Peak Oil News: 11/01/2004 - 12/01/2004

Tuesday, November 30, 2004

Peak Oil and the Big Picture

Speech by Michael Ruppert at the Commonwealth Club in San Francisco on August 31, 2004.

Oil and natural gas are indispensable to our way of life. The world consumes ten calories of hydro-carbon energy for every calorie of food that is eaten. All commercial fertilizers are made from natural gas. All pesticides are made from petroleum. All irrigation, plowing, harvesting and transport is accomplished by either oil-powered machinery or oil- or natural-gas-generated electricity.

There are between 600 and 700 million internal-combustion-powered vehicles on the planet and the demand for them is exploding exponentially, especially in China where GM’s sales rose 300% in one year alone. According to the National Geographic this last June, there are seven gallons of oil in every tire. Want to suddenly build 600 million new vehicles that run on something else, hydrogen perhaps? How much oil will be required to do that? To mine and melt the ore? To transport it to factories that don’t exist, using electricity that isn’t there? To make the paints, solvents and all of the plastic needed? All plastic is made from oil.

Hydrogen is a cruel joke that creates false hope. A recent study from EV Magazine reported that the average life expectancy of a very expensive fuel cell engine was just 200 hours. Commercial hydrogen is now made from natural gas. We’re nearly out of that too.

China’s economic growth has seen that country replace Japan as the world’s second largest importer of oil, and China is now coming into direct economic and political competition with the US for what oil remains.

I have attended two international conferences on the subject of peak oil and its implications for civilization, one in Paris in 2003 and one in Berlin this year. For almost the entire year between the Paris and Berlin conferences, the icons of the mainstream press — the ones known and employed to mold public and business perception — have been acknowledging peak oil’s reality [see resources], sometimes reluctantly, sometimes less than directly, but also sometimes very boldly. CNN, the BBC, the New York Times, The Economist; dozens of media giants had begun to respond, like a giant ship turning slowly in the water. The subject of peak oil is one which requires a little study to get your brain around. It does not, however, require much science except for basic arithmetic. Discoveries of large oil deposits have been in steep decline since 1962. Demand, on the other hand, has been soaring.

To quote my energy editor Dale Allen Pfeiffer, a geologist: it appears that the year 2007 will be important. A new study published in Petroleum Review suggests that production might not be able to keep up with demand by 2007. The study is a survey of mega projects (those with reserves of over 500 million barrels and the potential to produce over 100,000 barrels per day of oil). Mega projects are important not only because they provide the bulk of world oil production, but also because they have a better net energy profile than smaller projects, and they provide a more substantial profit than smaller projects.

Bear in mind that the planet consumes a billion barrels of oil (or two mega fields) every 11-1/2days.

The discovery rate for mega projects has dwindled to almost nothing. This can be seen in the data for the last few years. In 2000, there were 16 discoveries; in 2001 there were 8, and in 2002, only 3. From discovery to first production generally takes about 6 years. If a new project can make use of existing infrastructure, then the start-up time might be cut to 4 years.

In 2003, seven new mega projects started producing. 2004 expects to see another 11. 2005 will be the peak year for bringing new projects on stream, with 18 new projects expected. In 2006, the pace drops back to 1l. But in 2007 there are only 3 new projects scheduled to begin production, followed by 3 more in 2008. There are no new projects on track for 2009 or 2010. And any new mega project sanctioned now could not possibly come on stream any sooner than 2008.

The study points out that currently about a third of the world’s oil comes from declining fields, with a likely overall decline rate of about 4%. As a result, global production capacity is contracting by over 1 million barrels per day every year. New production is the only thing offsetting this decline.

Of course, recent events have clearly demonstrated the fragility of a global production system that is operating at full tilt. Sabotage an Iraqi pipeline, and in one day the price goes up. Announce that Vladimir Putin is easing up on Russian oil giant Yukos, and the price drops. Announce that Putin is moving to sell off its assets and confiscate its cash, the price soars. Worry that Hugo Chavez of Venezuela might be ousted in a violent coup, and the price jumps. Watch Chavez — who is despised by the Bush administration — win his seventh election in as many years, and the price drops.

In spite of repeated assurances from the Saudi government that they can and are increasing production, the evidence is growing that they cannot. My organization, From the Wilderness, was the first to report, a year before the New York Times did, that Saudi Arabia may have actually peaked. New studies are reporting that Saudi wells in the mother of all oil fields, Ghawar, are showing 55% water cut. That means that 55% of what is pumped out every day is the same seawater that was pumped in to push the oil up. Experience has shown that when the water cut gets to between 70 and 80%, the field collapses.

The rush to produce more oil is hastening the destruction of fields that could last longer otherwise.

Ghawar, the super giant of all fields was discovered more than 60 years ago. It had estimated reserves of almost 100 billion barrels. Professor Michael Klare has told us that, in order to keep pace with accelerating oil demand, the world will have to discover three new Ghawars in the next 10 to 15 years. There was only one Ghawar. There hasn’t been another since.

So when we look at the paltry and rapidly diminishing rate of discovery for the so-called mega fields, the prospects become a bit more chilling. In the year 2003, for the first time since the 1920s, according to a leading petroleum consulting firm, not a single so-called mega field — 500 million barrels or more — was discovered.

By 2007, production capacity will have declined by 3-4m b/d. Yet this decline will be offset by 8m b/d of new capacity drawn from the many new projects expected to come on stream over the next few years. This leaves a surplus of 4m b/d in spare capacity. Yet global demand is growing by over 1m b/d each year. So 3 years of demand growth will reduce our spare capacity to 1m b/d by the start of 2007. As very little new capacity is set to come on stream in 2007, that remaining 1m b/d spare capacity will likely disappear before 2008.

The oil supply appears sustainable, barring major wars or destruction of infrastructure, until 2007. With so much new production coming on stream, there may even be periods of price weakness. However, it is likely that we will begin suffering oil shortages after 2007, especially if anything happens to disrupt a portion of the production. If new projects are not found and online by 2008, then by the end of that year we are certain to see severe shortages without any cause other than rising demand.

But there is another factor to this oil calculus. We hear complaints that a major part of the problem with current oil prices has to do with a lack of refineries. Why are no more refineries being built? The answer is simple and an irrefutable confirmation of peak oil. The refineries are not being built and massive expensive exploration projects are not being undertaken because the oil companies understand that there is very little oil left to find.

Finding 10 new North Sea fields somewhere By 2015, global oil demand is expected to increase by over two-thirds, that is, 60m b/d beyond current global consumption of between 75 and 80m b/d. To meet that demand we will have to find the equivalent of 10 new North Sea oil fields within a decade. In the meantime, Britain’s North Sea, just like Alaska’s North Slope did a decade ago, is running dry. Rigs are shutting down and employees being laid off. Yet we are hard pressed now to discover even another mega-sized field. To quote former British environmental minister Michael Meacher, we are facing "the sharpest and perhaps the most violent dislocation (of society) in recent history."

There are many out there who refuse to believe that oil and natural gas are running out. There are those who insist that alternative energies can be snapped into place. But aside from looking at the events since 9/11 and seeing that they match a world of diminishing energy, let’s take a look at some recent developments around the world and see what they tell us.

Britain’s largest electricity provider has announced that prices will soar as much as 40% next year. Wholesale energy prices have doubled in the last year as Bloomberg has announced that the decline in North Sea production is creating a trade gap which is now threatening to cause widespread unemployment.

In March, Reuters reported that Argentina, facing its worst energy crisis in 15 years, is becoming unstable to the point of threatening the security of the entire region. It has cut its natural gas exports to Chile by 15%, which is threatening Chilean power generation. Argentina is now moving into the world oil market in search of oil for power generation and transportation as its own domestic supplies have dwindled.

The BBC reported recently that high oil prices are threatening many Asian economies.

Just two weeks ago, the Australian government ordered an emergency fuel review in anticipation of future crises. In June it conducted a test to see how the government and country would respond to a "disruption" in oil supplies.

On August 25, it was reported that Brazil was opening negotiations with Ecuador to replace diminishing oil supplies.

China, in the midst of rapidly diminishing harvests, is fearing a major food crisis. This, even as Hong Kong, Hangzhou, and Shanghai are facing mandatory blackouts which are disrupting manufacturing, trade and retail activity. Chinese oil imports have increased by 15% in just the first quarter of 2004 alone. In anticipation of pending military conflict in the region, China has decided to build a pipeline through Burma to the Indian Ocean so that tankers supplying China’s growing thirst will not have to travel through a region that is becoming increasingly dangerous.

Germany has moved to institute home energy passports and undertaken serious and well-planned efforts to reduce energy consumption. Chancellor Schroeder, in the wake of recent revelations that Shell revised its reserve estimates four times in one year, called upon the G8 nations to mandate total and verifiable transparency in all oil reserve figures.

India, whose oil imports jumped 23% in one month, has moved to create a strategic petroleum reserve.

Indonesia, a member of OPEC, has announced that its oil production will drop significantly by 2008.

Japan, ignoring stiff opposition from Washington, has signed a major oil contract with Iran, at the same time that it is feuding with China, Vietnam and the Philippines over relatively small oil and gas deposits in the Spratly Islands of the South China Sea. Three bills have been introduced in the Japanese parliament that would suspend its nonviolent constitution and permit a full-scale rearmament.

Russia, having recently admitted that its oil reserves are finite and that production might start to decline sharply within the next five years, has announced it will build a pipeline from its Siberian fields to the Pacific ports of Vladivostok and Sakhalin, thus agreeing to sell its oil to Japan, Korea and the Philippines. Russia’s other choice was to have the pipeline terminate in central China.

"This Week in Petroleum," an industry journal, has reported that non-OECD countries have begun to hoard petroleum and are buying all they can even at what some analysts call "inflated" prices.

In Thailand, mandatory curfews have been imposed two nights a week, requiring all businesses to shut down in order to conserve energy.

On August 24, Britain’s Oil Depletion Analysis Center confirmed, citing data from "Petroleum Review," that daily oil depletion is now exceeding 1m b/d. In other words, every day, the world is producing 1.14 million barrels per day less than it did the day before. By analyzing data from the 18 largest oil producing nations, "Petroleum Review" calculated that production from these countries peaked in 1997 at 24.7 m b/d and that by 2003 it had fallen to 22.1 m b/d.

On August 21, the Houston Chronicle posed a great question. If oil prices are soaring and there’s insatiable demand, why isn’t there a boom in hiring and corporate expansion? The Chronicle, paying due heed to the financial markets, offered the dubious explanation that the oil companies just didn’t want to overdo things and look greedy. In fact, all over the world, oil companies are downsizing, selling off assets, laying off employees and merging. Just last week it was announced that French giant Total was considering a tender offer to purchase Royal Dutch Shell.

And here in the United States, rising oil prices have forced major airlines like United to consider raiding corporate pension funds in order to offset rising oil costs as an alternative to bankruptcy.

This, ladies and gentlemen, is just the beginning. And neither presidential candidate has even remotely addressed the real issues or dared to tell the American people the worst. The one overriding concern I have seen expressed everywhere is "Oh, no. We can’t do that. It will crash the markets."

Is that the sum total of human expression and achievement? The markets?

To close this presentation tonight, I would like to offer you a quote from John Kenneth Galbraith, from a 2002 article, "The Unbearable Costs of Empire":

"It is a straightforward fact that if global oil production starts to decline but U.S. consumption does not, everyone else will be required to cut purchases of oil. But how can oil prices be held stable for Americans yet be made to rise for everyone else? Only by a policy of continuing depreciation in everyone else’s currency. Such a policy of dollar hegemony amid worldwide financial instability, of crushing debt burdens and deflation throughout the developing world, is perverse. It will make our trading partners’ exports cheap, render their imports dear and keep their real wages low. It will price American goods out of world markets and lead to unsustainable dependence on foreign capital. This is the policy that Bush and Cheney are actually imposing on the rest of the world. But they cannot make it last. It will make lives miserable elsewhere, generating ever more resistance, terrorism and military engagement. Meanwhile, we will not experience even gradual exposure to the changing energy balance; we will therefore never make the investments required to adjust, even eventually, to a world of scarce and expensive oil. In the end, therefore, that world will arrive much more abruptly than it otherwise would, shaking the fragile edifice of our oil economy to its foundations. And we will someday face a double explosion: of anger against our arrogance and of actual shortage and collapsing living standards, when the confidence of investors in the dollar finally gives way.

Compared with this future, a new commitment to collective security, to a new world financial structure, to a rational energy and transportation policy, and to spending to meet our actual domestic needs would be a bargain. At the end of the Constitutional Convention, Benjamin Franklin was asked what type of government the framers had given our new country. He famously replied, "A republic, if you can keep it."

In 49 BC, Julius Caesar, fresh from a battlefield victory in central Italy ordered his legions to cross a small creek called the Rubicon. Under the laws of the Roman Republic, the army was not allowed to enter the capital city.

As Julius Caesar crossed the Rubicon, the Roman Republic died and the Roman Empire was born.

Our task, if we and much of human civilization are to survive, is not to keep our republic, but to take it back.

Thank you.

Monday, November 29, 2004

How Long Will Cheap Oil Last?

National Geographic

Global thirst for crude oil keeps growing, despite the current high prices. Just how much oil does the world have left, and what will happen when demand begins to outstrip supply?

Last month the Paris-based International Energy Agency (IEA) released its World Energy Outlook 2004, a report detailing energy projections to 2030.

The outlook's central message was optimistic. "The Earth contains more than enough energy resources to meet demand for many decades to come," Claude Mandil, IEA's executive director, told assembled press. "The world is not running out of oil just yet."

When the oil runs out

Yemen Times

Oil is the sinews of the modern life, providing the world with power. It supplies fuel for factories, heavy and light industries and generates electricity. Not only that, oil derivatives are used to make a diversity of products including clothes. Oil is also the raw material of many plastic products.

Unfortunately, this valuable substance which has been relatively recently introduced into man's life is going to be exhausted. This is a prediction based on up-to-date studies. People in the oil industry confirm this end and show their apprehension of the future. The Association for the Study of Peak Oil (ASPO) is sending warnings on this issue, and so do many other experts, for governments to make precautions before it is too late.

Demand continues to rise but oil reserves are becoming exhausted. Thus within the coming few years, the era of cheap unlimited energy is expected to come to a close. This phenomenon is known as 'peak oil production' or 'oil depletion'. In other words, peak oil indicates that we have consumed as much as half of the total oil reserves and that we are going down the curve.

Industry consultants IHS Energy recently reported that 85 percent of all the oil ever discovered is now in production, and only half the total produced last year was replaced by new field discoveries. Annual consumption has now exceeded new discoveries every year since the early 1980s. Overall worldwide oil discoveries have been declining steadily for the past 40 years.

Many measures should be put into play to avoid the problem of power shortage. People should conserve power. Most of us still waste fuel on a prodigious scale, and the savings we could make by more efficiency, and by just switching off, are immense.

Our hope lies on scientific research and probable solutions to find new sources of power, and improve available ones.
So far it seems that the only possible substitutes for our fossil-fuel dependency are solar power and nuclear energy. The efficient exploitation of nuclear energy depends on man's ability to harness it. Developing a way of running this highly sophisticated civilization on those resources is an enormous challenge. Whether we will be able to cope with it remains to be seen.

Finite fuels threaten life as we know it

ABC News Online

If predictions are correct, no future generation will forget 2005 - the year the world began eating into the second half of its oil reserves.

Or, as Professor David Goodstein of the California Institute of Technology argues, the beginning of the end of the civilisation as we know it.

In his latest book, Out of Gas - The End of the Age of Oil, Professor Goodstein argues that all fossil fuels are finite, and so are our current lifestyles.

"Everybody has come to imagine that the flow of oil is like the rivers that flow from the mountains to the sea," Colin Campbell, of the Oil Depletion Analysis Centre, said.

"It's just perceived to be a natural part of the world we live in."

But according to the Hubbard's peak theory, discoveries of fossil fuel reserves have already peaked.

All For Oil

There is a momentous, sinister development preoccupying the attention of those in power in Bush's government. Neocon unilateralism and multilateralist construction of coalitions of the willing are just two of differing tactical choices to confront an unprecedented challenge to the US, to American values and the American way of life.

The war on terrorism? No.

In reasoned analysis of America's place in the world, of the American empire and of the costs of empire, 9/11 was a bee sting: a mere three thousand people in one awful attack by a very small number of suicidal terrorists. Like the brutal beheadings now captured in gruesome video, terrorist retaliation should be a sadly expected but ultimately very minor impediment to the use of US power.

No, the momentous challenge facing the Bush Administration and America is the very real danger to the continuing supply of America's very lifeblood: oil.

Global oil production will peak (or has already possibly peaked) within several decades. Already, growing oil demand - from China and India especially, joining ever increasing American (20% of global demand) and other developed world usage - has created a very tight market with a doubling of price for benchmark crude oil. Some market analysts see US$100 oil in our immediate future and pessimists direly predict the mother of all depressions, a new dark age and even human die-off as we go over the cliff past Hubbert's Peak down the steep slopes of rapidly diminishing global oil production.

Oil at US$100 would be bad for business. This is a specter to chill an Administration trying to manage an indebted, precarious US economic hegemony based upon a very vulnerable dollar. This ominous scenario is potentially more devastating to Bush's America than a hundred 9/11s.

Tuesday, November 23, 2004

Innovation seen crucial to future energy supply

Oil & Gas Journal

Escalating world oil demand and declining production rates will push the world toward unconventional forms of energy, including synthetic hydrocarbons, said speakers at an annual oil and gas conference hosted by Deloitte & Touche LLP, the US arm of Deloitte Touche Tohmatsu.

"It's already too late to modify the energy mix for 2020," said Pierre-René Bauquis, a retired petroleum engineer and an associate professor at the Institut Français du Pétrole near Paris. "Not only are we going to face a world oil peak, we are going to face a world gas peak 20 years later."

Monday, November 22, 2004

A Propensity For Human Ingenuity

We use oil because it is cheap, and it is a highly abundant source when we developed engines, power plants and many other devices that would run on it. But let's imagine for a moment that there had been no such commodity as crude oil. Would that have meant we'd now be sitting in the dark without having progressed much technologically over the past century?

I don't think so. Human ingenuity is more creative than that. We'd have found another energy source. It might not have been quite so cheap. It might not have been so readily available. It might have other environmental costs, but we'd be progressing along another level of development. It might even be a cleaner one in some respects.

As oil supply diminishes, as it no doubt will eventually - although perhaps not quite so quickly as the alarmists might have us believe - alternatives will be found. If all oil imports were cut off tomorrow by war, collusion among producing countries, worldwide rebellions, or hurricanes whatever, we'd survive because we'd have much greater incentive to develop those alternative energy sources.

The reason these alternatives have not already flourished is to a great extent because of the much cheaper availability of oil.

Gradual depletion of the world's oil reserves is nothing to fear, and it is by no means a transition that will have to take place overnight.

It doesn't have to be viewed as a negative thing, or cause for alarm.

It might even be good for us.

Running out of oil

Lateline - Austrailian Broadcasting Corp

TONY JONES: Now to our feature on oil and though it's a finite resource, there is great debate about how much black gold remains.

Yet a growing number of industry experts now think we will very quickly reach the milestone 'peak' of oil supply.

This would mean the world is then eating into the second half of all available oil reserves.

Though there'd still be plenty of oil left, if the peak theory is right we are now on the road to running out.

Stephen McDonell reports.

STEPHEN McDONELL: 2005 could be a milestone in history.

Some think we could reach the peak in world oil supply and next year start using up the second half of all the world's reserves.

Sunday, November 21, 2004

New study analyzes global energy resources

In a long awaited analysis of global energy resources, the Paris-based International Energy Agency attempted to calm fears of severe world energy shortages anytime soon. Since the IEA is recognized as the pre-eminent global source for predicting long-term energy supply and demand balance, this periodic projection is eagerly anticipated, especially this year.

Above everything else, the report stressed the need for oil producing countries and international oil consortiums to become more aggressive in locating and pumping available reserves to make this happen. At this juncture, very little money is being invested in new exploration as producers wait to see whether the present shortages and high prices extend into next year.

Although claiming that there are sufficient reserves to meet demand for the next 25 years, the IEA assumption has been based on conservative demand increases and an assumption that oil producers will invest the capital necessary to keep up with increasing demand.

Friday, November 19, 2004

With Oil Production Near Peak, Analysts Worry About Meeting Growing Demand

VOA News

Most people in the oil and gas industry believe prices will come back down in the months ahead as new production comes online and economic growth cools. But what would happen if oil production were not able to keep pace with demand? What if, in fact, worldwide production were to peak soon, meaning that less-and-less oil would be produced every year even as demand soars?

These are the questions that haunt people like Matt Simmons, a Houston-based investment banker who has spent 30 years working with the energy sector.

"I am increasingly convinced that we must be at a level now where it is going to become really difficult to get any significant increases in supply and, conversely, demand has become a runaway train," he said.

In a VOA interview, Mr. Simmons expressed concern that very little is being done to prepare for a possible peak in production and that there is, as yet, no alternative form of energy available that can even come close to replacing oil.

"We do not have a plan B," he said. "We literally do not have any kind of workable solution for what we would do in a world that is basically geared up to use more and more non-renewable energy, and if that day finally comes when we are going to have to get along next year with only 98 percent of what we had this year and the year after that it is going to be 95 percent and then the year after that it is going to be 90 percent? What do we do? And the answer is that we do not have any idea."

Wednesday, November 17, 2004

The Energy Challenge 2004 – Petroleum


What most people don't know is that USA oil production has been in decline since 1970, with the rate of decline slowly increasing. It's at about 4%/yr. now. We now produce only about 40% of the oil we consume, and oil imports are the single largest item in our very negative balance of payments. If you had to pay at the pump to maintain the military we keep in the middle-east to keep the supply lanes open, (not counting the cost of the war in Iraq), instead of having it buried in the defense budget, gasoline would be over $7.00/gal today.

To make things more interesting, worldwide oil production will probably be in irreversible decline before the end of this decade. The present high oil and gasoline prices are just the first tremors of the earthquake that is coming.

Some months ago Lee Raymond, the chairman of Exxon-Mobil made a presentation that included a curve showing historic oil production (in Mb/d) and projecting future supply and demand. The supply curve, based on production from present known reserves sloped downwards. The demand curve sloped upwards. The growing gap between supply and demand represented new sources that we must discover to support world economic growth. Mr. Raymond made the point that by 2020 we must find enough new oil sources to supply 50 Mb/d. Today Russia and Saudi Arabia are each supplying a little more than 9 Mb/d, and struggling to get to 10. Their combined claimed reserves are about 400 Gb. One can extrapolate that we need to find and develop1100 Gb of new reserves during the next 15 years, or an average of about 75 Gb/yr. During the last 15 years, with plenty of incentive to find new oil sources, we have not averaged 10 Gb/yr.

Autoguy discusses Peak Oil and how it could impact our precious babies


And by precious babies I mean our cars. We try and stay away from being political at Autoblog but there’s no arguing that fossil fuels of any kind run out and some say oil could start a decline soon, very soon. How the auto industry goes about providing awesome performance vehicles that get unheard of mileage is another question. But with the success of fairly unproven hybrids, I’m sure automakers know there’s money to be had in being frugal with the mpg. People will probably still pay through the nose for certain gas hogs.

Tuesday, November 16, 2004

New Oil Projects Cannot Meet World Needs This Decade

Environmental Media Services

World oil supplies are all but certain to remain tight through the rest of this decade, unless there is a precipitous drop in demand, according to the results of a study by the London-based Oil Depletion Analysis Centre (ODAC).

The study found that all of the major new oil-recovery projects scheduled to come on stream over the next six years are unlikely to boost supplies enough to meet the world’s growing needs.

ODAC analysed a total of 68 'mega projects' with publicly announced start-up dates from 2004 through 2010. In total, these projects would add around 12.5 million barrels a day to world oil supplies by the turn of the decade.

"This new production would almost certainly not be sufficient to offset diminishing supplies from existing sources and still meet growing global demand," ODAC Board member Chris Skrebowski said.

More than half of the estimated new supply would simply replace production declines elsewhere due to natural depletion, the study found. A modest one percent annual rise in demand over the six-year period would then leave little or no surplus capacity to cushion against unforeseen disruptions in supply.

If demand were to increase by two percent annually, available supplies could fall short of the total needed in 2010 by more than two million barrels a day – roughly equivalent to losing all of Kuwait’s current daily production.

Monday, November 15, 2004

The End is Near

In These Times

The End is Near
By Kurt Vonnegut

I am writing this before the election, so I cannot know whether George W. Bush or John F. Kerry will be our President, God willing, for the next four years. These two Nordic, aristocratic multi-millionaires are virtually twins, and as unlike most of the rest of us as a couple of cross-eyed albinos. But this much I find timely: Both candidates were and still are members of the exclusive secret society at Yale, called “Skull and Bones.” That means that, no matter which one wins, we will have a Skull and Bones President at a time when entire vertebrate species, because of how we have poisoned the topsoil, the waters and the atmosphere, are becoming, hey presto, nothing but skulls and bones.


What was the beginning of this end? Some might say Adam and Eve and the apple of knowledge. I say it was Prometheus, a Titan, a son of gods, who in Greek myth stole fire from his parents and gave it to human beings. The gods were so mad they chained him naked to a rock with his back exposed, and had eagles eat his liver.

And it is now plain that the gods were right to do that. Our close cousins the gorillas and orangutans and chimps and gibbons have gotten along just fine all this time while eating raw vegetable matter, whereas we not only prepare hot meals, but have now all but destroyed this once salubrious planet as a life-support system in fewer than 200 years, mainly by making thermodynamic whoopee with fossil fuels.

The Englishman Michael Faraday built the first dynamo, capable of turning mechanical energy into electricity, only 173 years ago. The first oil well in the United States, now a dry hole, was drilled in Titusville, Pennsylvania, by Edwin L. Drake only 145 years ago. The German Karl Benz built the first automobile powered by an internal combustion engine only 119 years ago.

The American Wright brothers, of course, built and flew the first airplane only 101 years ago. It was powered by gasoline. You want to talk about irresistible whoopee?

A booby trap.

Fossil fuels, so easily set alight! Yes, and as Bush and Kerry are out campaigning, we are presently touching off nearly the very last whiffs and drops and chunks of them. All lights are about to go out. No more electricity. All forms of transportation are about to stop, and the planet Earth will soon have a crust of skulls and bones and dead machinery.

And nobody can do a thing about it. It’s too late in the game. Don’t spoil the party, but here’s the truth: We have squandered our planet’s resources, including air and water, as though there were no tomorrow, so now there isn’t going to be one.
So there goes the Junior Prom, but that’s not the half of it.

Experts say only 50 years of known oil, gas remain

Is nuclear the only alternative?

“The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.”
Ironically, that quote did not originate with some dolphin hugging Green Peace member. Sheikh Zaki Yamani, a Saudi Arabian who served as his country’s oil minister three decades ago, uttered it.

Florida Power and Light (FPL) generates its electricity using a variety of energy sources: oil, 11 percent; coal, 28.5 percent; nuclear, 14 percent, and natural gas, 32 percent. The balance comes from biomass (organic substance burning) or from methane, according to the Florida Public Service Commission (PSC).

However, “the outlook for fuel diversity in Florida is somewhat uncertain at this time,” says PSC Chairman Braulio L. Baez. Baez said in a recent statement that FPL “is currently seeking to address these uncertainties by comparing natural gas-fired to coal-fired alternatives.”

That’s the least of FPL’s worries, according to President George W. Bush. The President has joined a growing chorus around the world who’ve agreed to confront that the world’s looming energy crisis is not about Chicken Little and the sky falling. The end of the Oil Age is in sight, Bush has said, “and what people need to hear loud and clear is that we’re running out of energy in America.

Global supplies of crude oil will peak as early as 2010 and then start to decline, ushering in an era of soaring energy prices and economic upheaval – or so said an international group of petroleum specialists at a recent two-day conference on oil depletion at Uppsala University in Uppsala, Sweden.

Running After Empty

Kansas City Star

Some experts believe oil producers are many years away from maximizing output. But Sam Shelton said that even if the peak is not in the immediate future, the outcome is inevitable and action should be taken sooner rather than later.

“The only debatable point is when it will occur, but we must realize it takes at least 20 years to completely change our energy system's infrastructure,” he said. “Even the optimists predict peaking within this 20 years, which means we are already late in starting to adjust.”

The Case for Cheaper Oil

Business Week

Tim Evans says that while no one really knows how much oil is in the ground, he believes global supplies are unlikely to run out for at least 100 years. Big companies have proven reserves that are good for 20 years, he asserts. While growth in Asia is sure to push global demand ever higher, Evans thinks that the supply of recoverable crude oil is likely to expand. Here's why:

• Economic pressure. There is a powerful incentive to find more oil. "Oil companies pride themselves on being able to find more oil than they use each year," Evans says. That's the only way that they can convince Wall Street that they have a viable future, thereby maintaining their stock prices at a decent level.

• Low costs. The underlying cost of recovering oil is actually pretty low, according to Evans -- around $7 to $9 a barrel. Oil companies will sell it for $50 a barrel if they can, but they can still make a reasonable return on their investment by charging customers much less. Oil companies made money even when oil was selling for $12 a barrel in the 1980s.

• Better late than never.Big Oil is in no particular rush to find every last proven reserve. They know they have enough to see them through the next 20 years. And it isn't a good investment to tie up capital now to find resources that won't be used for 30 or 40 years.

• Technology: The biggest variable in the outlook for crude oil is technology. Improvements in exploration and refining technology will expand the idea of what recoverable oil is, according to Evans.

Saturday, November 13, 2004

Experts ponder fallout of oil production peak

Shreveport Times

Those who believe that depletion of the world's oil supply is imminent are sometimes derided as Chicken Little-like eccentrics who tell governments, the media, the energy industry and just about anyone else willing to listen that the world is on the front edge of an emergency.

One of the worriers is David Goodstein, a physics professor at the California Institute of Technology. In his book, Out of Gas: The End of the Age of Oil, Goodstein writes that once production peaks, people will have to switch to alternative fuels in time to meet rising energy demand.

Otherwise, "runaway inflation and worldwide depression" will force billions of people to burn coal, he says. The so-called "greenhouse effect" -- the rise in temperature caused by gases trapping energy from the sun -- could make the planet unlivable, Goodstein says.

"End of story" is his somber conclusion. "In this instance, worst case really means worst case."

Not everyone who has studied the world oil supply believes production is about to peak. Researchers at the U.S. Energy Information Administration say they believe production will not peak until 2037, while other analysts point out that previous predictions of a peak date proved to be wrong.

In an interview, Goodstein indicated that he tries to do his part. He drives a hybrid car, which runs on a combination of gasoline and electricity, and lives close enough to his job that he can walk some days. But he realizes his contribution "doesn't make very much difference. I don't use 20 million barrels of oil a day."

Marion King Hubbert, a Shell Oil Co. geologist, predicted in 1956 that American oil production would peak between 1966 and 1971. Skeptics questioned Hubbert's projection, but U.S. crude oil production reached 9.64 million barrels a day in 1970 and by last year had dropped to 5.74 million barrels, according to the EIA.

The world produced 69.3 million barrels of crude oil a day last year, the largest total on record. The United States was the largest consumer of petroleum, using 20.04 million barrels a day.

Some researchers who have studied oil supplies believe that the peak in world production is decades, not years, in the future. They point to numerous variables, such as the development of alternative sources of energy, the possibility of finding new fields and the emergence of technologies that could make it economical for producers to pull more oil out of a field than they do now.

Energy for the future

With oil demand growing faster than supplies, America will have to develop renewable energy sources while cutting consumption — and Georgia Tech plans to put itself at the center of that effort.

"The solution is not in finding more oil, because there isn't going to be any more to find," said Sam Shelton, an associate professor at the university's Woodruff School of Mechanical Engineering. "The only answer is technology."

Shelton, who has been doing energy technology research at Georgia Tech for 30 years, is among a growing number of experts who believe global oil production is near a peak and soon will begin to decline.

"With dwindling oil supplies, we're going to see higher and higher energy prices," he said. "We see the energy situation as being the technological challenge of the coming decade."

Some experts believe oil producers are many years away from maximizing output. But Shelton said that even if the peak is not in the immediate future, the outcome is inevitable and action should be taken sooner rather than later.

"The only debatable point is when it will occur, but we must realize it takes at least 20 years to completely change our energy system's infrastructure," he said. "Even the optimists predict peaking within this 20 years, which means we are already late in starting to adjust."

Friday, November 12, 2004

Apocalypse Denial

Mother Jones

In a Mother Jones magazine essay, Over a Barrel, energy expert Paul Roberts, considering the near-impossibility of creating a sustainable-energy world in any reasonable span of time based only on market forces, speaks of an American "wall of energy denial" and of American consumers who "still share the [Bush] administration's energy obliviousness." He adds that "U.S. gasoline consumption continues to rise, despite high oil prices." Well, exactly. And we're talking about something closer to the Great Wall of China than a picket fence. Those fortifications of denial start with oil and wend their way across a rather impressive terrain of future troubles, well patrolled by an army of Hummers and SUVs. But even those Americans who don't care to -- and still don't have to -- peer over the wall already essentially know what's on the other side. That's the nature of denial. After all, you can't deny what you don't, at heart, know to be so.

Tuesday, November 09, 2004

The Great Energy Transition


Another Great Energy Transition beyond oil must occur over the generations just ahead. Global oil demand will exceed global production of conventional oil, and we will need to shift away from oil to limit global warming. A high-stakes debate is raging today about when global oil production will peak and begin to decline. If the peak oil pessimists are right, the negative economic and social consequences are going to be huge and we need to be thinking about how to adapt. If the optimists are right, we may have just enough time to make a smooth transition to a new energy regime, if we mobilize now.

Peak of global oil production is anyone's guess

Salt Lake Tribune

Not everyone who has studied the world oil supply believes production is about to peak. Researchers at the U.S. Energy Information Administration say they believe production will not peak until 2037, while other analysts point out that previous predictions of a peak date proved to be wrong.

Over a Barrel

It's eight o'clock on a fresh summer morning in Denver, and I'm at a podium before a hundred executives from regional energy companies. Having spent the last few years closely observing trends in the oil industry, I'm often asked to speak about the decline of global energy supplies, the way oil has corrupted U.S. foreign policy, and why the worldwide energy economy needs a radical transformation if we want to avoid catastrophic climate change. Yet while these themes play well to liberal audiences in Boulder and Berkeley, I worry my reception here will be much cooler. Most of these weather-beaten men (and a few women) spend their days squeezing hydrocarbons from the sand and stone beneath the Rockies; if my past observations of the energy industry are any guide, they voted for Bush, support the Iraq war, think climate change is a leftist hoax, and believe the main cause of America's energy crisis is that overzealous regulation keeps drillers like themselves from tapping the most promising reserves of oil and natural gas.

But as I finish my spiel and take questions, my initial assumptions vanish. When I suggest that the Iraq war might not have been motivated entirely by America's thirst for oil, many in the room openly smirk, as if I've just suggested that the world is flat. Likewise, few here seem to share the White House's Panglossian view that the United States is sitting atop some massive, but politically off-limits, reserve of natural gas. In fact, as much as these executives would love to sink their drills anywhere they want -- and as much as they detest environmentalists for stopping them -- no one here believes the volume of natural gas yet to be discovered in the Rockies, or anywhere else in America, would reverse the nation's decline of gas production or let the United States move to a cleaner, more secure "gas" economy. As one executive tells me, "even if all the off-limits land were opened for drilling, all the new gas we could bring on-line wouldn't be enough to replace all the production we're losing from older fields. We'd barely keep production flat."

For those who wonder where the world will be getting its energy a decade from now, confessions like these only confirm what many have feared for some time: namely, that the cheap, "easy" oil and natural gas that powered industrial growth for a century no longer exist in such easy abundance; and that we may have a lot less time than we thought to replace that system with something cleaner, more sustainable, and far less vulnerable to political upheaval.

The evidence is certainly piling up. Pollution levels from cars and power plants are on the rise. Climate change, another energy-related disaster, has begun impacting crop yields and water supplies and may soon provoke political strife. In fact, according to a Pentagon report last October, global warming could make key resources so scarce, and nations so desperate, that "disruption and conflict will be endemic" and "warfare would define human life."

Yet the most alarming symptoms of an energy system on the verge of collapse are found in the oil markets. Today, even as global demand for oil, led by the economic boom in Asia, is rising far faster than anticipated, our ability to pump more oil is falling. Despite assurances from oil's two biggest players -- the House of Bush and the House of Saud -- that supplies are plentiful (and, as George W. Bush famously put it, that getting the oil is just a matter of "jawboning" "our friends in OPEC to open the spigots"), it's now clear that even the Saudis lack the physical capacity to bring enough oil to desperate consumers. As a result, oil markets are now so tight that even a minor disturbance -- accelerated fighting in Iraq, another bomb in Riyadh, more unrest in Venezuela or Nigeria -- could send prices soaring and crash the global economy into a recession. "The world really has run out of production capacity," a veteran oil analyst warned me in late August. "Iraq is producing less than a third of the oil that had been forecast, the Saudis are maxed out, and there is no place else to go. And America is still relying on an energy policy that hasn't changed significantly in 20 years."

Nor is it any longer a matter of simply drilling new wells or laying new pipe. Oil is finite, and eventually, global production must peak, much as happened to domestic supplies in the early 1970s. When it does, oil prices will leap, perhaps as high as $100 per barrel -- a disaster if we don't have a cost-effective alternative fuel or technology in place. When the peak is coming is impossible to predict with precision. Estimates range from the ultra-optimistic, which foresee a peak no sooner than 2035, to the pessimistic, which hold that the peak may have already occurred. In any case, the signs are clear that the easy oil is harder to find and what remains is increasingly difficult and expensive to extract. Already, Western oil companies are struggling to discover new supplies fast enough to replace the oil they are selling. (Royal/Dutch Shell was so concerned about how declining discovery rates would devastate its stock price that it inflated its reserves figures by 20 percent.)

Worse, according to a new study in the respected Petroleum Review, in the United Kingdom, Indonesia, Gabon, and 15 other oil-rich nations that now supply 30 percent of the world's daily crude, oil production -- that is, the number of barrels that are pumped each day -- is declining by 5 percent a year. That's double the rate of decline of even a year ago, and it has forced other oil producers to pump extra simply to keep global supplies steady. "Those producers still with expansion potential are having to work harder and harder just to make up for the accelerating losses of the large number that have clearly peaked and are now in continuous decline," writes Chris Skrebowski, editor of Petroleum Review and a former analyst with BP and the Saudi national oil company. "Though largely unrecognized, [depletion] may be contributing to the rise in oil prices."

If there is one positive sign, it's that the high prices seem to have finally broken through America's wall of energy denial. In fact, while energy experts like Skrebowski have been fretting about oil dependency and depleting reserves since the 1970s, today's energy anxiety is no longer coming simply from academia or the political margins. In recent months, energy problems have come under intense focus by the mainstream media, filling radio and TV talk shows and newsmagazines. Whereas official U.S. policy still blames OPEC for our oil woes, even right-of-center, pro-business outlets like Business Week, The Economist, and Fortune have acceded that the biggest risk for U.S. energy security isn't "foreign" producers or even environmentalists, but rather a decades-old domestic energy policy that remains focused almost entirely on finding new supplies while doing nothing to curb demand. "Much as we might like to, we can't blame it on OPEC," noted Fortune in August. "After all, Americans have been on a two-decade oil pig-out, gorging like oversized vacationers at a Vegas buffet."

What's more, while a powerful, ideologically driven minority -- led, sadly, by the Bush administration -- continues to insist that energy security is simply a question of drilling in the Arctic National Wildlife Refuge (ANWR) or browbeating OPEC, outside the White House, and certainly outside the Beltway, there's a growing push to build a fundamentally new energy system. Thus, while the Bush administration dithered on climate change and the future of energy, individual states, like California and New York, enacted their own alternative energy policies and even sued utilities over carbon dioxide emissions. The corporate world, once a stalwart opponent of any policy reform, has become startlingly progressive. Toyota and Honda are busily rolling out hybrid cars. Agriculture and insurance firms warn of the future costs of oil-price swings and climate change. And energy companies like BP and Shell, eager to profit in the new energy order, are developing new fuels and technologies to help reduce oil use and emissions.

And if most U.S. consumers still share the administration's energy obliviousness (U.S. gasoline consumption continues to rise, despite high oil prices), some in Congress have become downright activist. Last year in the Senate, Republican John McCain and Democrat Joseph Lieberman came close to passing a climate policy far beyond anything the White House has countenanced. In fact, even some traditional oil-and-gas politicians appear to see the writing on the wall. For example, U.S. Senator Lisa Murkowski, a Republican from Alaska and still an ardent supporter of drilling for oil in ANWR, nonetheless concedes "this nation needs to do a far better job of energy conservation and needs to develop alternative energy technologies to wean us from fossil fuels."

Unfortunately, as encouraging as all this new energy awareness is, actually weaning the United States from fossil fuels is far easier said than done. To begin with, our current energy infrastructure -- the pipelines and refineries, the power plants and grids, the gasoline stations, and, of course, the cars, trucks, planes, and ships -- is a massive, sprawling asset that took more than a century to build and is worth some $1 trillion. Replacing that hydrocarbon monster with "clean" technologies and fuels before our current energy problems escalate into catastrophes will likely be the most complex and expensive challenge this country has ever faced.

Monday, November 08, 2004

Technology key to More oil supplies in the future


Owing to the current turmoil in oil markets, a number of analysts have raised the specter of the world soon running out of oil. This concern emerges periodically in large measure because of the inherent uncertainty of estimates of worldwide reserves. Such episodes of heightened anxiety about pending depletion date back a century and more. But, unlike past concerns, the current situation reflects an increasing fear that existing reserves and productive crude oil capacity have become subject to potential geopolitical adversity. These anxieties patently are not frivolous given the stark realities evident in many areas of the world.

While there are concerns of seeming inadequate levels of investment to meet expected rising world demand for oil over coming decades, technology, given a more supportive environment, is likely to ensure the needed supplies, at least for a very long while.

Is the world running out of oil?

The Daily Star

Although the world will not run out of oil tomorrow, the world is nearing the end of what might be called the easy oil. Even in the best of circumstances, the oil that still remains will be more costly to find and produce and less dependable than the oil being used today. This fact means not only higher prices, but also more volatile prices. This will make it difficult to see how rapidly oil supplies are being depleted, and even more difficult to know when the world would need to start looking for a new energy regime.

When does oil production peak? In theory, the production of oil reaches a peak when half the original supply has been pumped from the ground. This holds true for a single well or the collective behaviour of all oil wells on the planet. With half the supply consumed, it simply gets more difficult and harder to maintain the same levels of production.

Oil is a finite substance, and at some point, all the oil being discovered around the world will no longer replace the oil that has been produced, and global production will peak. The term "peak" suggests a neat curve with production rise slowly to the halfway point, then tapering off gradually to zero. As the worlds approach the peak in production, soaring prices -- seventy, eighty or even a hundred dollars a barrel -- will encourage oil companies and oil states to scour the planet for oil. Oil companies and oil states will find it harder and harder to maintain current production levels and hence keep up with rising consumption.

Not So Vast As Our Failure

World Crisis Web

Few people seem to recall that the U.S. was the Saudi Arabia of the world at one time producing more oil than any other country. At the beginning of the last century the U.S. was the greatest oil exporter in the world. 7 out of 8 barrels of oil used in the first and second world wars were U.S. oil barrels. The sale and use of oil is in large part how the U.S. became so rich and powerful. For decades the U.S. was the largest creditor nation in the world. U.S. money, “sound as the dollar”, flooded into countries all over the world as investment capital and at home it allowed the U.S. to fund the greatest investment in pure research, technological advancement and military power that the world has ever seen.

How things have changed. Today the U.S. is both the largest importer of oil in the world as well as by far the largest debtor nation in the world. These two facts being not at all coincidental. It is very difficult for anyone to fully grasp the enormity of what “by far” means in the case of U.S. debt but let me try to give you an idea. The U.S. national debt is 7 trillion dollars,13 trillion if you add State, municipal and consumer debt and 18 trillion if the Bush economic ‘plan’ is fully enacted. The entirety of the third world’s debt is just about two trillion dollars. In other words the U.S. debt is many times the size of a debt that has been large enough to choke the economic life out of two-thirds of the world’s people. Many of whom are being forced to try and get by on $1 a day. To give an idea of what $1 a day means. If you had been paid $1 a day since the time of the birth of Jesus you would not yet have earned your first million. ($731,953 as of this sentence, and now back to our peak oil story.)

Wednesday, November 03, 2004

Prognosticating oil supplies

The Washington Times

A rather alarming theory about oil supplies — which had been discussed mostly among fringe economists and on quirky Internet Web sites — has recently received much broader attention. Signs of the theory being taken seriously include a recent front-page story in the Wall Street Journal and advocacy by Matthew Simmons, a much-respected investment banker and former Bush energy adviser. Proponents' dire, near-term predictions are as yet unprovable, and they are widely refuted by all major energy companies and government oil ministries.

But I keep thinking of National Security Adviser Condoleezza Rice's statement that "No one could have imagined" the terrorist tactics used on September 11. Our national security managers need to "imagine" the consequences of this disturbing theory, watch closely as the data emerge, and prepare actions if it proves credible.

Very briefly, peak oil theorists state that world reserves of fossil fuels are much smaller and less recoverable than generally accepted estimates, and that prices will soon sharply increase as we reach a global halfway point in extraction of available supplies. Peak oil theory proponents track physical data from oil fields such as the Saudi Ghawar field and compare them with public data supplied by corporate and government sources. The theory was conceived by a contrarian geologist from Shell Oil in the late 1950s, and interested readers should judge for themselves the often-hyperventilated discussion of "Hubbert's peak" on myriad Web sites. Oil at $100 a barrel and climbing by 2006 is a typical scenario thrown around by some peak alarmists. At a high of $55 a barrel this month, we are finally getting close to the price spike that followed the 1979 revolution in Iran (about $61 a barrel in today's dollars).

Even if peak oil supply predictions are exaggerated, the risk of increasingly sophisticated supply disruptions by our adversaries, as global demand surges, is worrisome. Already, in Iraq, terrorists have moved away from horrific but largely symbolic terrorist acts towards attacks on supply lines — of oil pipelines, troop supply convoys, power and water distribution and most recently newly trained Iraqi army recruits. The extension of this supply choking strategy to global oil is a stated goal of al Qaeda, and related attacks in Saudi Arabia have already impacted world oil markets at the margins. If oil shortages and prices were to sharply increase, this strategy would have proportionally greater leverage to threaten the daily life of Americans, probably even more than direct physical attacks. The multiplier effects on U.S. supply chains and infrastructures would severely disrupt the manufacture and distribution of most goods and services. U.S. relations with politically unstable energy-supplier nations and energy-hungry competitors (particularly China) would be much further strained.

As prices at the pumps climbed and the impact spread to most facets of everyday life, many assumptions of liberals and conservatives would be challenged. Liberals would have to accept the necessity of crash investment in nuclear power, clean coal and energy-related defense efforts. Conservatives would have to accept the practical need for drastic energy conservation measures and renewable energy technologies that had previously been cost ineffective. The global warming debate would become irrelevant as fossil-fuel usage decreased due to purely market forces. In some dark way, maybe extreme self-interest would pull Americans together. Well, that's probably naive. "Peak oil" would more likely create a wrenching mess of our already troubled country. Hopefully it is just another flaky, Internet-stoked theory. But my advice to Miss Rice and the national-security folks would be to "imagine" the consequences now. Just in case.

Pemex problems deeper than management

The United States imports about 15 percent of its oil from Mexico. Pemex sells more debt than any other oil company, with about $37 billion in bonds held by investors around the globe.

Despite being one of the world's biggest producers, Pemex's reserves have been falling for 22 years. At current depletion rates, Mexico may have to start importing oil in a little more than decade.

Tuesday, November 02, 2004

Peak oil fringe group gains mainstream attention

CNN Money

Even if we don't run out of oil, the federal government admits it may become phenomenally expensive. "Will the world ever physically run out of crude oil? No, but only because it will eventually become very expensive in absence of lower-cost alternatives," the EIA report said.

To avoid a peak oil crisis, analysts said more conservation will be needed, especially in the United States. Accounting for only 5 percent of the world population, America currently uses a quarter of the world's oil, according to the EIA.

"The U.S. government should consider the possibilities raised by the peak-oil people. We have to be prepared to deal with all plausible situations, and it has to be reflected in policy," said Rodgers.

No one from the Department of Energy was available to comment, but analysts agreed the peak movement's warnings have not been widely reflected in domestic energy policy. Most politicians will be loathe to tackle the issue, analysts said.

"People don't want to face this reality," said Rodgers. "Once you accept it as a possibility -- not even as a certainty, but just as one of many possible scenarios -- then you have to make all sorts of changes (in the way you live), because it would not make sense not to."

We're All Bozos On The Bus

Fortunately or not, this is a strategy of desperation that won't and can't work. The folks in charge may have plenty of brain power at their disposal, but all the geniuses in the world, lined up end to end, can't reach a solution in which the global control system survives in any recognizable form.

Why? The basis of all existence is energy: all living systems on planet Earth rely on energy derived ultimately from the Sun, and so do human social systems; the more complex the system, the more energy per capita is required for its maintenance. We are coming to the end of a century or so of burgeoning energy availability derived from fossil fuels. Within the next few years global petroleum production will peak and energy availability will begin to decline dramatically. The only alternative sources in sight (photovoltaics, wind, etc.) provide less energy at lower levels of concentration.

Previous complex societies have met analogous energy crises, and in every case the result has been the reversion of the society to a lower level of complexity - in common parlance, collapse. As archaeologist Joseph Tainter points out in The Collapse of Complex Societies, collapse is an economizing strategy (usually not deliberate) necessitated by serious and prolonged energy deficits.

But how do we know that the system's managers haven't foreseen petroleum depletion and somehow planned for it? After all, they're smart and they have a lot to lose if the ship goes down. They wouldn't make a blunder that big, would they?

Of course not - not if they were rational and had any choice in the matter. However, they are not and do not. So far as industrial society is concerned, fossil-fuel dependency constitutes a long-term trend. The trend began decades before anyone thought seriously about petroleum depletion and its ultimate consequences. By the time analysts had determined when the oil would begin to run out (they did this in the late '50s and early '60s), dependency was systemic and profound; and the production peak was far enough away that those in charge could only simply hope that somehow an alternative would appear. They've been hoping ever since.

We must remember that, no matter how well-funded an intelligence organization may be, and no matter how many satellites and computers it deploys, it is still fallible. Consider the CIA and its spectacular record of ineptness over the past few decades - its inability to foresee the revolution in Iran, its miscalculations in Afghanistan and Iraq. Even information that has been gathered and processed by computers must still be evaluated and passed along the chain of command by human beings, and humans are never entirely rational.

Every organization tends to discourage unwanted information. If you happen to be an underling charged with carrying news to managers, you know that you are more likely to be rewarded if the news is good. For industrial society, petroleum depletion is the ultimate bad news. Nobody wants to hear it, so nobody wants to deliver it.

Suppose you're a senior executive at Boeing. Someone in the long-range planning department mentions in a report that petroleum production will peak around the year 2005, after which jet fuel will quickly become prohibitively expensive. You make an inquiry to your engineering staff, who tell you that there is no alternative to kerosene for fueling jets. The implication: by 2020, perhaps much sooner, it may no longer be possible to operate a commercial airline anywhere in the world. The responsible thing to do would be to pass this information along to clients - airlines and governments that are intending to spend billions of dollars to purchase new jets with a projected operating lifetime of thirty years. If you tell the clients, you will lose your job, the mortgage bills on your million-dollar house won't get paid, and your son or daughter might even have to drop out of college. Stockholders will sue the company for billions and everyone you've worked with will hate you. On the other hand, you could bury the report and continue with business as usual, take home the million-dollar bonus, and retire rich and happy. Tough choice.

Most CEOs and senior strategic managers are close to retirement. And it is a truism of management that, as one ascends the ranks, the time span between when a key strategic decision is made and when one becomes accountable for its consequences lengthens. It is one's successors who will have to deal with whatever mess results, and they in turn will be similarly motivated to pass the buck to their successors.

We must also remember that, while industrial capitalism is in many respects an integrated system, it is not controlled by a single unified power center, but rather by a feudal oligarchy of corporate, governmental, military, and intelligence establishments. Within and among these establishments there is often fierce competition. Managers spend much more of their time looking for short-term advantages over their competitors than they do considering the long-range picture of where society as a whole is headed.

There are, of course, some managers who do understand the long-range picture; but the most they can do, given all the constraints just mentioned, is to create a corporate "sustainability" initiative that is mostly public-relations hype, and to make desperate plans for worst-case scenarios (Build more prisons! Expand the military!). None of these measures can change the basic fact that industry runs on oil, and oil is going away.

Now, assuming that the folks in charge really don't know what they're doing, does this spell catastrophe for everyone? Not necessarily. There is probably no way to avoid economic turmoil and wrenching social dislocations over the next few decades. However, an argument can be made that the collapse of the current predatory, exploitive system will be a good thing in the long run, in that it could open the way for other possibilities. As Tainter notes, collapse means simply a reversion to a less-complex level of social organization. Despite the likelihood of short-term chaos, that could be a chance for humanity to internalize and implement a new environmental ethic. The way could be opened for the survival of currently embattled indigenous cultures, and people in industrialized countries would be forced to return to local self-reliance and community solidarity. Organic agriculture would be the only kind of agriculture possible. Look to Cuba for some hint of how we might get along quite well in a post-petroleum, post-globalization world. That's the third alternative.

There's no point wasting many words on the fourth. If everyone is on the raft and the raft goes down, only strong swimmers will even have a chance. It's not difficult to spin out scenarios in which there would simply be no survivors.

Monday, November 01, 2004

Supply, demand and oil

The Washington Times

It is not in the economic interests of Saudi Arabia or the world economy to manipulate oil production in an attempt to provide stability in oil markets. As oil is a depleted natural resource, its value when extracted in the future is higher than at present. Saudi Arabia ought to pursue a production policy compatible with its own economic interests. Its development is based on the conversion of its subsoil resources into other assets such as plants, equipment, education and technology. Obviously the conversion process can be carried on at different rates. An optimum rate is that at which oil should be pumped so that the present discounted value of the income created in the conversion process is maximized.

Saudi Arabia has sold and is selling far more oil than it would if these basic economic principles were observed. The excess — the difference between the volume of oil actually supplied and the volume that should be supplied in the strict observance of the national economic interests of Saudi Arabia — is in fact a subsidy it grants the West, Japan and other oil-importing nations.

Energy Transition and Final Energy Crisis


World commercial energy demand, overall, is well over 90% based on non-renewable and environmentally damaging fossil fuels (only 8% is hydropower based, while capital intensive nuclear power depends entirely on non-renewable uranium, thorium and other minerals). The current ‘oil price crisis’ in reality reflects an emerging and permanent supply crisis for oil and gas (which currently provide about 65% of world commercial energy). Initially, this will concern ever slower net additions of world production capacity in the face of strong demand growth, and will manifest itself as continued oil price rises, and continued gas price rises. For oil, the myth of OPEC always being the ‘supplier of last resort’ has in 2004 already been discredited if not finally destroyed. Soon after the present and short-term ‘price crisis’, which can only intensify in the 2005-2008 period, and within at most 10 years, both oil supply and natural gas supply will enter into constant and terminal decline, due to physical depletion.

Presidential Candidates Seen Ignoring Consequences of Global Oil Depletion

During months of often bitter campaigning, the U.S. presidential candidates have focused on many issues, but one that has gotten little if any attention is the problem of oil depletion, often referred to as "peak oil"; the point at which global demand for petroleum exceeds our ability to extract it. While the precise timing of peak oil is still a matter of conjecture and occasionally contentious debate, few experts question that it will occur sometime during the first half of this century. The consequences of this event economically and politically will be profound and potentially highly disruptive.

So, during the month of October, EV World asked its readers, "Do you believe the U.S. presidential candidates are giving sufficient attention to the problem of peak oil and how they will address it in the next four years"?

Our readers responded overwhelmingly in the negative. Of the 1,470 who participated in the poll, 1280 replied "No". That's 87%. Only 148 (10%) answered, "Yes" and 42 ( 3%) indicated that they didn't know. This clearly suggests that among EV World readers, there is a strong perception that not only is peak oil a significant future event but also that neither presidential candidate is giving it sufficient public attention.

While the results of EV World ( surveys are not considered scientific and reflect the personal views of readers who are interested in electric-drive and other alternative fuel vehicle technologies, they do suggest that among this group, the major presidential candidates are perceived to be ignoring the peak oil phenomenon and its consequences.