensive to pump, and so two things will happen.

First, the amount of oil we pump will level off and start to decline, by about two percent per year. And second, since demand by a growing world population will keep rising, the market will respond by pricing the decreasing amount of oil higher and higher.

An oil geologist named M. King Hubbert predicted this phenomenon for the continental USA back in the 50s. In those halcyon days, US production seemed limitless, but Hubbert predicted that sometime between 1966 and 1972, the USA would reach peak oil production and American production would thereafter decline.

People laughed at Hubbert. Then, in 1970, right on schedule, production of US oil peaked and began to drop. Hubbert had been correct. So he and a host of oil geologists attempted to replicate his prediction for the whole world.

Some used modifications of Hubbert's formula to determine when global peak oil would happen. Others used different formulas. What is interesting is that many of them came up with remarkably consistent predictions: Peak oil would happen for the whole world sometime between 2005 and 2010.

And you would know it was arriving, the Cassandras warned, by the market. Sometime between 2005 and 2010, markets would see what was occurring and the price would begin a dizzying rise.

It is now August of 2008, smack dab in the middle of that long-predicted window. And as we have seen, prices have skyrocketed.

If the peak oil folks are correct -- and I'm not saying they are, but their predictions seem to be coming to pass, so they deserve a decent hearing in the world media -- it constitutes a story of immense importance.

The world runs on oil. The prosperity of the middle classes of the industrialized world was built on it. So was the green revolution that allowed world population to increase from two billion to six and a half billion. So was globalization, which allows the flow of goods from everywhere to everywhere on a magic carpet of cheap oil. So was air travel and mass tourism. The list goes on and on.

Indeed, as writers like Robert Heinberg point out, you can make the case that the entire structure of modern industrial civilization is an artifact of cheap, limitless, almost free energy, thanks to the 'treasure in the basement' discovered in 1859 and exploited ever since.

Some would argue that if this treasure is indeed about to level off and decline, that's a very good thing, since we need to phase out fossil fuels anyway to combat global warming. In a perfect world, they would be right.

Unfortunately, many peak oil folks warn that there is no energy source or combination of sources on the horizon that can fully compensate for the decline of oil over the next few decades -- though we should obviously be racing to come up with alternatives and to embark on massive conservation.

They also caution that many of the cheapest and easiest alternatives to petroleum are other fossil fuels, particularly abundant and dirty coal. If economies start tanking, the pressure around the world to increase the use of these climate-busters would be immense. So in some scenarios, a decline in oil could actually make global warming worse.

Don't get me wrong. I'm not saying the pessimistic peak oil geologists are right and their critics are wrong. They have very serious critics, and there are several other plausible explanations of the current price run-up, from a classic bubble to old-fashioned fear mongering.

But I can say this. Many of the most prominent peak oil geologists predicted oil prices would skyrocket between 2005 and 2010 and oil prices did indeed skyrocket. They may be wrong about the reasons. It all may be just a coincidence.

But if the fate of the world economy hangs in the balance, it's a story that deserves significant attention and analysis by the media. If I were an editor at the NY Times or the Wall Street Journal, Time or Newsweek, I would want to analyze it, write about it, inform my readers and viewers about it. I would hate to go down in history as having missed possibly biggest energy story in a hundred years.

Until, of course, it was obvious. And too late.


Deep Green: peak oil changes everything

Greenpeace UK


By Rex Weyler


As the era of cheap liquid fuels draws to an end, everything about modern consumer society will change. Likewise, developing societies pursuing the benefits of globalization will struggle to grow economies in an era of scarce liquid fuels. The most localized, self-reliant communities will experience the least disruption.

Oil is a fixed asset of the planet, representing stored sunlight accumulated over a billion years as early marine algae, and other marine organisms (not dinosaurs) captured solar energy, formed carbon bonds, gathered nutrients, died, sank to the ocean floors, and lay buried under eons of sediment. Like any fixed non-renewable resource, oil is limited, and its consumption will rise, peak, and decline.

World oil production increased for 150 years until the spring of 2005, when world crude oil production reached about 74.3 million barrels per day (mb/d), and total liquid fuels, including tar sands, liquefied gas, and biofuels reached about 85 mb/d. In spite of the efforts since, and tales of “trillions of barrels” of oil in undiscovered fields, liquid fuel production has remained at about 85.5 mb/d for three years, the longest sustained plateau in modern petroleum history. Discoveries of new fields peaked 40 years ago.

Meanwhile economies everywhere want to grow, so demand for oil soars worldwide. The gap between this surging demand and flat or declining production will drive price increases and shortages. That’s peak oil.

Peak experience

Peak oil is not a theory, but rather a simple observation of a common natural occurrence. Peak oil is only one symptom of an exponentially growing population, with exponentially growing demands, reaching worldwide limits of all resources.

“Peak oil has long been a reality for the oil industry,” says Anita M Burke, former Shell International senior advisor on Climate Change and Sustainability. “To believe anything else belies the facts of science.” In 2007, Dr James Schlesinger, former US Defense and Energy Secretary stated flatly, “if you talk to industry leaders, they concede … we are facing a decline in liquid fuels. The battle is over. The peakists have won.”

Global warming, caused primarily by forest destruction and the burning of fossil fuels, now aggravates natural limits and the human turmoil that these limits provoke. One might think that peak oil will solve global warming because less oil means less carbon emissions. Sadly, this is not so because humanity took the best, cheapest, and easiest oil first, leaving dirty, acidic, expensive oil in marginal reserves that require vast amounts of energy to recover. In the 1930s, 100 barrels of oil cost about 1 barrel in equivalent energy to extract. That ratio is now about 20:1 and sinking fast. The Canadian tar sands produce barely 1:1 net energy. By the time someone burns tar sands oil in his or her vehicle, the industry has burned nearly an equal amount retrieving it.

When we account for the net energy left after production, and population growth, we discover that the world peak for net-oil per-capita occurred three decades ago, in 1979. Many oil suppliers – Saudi Arabia, Venezuela, and others – recognizing the limits of the resource, are now keeping more of their oil for domestic use, and saving it for future growth. Regardless of energy alternatives – ethanol, nuclear, solar, wind, tidal – humanity will never again enjoy the current consumption rates of cheap, convenient fuels. This fact changes everything.

We witness the impact in the increasing scarcity and cost of food and other critical resources that rely on oil. Most trucking firms now add a fuel surcharge to hedge against fuel price increases. As fuel prices soar, airlines cancel flights or simply close down. In many cities, police add a gas charge to traffic tickets because police departments have already spent their annual fuel budget on high-priced gasoline.

The post-peak oil era will require new human development patterns and strategies that cope with limits to growth. Humanity has no new continents to exploit or planets to occupy. Frantic industrial nations may drill in the Arctic and dig into dirty tar sands, but none of this will increase or even match the past abundance of cheap liquid fuel that we have already squandered. Nevertheless, the actual moment that world oil production peaks is less relevant than our preparation for the impact.

Relocalization

Well-financed voices promoting global industrialization claim our economies can grow “forever,” or “for the foreseeable future,” but these voices cry out against the evidence before our eyes. Our massive growth economies were built with cheap oil. Poorly planned development left behind disappearing forests, toxic lakes, soil erosion, species loss, foul air, dead rivers, drying aquifers, and creeping deserts.

The dream of a globalized world marketplace linked by airplanes and trucks will not endure. Monolithic superstores that rely on liquid fuels to ship cheap goods around the world will become the relics of the cheap oil era. These massive chain stores also undermine the local enterprise that communities will need to survive.

“The current solutions being bantered about are inadequate to the conditions we are faced with,” says Anita Burke, after decades inside the oil industry. “We must embrace adaptation strategies that immediately create whole new ways of being in relationship to each other and the planet. Buy local, get off of hydrocarbons in every aspect of your life, gather in community, and espouse only love - your grandchildren’s lives depend on it.”

Communities addicted to cheap oil, especially suburban environments without public transport, will become untenable. Regions that still build highways for cars are simply designing their own demise. Smart communities will design light, convenient public transport to run efficiently on the most locally available energy source.

The post-peak oil era will require that we re-establish local manufacturing and food production, and refurbish economies that have been gutted by globalization. Smart urban designers are now planning for the end of cheap energy, global warming, and the human migration that these changes will set in motion. Smart neighbourhood and regional planners are preparing communities for the inevitable transition from escalating consumption to conserver societies, built on a human scale and linked to social services and the natural cycles that sustain them.
building communities in nature
Building communities in nature

I recently walked through an abandoned industrial section of Vancouver, where I live. The empty, poorly designed, decaying buildings seemed depressing, but I noticed how much actual green space flourished with wild plants. Squatters with gardening skills, I kept thinking, could make a life for themselves here.

Human society can change. Witness the historic changes to establish democracies, end slavery, secure civil and women’s rights, or eradicate polio and AIDS. Humanity can harness its resources to change destructive habits and improve living conditions. The crisis of peak oil provides an opportunity strengthen the two pillars that nourish real quality of life: local community and wild nature.

Relocalize: The end of cheap oil means less products arriving from around the world and less jobs making junk to sell elsewhere. Globalization is literally running out of gas. As fuel prices soar, communities will have to supply more food, water, and vital resources locally. If you are thinking of earning a degree in international finance, it might be smart to take some permaculture courses as well.

Preserve Farmland: Wise communities will preserve agricultural land, support farmers, provide local food for local consumption, compost all organic waste including sewage, build soils, apply efficient water use, move toward vegetable diets, and restore and replenish water resources. Rather than building suburbs and highways on farmland, smart communities will design small residential neighbourhoods on the least-arable land, integrated with the life-giving farmland and natural bounty that supports a healthy society.

Change the pattern of community: The entire distribution of public activity, public space, and housing must adapt to less fuel and resource consumption. Past planning in the cheap-oil era created public dysfunction, decaying city cores, foul air, and squandered energy. We do not have generations to correct these mistakes – the time we have to act is now best measured in months, not decades. We now face the choice of responding gracefully and wisely or reacting later in chaos.

Productive urban green spaces: Cities face huge challenges and require green space, not only for play and peace of mind, but for food. Suburbs and urban neighbourhoods must be redesigned to transform lawns and streets into productive green zones linked by public transport. Planting trees anywhere reduces global warming. Cities such as Bogotá, Columbia, and San Luis Obispo, California have shown that degraded cities can revitalize community and economic life with programs that increase green space.

Public transport: Basing development and land-use patterns on the private automobile may be the worst design decision in human history. The automobile is responsible for resource depletion, global warming, degraded farmland, alienated neighbourhoods, aesthetic eyesores, time wasted in traffic, and an epidemic of transport death and injury. Light rail public transport is clean, energy efficient, safe, community-building, and allows travellers to be productive rather than stressed. Smart cities will implement public transit, encourage bicycle use, and create neighbourhoods that encourage walking for most services and family needs.

100% recycling: Nature recycles everything. There is no “away” in nature where garbage and waste is thrown. Human communities must mimic the 100% recycling of nature, eliminate designed obsolescence, and turn garbage landfills into recycling centres. Sewage is natural compost that can be converted to productive soil, as demonstrated in Sweden, India, and Mongolia.

Preserve wilderness: Smart ecological planning not only nurtures people but also preserves wilderness habitat for species diversity. In regions where indigenous people still live on the land, wilderness also preserves cultural diversity and knowledge of local food, medicines and resources.

Modern consumer cities – made possible by the age of cheap fuels, designed for cash profits, or not designed at all – alienated people from each other and from their organic roots. When we gaze upon degraded cement landscapes and the lost souls of inner city children taking refuge in gangs and drugs, we see the cost of broken communities. The end of cheap fuels may help us reclaim an authentic quality of life, not purchased with more stuff but with relationship: our affiliation with each other and with nature.


Saturday, August 02, 2008

Oil: Behind the Big Numbers

Daily Kos


By Devilstower

At first, the fact that Exxon Mobil scored the biggest quarterly profit for any company in history may seem like the central (and maddening) point of Thursday's press release, but looking past the top number shows several more interesting items.

First off, that record $11.68 billion is less than expected, sending Exxon Mobil's shares down on Wall Street. Why did they underperform the analyst's expectations? Well, with rising oil prices come rising amounts of overseas strife.

Production tumbled 7.8 percent after assets were seized in Venezuela, Nigerian workers went on strike and record prices triggered contract clauses that give oil-rich governments a bigger share of output.

Countries that are selling oil -- from Russia to Iran -- are getting richer as the prices climb, and they see less and less reason to give any of their wealth to the big international companies. Exxon Mobil, like other companies, finds that their leverage is slipping.

But there's an even more interesting calculation at work. While Exxon Mobil was cranking out record profits on oil production, its refineries were actually bringing in less money than last year. Why?

Profits from its refining business totaled $1.6 billion in the quarter, less than half of what they were last year. ... Oil prices in the quarter were nearly twice as high as the same time last year, while gasoline prices were an average of nearly 30% higher.

Oil prices doubled, but the price of the biggest product produced from oil didn't follow suit. And there's a good reason for that.

Americans drove 9.6 billion fewer miles in May 2008 than in May 2007, according to federal data released Monday. The 3.7 percent decline was the third-largest monthly drop in the 66 years the Department of Transportation has been collecting the data.

For decades, gasoline has been considered a commodity that lives by its own special rules. In a country that was designed around highways, gas was required to get Americans to work, school, and stores. It wasn't fungible, and demand wasn't tightly coupled to price. Whatever they asked for it, Americans would be forced to pay.

As it turns out, that's not entirely true. The sharp decline in miles driven and even sharper turn away from low mileage vehicles shows that gas is not a product untouched by pricing. $4 gas turned out to be enough to make Americans simply park it. Which, paired with increasingly bad signs in the economy, was enough to spur a retreat in the price of oil. If the increased price of oil had been directly reflected at the pump this year, we'd be looking at $6 gas -- and likely taking actions that would put Exxon's future in serious doubt. They took lower profits at the refineries because they had to.

Even more interesting is where Exxon spent its money.

On an earnings-per-share basis, Exxon made $2.22. That was still lower than analysts had expected, but 24% higher than last year, a gain Exxon attributed to its aggressive stock buyback plan.

And where it didn't.

"While oil companies are earning record profits and gas prices are soaring, the largest oil companies have invested more resources in stock buybacks than U.S. production," said Congressional Democrats in a press release shortly after Exxon announced its earnings.

Other critics charge the oil companies with deliberately restricting production in an attempt to keep prices high.

The industry says it's investing as much as it can in finding new oil, but is having a hard time given the shortage of workers and equipment in the sector.

Notice that Exxon's complaint is a lack of workers and equipment, not a shortage of places to drill as the GOP would have you believe. The fact is, they're producing all that they can, and aiming their platforms at the most likely locations. Neither tax breaks nor scads of new leases would have any significant effect.

But hey, let's declare GOP Magical Fairy Drilling Day and say that suddenly there's a drilling platform for every potential reserve out there. What could we get?

It's hard to say just how much oil is there, but estimates compiled by CNNMoney.com from various government agencies indicate crude oil production could be increased between 1 and 3 million barrels per day.

Since it's GOP Magical Fairy Drilling Day, let's be generous and go with the top number. And lets assume, since those GOP magical fairies have plenty of magical powder on hand, that a mere ten years from now all that production comes on line all at once. Happy days, right?

Wrong. The US currently produces about 5 million barrels a day, which makes another 3 look like a big increase. But US production is in a sharp decline. Even if we held the 5 million/day level, adding in another 3 million would put us well below US production back in 1970. Imports increased 3.5 million barrels a day between 1990 and 2000 alone. If there were unlimited drill rigs, if there were unlimited resources for oil infrastructure, if every potential reserves performs at the high end of prediction, we would still be importing more oil at the end of the decade, not less.

And that's all GOP magic fairly land. In reality, opening up every single area for drilling, and doing it today, won't even be enough to stop the steady decrease in US production. This production would come on line over a period of decades, during which other fields would fall off the radar. It won't even make a blip in the decline. You might as well try to save a sinking boat by drilling holes in the hull to let the water out.

Here's reality: between 1970 and 1980, oil prices increased twenty-fold and the US got a vivid demonstration of how vulnerable we were to the availability of imported oil. In that decade, the Trans-Alaskan Pipeline was completed and the largest US oil field in history came on line. The executive order banning offshore exploration was still more than a decade in the future. So what happened to US production? It fell over a million barrels a day. Of course, some of the exploration in that decade didn't really make it to the pumps until the 1980s... when production fell another million barrels a day. Or maybe the 1990s, when it was down another million. Over all that time, US dependence on foreign oil increased.

We can repeat that pattern. If we make "drill more" the centerpiece of our strategy, we mimic the 1970s, handing over more control of our economy and national security to foreign powers. "Drill more" and "import more" are two sides of the same coin.

Or we can focus our efforts on getting away from oil, and turn the money that would go digging our current hole even deeper toward climbing out of the hole entirely. We can do that through helping define plans like Energize America and through supporting EnergySmart candidates.

For 2008, it's the energy, stupid. And thinking that opening up more areas for drilling will help really is stupid.