Peak Oil News: 08/01/2004 - 09/01/2004

Monday, August 30, 2004

It's the End of the World as We Know It

Left Hook

A simple fact of life is that any system based on the use of nonrenewable resources is unsustainable. Despite all the warnings that we are headed for an ecological and environmental perfect storm, many Americans are oblivious to the flashing red light on the earth's fuel gauge. Many feel the "American way of life" is an entitlement that operates outside the laws of nature. At the Earth Summit in 1992, George H.W. Bush forcefully declared, "The American way of life is not negotiable." That way of life requires a highly disproportionate use of the world's nonrenewable resources. While only containing 4% of the world population, the United States consumes 25% of the world's oil. The centerpiece of that way of life is suburbia. And massive amounts of nonrenewable fuels are required to maintain the project of suburbia.

The suburban lifestyle is considered by many Americans to be an accepted and normal way of life. But this gluttonous, sprawling, and energy-intensive way of life is simply not sustainable. Few people are aware of how their lives are dependent on cheap and abundant energy. Are these Americans in for a rude awakening? In a fascinating new documentary, The End of Suburbia - Oil Depletion and the Collapse of the American Dream, the central question is this: Does the suburban way of life have a future? The answer is a resounding no.

Get Ready for the Peak Experience

AlterNet: EnviroHealth

Two new realities are fast converging on the public consciousness with what may be serendipitous timing: climate change and peak oil. After years of controversy and denial, there finally seems to be a solid consensus that climate change is here; that it threatens everything from agriculture to human health; and that it will probably turn out to be even worse than predicted.

"Peak oil" is a still-obscure term you will soon be hearing a lot more about. It simply refers to the peak of oil production. Oil was made over millions of years as ancient life was crushed and buried under the earth, and they ain't making any more of it – at least not on any timescale that is meaningful to us – so like any limited commodity (think Picassos or antique porcelain), the supply will rise to meet demand and then begin to fall. As supply falls, prices will go up, perhaps drastically.

Like a hiker climbing through clouds, we can't know where the peak is until we reach it and feel the ground falling away beneath our feet. But wait – why are there clouds? Why can't we see the peak before we get there? Don't we have monitoring agencies that exist to make predictions about things like when the oil supply will peak?

Friday, August 27, 2004

Why Is Mike Ruppert Promoting the 'Peak Oil' Scam?

Conspiracy Planet

Whoa, Dude! Are We Peaking Yet? "The Club of Rome, a non-profit global think tank, said in the 1970s that we'd hit peak oil in 2003. It didn't happen."

So said Kevin Kelleher, writing for Popular Science magazine in August of this year. But it did indeed happen, according to Michael Ruppert and his band of resident 'experts,' who collectively insist that the planet is now at the point of 'peak' oil production.
(Kevin Kelleher "How Long Will the Oil Age Last?" Popular Science, August 2004)

It appears then that today's 'Peak Oil' crowd has some pages in their propaganda playbook that were lifted directly from the Club of Rome, which raises the obvious question: what exactly is the Club of Rome?

Who is it that has handed Michael Ruppert and company the baton?

The initial membership list of the Club of Rome, as it turns out, contains some interesting names:

Thursday, August 26, 2004

Iraq and the Problem of Peak Oil


The era of cheap, abundant oil, which has supported world economic growth for more than three quarters of a century, is most probably at or past its absolute peak, according to leading independent oil geologists. If this analysis is accurate, the economic and social consequences will be staggering. This reality is being hidden from general discussion by the oil multinationals and major government agencies, above all by the United States government. Oil companies have a vested interest in hiding the truth in order to keep the price of getting new oil as low as possible. The US government has a strategic interest in keeping the rest of the world from realising how critical the problem has become.

According to the best estimates of a number of respected international geologists, including the French Petroleum Institute, Colorado School of Mines, Uppsala University and Petroconsultants in Geneva, the world will likely feel the impact of the peaking of most of the present large oil fields and the dramatic fall in supply by the end of this decade, 2010, or possibly even several years sooner. At that point, the world economy will face shocks which will make the oil price rises of the 1970’s pale by contrast. In other words, we face a major global energy shortage for the prime fuel of our entire economy within about seven years. Peak oil.

The problem in oil production is not how much reserves are underground. There the numbers are more encouraging. The problem comes when large oilfields such as Prudhoe Bay Alaska or the fields of the North Sea pass their peak output. Much like a bell curve, oil fields rise to a maximum output or peak. The peak is the point when half the oil has been extracted. In terms of reserves remaining it may seem there is still ample oil. But it is not as rosy as it seems. The oil production may hold at the peak output for a number of years before beginning a slow decline. Once the peak is past however, the decline can become very rapid. Past the peak, there is still oil, but each barrel becomes more difficult to exploit, and more costly, as internal well pressures decline or other problems make recovery more expensive for each barrel. The oil is there but not at all easy to extract. The cost of each barrel past peak is increasingly higher as artificial means are employed to extract it. After a certain point it becomes uneconomical to continue to try to extract this peak oil.

Global Climate Change & Peak Oil Part III

From The Wilderness

The first reaction of most environmental activists to the news of peak oil is to say, "Good, we need to stop using fossil fuels anyway." It seems logical that a decline in hydrocarbon production will lead to a decline in carbon dioxide emissions. And it is likely that somewhere down the line, carbon emissions will abate simply due to the scarcity of fuel. But we will not go gently into that good night.

Peak oil will not be a blessing in disguise with regard to global warming. The models of global climate change developed by the IPCC and others have not taken into account the impacts of Peak Oil and the North American Natural Gas Cliff. These models are based on faulty economic projections produced by neo-classical economics-a warped discipline which is blind to resource depletion.26 If we turn to coal and biomass to make up for the decrease in oil and natural gas production, then it is likely that our actions will push the average global temperature well beyond the 6º C threshold mentioned above. The end of the oil age could very well push us into an age of runaway global warming.

Coal will not be able to support the kind of energy-intensive economy which we have built on oil and natural gas. It will be a faltering effort from a civilization in denial, intent on clinging to unsustainable ways. It will fail in the end, but in this last mad burn-off of energy resources, we may very well incur the demise of life on this planet.

Russia Proves 'Peak Oil' is a Misleading Zionist Scam

Russia Proves 'Peak Oil' is a Misleading Zionist Scam

            If the opening paragraph of this report started by claiming that completely unlimited crude oil reserves exist inside planet earth, readers might be tempted to regard the entire text as preposterous ghostwriting for a novelist like Frederick Forsyth. If the report then went on to  claim that the Russians have exploited this stunning reality for nearly thirty years, right under the largely unwitting noses of western intelligence, readers could be excused for mistaking the author for a lunatic, or perhaps as a front for spy novelist John le Carr. The problem here  is that unlimited oil reserves do exist inside planet earth, and the Russians long ago developed the advanced technology necessary to recover these unlimited oil reserves in an efficient and timely manner. 

            Profoundly disturbing hard intelligence like this does not sit well with the frantic cries of western academic shills and lobbyists, determined to convince you all that the end of the oil world is nigh, or, more accurately, that America faces an imminent catastrophe when global production capacity "Peaks", i.e. when world demand for crude oil finally exceeds the rate at which we can physically pump the required product out of the ground. The gist of these false claims are outlined in a speech given at the at the University of Clausthal, by lobbyist Doctor Colin Campbell during December 2000:

           "In summary, these are the main points that we have to grasp: Conventional [Free flowing] oil provides most of the oil produced today, and is responsible for about 95%  of all oil that has been produced so far. It will continue to dominate supply for a long time to come. It is what matters most. Its discovery peaked in the 1960s. We now find one barrel for every four we consume. Middle East share of production is set to rise. The rest of the world peaked in 1997, and is therefore in terminal decline. World peak comes within about five years" [circa 12/2005]
            Campbell is just the tip of a giant iceberg of academic Peak Oil 'experts' who suddenly appeared en-masse to give you this frightening news, right after President Saddam Hussein suddenly started trading his oil in Euros rather than in US Dollars, a devastating switch with the easy capacity to destroy the US Dollar in less than five years if it was left unchallenged and unchecked. 
            So these shills [decoys] were carefully positioned to deflect your attention away from  the obvious greed and incompetence of the United States Government and its Wall Street masters, and focus it elsewhere instead. Then, hopefully, a few years later down the track when prices start to bounce through the roof, and America has no Euros to buy crude oil, you will blame gasoline prices of $5.00+ per gallon at the pumps on an 'inevitable decline' in world oil production, rather than march furiously on Washington DC with locked and loaded firearms.
            Though attacking Campbell and his ilk is not the purpose of this report, his idiot claims can be debunked readily enough. While it is true that nowadays we only officially find one barrel of oil for every four barrels we consume, this is primarily because we temporarily stopped the incredibly expensive process of looking for crude oil when we had already physically established more than two trillion barrels of reserves in known reservoir locations around the world. When those known reserves drop to [say] one trillion barrels we may be tempted to go and find more, but not until then. And while it is true that the production rate from each individual oil well ever drilled has slowly declined over the years, there is a perfectly valid technical reason for this predictable reduced flow rate, which will be explained later.

Doomsday nearer than you think

It takes a little common sense to realize that every link in the economic chain is powered by fossil fuels. Cars, airports, docks, factories, water treatment plants, food processing centers, basically all metals, plastics and most usable materials are all derived from fossil fuels.

Extreme estimates predict that between now and 2050, as oil reserves dwindle, various global assaults will take place in order to control the world’s remaining supply.

Take solace in the fact that these are the most extreme estimates. But even the most conservative estimates predict life will change considerably.

Wednesday, August 25, 2004

Oil depletion: knowledge bank

Oil depletion: knowledge bank

Oil (& gas) depletion - a brief guide to online information and bibliography

This is a good source of information links.

Arithmetic, Population, and Energy

The following is a small excerpt from the acedemic paper of Dr. Albert Bartlett, Department of Physics, University of Colorado at Boulder.

Arithmetic, Population, and Energy

A friend recently tried to reassure me by asserting that there remained undiscovered under our country at least as much oil as all we have ever used. Since it has been about 120 yr since the first discovery of oil in this country, he was sure that the undiscovered oil would be sufficient for another 120 yr. I had no success in convincing him that if such oil was found it would be sufficient only for one doubling time or about a decade.

As the reader ponders the seriousness of the situation and asks, "What will life be like without petroleum?" the thought arises of heating homes electrically or with solar power and of traveling in electric cars. A far more fundamental problem becomes apparent when one recognizes that modern agriculture is based on petroleum-powered machinery and on petroleum-based fertilizers. This is reflected in a definition of modern agriculture: "Modern agriculture is the use of land to convert petroleum into food."

Item: We have now reached the point in U.S. agriculture where we use 80 gallons of gasoline or its equivalent to raise an acre of corn, but only nine hours of human labor per crop acre for the average of all types of produce.12

Think for a moment of the effect of petroleum on American life. Petroleum has made it possible for American farms to be operated by only a tiny fraction of our population; only 1 American in 26 lived on a farm in 1976. The people thus displaced from our farms by petroleum-based mechanization have migrated to the cities where our ways of life are critically dependent on petroleum. The farms without the large number of people to do the work are also critically dependent on petroleum-based mechanization. The approaching exhaustion of the domestic reserves of petroleum and the rapid depletion of world reserves will have a profound effect on Americans in the cities and on the farms. It is clear that agriculture as we know it will experience major changes within the life expectancy of most of us, and with these changes could come a major further deterioration of world-wide levels of nutrition. The doubling time (36 - 42 yr) of world population (depending on whether the annual growth rate is 1.9 % or 1.64 %) means that we have this period of time in which we must double world food production if we wish to do no better than hold constant the fraction of the world population that is starving. This would mean that the number starving at the end of the doubling time would be twice the number that are starving today. This was put into bold relief by David Pimentel of Cornell University in an invited paper at the 1977 annual meeting of AAPT-APS (Chicago, 1977):

Over A Million Barrels Of Oil A Day Lost To Depletion

Environmental Media Services

The world is now losing more than a million barrels of oil a day to depletion – twice the rate of two years ago – according to a new analysis published this month in Petroleum Review, the oil and gas magazine of the Energy Institute in London.

The analysis shows that output from 18 significant oil-producing countries, accounting for almost 29 percent of total world production, declined by 1.14 million barrels a day (mb/d) in 2003. The annual rate of decline also appears to be accelerating, contrary to the widely held view that depletion progresses slowly.

Based on data in the latest BP Statistical Review of World Energy, production from this group of 18 countries peaked in 1997 at 24.7 mb/d and by 2003 it had fallen to 22.1 mb/d. In 1998 their total production dropped by less than one percent, whereas last year it declined by nearly five percent.

Oil's Slippery Slope

Asia Times

Welcome to peak oil

According to HSBC, oil is now 136% - and counting - more expensive than before September 11, 2001. The United States - with 5% of the world's population - gobbles up no less than 26% of the world's oil production.

The world currently consumes 81.2 million barrels of oil a day (1 barrel = 159 liters), according to the International Energy Agency (IEA), the energy forum for 26 industrialized consumer nations. But the really alarming figure is 84 million barrels of oil a day: according to the IEA, this will be the global demand by 2005.

A few months ago, the same IEA was saying that demand in 2005 would be of only 82.6 million barrels a day. And more than a year ago, the IEA said we would reach 84 million barrels a day only by 2007 or 2008. This is leading analysts in Dubai to predict that demand - on a very optimistic scenario - will reach 120 million barrels a day in 2020. Additionally, this should mean that if demand continues to grow at the current frenetic level, all proven oil reserves in the world - at the best-estimate level - will be extinguished by 2054.

Way before that happens, of course, we will reach what experts define as "peak oil". The oil-supply bell curve inexorably will be going down - with no return in sight - while the price curve will be going up, toward $100 a barrel and beyond.

Experts: Oil Production Peak Inevitable

NPR - Morning Edition, Wednesday, August 25, 2004

The summer's record high oil prices and tight supplies raise questions about how much oil is left. Though oil companies are seeking new discoveries, industry veterans agree oil production will hit a peak -- though estimates on when vary from 10 to 40 years.

Hear NPR's Steve Inskeep report with experts interviews. 
(The linked page contains a streaming audio link to a current show segment and may not be available later.)

Tuesday, August 24, 2004

Amory Lovins' Leaner, Greener World


Amory Lovins has a simple message: Saving energy is easier than finding more. It's a point that certainly resonates with environmentalists. And businesses increasingly are drawn to his mantra, since conserving energy saves money and improves competitiveness.

Oil Haves and Have-Nots -- The fossil fuel age will end, but few agree on when

Science & Technology at Scientific

To some geologists, the world is heading toward an oil crisis of historic proportions. The crisis will come, they say, not when the wells go dry, but when world oil production reaches a peak and begins to decline. At that time, prices are likely to rise precipitously unless demand, which has been growing year by year, also declines.

There is, however, little agreement on when the peak production will occur. For example, the Energy Information Administration (EIA) of the U.S. Department of Energy has made several projections, with the shortfall happening at the earliest in 2021 and at the latest in 2112. Others--such as geologist Colin Campbell, chair of the Association for the Study of Peak Oil and Gas in Uppsala, Sweden--suggest the peak may occur as early as 2005; geophysicist Kenneth Deffeyes of Princeton University says the peak will definitely be next year. Economist Morris Adelman of the Massachusetts Institute of Technology insists that "for the next 25 to 50 years, the oil available to the market is for all intents and purposes infinite." The difference between oil optimists and oil pessimists is crucial, for if the pessimists are correct, there will be insufficient time for an orderly transition to alternative energy sources....

Oil's slippery slope

AxisofLogic/ World

BRUSSELS and DUBAI - As the neo-conservative dream of a "liberated" Iraq came true in April 2003, who would have predicted that 16 months later oil would become the ultimate time bomb for the Bush administration?

And the Saudi royal/oil family cavalry is not exactly coming to the rescue.

Many factors explain the current rise in the price of oil toward US$50 a barrel - and counting: incapacity - or unwillingness - of the Organization of Petroleum Exporting Countries (OPEC) to respond to growing global demand; maximum terrorist risk in Saudi Arabia; the Yukos saga in Russia; the recent referendum in Venezuela; ethnic trouble in Nigeria; China's unquenchable oil thirst; widespread speculation frenzy propelled by pension funds; and serial pipeline bombing in Iraq.

Average prices for last week stood at $47.02 a barrel in the United States, $44.44 a barrel for North Sea Brent and $41.64 a barrel for the OPEC basket - a more than 4% overall rise on the previous week. Crude futures for October were trading at $46.87 a barrel on Monday.

OPEC, in its latest report, insists the world economy is coping: "On current trends OPEC production will be more than adequate to meet demand in the remainder of 2004 and 2005." A survey by with 55 economists concluded that oil would have to top $60 a barrel to compromise the US economy seriously. But in the real world, the fact is that high oil prices are already set to shave as much as 1% off Asia's gross domestic product in 2004, according to the United Nations' Economic and Social Commission for Asia and the Pacific.

Cheap oil is the Holy Grail of the Bush administration's global strategy. According to the sanitized version of US Vice President Dick Cheney's secret energy report published in May 2001 - the work sessions and the people involved remain classified information - the US in 2020 will be importing 66% of its oil, against 55% in 2001. So, the report says, oil is "the priority of America's foreign and trade policy", and "Russia, Central Asia, the Caspian, the Gulf countries and Western Africa" need "special attention".

This, in the long term, represents one of the explanations for the invasion of Iraq. In the short term, the administration of President George W Bush is in for a lot of trouble when oil-guzzling SUV (sport-utility vehicle) armadas of voters start making the connection between the unmitigated disaster in Iraq and oil at $50 a barrel and beyond. Analysts in Dubai estimate that the Iraqi premium - fueling uncertainty and speculation - adds at least $10 to each barrel of oil.

Welcome to peak oil
According to HSBC, oil is now 136% - and counting - more expensive than before September 11, 2001. The United States - with 5% of the world's population - gobbles up no less than 26% of the world's oil production.

The world currently consumes 81.2 million barrels of oil a day (1 barrel = 159 liters), according to the International Energy Agency (IEA), the energy forum for 26 industrialized consumer nations. But the really alarming figure is 84 million barrels of oil a day: according to the IEA, this will be the global demand by 2005.

A few months ago, the same IEA was saying that demand in 2005 would be of only 82.6 million barrels a day. And more than a year ago, the IEA said we would reach 84 million barrels a day only by 2007 or 2008. This is leading analysts in Dubai to predict that demand - on a very optimistic scenario - will reach 120 million barrels a day in 2020. Additionally, this should mean that if demand continues to grow at the current frenetic level, all proven oil reserves in the world - at the best-estimate level - will be extinguished by 2054.

Way before that happens, of course, we will reach what experts define as "peak oil". The oil-supply bell curve inexorably will be going down - with no return in sight - while the price curve will be going up, toward $100 a barrel and beyond.

Colin Campbell makes no bones about it: for him, peak oil is already here, or around the corner in 2005. For years, Campbell - a PhD in geology at Oxford University in England and former chief executive for BP, Texaco, Amoco and Fina - has been a lonely voice contradicting the supremely powerful oil lobby, according to whom high technology and the invisible hand of the market must guarantee discovery and exploitation of reserves virtually forever.

Already in 2000, Campbell was charging that "oil giants are fooling the planet" and that everybody was myopic - especially producing countries. He was saying that "we only find a new barrel of oil for each four we produce". He is sure that the world has already consumed half of its proven oil reserves, and he is sure that the Middle East will again manipulate oil prices. It turns out that Campbell might have been wrong by a margin of only a few months: he was betting on a new oil shock by 2005, "when production will start to fall and reserves will begin to dwindle at a rate of 3% a year".

In Europe, experts from the IEA, echoed by diplomats, acknowledge that the market is tense and production facilities are extended to the limit, but they insist the current hysteria is a question of "irrational exuberance". One expert says that "there is plenty of oil in the market, and offer is superior to demand". The consensus is to blame traders and speculators who are pushing the price of the barrel higher and higher by brandishing the specter of scarcity.

But things are not so clear cut. Especially because of China, global demand this year will increase by a staggering 2.5 million barrels a day compared with 2003. In terms of offer, analysts in Dubai say that OPEC as of July had an excess production capacity of a maximum 1.2 million barrels a day. OPEC is currently producing 29.1 million barrels a day. This means non-OPEC members such as Russia or Norway must also increase their production to push prices down. But North Sea oilfields have already peaked; and Yukos in Russia, pumping 2% of the daily global demand for oil - 1.7 million barrels - even as it's about to go bankrupt, is also stretched to the limit.

The Chavez factor
They certainly prefer neo-liberalism to Hugo Chavez' "Bolivarian Revolution". But the 50 multinationals involved in the oil-and-gas business in Venezuela - including US majors ExxonMobil, ChevronTexaco and ConocoPhillips - as well as world markets, all badly wanted a Chavez victory in the latest referendum in that country. Chavez could not possibly beat the markets' bete noire: uncertainty. Venezuela is the fifth-largest oil exporter and eighth-largest oil producer, the only Latin American member of OPEC and the supplier of 15% of the United States' oil needs. Chavez played like a master his role of guaranteeing Venezuela's constitutional stability. And markets - when it suits them - do have memory: everybody remembered the December 2002-February 2003 general strike provoked by Chavez' opposition, which led to production falling to 150,000 barrels a day (against 2.5 million to 2.6 million nowadays) and exports to the US being interrupted for the first time in 80 years.

So Venezuela as part of the fear factor may be out of the equation - at least for now. As well as global oil majors and major oil producers, Venezuela is profiting handsomely from high oil prices: the country is scheduled to grow no less than 10% in 2004.

Saudi trouble
Ali al-Naimi, the Saudi energy minister, is the Alan Greenspan of black gold. In early July, Naimi said on the record that oil at about $35 a barrel was a "fair" price. That was the formal burial of the old OPEC selling price range of $22-$28 a barrel. This extremely important statement in fact meant two things. The first is that there will be no October surprise - or the Saudis coming to President George Bush's rescue. The second is that Saudi Arabia is not able to increase oil production (although they have promised an increase to almost 10 million barrels a day in September: not many in the industry are counting on it). The whole thing leads us back - once again - to peak oil.

When oil reached $45 a barrel, Naimi said again on the record that Saudi Arabia would be ready "immediately" to increase its production by 1.3 million barrels a day. Once again, not many in the industry took him seriously.

Besides, there's the all-important bickering over Saudi oil reserves. According to Saudi Aramco, the kingdom's proven reserves are estimated at 257.5 billion barrels. But analysts in Dubai prefer to cling to Aramco's former executive vice president Sadad al-Hussayni who, in articles appearing in the Oil & Gas Journal, insists proven reserves amount to only 130 billion barrels.

In Dubai, it is estimated that the recent al-Qaeda activities inside Saudi Arabia - via attacks on expats working in the oil business - have increased the geopolitical risk of a barrel of oil by something from $8-$12. Analysts comment that crucial Saudi installations such as Ras Tanura and Abqaiq - the world's largest oil-processing complex - can be extremely vulnerable to an al-Qaeda attack. The ultimate nightmare scenario doing the rounds in the oil business is of Osama bin Laden as a new caliph in a non-Saudi Arabia - before the Americans decide to invade and take over the oilfields. "Five hundred dollars for a barrel of oil, anyone?" scoffs a Dubai analyst.

Investing in Iraq, anyone?
It's fascinating to compare the current situation with the situation in the Middle East prior to the invasion of Iraq.

Back in February 2003, people in Dubai were saying an oil shock was inevitable: the price of a barrel would climb to as much as $50, and in the event of a civil war in Iraq, it would reach $100. They agreed that in the short term this would be a windfall for the Saudis, the Kuwaitis and the United Arab Emirates. Dubai at the time was confident that Saudi Arabia, Kuwait and the UAE - with a combined spare capacity of an alleged 5 million barrels a day - would be able to cover Iraq's production and Venezuela's shortfall caused by the general strike.

Now there's not so much optimism as far as spare capacity is concerned - although oil experts in the Persian Gulf region keep saying that production costs in Iraq are a blessing: only $1.50 per barrel, compared to $2.50 for Saudi Arabia and $4 for the US or North Sea oil. Iraqi oil could be extracted for as little as 97 cents a barrel. But Iraqi equipment is more than 20 years old. Sanctions have devastated the economy and nothing has been upgraded. Water is getting into the pipelines. And 16 months after the Americans took over, the oil industry is still rusting.

Walid Khadduri, editor-in-chief of the Middle East Economic Survey (MEES), believes at least $3 billion is needed to raise Iraqi oil exports to the pre-sanctions level of 3.5 million barrels a day. In his view, this would take at least two or three years of investment after peace has been established - and Iraq is still at war. Others in Dubai believe it would take $10 billion and no less than six years to get to 5 million barrels a day. And to realize Iraq's potential fully, an investment of up to $50 billion in more than a decade will be necessary. This leads the MEES to conclude that Iraq's oil sector will not produce large returns in the next 10 years.

Ahmed el-Sayed el-Naggar, of the al-Ahram Center for Political and Strategic Studies in Cairo, remembers how "Iraq had always been among the hawks in OPEC. As a matter of historical record, Iraq has always presented an obstacle to the US's oil-market strategy. This explains why the US administration's behavior towards that country was so implacably vindictive, and why, in the process of occupying Iraq to drive oil prices down to the cheapest possible levels, it wanted to drive a lesson home to all nations opposed to the US and use the fate of Iraq as an example to intimidate all developing nations."

Whatever the spin from the White House and the Pentagon, the fact is one of the key objectives in the whole Iraqi adventure - completely in line with Dick Cheney's 2001 energy report - was to take over the world's second-largest oil reserves, extirpate Iraq from the much-hated OPEC and maybe kill the cartel for good. Last May in Houston, Asia Times Online confirmed that even the oil business didn't think this was a good idea.

The crumbling Iraq oil infrastructure - on the most optimistic of days - currently cannot produce more than 1.8 million barrels, and much less export it. The Iraqi resistance knows how formidable a weapon is the regular bombing of either the northern pipeline from Kirkuk to Ceyhan, Turkey, or the southern pipeline from Basra. Whenever there is a bombing - or an interruption in pumping because of workers condemning the offensive against Shi'ite cleric Muqtada al-Sadr in Najaf - production in Basra falls to less than 1 million barrels a day. It's always important to remember that even under United Nations sanctions, Iraq exported at least 2.5 million barrels a day.

Officially, not many in the oil business seem prepared to admit that the real big problem today is unprecedented demand by the US, China and India - which production simply cannot match. But if people in the oil business know that consumption is growing at its fastest in more than 20 years, they also know that OPEC - controlling about half of the world's oil export supply - is already pumping at the highest levels since 1979.

China - the second-largest oil consumer in the world, way behind the US - grew 9.7% in the first semester of 2004, and is importing 40% more oil this year than in 2003. Its own production grows very slowly: for example, as its consumption rises feverishly, the production of its main oilfield, Daqing, is declining, according to official Chinese data, by 7% a year (it may be more). Daqing used to be responsible for 50% of China's oil. This leaves China scrambling for all sorts of deals with Gulf countries, Central Asia (especially Kazakhstan), Russia and Africa. China's ultimate nightmare is its "petro-dependency". Energy-saving is now part of the official language, the nuclear program is back, and research for alternative forms of energy is definitely on.

China devoured 6 million bpd in 2003, of which it imported 2.6 million bpd. Oil imports in India, which consumed 2.4 million bpd last year, 1.6 million of which were imported, will increase 11% this year, the state-owned Indian Oil Corp reported.

Some diplomats in Brussels admit that the whole system may face a major structural problem. Huge oilfields are on their way down; there's been no major oil discovery for the past 18 months - despite huge technological progress; and producer countries are operating at their limits.

The key indication of a crisis has been the now famous line by Indonesian Oil Minister and current OPEC president Purnomo Yusgiantoro. "We cannot increase the supply." And this only a few weeks after OPEC guaranteed supply was not a problem. In June, Indonesia admitted it was in the unenviable position of being the first OPEC country to actually become a net importer of oil. Russia has already announced its production will fall in 2005.

In euros, please
From an American perspective, the need to control Iraq's oil is deeply intertwined with the defense of the dollar. The strength of the dollar is guaranteed above all by a secret agreement signed between the US and Saudi Arabia in the 1970s that all OPEC oil sales be denominated in dollars. Saddam Hussein started selling Iraqi oil in euros (and making a handsome profit) in November 2000 - and that's another crucial reason for the Iraqi invasion. Many OPEC countries, not to mention Russia (President Vladimir Putin already referred to it on the record), flirt with the idea of trading their oil in euros. (OPEC is made up of Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.)

A recent analysis published by Goldmoney states that OPEC has already switched, in fact, to trading oil in euros - as oil-exporting countries fight to offset the weak dollar, "It seems clear that OPEC and the other oil exporters are already pricing crude oil in terms of euros, at least tacitly. Whether they start invoicing their crude oil sales in terms of euros remains to be seen."

So what is Cheney doing in the middle of this crisis? He's blaming the Democrats. The failure of Cheney's Russia strategy will be examined in a separate article. But as far as Iraq is concerned, the blowback is obvious. The neo-cons dreamed of exporting "democracy". Instead, they imported geopolitical instability - reflected in the rising price of oil. The Bush administration has not been rewarded with cheap oil: it is now facing a new, slow, mutating oil shock.

The oil business knows that with its oil infrastructure repaired, Iraq could rival or might even surpass Saudi Arabia as the world's largest oil producer. But the neo-con dream of a US military protectorate with US oil companies running the oil business is a more distant prospect by the day. There's no credible evidence that Iraq may become, sooner or even later, a source of spare capacity to world oil production, or be able to stop the migration of OPEC and non-OPEC countries from the petro-dollar to the petro-euro.

Oil at $50 a barrel, and on its way to $60, is an absolute disaster for oil-importing countries (and this means most of the world). Business costs are automatically higher - leading in many cases to job cuts, which means higher unemployment. The days of cheap oil may be over - as most analysts agree. But beyond the current hysteria over oil at $50 and the failure of Cheney's US energy policy, the world seems to be failing to address at least four extremely important questions on which the common future depends: how much oil - proven reserves - is left in the Middle East? How much oil does Russia have? What is the real amount of proven reserves in the Caspian Sea? How long will all this oil last?

Monday, August 23, 2004

Will hydrogen soon kill Middle East crude?

The Daily Star

The Economist magazine has estimated that "With oil prices at their highest level in two decades, revenues of $600 million a day are gushing into the Gulf, double the volume during the 1990s. The monarchies of the Gulf Cooperation Council are alone likely to earn $35 billion more from oil exports this year than last ..." - and that excludes big producers such as Algeria, Libya and Iraq.

Arabs should beware. The bonanza will not last forever. Instead of frittering away their oil wealth on conspicuous consumption, on real estate extravaganzas and uncertain overseas investments, the Arabs should devote every surplus dollar to preparing their societies for a post-oil economy. As most Arabs are today under 30 years of age, a radical change could occur in their lifetime, and it could be painful. Urgent measures need to be taken to prepare for the day when the world economy will no longer be dependent on Arab oil.

Instead of deregulating their economies, eliminating corruption, privatizing their inefficient state-owned industries and stimulating growth in non-oil sectors, high Arab oil revenues have created a sense of complacency and retarded the introduction of much-needed reforms. Most Arab economies have stagnated over the past two decades with the result that 80 million Arabs out of a total of 290 million still live below the poverty line.

It is almost certain that within three, four or, at the latest, five decades from now, the petrol pump will have been left behind and replaced by some other form of energy-provider. At present, internal-combustion gasoline engines drive the world's 500 million cars. By 2030, the number of cars is forecast to increase to more than 2 billion, largely due to growth in Asia. What new technology will drive them? Might many of them be all-electric vehicles? Or might they be powered by hydrogen fuel cells - hydrogen being, after all, the most abundant element in the universe?

Whatever the answer, tomorrow's cars are most unlikely to be the gas-guzzlers we see on the roads today, pumping carbon dioxide into the atmosphere and contributing fatally to global warming and climate change.

Sunday, August 22, 2004

Oil demand fuels pump fears

TASMANIAN business manager Craig Farrer feels a little nervous when he pumps fuel from the bowser.

Mr Farrer, 36, is one of thousands of Tasmanians who commute to work.
Many of us live in satellite centres like Port Sorell, Paper Beach, Boat Harbour and Blackmans Bay and travel to work in centres like Burnie, Devonport, Launceston and Hobart.
A restaurant manager, Mr Farrer bought a house at Clifton Beach, about 30km from Hobart where he works.
"I love living out here, it's like going to the shack each night, it's relaxing," Mr Farrer said.
Mr Farrer spends about $60 a week on fuel.
His weekly fuel bill could balloon to $180 in three years, says the theory of one oil expert.
Ali Samsam Bakhtiari, a 30-year veteran with the Iranian National Oil Company, said Aussie bowser prices could reach $3 a litre in three years -- a nightmare scenario for Mr Farrer.
"I'd have to think about selling and moving closer to the city," Mr Farrer said. "I'd stress the budget."
Mr Farrer said he would have to consider sharing travel with friends and neighbours to cut costs.
Dr Bakhtiari is one of many oil academics and experts predicting a global oil crisis.
These experts say world oil reserves are pumping near capacity.
With added demand from China, India and other fast growing Asian economies, demand will outstrip supply.
Some estimate demand will rise more than 50 per cent in the next 20 years.
The moment demand outstrips supply prices will start to rise -- and keep rising.
That is the theory, anyway.
Dr Bakhtiari predicts world production will peak by 2007, then decline.
Geophysicist Kenneth Deffeyes, of Princeton University in New Jersey, has warned about an impending oil crisis for years.
In Hubbert's Peak: The Impending World Oil Shortage, Professor Deffeyes says the threshold when demand outstrips supply will be crossed this year.
In 1956 another geophysicist, M. King Hubbert, predicted US oil production would peak in the 1970s. He was ridiculed but later proved right.
Professor Deffeyes' predictions are gaining credibility with oil prices this year already rising 30 per cent.
Concerned scientists and retired industry experts have formed ASPO, the Association for the Study of Peak Oil and Gas.
US energy sector investment banker Matthew Simmons shares ASPO's concerns and is worried at the world's lack of attention to the problem.
"I am still amazed at the limited knowledge that exists, even in the US or within our major oil and gas company's senior management, about this topic and its dire consequences," Mr Simmons said after an ASPO meeting.
ASPO, using data that is very different from that published by oil trade journals, predicts the oil threshold, when demand outstrips supply, will happen in 2010.
With a predicted 40 years of oil remaining at current production, ASPO scientists fear a decline in production will see a huge power shift to the Middle East, which controls two thirds of the world's oil.
Production is declining in the US, the North Sea and Australia.
Oil from the Middle East is expected to decline from about 2010.
A common theory is the rising demand and falling supply will spark further political instability and cause a global recession.
The recession will in turn reduce oil demand and extend the age of oil.
West Australian scientist Bruce Robinson reckons major oil companies are consciously ignoring the problems -- an "HIH or Enron factor" is at work with oil companies producing highly optimistic and unrealistic data about the impending crisis.
Predictions by GeoScience Australia and Woodside Petroleum show Australia's oil production will fall significantly this decade.
Australia has been virtually self-sufficient but GeoScience predictions in 2001 show Australia will import 60 per cent of its oil by 2010.
In the report World Oil Markets and the Challenges for Australia, Woodside predicts serious trade deficit issues.
Australia's trade in liquid hydrocarbons would go from a surplus of $1.2 billion in 2001-02 to a deficit of $7.6 billion by 2009-10.
Australian Bureau of Agricultural and Resource Economics (ABARE) projections released this month are more optimistic than GeoScience data.
ABARE suggests Australia will be importing half of its oil by 2020 unless significant new fields are discovered.
The US Department of Energy has put the oil threshold further out -- more like 20 years away.
Major oil companies Shell and Exxon are also more optimistic expecting the threshold to be decades away.
Greg Bourne, regional president BP Australasia, presented a paper at an energy conference in WA last year putting the threshold more than 20 years away.
"While oil and its derivatives was the fuel of the 20th century, it will start to run out this century, with Australia facing a downturn in domestic production and rising imports," Mr Bourne said.
"At BP our best estimate of when global shortages of oil will begin to bite deeply is between 20 and 40 years.
"Much depends on further exploration outcomes and geo-political uncertainties, including whether we have more war or achieve peace in the oil-rich Middle East."
Dependence on the Middle East for oil is a major US election issue.
Democrat presidential candidate John Kerry unveiled an ambitious $US30 billion plan this month to make the US less dependent on overseas oil.
More than 60 per cent of America's fuel is from the Middle East.
Just this month threats of sabotage brought Iraqi oil production to a halt and caused oil prices to race to record highs.
Crude oil went above $45 a barrel in New York -- with some predicting it could go over $100 in the current climate.
But while the oil prices are making many tremble, they are cause for celebration to others.
High oil prices are doing wonders for the international oil companies' bottom lines.
Exxon Mobil last month reported it earned almost $6 billion in the second quarter of the year, a record for any company in a three-month period.
Share prices in Saudi Arabia and Qatar rose about 40 per cent in the first seven months of the year.
The economies of Saudi Arabia, Kuwait and Qatar are expected to expand by between 8 per cent and 10 per cent this year.

Crude Oil Prices Rising / Gasoline Prices Dropping -- What Does It Mean?

Media Monitors Network (MMN)

In normal economic circumstances, retail gasoline prices rise, often dramatically with the rise of crude oil prices. Often, gasoline prices rise on rumors of pending crude oil price hikes, and gasoline prices tend to stay elevated long after crude oil prices have dropped to prior levels. Gasoline retailers and refiners tend to milk profits for the most extended length of time possible, and tend to be totally disdainful of consumer outrage or discomfort. We have especially seen this pattern during the entire period of the George W. Bush administration, during which time the petroleum industry has raked in the most obscene corporate profits in their long history.

However, at the present time, this paradigm has changed. Crude oil prices on the spot market have reached the highest absolute prices in history (prices adjusted for inflation are still somewhat below record levels). Yet, even as crude oil prices are inching upwards day by day, and the news broadcasters and media outlets continue to promote public awareness of crude oil price increases, at the local level, gasoline has dropped as much as ten cents per gallon in the past month. What is happening?

There may be several factors. One factor that may play a significant role is the Federal presidential election season. The petroleum industry would no doubt intensely desire their wholly owned subsidiary, the Bush administration, elected this November. Gasoline prices draw public attention, and rising gasoline prices (not necessarily crude oil prices), tend to drive up inflation, unemployment and other "bad news" items that could decrease election chances for the Bush/Cheney team. Thus, the petroleum industry may decide at present to absorb some of the short term losses of enhanced profits and attempt to put the nation in a best possible financial mood prior to the election in November. Lowering gasoline and fuel prices helps Bush no doubt, and it is a prudent business mood for the cash/flush petroleum giants.

However, there is likely more at play here. Recent reports by the Association for the Study of Peak Oil, by petroleum investment specialist Matt Simmons, and others tell us that we may be at the peak or plateau of all-time global oil production. Some are suggesting that recent data shows the Saudis are at their all time peak of production, with no direction to go but down for all time. The same may be true of North Sea oil production, and we know American crude oil production peaked many years ago and is only a fraction now of its peak decades ago. Even natural gas is getting increasingly more difficult and expensive to recover, though no one is suggesting a peak of natural gas production.

The point of this information about the global oil production peak is that public awareness of the seriousness of its ramifications could cause international panic, including huge drops in the international and national financial markets, which utterly depend on cheap oil to fuel continued economic growth to ensure investor well-being in the current paradigm. National governments of most technology based nations of the world are very averse to sharing bad news, much less catastrophically bad news. The current American administration would be particularly uninterested in revealing the distressing truth that the end of the Oil Age might occur at the midway point (Hubbert Peak) of oil production, and not at the global cessation of oil production. If we are at the peak right now, as several experts have suggested, it would be among the worst economic news in the history of modern civilization worldwide. Instead of notifying the public and facing extremely difficult choices, the powers that be may very well attempt to disguise the new reality temporarily by lowering gasoline prices.

This could enable preparations for a coming turmoil, for contingency planning, or for whatever machinations the corporate elite/ power elite have to ease their transition into the rapidly changing world.
One thing is for sure -- gasoline prices do not go down while crude oil prices go up, except in highly extraordinary circumstances! This reality should be a signal to the masses that something extremely unusual and highly significant must be pending at the highest levels of national and world governance. This pattern is absolutely unsustainable, and common sense should tell us to treat it that way.

Monday, August 16, 2004

(Temporary) Continuance of the American Way of Life At State in Iraq

(Temporary) Continuance of the American Way of Life At State in Iraq

Soon after September 11, 2001, the discussion by American government officials regarding the American response began to pour forth. A memorable one was by American Vice-President Dick Cheney, who before becoming vice-president had been leader of the largest oilfield supply company in the world. Dick Cheney said regarding the goals of "terrorists" and the "appropriate" American response: "The American way of life is non-negotiable".

That mindset explains why President Bush AND presidential nominee John Kerry BOTH favor continuance of the American war in Iraq and why vice-presidential nominee John Edwards said at the Boston convention: "We are going to WIN that war!" That is why the American military in Iraq is invading nonstrategic cities like Najaf with overwhelming force, disarming Iraqis and preventing the institution of a free democracy in Iraq while advocating the Orwellian concept of "Democracy by appointment" (by an occupying military power).

The American government officials and presidential candidates of both parties know all about Peak Oil and the fact that (UNDER ALL CIRCUMSTANCES) the American way of life (as we know it) is nearing its end. Even if the U.S. were to successfully continue its policy and maintain control of Iraqi oil and even extend the policy and control all Persian Gulf Oil, the end is in sight for the consumerist American way of life.

The American way of life is on borrowed time. Perhaps that is what the Project for the New American Century was all about. Perhaps the PNAC was an acknowledgment that American hegemony and even American "normalcy" cannot extend beyond 100 years. The reality is that the American way of life, according to Petroleum geologists and analysts cannot be maintained as we have known it even for another twenty years, in all likelihood. In fact, some believe that the American way of life has already begun to irreversibly change, and for the worse, and the change will be catastrophic.

For instance, American freedoms are being lost AT HOME. The installation of a surveillance apparatus and legal machinations to invoke a true BIG BROTHER process are well underway. In the intermediate future, American citizens will not only be unable to exercise a real ability to question their government and petition it for redress of grievances, but Americans will likely find themselves living in a techno-oriented police state in which they are in heavy debt, with all their assets and incomes monitored and even controlled by the central government. How much freedom could exist in that America?

The distribution of wealth in America is changing, and with it the American way of life for poor people. The great likelihood is that, in the future, when survival of the way of consumptive life is at risk, the poor will be deemed expendable and not worth the cost and effort required for maintenance, even at poverty levels. No one can say that in a few years, when cheap energy is no longer available and food itself becomes scarce, the central government might enact operations and policies to liquidate the poor in ways that would make Himmler proud.

The American way of life has always been a two-tiered system in which the wealthy elite exercise control of government and wealth, and allow an adequate trickle down effect to placate the masses and stimulate enough wealth generation at lower tiers to provide a surfeit of wealth to be skimmed and accumulated by the elite. With the advent of Peak Oil and the end of the growth economy, the American way of life will become "each man for himself" and the rich will have the upper hand for survival itself (with a likelihood of survival in comfort/luxury for a prolonged period of time).

The wealthy American and world elite already know all of the above and they are not only aware of it, but they are planning strategies to enhance their own survival and comfort at the expense of everyone else. But Americans of all social classes have a degree of priority in this planning over all Iraqis. Entire Iraqi citizens and infrastructure are deemed expendable. American warplanes are welcome to bomb Fallujah and Najaf and every other city in Iraq, and no more pretense is being made of serious rebuilding The principal idea behind the American invasion and occupation of Iraq was always to consolidate strategic control over Iraqi oil and with a secondary goal of attempting consolidation of American control over the entire Iraqi economy. The same wealthy Americans who skim the wealth of American workers for their own wealth also will skim Iraq's wealth for a period of time, if it is deemed cost-effective. There is no altruistic motive in the American invasion and occupation of Iraq whatsoever, never was, and never will be -- even if Kerry/Edwards were to win the presidency. You NEVER hear Kerry/Edwards talk about rebuilding Iraq, do you?

In the end, after a period of indeterminable length, but possibly quite short, the American way of life will fade into history. If mankind survives the related upheaval, and if future archaeologists and sociologists and anthropologists examine the remains of the former American civilization and its impact on the world, it will be determined to have been yet another blow out of an empire -- consumed with wealth accumulation, beset by corruption, and ultimately unsustainable. But just because serious thinkers and leaders of the current status quo know it is not sustainable, does not mean that they can resist the alluring attempt to continue sustaining it -- because "The American way of life is not negotiable" (Dick Cheney, 2001).

Abiotic Theory of Oil Formation

The Environmental Literacy Council

There is an alternative theory about the formation of oil and gas deposits that could change estimates of potential future oil reserves. According to this theory, oil is not a fossil fuel at all, but was formed deep in the Earth's crust from inorganic materials. The theory was first proposed in the 1950s by Russian and Ukranian scientists. Based on the theory, successful exploratory drilling has been undertaken in the Caspian Sea region, Western Siberia, and the Dneiper-Donets Basin.

The prevailing explanation for the formation of oil and gas deposits is that they are the remains of plant and animal life that died millions of years ago and were compressed by heat and pressure over millions of years. Russian and Ukranian geologists argue that formation of oil deposits requires the high pressures only found in the deep mantle and that the hydrocarbon contents in sediments do not exhibit sufficient organic material to supply the enormous amounts of petroleum found in supergiant oil fields.

The abyssal, abiotic theory of oil formation has received more attention in the West recently because of the work of retired Cornell astronomy professor Thomas Gold, who is known for development of several theories that were initially dismissed, but eventually proven true, including the existence of neutron stars. He has also been wrong, however; he was a proponent of the "steady state" theory of the universe, which has since been discarded for the "Big Bang" theory. Gold's theory of oil formation, which he expounded recently in a book entitled The Deep Hot Biosphere, is that hydrogen and carbon, under high temperatures and pressures found in the mantle during the formation of the Earth, form hydrocarbon molecules which have gradually leaked up to the surface through cracks in rocks. The organic materials which are found in petroleum deposits are easily explained by the metabolism of bacteria which have been found in extreme environments similar to Earth's mantle. These hyperthermophiles, or bacteria which thrive in extreme environments, have been found in hydrothermal vents, at the bottom of volcanoes, and in places where scientists formerly believed life was not possible. Gold argues that the mantle contains vast numbers of these bacteria.

The abiogenic origin of petroleum deposits would explain some phenomena that are not currently understood, such as why petroleum deposits almost always contain biologically inert helium. Based on his theory, Gold persuaded the Swedish State Power Board to drill for oil in a rock that had been fractured by an ancient meteorite. It was a good test of his theory because the rock was not sedimentary and would not contain remains of plant or marine life. The drilling was successful, although not enough oil was found to make the field commercially viable. The abiotic theory, if true, could affect estimates of how much oil remains in the Earth's crust.

The abiogenic origin theory of oil formation is rejected by most geologists, who argue that the composition of hydrocarbons found in commercial oil fields have a low content of 13C isotopes, similar to that found in marine and terrestrial plants; whereas hydrocarbons from abiotic origins such as methane have a higher content of 13C isotopes. In an April 2002 letter published in the science journal Nature, Barbara Sherwood Lollar and her colleagues from the Stable Isotope Lab at the University of Toronto reported their analysis of the Kidd Creek mine in Ontario. An unusual ratio of 13C isotopes and the presence of helium provided evidence of hydrocarbons with abiotic origins, but they argued that commercial gas reservoirs do not contain large amounts of hydrocarbons with a similar signature. Gold and other geologists who argue that there are significant amounts of oil from abiotic origins maintain that as oil seeps up through the layers of Earth closer to the surface, it mixes with oil from biological origins, and takes on its characteristics.

Friday, August 13, 2004

Abiotic Petroleum?

Is petroleum a renewable and sustainable energy resource?

Here is a Google search for more information.

Google search: abiotic oil OR petroleum

Sustainable Oil?

An intriguing theory now permeating oil company research staffs suggests that crude oil may actually be a natural inorganic product, not a stepchild of unfathomable time and organic degradation. The theory suggests there may be huge, yet-to-be-discovered reserves of oil at depths that dwarf current world estimates.

The theory is simple: Crude oil forms as a natural inorganic process which occurs between the mantle and the crust, somewhere between 5 and 20 miles deep. The proposed mechanism is as follows:

Methane (CH4) is a common molecule found in quantity throughout our solar system - huge concentrations exist at great depth in the Earth.

At the mantle-crust interface, roughly 20,000 feet beneath the surface, rapidly rising streams of compressed methane-based gasses hit pockets of high temperature causing the condensation of heavier hydrocarbons. The product of this condensation is commonly known as crude oil.

Some compressed methane-based gasses migrate into pockets and reservoirs we extract as "natural gas."

In the geologically "cooler," more tectonically stable regions around the globe, the crude oil pools into reservoirs.

In the "hotter," more volcanic and tectonically active areas, the oil and natural gas continue to condense and eventually to oxidize, producing carbon dioxide and steam, which exits from active volcanoes.

Periodically, depending on variations of geology and Earth movement, oil seeps to the surface in quantity, creating the vast oil-sand deposits of Canada and Venezuela, or the continual seeps found beneath the Gulf of Mexico and Uzbekistan.

Periodically, depending on variations of geology, the vast, deep pools of oil break free and replenish existing known reserves of oil.

More Evidence For Sustainable Oil


SEATTLE - The public's most widely known piece of geological knowledge--how petroleum and natual-gas deposts formed on Earth---is false, a noted scientist says. Surprisingly, his campaign to rewrite school textbooks and encyclopedias is getting grudging support from some geologists, who acknowledge that petroleum's origins may be dramatically different than what people believe.

Millions of Americans learned in grade school that oil deposits originated in the age of dinosaurs, when vegetation in lush forests was buried and subjected to high heat and pressure. Those extreme conditions supposedly transformed the hydrocarbons in vegetation into the hydrocarbons of petroleum.

"That's nonsense," snapped Thomas Gold, a scientist at Cornell University. "There's not a shred of evidence from chemistry, geology, or any other science to support it. It has no place in textbooks and school classrooms."

In appearances at the annual meeting of The American Association for the Advancement of Science in Seattle here that ended Thursday, Gold repeatedly challenged geologists to reconsider and reject the conventional theory.

Gold also presented evidence that oil and gas deposits on Earth are primordial. That means they came with the planet. They were part of the original raw material that formed the sun and planets, and deposited deep below Earth's surface when the planet formed 4.5 billion years ago.

Some of the oil gradually oozes upward from these original deposits 100 to 200 miles below the surface and collects where oil drillers can reach it.

In one presentation, Gold described shafts that he and associates drilled in an ancient meteorite impact crater in Sweden. They drilled into a kind of rock that was not sedimentary, not associated with the sediments believed to produce oil deposits.

At a depth of about 4 miles, they encluntered a hydrocarbon oil similar to light petroleum that Gold believes was primordial oil. He noted a variety of evidence to support the belief. Gold estimated that this single site contained "more petroleum than all of Saudi Arabia." With current technology, however, pumping it out would be impossible, he added. Gold contended that many other planets and planetary bodies in the solar system have similar deep deposits of hydrocarbons, which are the stuff of oil and natural gas. Gold argues that a primordial origin for petroleum is the only way to explain its chemical composition.

Petroleum originating from plant matter decayed by bacteria, similar to bacteria that decay backyard garden-compost piles, would resemble a microbial product. Instead, petroleum is chemically similar to a pure hydrocarbon that has been contaminated with microbial material. That contamination, he argues, occurred as petroleum seeped upward through rock now known to contain enormous amounts of bacterial life. In moving upward, petroleum also collected helium, explaining why oil wells are such a rich source of helium.

"This is the only possible explanation," Gold said. "The association of helium with petroleum has not been accounted for in any other way."

How do geologists respond?

They're beginning to listen, according to Michael Carr, who appeared on a panel where Gold presented his theory. Carr is a scientist with the U.S. Geological Survey in Reston, Va. "Dr. Gold has some very, very good evidence, especially that involving helium," Carr said. "He certainly is challenging the geological community. There is a debate within the gological community." Carr said geologists plan to reconsider the conventional theory about petroleum formation at a major meting later in the year.

Thursday, August 12, 2004

End of Cheap Oil

National Geographic Magazine

(The issue of peak oil continues to be avoided by most mass media. National Geographic Magazine recently published an exception and brought the topic to attention with this cover story.)

June, 2004

Below more than a mile of ocean and three more of mud and rock, the prize is waiting. At the surface a massive drilling vessel called the Discoverer Enterprise strains to reach it. It’s the spring of 2003, and for more than two months now the Enterprise has been holding steady over a spot 120 miles southeast of New Orleans in the Gulf of Mexico. The ship is driving a well toward an estimated one billion barrels of oil below the seafloor— the biggest oil field discovered in United States territory in three decades.

The 835-foot Enterprise shudders every few minutes as its thrusters put out a burst of power to fight the strong current. The PA system crackles, warning of small amounts of gas bubbling from the deep Earth. And in the shadow of the 23-story-tall derrick, engineers and managers gather in worried knots. “We’ve got an unstable hole,” laments Bill Kirton, who’s overseeing the F project for the oil giant BP.

The drill, suspended from the Enterprise’s derrick through a swimming-pool-size gap in the hull, has penetrated 17,000 feet below the seafloor. Instead of boring straight down, it has swerved more than a mile sideways, around a massive plume of rock salt. But now, with 2,000 feet to go, progress is stalled. Water has begun seeping into the well from the surrounding rock, and the engineers are determined to stem its spread before drilling farther. Otherwise, the trickle of water could turn into an uncontrolled surge of crude. “There’s a lot of oil down there wanting to come out,” says Cecil Cheshier, a drilling supervisor, after struggling all night with the unruly hole. “You can cut corners and take chances—but that could cost you a lawsuit or cause a spill into the Gulf of Mexico, and then deepwater drilling gets shut down.”

The troubled well is just one of 25 that BP plans to drill in the giant field, called Thunder Horse, which sprawls over 54 square miles of seafloor. The entire project, including a floating platform half again as wide as a football field that will collect the oil from individual wells and pipe it to shore starting next year, will cost four billion dollars. But if the wells live up to expectations, each will eventually gush tens of thousands of barrels a day. “That’s like a well in Saudi Arabia,” says Cheshier. “We hardly get those in the U.S. anymore.”

You wouldn’t know it from the hulking SUVs and traffic-clogged freeways of the United States, but we’re in the twilight of plentiful oil. There’s no global shortage yet; far from it. The world can still produce so much crude that the current price of about $30 for a 42-gallon barrel would plummet if the Organization of the Petroleum Exporting Countries (OPEC) did not limit production. This abundance of oil means, for now, that oil is cheap. In the United States, where gasoline taxes average 43 cents a gallon (instead of dollars, as in Europe and Japan), a gallon of gasoline can be cheaper than a bottle of water— making it too cheap for most people to bother conserving. While oil demand is up everywhere, the U.S. remains the king of consumers, slurping up a quarter of the world’s oil—about three gallons a person every day—even though it has just 5 percent of the population.

Yet as the Enterprise drillers know, slaking the world’s oil thirst is harder than it used to be. The old sources can’t be counted on anymore. On land the lower 48 states of the U.S. are tapped out, producing less than half the oil they did at their peak in 1970. Production from the North Slope of Alaska and the North Sea of Europe, burgeoning oil regions 20 years ago, is in decline. Unrest in Venezuela and Nigeria threatens the flow of oil. The Middle East remains the mother lode of crude, but war and instability underscore the perils of depending on that region.

And so oil companies are searching for new supplies and braving high costs, both human and economic. Making gambles like Thunder Horse and venturing into West Africa and Russia, they are still finding oil in quantities to gladden a Hummer owner’s heart. But in the end the quest for more cheap oil will prove a losing game. Not just because oil consumption imposes severe costs on the environment, health, and taxpayers, but also because the world’s oil addiction is hastening a day of reckoning.

Humanity’s way of life is on a collision course with geology—with the stark fact that the Earth holds a finite supply of oil. The flood of crude from fields around the world will ultimately top out, then dwindle. It could be 5 years from now or 30. No one knows for sure, and geologists and economists are embroiled in debate about just when the “oil peak” will be upon us. But few doubt that it is coming. “In our lifetime,” says economist Robert K. Kaufmann of Boston University, who is 46, “we will have to deal with a peak in the supply of cheap oil.”

The peak will be a watershed moment, marking the change from an increasing supply of cheap oil to a dwindling supply of expensive oil. Some experts foresee dire consequences. shortages, price spikes, economic disruption, and a desperate push to wrest oil from “unconventional” sources such as tar sands, oil shale, or coal. Others think that by curbing our oil use and developing sustainable alternatives now, we can delay the peak and wean ourselves more easily when the inevitable happens. “There are many things you can do to ease the transition,” says Alfred Cavallo, an energy consultant in Princeton, New Jersey. “And you can have a very nice life on a sustainable system. Of course, not everyone is going to be driving SUVs.”

The stuff we pump into our gas tanks is a freak of geology, the product of a series of lucky breaks over millions of years. The first break came in a life- rich ancient sea. Sediments buried the organic material raining down onto the seafloor faster than it could decay. The next break: Eons later the seafloor sediments ended up at just the right depth—generally between 7,500 and 15,000 feet—for heat and pressure to slow-cook the organic material into oil. Then the oil collected in a “trap” of porous sandstone or limestone, and an impermeable cap of shale or salt kept it from escaping.

Any gap in this lucky chain of happenstance means a dry hole today. The luck held often enough that the world can now feed a daily oil habit of nearly 80 million barrels. In the U.S. about two-thirds of the oil goes to make fuel for cars, trucks, and planes. But the synthetic fabrics in our wardrobe and the plastics in just about everything we touch started out as oil too. We can also thank oil and its cousin, natural gas, for the cheap and plentiful food at the supermarket, grown with the help of hydrocarbon-based fertilizers and pesticides. As Daniel Yergin writes in his oil history The Prize, we live in “the Age of Hydrocarbon Man.”

Around the world Hydrocarbon Man is getting thirstier. In the U.S., where oil consumption is expected to grow nearly 50 percent in 20 years, carmakers are touting horsepower as they did in the muscle-car 1960s. SUVs and minivans are displacing thriftier sedans and wagons as the standard family car. Even the tax code encourages consumption, offering people who buy the biggest SUVs for business use a deduction of up to $100,000. Since 1988 the average gas mileage of U.S. passenger vehicles has fallen, while the world has burned up more than a third of a trillion barrels of irreplaceable oil.

China, too, is learning to drink deep. A decade ago the world’s most populous nation sipped oil, its streets choked with bicycles rather than motorized traffic. But last year newly prosperous professionals snapped up over two million cars—up 70 percent over 2002. China may have already leapfrogged Japan to become the world’s second largest oil user. By 2025 China could be using ten million barrels a day, most of which will come from outside its own borders.

That’s a predicament familiar to the U.S., where the roots of oil dependence deepened in the spring of 1971. Through 1970 the U.S. produced more than two-thirds of the oil it needed. An agency called the Texas Railroad Commission held down oil production to avoid overwhelming the market, keeping prices stable. By that spring, though, the giant, seemingly inexhaustible fields of Texas had reached their limits. The commission announced it would allow full- throttle production, but even so imports began rising—and the Texas fields just couldn’t produce any faster.

That became painfully clear two years later, when Arab leaders clamped an oil embargo on the U.S. in retaliation for Washington’s support of Israel in the 1973 Mideast war. Fields at home could not make up the difference. Gas lines grew and prices soared, giving most Americans their first lesson in the fragility of oil supplies.

The speed limit was dropped to 55 miles an hour to save fuel, and sales of thrifty Japanese and European cars surged. The 1978 revolution in Iran cut off that country’s oil exports and triggered a second oil shock. By 1981 crude oil prices had risen above $70 a barrel in today’s dollars, and U.S. oil consumption had dropped by nearly 15 percent from its 1978 peak. Higher prices also spurred the development of new fields outside the Persian Gulf. on Alaska’s North Slope and in Mexico and the North Sea.

The new fields increased the world’s oil supply, and by the inevitable logic of the market, more supply and less demand led to a price collapse. By the mid-1980s oil was selling for less than $25 a barrel in today’s dollars. OPEC’s grip weakened, its share of the oil on the world market falling from 55 percent to 30 percent. And even though supply disruptions in Venezuela, Nigeria, and Iraq have pushed up prices, “the stuff is still dirt cheap,” says Cavallo. It’s so cheap that U.S. consumption has climbed 25 percent since the mid-1980s, to its highest level ever. Imports have surged to 54 percent of the country’s oil needs. And the best hope for slowing the U.S. rise in dependence on imported oil lies far out at sea.

To reach the deep waters of the Gulf of Mexico, where the tireless drillers aboard the Enterprise are wrestling with the balky well, you board a helicopter in the coastal flatlands of Louisiana and fly south, over the small oil platforms that have colonized the green shallows of the Gulf in the past 30 to 40 years. Like the fields on the U.S. mainland, they are in their twilight, their oil production slipping year by year.

The platforms thin out and vanish by the time the ocean turns the blue of deep water, an hour from shore. Soon, another platform emerges from the haze. Called Marlin, it rides the waves on stout orange pontoons, its bright gas flare streaming in the breeze. Marlin is where BP engineers first learned to tap the Gulf’s deepwater riches. Discovered in 1993, the Marlin field is now in full-scale production.

Tethered to the bottom half a mile down by thick steel tendons, Marlin taps 48,000 barrels of oil a day from reservoirs two miles below the seafloor. Silvery ducts carry the crude to a complex of separator tanks. There natural gas, waters and sand are stripped out of the oil before it is pumped off the platform into a submerged pipeline, which carries it to shore.

Geologists once doubted oil could be found this far from shore. Twenty years ago, as drilling marched seaward across the shallow continental shelf, the oil-bearing sandstone layer seemed to be petering out. Scientists concluded that the sand deposited tens of millions of years ago by great rivers had not spread all the way out on the shelf. But they were mistaken. The sand— and oil—was there all right.

The sand had spilled off the edge of the shelf and down the steep continental slope to the deep-ocean floor. There it had pooled in apron- like deposits that turned into porous rock—perfect for capturing oil oozing from still deeper rock layers. In the 1990s, as hints of these deposits began showing up in seismic data, the vanguard of oil production stepped off the continental shelf, into waters thousands of feet deep. Now giant new fields, the biggest of them Thunder Horse, beckon at 6,000 feet and more. At still greater depths approaching 10,000 feet, says geophysicist Roger Anderson of Columbia University, “there have been a whole series of finds,” although they have yet to be exploited.

All in all, oil experts estimate that the deep waters of the Gulf of Mexico will yield more than 25 billion barrels of oil. That’s twice as much as in Alaska’s giant Prudhoe Bay field, and far more than in any untapped U.S. prospect, including the controversial Arctic National Wildlife Refuge. “There’s a major consensus that there’s more oil there than you’d ever find in ANWR,” says Anderson. With the boost from deepwater wells, offshore oil should increase from a third of U.S. oil production now to more than 40 percent by 2008, before tapering off. But it will still barely ease the American thirst for oil.

On the other side of the Atlantic, just off the coast of Cameroon, in West Africa, a giant pipeline terminal is helping quench that thirst. Every few days a tanker departs from the terminal with a belly full of oil piped 665 miles through savanna and rain forest from the billion-barrel Doba fields in Chad. The oil began flowing in July 2003, much of it bound for the United States. At 3.7 billion dollars, the project is the biggest private-sector investment in sub-Saharan Africa—a measure of U.S. interest in the 30 billion to 50 billion barrels of oil trapped in and near the Gulf of Guinea. A swelling river of crude from Chad, Nigeria, Angola, and other African countries now makes up 15 percent of U.S. imports and is expected to rise.

The Chad-Cameroon pipeline is more than another assurance that U.S. gas stations won’t run short. It’s also an effort by the World Bank and an industry consortium led by Exxon- Mobil to reverse the mounting human costs of oil development in Africa. So far, says Terry Lynn Karl, a Stanford University political scientist, the track record is “about as bleak as you can get.”

By fueling inflation and dreams of quick wealth, she says, oil revenue has withered Africa’s oil economies. In Nigeria the proportion of the population living in severe poverty has more than doubled, to 66 percent, after three decades of oil production. Oil revenues have vanished from national treasuries and into the pockets of corrupt officials in staggering amounts—over four billion dollars since 1997 in Angola, for example. “Oil has had a tendency to erode the democratic institutions that did exist,” says Ian Gary of the Catholic Relief Services, who co-authored a study of African oil development with Karl. And oil money has often fed the region’s many civil wars.

Eager to avoid such problems in Chad, ExxonMobil enlisted the World Bank to ensure that the country’s government spends its oil windfalls on its people. The bank insisted that Chad set up an independent committee to manage its new riches—109 million dollars or more this year—reserving most of it for infrastructure, education, and health. The bank also monitored the pipeline construction and arranged compensation for farmers along the route.

But to Karl the arrangement has “loopholes you can drive a supertanker through,” and Chad’s government got off to a spectacularly bad start when it spent 4.5 million dollars—of a 25-million-dollar initial bonus from the oil companies—on weapons. Yet Columbia University law professor Peter Rosenblum believes the agreement is an important step. “As much as there’s foreboding and fear about what’s going to happen, there’s also a recognition that this has put into place meaningful ground rules.”

In Africa, oil’s corrosive effects are metaphorical. In Kazakhstan, another frontier in the oil scramble, the crude itself is literally corrosive. The Central Asian land east of the Caspian Sea boasts the biggest single discovery in 30 years, a vast geologic trap extending beneath the Caspian, called the Kashagan field, that could yield seven billion to thirteen billion barrels as it’s developed. But it won’t be easy. Its oil is under high pressure and laced with poisonous hydrogen sulfide, which requires special equipment and handling. And the field lies in the northern Caspian, a stronghold of the endangered beluga sturgeon, in waters too shallow for ordinary ships and oil platforms.

In the 1990s the first glimpse of fields like Kashagan spurred talk that the Caspian might be a new Middle East, with reserves of hundreds of billions of barrels. But the promising geologic structures did not always hold oil. More sober assessments now put the Caspian’s promise at 17 billion to 33 billion barrels.

The real challenge to the Middle East’s oil dominance comes from elsewhere in the old Soviet Union, the boggy, cold forest of western Siberia. Once the bulwark of the Soviet oil industry, Siberia declined in the early 1990s as its wells and infrastructure fell into disrepair. Many analysts believed Siberia’s oil was played out. Now it’s making a comeback.

Russia passed Saudi Arabia in 2003 as the world’s biggest producer. And, says Matt Sagers, a Russia expert at Cambridge Energy Research Associates, “for Russia it’s still up, up, and away.” That’s because the rough-and-tumble private companies that grabbed the Soviet fields at fire-sale prices in the early 1990s have gotten serious about modernizing them. Enlisting Western specialists, the companies resurveyed the fields with up-to-date seismic technology to determine where the oil was hiding and how best to get it out. They shut down unpromising wells and coaxed more out of others by hydraulic fracturing, driving high- pressure fluids down the wells to break up the rock and open new escape routes for the crude. “We went in and developed the fields the way ExxonMobil or ChevronTexaco would have done and are getting [production] increases of 20 percent a year,” says Ray Leonard, an American oilman and a vice president of Yukos, one of Russia’s two largest oil companies.

Russia is pumping nearly nine million barrels a day and exporting about two-thirds of it. Production would be even higher if Russia only had enough pipelines to get the oil to its borders. Says Eugene Khartukov, director of the Moscow-based Center for Petroleum Business Studies: “If the export routes are opened, the oil will fly like a cork from a bottle of ex-Soviet champagne.”

But struggles between the oil companies and Russia’s government, which owns the pipelines, have slowed the construction of new routes to an ice-free port in the west and to China and Japan, eager customers. And the jailing for alleged fraud and tax evasion of former Yukos boss Mikhail Khodorkovsky, a billionaire with political ambitions, has scared off foreign investors who could bankroll further upgrading of the fields. Even so, Russia’s output is drawing uneasy glances from OPEC. A surge of Russian oil could undercut the cartel’s effort to adjust its production to hold world oil prices between $22 and $28 a barrel.

Leonard puts Russian reserves at around 100 billion barrels. Other experts say the companies haven’t explored enough to know. Either way, even Russia has its limits, as Leonard acknowledges. He thinks Russia’s oil output will crest in 10 to 15 years, putting OPEC firmly in control of prices again. “Around the middle of the next decade, the price of oil is going to go up

You can get a glimpse of it just north of Fort McMurray, a former fur- trading outpost in the Canadian province of Alberta. Just where the highway crosses the Athabasca River, veins of black, tarry sand streak the riverbanks. On a hot day tar sand is sticky and smells like fresh asphalt—the smell of money the locals call it. No wonder they’re smug. The tar-sand deposits here and elsewhere in Alberta hold the equivalent of more than 1.6 trillion barrels of oil—an amount that may exceed the world’s remaining reserves of ordinary crude. But this is no ordinary crude. In fact, it’s a residue created when conventional oil escaped from its birthplace deep in the Earth’s crust and was degraded into tar by groundwater and bacteria.

Most of the tar sand lies too deep or in deposits too sparse to be exploited. But oil-sand companies got a boost in the 1990s as technology improved and Canada cut the first few years of the royalties that companies were required to pay. The Alberta government reckons that 174 billion barrels could now be tapped economically. Last year the U.S. Department of Energy agreed and included that number in Canada’s proven reserves. The move catapulted Canada to second place in the ranking of oil-rich states, right behind Saudi Arabia—and ahead of Iraq, Iran, and Kuwait.

But standing at the edge of a 200-foot-deep pit where giant electric- and diesel-powered shovels devour beds of oil sand, Shell Canada Senior Vice President Neil Camarta acknowledges that there’s a big difference between the oil-sand riches and free-flowing crude. “It’s not like the oil in Saudi Arabia. You see all the work we have to do; it doesn’t just jump out of the ground.” Shell’s is one of three big operations that together wring more than 600,000 barrels of oil a day from the Athabasca sands. Every step of the way takes brute force.

The sand has to be strip-mined, two tons of it for each barrel of oil. Dump trucks the size of mini-mansions haul 400 tons in a single load, in beds heated during the subarctic winters so the sand doesn’t freeze into a giant blob. Next to the mine, the sand goes into the equivalent of giant washing machines, where torrents of warm water and solvent rinse out the tar, or bitumen, leaving wet sand that is dumped in tailing ponds.

Even then the bitumen is not ready to be piped off to a refinery like ordinary crude. To turn it back into crude oil, the operations either cook it in cokers, where temperatures of 900°F break up the giant tar molecules, or heat it to lower temperatures and churn it with hydrogen gas and a catalyst. The result is a clean, low-sulfur crude—”beautiful stuff’ says Camarta.

But producing it is not so pretty, he acknowledges. “This really is a big, big project’ Camarta says of Shell’s four-billion-dollar mine and plant, which opened last year. “It has a big footprint too, and we don’t hide that—a big environmental and a big social imprint’

Other oil-sand operations have left the land north of Fort McMurray pocked with mines and lakes of sludgy gray tailings. So far less than 20 percent of the disturbed land has been restored to grassland and forest. Dust, diesel exhaust, and sulfurous fumes pollute the air. It takes three barrels of water to extract each barrel of bitumen, and although the plants are careful to recycle water, they still draw heavily on the Athabasca River. Heating all that water takes vast amounts of natural gas. Worried about Canada’s dwindling natural gas supplies, Alberta has even considered someday building a nuclear reactor smack in the tar-sands region to supply power and steam.

The local First Nations people—Canada’s Native Americans—mourn the loss of once pristine land. In the village of Fort McKay seven miles from Shell’s mine, the company paid to build a community center on the poplar-clad banks of the Athabasca. Seated by a soaring fireplace bearing a Shell plaque, Chief Jim Boucher, president of the Athabasca Tribal Council, acknowledges that development has brought jobs and money. But the chief, who grew up trapping mink, muskrat, and beaver in intact forest, says. “In people’s minds, what’s going on is too much. We’re losing too much of our land. The amount of destruction, especially in the minds of the elders, is horrendous’

Unless oil prices collapse, the destruction is likely to continue. With tar-sand production costs down to about ten dollars a barrel, the operations expect to make a handsome profit. Existing mines are expanding, and more companies are jumping in. Some are starting to exploit tar sands too deep to be mined, by forcing high-pressure steam down wells to melt out the bitumen. Production could reach two million barrels a day in a decade, according to the Alberta government.

That may be a comfort when the other up-and-coming oil fields of today start to dwindle, from the Gulf of Mexico to Russia. But the tar sands won’t be enough to stave off new dependence on the volatile Middle East. The U.S. government’s Energy Information Administration projects that in 20 years, the Persian Gulf will supply between one-half and two-thirds of the oil on the world market—the same percentage as before the 1973 embargo. Fifty years later, in other words, the Middle East will have regained all its old power over oil—and the U.S. government knows it. Whether or not Washington’s war in Iraq was directly motivated by oil, American planners clearly hoped it would lay the groundwork for a stable, democratic Middle East—which, among other benefits, would in Washington’s view put the world’s oil supply in more trustworthy hands.

Yet the real threat to the world economy 20 years from now may not be the policies of the Middle East. It may be a global shortage of conventional oil. These days a raging debate divides oil experts, with prophets of imminent shortage pitted against believers in at least a couple more decades of abundance. Pessimists note that oil prospectors had their best luck in the early 1960s, and that discoveries have slowed since then. They conclude that little conventional oil is left to be found and that the oil peak could be upon us by 2010. Optimists call that a naive extrapolation, which overlooks the economic and political factors that drive the search for oil. “People who are predicting an imminent peak are simply wrong,” says Boston University’s Kaufmann.

The argument ultimately depends on how much oil is left in the world’s biggest wellspring of crude, the Middle East. With nearly two-thirds of proven conventional reserves, Middle Eastern lands will be the supply of last resort as oil production declines elsewhere. “We take it for granted that they’ll come forth with whatever volume of oil is needed to balance supply and demand,” says Robert Ebel, head of the energy program at the Center for Strategic and International Studies, a Washington think tank.

Maybe not for long, says Matthew Simmons, president of the Houston energy-investment advisory bank Simmons and Company. He notes that Saudi Arabia, “the one country that we always assumed had fabulous reserves,” hasn’t found a big new field for decades. And in Saudi technical reports he sees hints of trouble.

When water starts coming up a well, its productive life is over—and that’s starting to happen in Saudi fields. If he’s right, even the Middle East may fall short of growing demand sooner than expected.

On the optimistic side, the United States Geological Survey (USGS) concluded in a 2000 study that there’s at least 50 percent more oil left than the pessimists believe, much of it in the Middle East. New technologies will wring additional supplies from existing fields, the USGS predicts, and vast new reserves remain to be found. Many economists agree, saying discoveries have fallen off simply because countries awash in oil like Iraq, Iran, and Saudi Arabia have had no incentive to drill for more. “If I’m an OPEC producer, with lots of spare capacity, why would I waste money looking for more reserves?” asks Kaufmann.

But in the end, “you’re talking about a few years one way or another’ says Cavallo, the Princeton consultant. Thomas Ahlbrandt, the geologist who led the USGS study, says that even the larger reserves he envisions can’t sustain the world’s growing thirst for oil indefinitely. “Oil and gas are limited’ he says flatly. “My personal feeling is we have a concern in the next couple of decades.” Either way, the crude won’t suddenly dry up.

Old oil fields don’t die, they slowly fade away. But the world will face shortages more lasting than any 1970s oil shock—and some stark choices. Should we increase production from the Canadian tar sands and similar “heavy oil” deposits in Venezuela? Try to exploit the American West’s vast deposits of oil shale and other organic-rich rock that yields oil when roasted? Both options carry heavy environmental costs. Or should we pin our hopes on finding new supplies of natural gas, extracting fuel from plant material, or building solar, wind, or nuclear plants to make hydrogen for fuel-cell vehicles? There are no easy options, and all will take time to explore.

Aboard the Enterprise drill ship in the deep Gulf, engineers and roughnecks are doing their best to postpone the day of reckoning. By the summer of 2003 they had brought the well under control and finished it, 15 million dollars over budget and a month behind schedule. “We did fight that well for a little while,” says BP’s Kirton wryly. Now they’ve moved on to other holes, laboring on a drilling floor slick with fluids while the ship battles the current and the bit gnaws through salt, shale, and sandstone toward the geologic legacy that fuels our way of life.

But at least some of the ingenuity and toil that goes into getting oil needs to go toward limiting our thirst for it. “People should be doing something now to reduce oil dependence and not waiting for Mother Nature to slap them in the face,” says Cavallo.

With every visit to the gas pump, after all, the end of cheap oil draws closer.