Peak Oil News: 02/01/2005 - 03/01/2005

Monday, February 28, 2005

Electric Motorscooter

(This arrived in my email today. It looks exactly like what I have been wishing for.)


I was wondering if you could help get the word out about a revolutionary new EV that will be released in 2006. It cruises at over 60mph and goes up to 70 miles on a single charge—34¢ would be the national average electricity cost.  Of course, no noise or emissions.

The website is, and here’s an insider image of the bike’s new design. I’ve ridden the VXe and it’s amazing.  


I’m contacting you because the company considers the US (big SUV’s, big Harleys, etc.) to be a low-priority market relative to Europe, and they might not allocate many bikes here if they don’t know there’s interest.  In any case, availability will be limited.  They are taking free, no-obligation reservations right now and a strong turnout could make a difference.

Do you think you can help?


PS: I am not a Vectrix employee

Friday, February 25, 2005

Legislative Forum on Peak Oil and Its Consequences


Representative Ellen Story of Amherst is hosting an informational session on Peak Oil and its consequences in Conference Room A-1, at the State House in Boston, on Monday, February 28, 10:30am to noon.

The purpose of the session is to inform Massachusetts' legislators, staff, and the public about the implications of the imminent decline in global petroleum production. The session is titled “Cheap Oil; Gone Forever”.

The presentation is being given by Alex von Braun of the Karl Davies Energy Resources Task Force, a group based in the Pioneer Valley that has been researching and educating the public about Peak Oil since 2003. He is a member of the Massachusetts Energy Efficiency Partnership and a Master’s candidate at the University of Massachusetts/Amherst in Mechanical Engineering, specializing in energy efficiency.

By 2010, many energy resource experts predict that global oil production will peak and start to decline. As production begins to decrease, oil prices will soar with dramatic repercussions on local, national, and global economies.

The issue of Peak Oil has been gaining national attention. The magazine The Economist proclaimed the End of the Oil Age in a recent issue. National Geographic had a cover story in June 2004 entitled “The End of Cheap Oil” and a recent issue of the New Yorker explored the connections between resource depletion and war – past, present and future. Other extensive reports have appeared in The New York Times and the Wall Street Journal.

Energy expert Steven Strong of Solar Design Associates in Harvard, MA notes "No region of the United States is more dependent on petroleum than the Northeast. On top of the direct uses for transportation, agriculture and industry, our region has the highest consumption of oil per capita for heating and electrical generation of any in the country. It is fair to say that our regional economy is currently tied in ‘lock-step’ to the availability of oil and oil-derived energy."

"Every informed analysis of the future of petroleum leads to the same conclusion", said David Ahlfeld, Professor of Civil and Environmental Engineering at the University of Massachusetts in Amherst. "The United States should be dramatically reducing its reliance on energy-intensive housing, transportation and food supplies and moving rapidly towards transition to new energy sources."

Filmmaker says rude awakening about oil is coming

North Adams Transcript

By John E. Mitchell

Canadian filmmaker Greg Greene has oil depletion on his mind and has made it his mission to spread the news of something that he and others think may be the biggest and most under-reported story around.

Greene's film, "The End of Suburbia," will be showing at the Images Cinema in Williamstown on March 8 at 7 p.m. Writer James Howard Kunstler, who is featured in the film, will field questions following the screening.

Greene had to talk to industry insiders and scientists at to find out the basic issue of oil depletion.

"I read the Globe and Mail and the Toronto Star almost everyday," said Greene, "and I hadn't heard a thing about this, so I was very skeptical. It was really hard for me to continue to be skeptical after talking to geologists working within OPEC at this conference."

The world consumes seven times more oil than it did 50 years, largely due to a population increase and transportation needs, as well as ever-expanding industry. Those concerned about oil depletion claim that half the available oil in the world has been used, which means oil drilling is at the peak. In other words, there is nowhere to go but down.

Will run out

"Everyone relates to energy and oil like they relate to the gas in their car," said Greene, "once you get to empty you've got to get some more gas, but you can carry on steadily until then. Oil production doesn't work that way. About halfway through a field or a region or a country or the planet, when you hit that half-way point, you start running out, it's the law of diminishing returns, it takes more energy to get the oil out of the ground. Oil in the Earth is not like gas in the car, it's a curve and we're on top of that curve."

This principle is called the Hubbert Curve, which was devised in 1950 by Dr. M. King Hubbert as a way to describe oil as a resource. His principle states that production starts at zero, then rises to a peak that cannot be surpassed -- soon after, production declines. According to Greene, the information released by the United States Geological Survey, which is used to predict oil reserves, is being misread.

What many scientists are claiming is that the government and media report projections based on the 50th percentile, despite the fact that all the data in the last 10 years is consistent with the 95th percent projections. In other words, there is a 95 percent probability that we have used up a trillion barrels of oil, with only two trillion left -- and a good portion of that amount will not be recoverable.

Things are at their best

"We're at the best of times right now," said Greene. "Oil prices are not going to go down. We're not going to find some sort of free energy in the next few years that will save our bacon. We have to face this as responsible adults."

The thought of oil depletion paints a dire future -- oil is responsible for 40 percent of the world's energy, and is even the driving force behind food production sustainability. As Greene sees it, American suburbanites have the most to lose in the scenario.

"The people who have invested the most in a high energy lifestyle are the most vulnerable to this coming crisis and they need to be warned," said Greene.

Part of the problem is the struggle to get past the resistance of some of the very people he is trying to warn.

"No oil people and no scientists have disagreed with us, none," said Greene. "We've got some folks living in suburbia who disagree with us."

Greene posits that suburbia is the ultimate culmination of the American disconnect in regard to the myth of infinite resources. As a country built on the idea of expansion, limitation is one notion that is not always welcome in political discourse -- in fact, consuming, whether it involves American Indian territory or SUVs, might be the thread that binds Americans. After all, following the attacks of Sept. 11, the government urged citizens to send the terrorists a message by spending money on goods and travel.

"The mythology of a limitlessness is at the basis of a suburban way of life," said Greene.

Those within the movement believe that there will be no easy answers as we seek an alternative to oil and, most probably, there will be a number of ways that energy will be produced.

The road to that time, Greene fears, will be a hard one and the challenge for Americans is to turn away from scapegoats and rise to the occasion by accepting responsibility and curbing consumption as best they can. This may mean turning back on the American birthright of consumption, but it also means embracing the American tradition of apocalyptic thinking, just retooling it to the right end of the world.

"Everyone's so fixated on apocalypse," said Greene, "but everyone's unaware of the causes that are going to bring it straight to their front doorstep very soon."

Greene believes that humans in general and Americans in particular are an ingenious lot and sustainable forms of energy will be found. In the meantime, he and others worry that short term thinking might ruin the bright promise of tomorrow.

"If we don't manage this crisis, what will be left to power?" said Greene.

"How many people have to suffer? How many people in the third world have to die? How many middle class people in the developed world have to lose their homes? Lose their jobs? Offer a darker future to their children simply because we have not managed this transitional crisis properly?"

Thursday, February 24, 2005

Market Failure: Global Warming and Peak Oil


By Bill Henderson

"'A crisis is a problem that was ignored'. All great crises were ignored until it was too late.
"Most serious scientists worry that the world oil supplies will peak (and then decline). While the optimist/pessimist debate (economists vs scientists) rages on, the jury has decided the optimists have lost. Too much real data now proves their total thesis was wrong.
"Does this prove the pessimists were right? The pessimists might also be wrong, they might also be too optimistic.
"Peaking of oil cannot be predicted accurately, but the event will occur. Peaking turns out to only be clear through a "rear-view mirror". By then, an alternative or solution is too late."
Oil industry expert/ Bush Admin consultant Matthew Simmons

A new study of the effects of global warming on oceans by researchers at the Scripps Institution of Oceanography at the University of California, San Diego contains the first clear scientific evidence that the indisputable rise in global mean temperatures called global warming can only be the result of greenhouse gas emissions from the burning of fossil fuels.

Skeptics - including the Bush Administration which has always maintained that global warming science is uncertain - have up until now insisted that evidence of warming could not be connected only to greenhouse gas emissions because climate change is 'natural', i.e. not human caused so nothing economic has to change. Given the complexity of climate cycles, they argued that climate change science confused the effects of volcanism, celestial positioning or variable solar activity.

Skeptics have always been a very small minority of scientists studying climate change and most skeptics have been funded by fossil fuel business organizations, but their minority opinion has been used to confuse the public and paralyze efforts to reduce greenhouse gas production.

The evidence derived by American scientists using powerful computer models to study data from the US National Oceanic and Atmospheric Administration may be able to squash the skeptics:

“The debate about whether there is a global warming signal now is over, at least for rational people,” said Tim Barnett, lead scientist on the Scripps team. “The models got it right. If a politician stands up and says the uncertainty is too great to believe these models, that is no longer tenable.”

There is a wider lesson from our evolving understanding of global warming that is particularity relevant to that other emerging global-scale problem threatening global society collapse: peak oil.

Markets have never quantified and accounted for the greenhouse gas costs of burning fossil fuels. The costs of production and demand by users have always been the market variables setting the price of coal and oil. This historic inability to take into account the effects of greenhouse gas emissions is a stake in the heart of ideologues who would reduce government and other attempts at rational-comprehensive planning and depend entirely upon markets.

These same ideologues dismiss the threat of peak oil. They believe that we cannot consume our finite supply of oil - we will find more. Severe depletion will not occur without the development of sufficient alternative energy sources and therefor we needn't worry about severe economic dislocation and possible societal collapse.

Their position is an unqualified optimism that markets will allocate the production and use of oil, improve efficiency, and develop new, always sufficient, energy sources.

Markets have always just accounted for costs of oil production and user demand. There has never been any market accounting for alternative fossil fuel use, for inter-generational equitable use of a once-only, finite resource, for example.

Information about potential recoverable reserves and estimated future demand for oil has never been quantified with an accuracy that would allow markets to work properly. The recent write down of oil reserves by Shell and the current debate about Saudi future production capacity are examples of this lack of reliable market information.

Has the market mechanism developed optimal efficiencies in our use of fossil fuels? Only a Luddite ideologue or state socialist (if there are any left) would deny the enormous efficiency gains over the history of fossil fuel use due in large part to market mechanisms. But the development of the SUV due in large part to loopholes in truck tariffs with Japan, or of the burgeoning luxury travel industry, suburbia, Caesar salads from Mexico, grapes from Chile, hundreds of pro sport teams jetting across America daily, etc. etc. etc. all suggest that the interaction of producers with consumers in markets does not have anything like full cost accounting from which optimal efficiency could result.

Peak oil pessimists are reasonable and informative in their critique of possible development of alternative, non-fossil fuel energy in time to sustain our economies present demands.

They point out that we have wasted decades of needed lead time where investment in solar, wind, tidal and other possible sources of energy has stagnated at a very small percentage of investments in oil. Non-fossil fuel energy production is still less than 1% of production from fossil fuels. And path dependency is diverting investment to within existing fossil fuel derived patterns, i.e. hydrogen or biofuels for continuing 'car economies'.

With peak oil now predicted within the immediate decade these pessimists have a pretty strong argument that market failure has already occurred. They also point out that it will take energy from much more expensive oil in the future to make the transition to alternative energies and that possible resource wars or severe economic dislocation caused by high oil prices could make the transition very much more difficult.

There is no question that markets have proven invaluable in helping achieve our present bountiful economy and wonderfully complex global society. But given these obvious examples of market failure, blind faith in markets is dubious ideology. Markets provided with full information might have lead us to a post-fossil fuel economy decades ago.

Even worse, like the global warming skeptics, it is obvious that those who remain optimistic that there will be no peak oil problem - no economic and societal collapse because the market mechanism will always provide needed energy - do not want to recognize the existence of these global-scale problems because they are completely committed, completely invested in business as usual. Completely preoccupied with their own short term economic self-interest.

There are potential rational-comprehensive frameworks for organizing our societies survival given these global-scale problems. Accurate knowledge of the dangers from and possible solutions to both global warming and peak oil are possible. Businesses operating in markets within these frameworks would be a big part of possible solutions.

But if the history of denial and greenwashing of global warming is any indication, and the peak oil pessimists are right, it is probably too late for even a wartime economy government to do anything but try and keep order and save memes needed for the birth of a future society.

OPEC "overcapacity" is the Mother of all Cheap Oil Myths

Andrew McKillop

* Note for Venezuelan readers. In fact, Venezuela is the 3rd-biggest net oil exporter outside the 'Middle East core OPEC,' that is OAPEC producers. This article deliberately avoids all mention of Venezuela, 'ray-jeem changeable,' or not * oil industry commentarist Andrew McKillop writes: Belief in OPEC "overcapacity" is the Mother of all Cheap Oil Myths. The opposite myth is in fact a belief, and increasingly easy to prove. Oil is already in short supply and will get more so. Prices will rise.

Oil producers anywhere, both OPEC and non-OPEC, are unable to keep pace with world demand, their own domestic oil consumption, and ward off depletion losses. Further increase in world oil supply will only get more difficult.

Depletion losses are estimated by ExxonMobil at around 2.5-3 million barrels/day (Mbd) of world output capacity lost, each year ... world oil demand increased 2.68 Mbd in 2004.

There is only one bottom line to this: Expensive oil.

This fact is becoming daily reality despite heroic efforts of traders and analysts to talk down prices. One present cheap oil myth is 'collapse of oil demand following winter', another is 'big oil stock build in the USA.'

On the supply side, OPEC and non-OPEC suppliers are held by cheap oil myth to only have one vocation: stoically pump all they can, at whatever price they get, perhaps for the pleasure of depleting their nonrenewable resources.

Or through plain stupidity, who knows?

A few days of cold weather in the USA and oil prices, like spring vegetable prices, claw back all the ground they lost ! A strike in Nigeria or storm in the Gulf of Mexico, and prices bound back upwards.

The reason for this is simple: there is almost NO spare production capacity. OPEC "overcapacity" was a myth of the 1986-1999 Cheap Oil Interval. It is dead and gone.

In fact, without so-called "OPEC overproduction," that is reservoir crunching full-tilt production, world oil supply would be in deficit right now, and prices would go only one way ... UP!

Cheap Oil folklore worked fine in the 1986-1999 period. At the time, world oil demand was only slowly recovering from the neoliberal recession of the early 1980s, caused by sky high interest rates, not high oil prices. World oil demand in 1986-1999 rarely increased by more than 1.4%-per-year.

In 2004 world oil demand increased nearly 4%. In 2005 it is likely to do it again, unless there is a nearly instant, worldwide, savage and intense economic recession.

In the Cheap Oil Interval the myth of OPEC being afflicted by "overcapacity" was a handy and effective tool for talking down prices anytime they inched forward. Today, nostalgic analysts and politicians of the big consumer and importer countries still gargle this slogan. But since 1999 at the latest it has no meaning in reality. Like the 'postindustrial energy-lean economy' it is pure myth.

* Today, everything hinges on the so-called 'Middle East core group of OPEC suppliers'. Once upon a time this included Iraq, now producing no more than 1.5 Mbd thanks to 'liberation'. The 'core group' is now shrunken to, and entirely dominated by Saudi Arabia, Kuwait and UAE.

Next in line by net exports come Russia, Norway and Mexico, none of which is an OPEC member. While Norway's and Mexico's output is surely diminishing, Russia's can be held up, but not massively increased. Russian boasts of 'huge hikes' in oil output being possible are in fact as laughable as the boasts of Saudi princes.

In reality, neither Russia nor Saudi Arabia are able to increase their combined production by more than 3 or 4 Mbd: say 16 months of world oil demand growth at current rates, NOT including compensation for world depletion losses. That is all.

Their boasts of 'huge output hikes imminent' wear really thin after a few dozen times of hearing -- with nothing coming down the pipeline. In turn, even cheap oil cheerleaders in consumer countries change their tune. They go back to 'end of winter demand collapse' or 'huge US oil stock builds'. This is all they have left, to talk down prices.

These are highly-paid experts, dedicated to cheap oil. These days, they are science fiction writers or plain liars.

On the supply side, in effect and reality, it is only the braggart pair Russia and Saudi Arabia which control and fix oil prices. On the demand side, the rumor mill around the NYMEX does what it can to make prices move, because traders make money when prices change, not when they stay fixed. This is the reality.

OPEC "overproduction" is nowhere in sight, for the simple reason that without full-tilt production by OPEC, oil prices would be way over US$75-per-barrel right now.

OPEC, in reality, can do less and less about oil prices, except to have its oil ministers stride to the microphone and say they too think oil is "too expensive". This draws on another myth, used by Sheikh Yamani for many long years. Its modern equivalent is the Arnie Schwarzenegger myth of the Hydrogen Economy, claimed to be possible almost overnight, and send world oil demand spinning down out of sight.

The chances of this happening are less even than G W Bush having a third term, which would only need changing the US constitution. Replacing current oil use with hydrogen, currently produced from natural gas, would need a repeal of the Laws of Thermodynamics.

Other than the 'fuel substitution' myth there is the economic crisis myth, also used by Yamani and clowns, that is experts with a sense of humor, at his Centre for Global Energy Studies. This myth claims that high priced oil will automatically cause world financial or economic crisis, which could even hurt what Wall Street Journal calls the "evil cartel," through rapid and large falls of world oil demand.

In only one 3-year period in the 60 years since 1945 has world oil demand fallen three straight years: in 1980-1982. This was through the deepest recession since 1929-31 and entry to the Great Depression. This recession was caused more by double-digit interest rates than by triple-digit oil prices.

Members of that "evil cartel" should in fact dwell a little on what happens to burnt out, fallen-away, oil-depleted, ex-OPEC countries. These include impoverished Ecuador and unflourishing Gabon, and will soon include very low-income Indonesia, unless OPEC is changed to OGEC, the gas exporters cartel. Evil of course. By about 2012 it is likely that Iran, the Axis-of-Evil star player, already completely or 'structurally' dependent on oil product imports, will cease to have net export surpluses of crude.

Oil output by USA, Norway, Mexico and UK, the 4-biggest non-OPEC producers, is falling at about 0.9 Mbd-per-year, and this rate will very soon increase.

As it gets yet more expensive and difficult to keep up export surpluses, and the myth of "overproduction," competing uses for government revenues in OPEC -- like education and agriculture -- become more urgent, more useful and more responsible ways to face the future.

OPEC countries only have one real vocation: reducing oil exports without being accused of 'underproduction' and regime changed as a result. Falling output will itself put a very certain floor to price falls, which in any case will soon be a rare event.

The myth of OPEC "overcapacity" is dying, if slowly.

Near the end however -- that is now -- the myth will die away very fast: perhaps this year, and certainly by 2007 or 2008 it will have totally disappeared.

Andrew McKillop is an energy economist and consultant who recently edited a book for Pluto Books, ISBN 0745320929, title 'The Final Energy Crisis' including articles by Colin Campbell and Edward R D Goldsmith. He has held posts in national, international and supranational (Euro Commission) energy, and energy policy divisions and agencies. These missions have for example included role of Energy policy coordinator, Dept Minerals & Energy, Govt of Papua NG, advisory and management at the AREC technology transfer subsidiary of OAPEC, Kuwait, study missions at the ILO and UNDP, in-house consulting to the Hydro & Power Authority of British Columbia, Canada, seminar presentations at the Administrative Staff College of India, Hyderabad, study and technology review at the Canada Science Council, and elsewhere. Andrew is a regular contributor to; he was first energy editor of the journal 'The Ecologist' and has co-authored published works with other analysts, e.g. 'Oil Crisis and Economic Adjustment.' Pinter Publishing, with Dr Salah al-Shaikhly, currently the Interim Iraqi government's Ambassador to London. He is actively seeking research, consulting or writing missions at this time. You may contact Mr. McKillop by email at -- telephone London UK +44/ (207) 288 0475

Wednesday, February 23, 2005

The Energy Crunch



The election-year mudslinging over gas prices officially began on March 29, when Dick Cheney accused John Kerry of flip-flopping on his support for increased gas taxes. "After voting three times to increase the gas tax and once proposing to increase it by 50 cents a gallon," Cheney charged, "he now says he doesn't support it."

With gas prices rising to record levels, Kerry was only too happy the vice president brought up the topic. That evening, Kerry told the crowd at a San Francisco fundraiser that if the cost of a gallon kept creeping toward $3, "Dick Cheney and President Bush are going to have to carpool to work together. Those aren't Exxon prices, ladies and gentleman, those are Halliburton prices!" That zinger elicited a huge roar and zipped around the world as the sound bite du jour. It was such a hit, Kerry added it to his stump speech.

The Bush campaign struck back with a new television ad, entitled "Wacky." "Some people have wacky ideas," says a mildly sarcastic male voice. "Like taxing gasoline more so people drive less. That's John Kerry." A vaudevillian image of 12 guys in business suits riding a gigantic, clownish bicycle jitterbugs across the screen.

You can't squeeze a whole lot of policy detail into a 30-second ad or an evening-news sound bite. But after sifting through the rhetorical chaff on gas prices, the parameters of the current national debate on energy policy become clear.

For the Bush campaign, gas taxes are out of the question. There will be no discussion of, say, the wide-ranging benefits that Europeans have derived from their $5 per gallon, or the fact that we pay a gas tax to the Saudis rather than our own public coffers. Gas taxes are simply "wacky." You'd have to be even more "wacky" to talk about people driving less.

The message coming from the Democrats is equally demagogic. Though the Kerry campaign has issued policy papers focused on reducing American dependence on foreign oil (buried deep within the Kerry web site), in public he has tended to steer clear of discussing these ideas. Rather, he uses his airtime to criticize the president.

While crowds love Kerry's line about Bush and Cheney riding to work together, there is something disappointing about the Democratic nominee ridiculing the idea of carpooling. In addition to reducing traffic, car-sharing happens to be one of the fastest, cheapest, most high-impact ways that Americans can make real reductions in daily oil consumption. Car-sharing should be part of the Democratic platform, not a laugh line.

Kerry and the Democrats' other gasoline talking points are equally ill-advised. Telling the president to do a better job of "jaw-boning" the Saudis does not address the need to make America less beholden to foreign energy suppliers. Nor does the call to release oil from the Strategic Reserve.

The strategy for both campaigns so far has been pretty simple: Gas prices are rising rapidly. Blame it on the other guy. Present yourself as the guy who will make gas cheaper.

In the age of the 30-second campaign ad, we've come to expect this sort of approach to complex issues. It's the norm. But America is on the cusp of an energy crisis that is going to redefine the way we live--whether our leaders prepare us for it or not.

IN 1956, a Shell Oil geologist named M. King Hubbert stood up before a meeting of the American Petroleum Institute and, much to the chagrin of his bosses, predicted that oil production in the continental United States would peak and begin to decline starting in the early 1970s.

According to his colleague and author of the book, Hubbert's Peak, Ken Deffeyes, "Almost everyone inside and outside the oil industry rejected Hubbert's analysis." They simply didn't want to hear it. The 1960s was the greatest decade of global oil discovery ever. Vast new reserves were found all over the world. Soon all but a faithful few simply forgot about Hubbert's forecast.

Hubbert arrived at his prediction through an analysis of oil-field discoveries. By 1956, after drilling tens of thousands of holes across the continental United States, some oilmen had a pretty solid idea of what was in the ground. The discovery of new reserves in the lower 48 had peaked in the 1930s and had been in decline ever since. Hubbert noted that, when plotted over time, the rate of discovery formed a nearly perfect bell-curve. He theorized that the annual rate of oil production would form a similar bell curve, more than a few decades later. The highest point of this second curve would be the year that the U.S. produced more oil than it ever had before and ever would again. That would be the "oil peak."

As Deffeyes is quick to tell you, "Old Hubbert was right." America never again produced as much as it did in 1970, despite a drilling boom that produced four times more oil wells each year. Since then, oil production has been in steady, rapid decline--the downhill side of Hubbert's bell curve. Today, we extract about 3.4 million barrels per day from the lower 48, about one-third of what we were getting at peak.

In recent years, scientists have built on Hubbert's techniques in an effort to discover how close we are to global oil peak. Though the estimates vary, everyone agrees that the question of global peak is not "if" it will occur, but "when." Based on 65 studies published over the last 50 years, the UK-based Oil Depletion Analysis Center estimates the world's original endowment of sweet, crude "conventional" oil to be somewhere between 2000- and 2400-billion barrels. As of today, humanity has consumed close to half that total.

The consequences of this are hard to overstate. Oil fuels 95 percent of all transportation and a significant portion of global food production. Industrial societies are dependent on a vast, steady flow of inexpensive petroleum for just about everything we make and do. Disrupt this flow, and modern society as we know it is inconceivable.

Global demand for oil has increased sevenfold over the past 50 years. In 1986 human beings consumed about 54 million barrels of oil each day. Today we use about 82 million. Though Americans make up only 5 percent of the world's total population, we consume more than one-quarter of this energy--about three gallons per person each day. U.S. oil demand sets a new record every few months.

The developing world, led by China, is catching up to us. In the last decade, Chinese oil consumption has doubled, while Chinese car ownership has jumped from 700,000 to seven million.

"There are basically six and a half billion people on earth today and five billion of them barely use energy. They all aspire to," says Matt Simmons, chief executive of Simmons & Company, the world's biggest energy-industry investment bank.

Yet new sources of oil are becoming increasingly difficult to find and more expensive to develop. Global discovery peaked in 1964 and has declined ever since. In 2000, there were 16 discoveries of oil "mega-fields." In 2001, we found eight, and in 2002 only three such discoveries were made. Today, we consume about six barrels of oil for every one new barrel discovered.

The U.S. Dept. of Energy estimates that the world will require 120 million barrels a day by 2025. To meet that demand we must find the equivalent of 10 new North Sea oil fields within a decade. These fields, before peaking at the end of the 90s, were producing close to six million barrels of oil per day. Today, we are hard-pressed to discover one new mega-field, let alone 10 reserves equaling the size of the North Sea, which is now in serious decline. This year, 11 new mega-projects came online; next year, 18 will start producing. But by 2008 only three big new fields are scheduled to start flowing, with no new projects on track for 2009 or 2010.

According to Dr. Colin Campbell, a former exploration geologist and oil company executive who is generally considered to be the dean of global oil depletion experts, "there is no way on Earth" that level of demand predicted by the U.S. government and many oil industry analysts "can be fulfilled."

Just as Hubbert predicted for the U.S., a decline in discovery presages a decline in production. Says Campbell: "If you add it all together, you get a peak of what I call ordinary oil in 2005 and a peak of unconventional oil in around 2007. By 2010 volatility comes to an end. Then, terminal decline."

Campbell's oil peak prediction is right in line with no fewer than 12 recent studies, using a variety of different assumptions and demand projections. They all foresee accelerating decline in global oil production within the coming decade. Even the most conservative studies, using highly optimistic estimates of future oil discoveries and low estimates of future demand, predict a global oil peak by 2020. No matter how you slice it, global oil supply will soon begin a steep, permanent, irreversible decline.

AS WE APPROACH the global oil peak, the world will grow increasingly dependent on Middle Eastern oil supplies. Already, 50 oil-producing countries have passed their peak, including the United States, which now imports 60 percent of its oil. The only excess production capacity in the world--that is, the only countries that are able to meet increasing daily demand--resides in the handful of oil-rich Persian Gulf states.

The Middle East accounts for nearly one-third of the world's total daily oil supply, and as other oil provinces reach their peak and begin to decline, that share is growing. Saudi Arabia alone controls one-quarter of these reserves. But despite Saudi assurances about the size of their future reserves, analysts are increasingly worried about the steady flow of Saudi oil that the world so depends upon.

First is the problem of security. A coordinated strategy has emerged among militants in the Middle East to sabotage oil infrastructure and target Western oil workers. In recent weeks, explosives-laden boats exploded alongside oil tankers in the Persian Gulf; gunmen burst into the offices of an Exxon-Mobil oil refinery in Saudi Arabia and killed seven workers; and Iraqi oil pipelines were sabotaged three times, disrupting the flow of 1.7 million barrels of oil per day.

The specter of increasing chaos in the region makes it difficult for Western oil companies to provide Saudi Arabia and other Gulf countries with the technological and financial support required to develop the reserves that would be necessary to increase its daily production.

"Even if the oil is there, is any American firm going to be anxious to go into Saudi Arabia and develop it at this point?" asks money manager Stephen Leeb and author of The Oil Factor. "You'd have to have rocks in your head."

The Oil Depletion Analysis Center estimates "the military costs of protecting pipelines and tanker routes, borne mainly by U.S. taxpayers, at around $15 to $20 per barrel."

A second major problem is the fact that the Saudis will not allow any independent third-party observer to examine their reserves, operations and books. It's off-limits and "totally opaque," according to Simmons. Analysts can't even know for sure exactly how much oil the Saudis produce each day. Often, the only way they can begin to divine these numbers is by measuring tanker traffic.

In general, OPEC numbers are extremely shifty, or as Colin Campbell less charitably describes them, "complete rubbish." Each OPEC member's daily production quota is based on their total reserves. Since each country tends to want to pump more and generate greater revenue, they have a history of overstating the estimates of how much oil they actually have in the ground. During the 80s, estimates of OPEC's total reserves magically jumped from 353 to 643 billion barrels, despite the lack of new oil fields or significant improvements in drilling technologies. The Saudis themselves jacked up their stated reserves from 170 to 257 billion barrels.

Matt Simmons has personally pored over 40 years' worth of Saudi petroleum reservoir engineering reports. A participant in Dick Cheney's secret energy taskforce meetings of 2001, he is lobbying for a totally new system of corporate disclosure in oil and gas data.

"I do data analysis," Simmons says. "And the data analysis is getting increasingly scary. We have clearly grossly overstated proved reserves."

Many believe the Saudis no longer have the excess production capacity necessary to calm global markets. "The good news," says Deffeyes, "is that OPEC is no longer in charge of the price of oil. The bad news is that nobody is in charge of the price of oil."

Simmons and others say that the recent Royal Dutch/Shell scandal is just the tip of the iceberg. Shell stunned the financial world four months ago by revealing that it had overstated its proven reserves by a full 20 percent. Since then, Shell has cut its reserves four times, wiping 4.9 billion barrels off of their balance sheet.

"Most of us can't believe Shell is the only one," says Deffeyes. "Traditionally, they've been very good and conservative in their accounting practices. A bunch of us suspect they are probably just the first to come clean."

Colin Campbell agrees, and sees the Shell case as a watershed event. "This really is the moment of truth, because all these games and foolery have finally reached their end," he says. "You can't paper over it anymore. I'm quite sure that all the major companies will come out with similar announcements."

Campbell points to mergers of companies like Exxon-Mobil and BP-Amoco as more evidence of impending decline. The mergers create growth on the companies' balance sheets despite the fact that actual oil discoveries are in rapid decline, production is tapering off and reserves are probably overstated.

The bottom line is that analysts don't have enough data to know what the suppliers of the world's most vital economic resource can or cannot provide in the coming years. But they know enough to be very worried.

As Simmons recently said in an interview with Julian Darley, founder of the Post Carbon Institute, "If this were corn flakes, it actually doesn't matter because if we ever ran short of corn flakes, then we have ample granola. But this isn't corn flakes."

His final assessment of the Saudis is chilling. "We could be on the verge of seeing a collapse of 30 or 40 percent of their production in the imminent future, and imminent means sometime in the next three to five years--but it could even be tomorrow. If we need a plan B, it would sure be nice to know that with a little bit of advance warning."

THE IMPLICATIONS OF the global oil peak could not be more profound. As increasing demand exceeds supplies, oil prices will rise substantially and international competition for reserves will grow ever more rancorous. The impact will be felt throughout the global economy and in every American's wallet.

Today, Americans are panicky over the impact of a $40 barrel of oil. In his new book, Stephen Leeb predicts, "Oil prices are likely to rise to triple-digit territory--$100 a barrel at a minimum, and probably higher--by the end of the decade and possibly sooner." He sees the high, unstable price of energy wreaking havoc.

"Inflation and deflation will seesaw back and forth in chaotic fashion, with inflation generally ascendant but not always."

Economic growth, as we have come to know it, is entirely dependent on a vast, continuous flow of remarkably cheap oil. As Simmons says, "Peak does not mean oil has run dry, it does mean that growth is over. Who would like to get on the plane and go tell India and China, sorry guys, your spurt is over. We used your energy."

Critics of the peak oil theory point out that we have heard these Malthusian doomsday predictions before. Ever since Col. Edwin Drake drilled the first oil well in Titusville, PA, in 1859, pessimists have been predicting the imminent end of oil. But this isn't 1973. We simply aren't discovering big new oil fields anymore. The oil crises of the 70s were about politics and the holding back of existing supplies. The coming crisis is about geology and the unchecked growth of demand.

"I have studied the depletion issue intensely for too long now to have any remaining doubts about the severity of the issue," Simmons says. "Not a soul has been able to produce evidence that the depletion issue is not real, nor have I had anyone at any time lay out a credible way that the world could actually add so much supply within such a short period of time. Sadly, there is no factual data to support the 'sense' that the world will be awash in cheap oil and gas forever."

Likewise, the U.S. economy has in the past been protected from the impact of energy price increases because energy costs have been so low and such a small percentage of total economic activity. According to Stephen Leeb, those days are coming to an end. "If the price of energy is only five percent of the total economy then increases aren't so important. When energy costs become 10 percent of the economy, that's significant. We're at about eight percent right now. That's very close to the tipping point."

When the tipping point comes, Americans will be compelled to live very differently than they do today. One leading American social critic, James Howard Kunstler, sees serious political and cultural turmoil up ahead as the way of life Americans have built over the last 60 years begins to break down. With decreasing access to cheap oil, Kunstler sees the fundamentals of industrial agriculture, manufacturing and retail trade changing significantly.

"The whole Archer Daniels Midland model of turning oil into corn into Taco Bell--that whole complex, that system, is really going to be over," says Kuntsler. "We're going to be forced to grow more of our food locally and return to a kind of agriculture that really hasn't been practiced here in a long time. A lot of the land that has only had value as suburban development in the past 30 or 40 years is going to have to be reassigned."

Likewise, Kunstler foresees "the demise of Wal-Mart style, big box, national chains." Companies whose profit margins depend on "merchandise made by factories 12,000 miles away" simply won't function in a world of $100-plus barrels of oil. "We're going to have to seriously reorganize our whole system of retail trade and economy."

Along with many scientists, Kunstler believes George Bush's "hydrogen economy" rhetoric is a "fantasy" and a stall tactic to avoid making immediate changes. "It's kind of a cruel hoax as far as the public is concerned because it raises expectations that we're going to be able to continue living this way, and we're not."

As the changes come down upon us, Americans may have a difficult time understanding what is happening and why. As we're already seeing in this year's simplistic and demagogic presidential- campaign discussion of gas prices, political leaders may find it easier to focus more on whom to blame rather than how to come together to address the fundamental problem.

"Many Americans will draw the conclusion that they're being somehow cheated by the oil companies or that there's some kind of corporate conspiracy that's causing all this trouble and they're going to militate to do something about it and, of course, that won't really be the problem. The problem is geological--about what's in the ground and where it's at and how much of it there is. I think that we'll elect maniacs to try to turn back the clock and bring back the 1990s," Kunstler says.

"It's going to be very painful and there are going to be a lot of losers created in this process. They're going to be angry."

Matt Simmons is not prone to hyperbole. That's why you sit up when he says Americans should be taking the peak oil crisis "as seriously as we took the threat of thermonuclear war."

He thinks there should be hysteria over rising gas prices, but the hysteria should be there for a different reason. "America got so spoiled with energy costs being free. We need to do a better job of explaining how cheap a $2 gallon of gas actually is."

There is ample evidence that Americans would respond favorably to a presidential candidate who stepped up and talked about energy issues in an honest, straightforward way and began preparing Americans for the bumpy ride ahead.

According to one participant in a recent series of yet-to-be-published campaign research studies by Republican pollster Frank Luntz, Americans are responding "favorably to any messaging that includes corporate accountability--and even more favorably to industry efforts to utilize alternative energy sources such as wind and solar."

Oil giant BP-Amoco's successful recent corporate makeover suggests the same thing. BP's public image, by any metric you choose, went through the roof after they changed their brand to mean "Beyond Petroleum" and began projecting an image of caring about the environment. If you want to buy a super-efficient Toyota Prius these days, there's an eight-month waiting list. Toyota can't make them fast enough to keep up with demand. The American people may be more ready to have a serious discussion about energy than their political leaders give them credit for.

Running as the Anti-Bush, Kerry has so far failed to craft a compelling theme for his campaign. Yet it is not at all difficult to imagine the Democrats building an inspiring message around energy. Americans' relationship to energy underlies and ties together most of today's headlines--gas prices, Middle Eastern terrorism and war, the environment, suburban sprawl, traffic-clogged roadways, the obesity epidemic. Talking about changing the way that we think about and use energy would give Kerry an entry point into discussing just about every hot-button issue in American life today.

Kerry could use rising gasoline prices and spiraling violence in the Middle East as a way to create a sense of urgency around energy issues. He could propose a Manhattan Project for energy independence. Such a project would include converting our blackout-prone electrical grid to wind power, incentives for high-fuel-efficiency automobiles, rebuilding the nation's passenger rail system and re-designing American communities for less automobile dependency. Like the creation of the federal highway system in the 50s--also predicated on urgent national defense needs--a massive investment in a sustainable energy economy would create new industries, research, jobs and benefits that we probably can't even imagine. It would also give the nation a sense of mission.

Unlike President Bush, who after the crisis of Sept. 11 asked the American people to go shopping, Kerry should ask something meaningful of the American people. He should ask every American to change at least one thing in their homes, workplaces and communities to make the nation a bit more independent of foreign energy. Americans would respond. We love self-help and personal transformation. It's our national religion.

In fact, only in the last few days, the Kerry campaign has started to head in this very direction, including more substantial discussion of energy in his campaign speeches. "A strong America begins at home," he said, "with energy independence from the Middle East... Our dependence on foreign oil is a problem we must solve together the only way we can: by inventing our way out of it. Let's ensure that no young American soldier has to fight and die because of our dependence on foreign oil."

Energy. Power. Change. These are the campaign themes of a presidential candidate worth electing this year.

Tuesday, February 22, 2005

Imperial Entropy - The Collapse of the American Empire


It is quite ironic: only a decade or so after the idea of the United States as an imperial power came to be accepted by both right and left, and people were actually able to talk openly about an American empire, it is showing multiple signs of its inability to continue. And indeed it is now possible to contemplate, and openly speculate about, its collapse.

The neocons in power in Washington these days, those who were delighted to talk about America as the sole empire in the world following the Soviet disintegration, will of course refuse to believe in any such collapse, just as they ignore the realities of the imperial war in Iraq. But I think it behooves us to examine seriously the ways in which the U.S. system is so drastically imperiling itself that it will cause not only the collapse of its worldwide empire but drastically alter the nation itself on the domestic front.

All empires collapse eventually: Akkad, Sumeria, Babylonia, Ninevah, Assyria, Persia, Macedonia, Greece, Carthage, Rome, Mali, Songhai, Mongonl, Tokugawaw, Gupta, Khmer, Hapbsburg, Inca, Aztec, Spanish, Dutch, Ottoman, Austrian, French, British, Soviet, you name them, they all fell, and most within a few hundred years. The reasons are not really complex. An empire is a kind of state system that inevitably makes the same mistakes simply by the nature of its imperial structure and inevitably fails because of its size, complexity, territorial reach, stratification, heterogeneity, domination, hierarchy, and inequalities.

In my reading of the history of empires, I have come up with four reasons that almost always explain their collapse. (Jared Diamond's new book Collapse also has a list of reasons for societal collapse, slightly overlapping, but he is talking about systems other than empires.) Let me set them out, largely in reference to the present American empire.

First, environmental degradation. Empires always end by destroying the lands and waters they depend upon for survival, largely because they build and farm and grow without limits, and ours is no exception, even if we have yet to experience the worst of our assault on nature. Science is in agreement that all important ecological indicators are in decline and have been for decades: erosion of topsoils and beaches, overfishing, deforestation, freshwater and aquifer depletion, pollution of water, soil, air, and food, soil salinization, overpopulation , overconsumption, depletion of oil and minerals, introduction of new diseases and invigoration of old ones, extreme weather, melting icecaps and rising sealevels, species extinctions, and excessive human overuse of the earth's photosynthetic capacity. As the Harvard biologist E.O. Wilson has said, after lengthy examination of human impact on the earth, our "ecological footprint is already too large for the planet to sustain, and it is getting larger." A Defense Department study last year predicted "abrupt climate change," likely to occur within a decade, will lead to "catastrophic" shortages of water and energy, endemic "disruption and conflict," warfare that "would define human life," and a "significant drop" in the planet's ability to sustain its present population. End of empire for sure, maybe end of civilization.

Second, economic meltdown. Empires always depend on excessive resource exploitation, usually derived from colonies farther and farther away from the center, and eventually fall when the resources are exhausted or become too expensive for all but the elite. This is exactly the path we are on-peak oil extraction, for example, is widely predicted to come in the next year or two-and our economy is built entirely on a fragile system in which the world produces and we, by and large, consume (U.S. manufacturing is just 13 per cent of our GDP). At the moment we sustain a nearly $630 billion trade deficit with the rest of the world-it has leapt by an incredible $500 billion since 1993, and $180 billion since Bush took office in 2001-and in order to pay for that we have to have an inflow of cash from the rest of the world of about $1 billion every day to pay for it, which was down by half late last year. That kind of excess is simply unsustainable, especially when you think that it is the other world empire, China, that is crucial for supporting it, at the tune of some $83 billion on loan to the U.S. treasury.

Add to that an economy resting on a nearly $500 billion Federal budget deficit, making up part of a total national debt of $7.4 trillion as of last fall, and the continual drain on the economy by the military of at least $530 billion a year (not counting military intelligence, whose figure we never know). Nobody thinks that is sustainable either, which is why the dollar has lost value everywhere-down by 30 per cent against the euro since 2000-and the world begins to lose faith in investment here. I foresee that in just a few years the dollar will be so battered that the oil states will no longer want to operate in that currency and will turn to the euro instead, and China will let the yuan float against the dollar, effectively making this nation bankrupt and powerless, unable to control economic life within its borders much less abroad.

Third, military overstretch. Empires, because they are by definition colonizers, are always forced to extend their military reach farther and farther, and enlarge it against unwilling colonies more and more, until coffers are exhausted, communication lines are overextended, troops are unreliable, and the periphery resists and ultimately revolts. The American empire, which began its worldwide reach well before Bush II, now has some 446,000 active troops at more than 725 acknowledged (and any number secret) bases in at least 38 countries around the world, plus a formal "military presence" in no less than 153 countries, on every continent but Antarctica-and nearly a dozen fully armed courier fleets on all the oceans. Talk about overstretch: the U.S. is less than 5 per cent of the world's population. And now that Bush has declared a "war on terror," instead of the more doable war on Al Quada we should have waged, our armies and agents will be on a battlefield universal and permanent that cannot possibly be controlled or contained.

So far that military network has not collapsed, but as Iraq indicates it is mightily tested and quite incapable of establishing client states to do our bidding and protect resources we need. And as anti-American sentiment continues to spread and darken-in all the Muslim countries, in much of Europe, in much of Asia-and as more countries refuse the "structural adjustments" that our IMF-led globalization requires, it is quite likely that the periphery of our empire will begin resisting our dominance, militarily if necessary. And far from having a capacity to fight two wars simultaneously, as the Pentagon once hoped, we are proving that we can't even fight one.

Finally, domestic dissent and upheaval. Traditional empires end up collapsing from within as well as often being attacked from without, and so far the level of dissent within the U.S. has not reached the point of rebellion or secession-thanks both to the increasing repression of dissent and escalation of fear in the name of "homeland security" and to the success of our modern version of bread and circuses, a unique combination of entertainment, sports, television, internet sex and games, consumption, drugs, liquor, and religion that effectively deadens the general public into stupor. But the tactics of the Bush II administration show that it is so fearful of an expression of popular dissent that it is willing to defy and ignore environmental, civil-rights, and progressive groups, to bribe commentators to put out its propaganda, to expand surveillance and data-base invasions of privacy, to use party superiority and backroom tactics to ride roughshod over Congressional opposition, to use lies and deceptions as a normal part of government operations, to break international laws and treaties for short-term ends, and to use religion to cloak its every policy.

It's hard to believe that the great mass of the American public would ever bestir itself to challenge the empire at home until things get much, much worse. It is a public, after all, of which, as a Gallup poll in 2004 found, 61 per cent believe that "religion can answer all or most of today's problems," and according to a Time/CNN poll in 2002 59 per cent believe in the imminent apocalypse foretold in the Book of Revelation and take every threat and disaster as evidence of God's will. And yet, it's also hard to believe that a nation so thoroughly corrupt as this-in all its fundamental institutions, its boughten parties, academies, corporations, brokerages, accountants, governments-and resting on a social and economic base of intolerably unequal incomes and property, getting increasingly unequal, will be able to sustain itself for long. The upsurge in talk about secession after the last election, some of which was deadly serious and led on to organizations throughout most of the blue states, indicates that at least a minority is willing to think about drastic steps to "alter or abolish" a regime it finds itself fundamentally at odds with.

Those four processes by which empires always eventually fall seem to me to be inescapably operative, in varying degrees, in this latest empire. And I think a combination of several or all of them will bring about its collapse within the next 15 years or so.

Jared Diamond's recent book detailing the ways societies collapse suggests that American society, or industrial civilization as a whole, once it is aware of the dangers of its current course, can learn from the failures of the past and avoid their fates. But it will never happen, and for a reason Diamond himself understands.

As he says, in his analysis of the doomed Norse society on Greenland that collapsed in the early 15th century: "The values to which people cling most stubbornly under inappropriate conditions are those values that were previously the source of their greatest triumphs over adversity." If this is so, and his examples would seem to prove it, then we can isolate the values of American society that have been responsible for its greatest triumphs and know that we will cling to them no matter what. They are, in one rough mixture, capitalism, individualism, nationalism, technophilia, and humanism (as the dominance of humans over nature). There is no chance whatever, no matter how grave and obvious the threat, that as a society that we will abandon those.

Hence no chance to escape the collapse of empire.

Indonesia's Proven Oil Reserves Only Enough for 12 Years

Money Plans - Banking and Finance News Indonesia

Indonesia's proven reserve of oil has been reduced to 6 billion barrels of 1 per cent of world petroleum reserves, an official said.

Deputy chairman of the oil fuel socialization team Hardy Prasetyo said the reserve will last only for the next 12 years with a daily output of 1 million barrels per day.

Prasetyo said the country's potential reserves are estimated at only 4.82 billion barrels.

The dwindling reserve will leave a serious problem in the next 10 to 20 years, he added.

He said oil is a renewable energy source but oil reserves will take 150 million years to recover after depletion.

He said the country's demand for oil fuel rises 5 per cent annually resulting in growing imports from year to year.

Complacency and the Threat of Diminishing Oil Reserves

Oil Price outlook: OVER A BARREL

Charles Whall
Global Oil & Gas Analyst at Newton

Summary: Oil companies continue to report, year by year, that they have found more reserves than they have produced, implying that exploration and the discovery of new reserves will satisfy increasing demand for oil for many years to come. This has led consumers and governments to believe that no immediate action is needed to reduce the dependency on oil. Fueling this complacency about the future availability of oil at a reasonable price is the notion that current high prices are merely the result of supply disruptions and political tensions and that, when these tensions subside, the price of oil will correct downward to its historic mean - as it has following past energy crises. The reality is much more shocking. The rapid increase in the price per barrel of oil experienced during the second half of 2004 is not a simple, temporary price spike that will soon abate; rather, it is the new baseline for oil prices, signaling the very real potential for upwardly spiraling real energy prices going forward. Should this potential not be recognized and acted upon…sooner rather than later…increasing energy costs could lead to substantial economic disruptions in the years ahead.

Global demand for oil is increasing alarmingly…

The International Energy Agency (IEA) estimates that “World primary energy demand…is projected to expand by 60% between 2002 and 2030.” It is predicted that oil demand will grow in-line with total energy demand, and that much of this new demand will come from the expanding economies of developing nations, notably China (from 5.2 million barrels a day in 2002 to 13.3 million in 2030) and India (from 2.5 million barrels a day in 2002 to 5.6 million in 2030) .

To meet this demand, OPEC would need to double its current production, which is unlikely given that presently it is producing oil at or near maximum capacity and reinvestment rates, as measured in terms of active drilling rigs, have not accelerated sufficiently to grow production .

Yet, year by year, oil companies continue to report that oil reserves are being replenished faster than they are being consumed, implying that we have a long way to go before dramatic, corrective measures must be implemented . This has led to complacency amongst the world’s oil consumers and, in turn, has failed to stimulate the required emphasis on conservation and the development of alternative energy resources.

Whilst these projections, like other such long-range forecasts, likely will be proven wrong, the materiality of the increase in demand for oil, driven by the growing prosperity of the world’s most populated countries, is very real. Most worrisome is that these healthy supply projections are likely to be proven to be overly ambitious, meaning that supplies could fall well short of the world’s future demand for oil.

Many of the commentators on the oil industry have backgrounds in economics, rather than in earth sciences. As such, their projections are framed around economic theory (supported by history), which suggests that current price spikes will correct to a historic mean as either demand wanes or further supply gains are achieved.

Whilst supply and demand dynamics are important elements of the short-term oil market, simple extrapolation of historic observations misses two key factors that differentiate the oil market from the broader market.

Firstly, oil is a finite commodity that is depleting, so much so that oil reserves are now increasingly concentrated in the OPEC countries. Secondly, with mobility increasing globally, the substitution of oil by other fuels becomes increasingly more difficult. This is due not only to the lack of progress with realistic energy alternatives, but also the huge investment in the supply and vehicle infrastructure that would be required to facilitate switching to other fuels.

While supplies are gradually running out…

We believe that the market has failed to recognize the decreasing quality of oil reserve replacement as reported by the oil companies. Instead of replacing reserves with new discoveries, reserve replacement has instead come from counting, today, exploration barrels discovered decades ago. In addition to the historic exploration component, the technology element is also important, as we have been able to recover more barrels from these existing fields. This, also, has in turn led to increasing reserves – reserve additions that will not be sustained, as recovery expectations for new fields are already higher. We consider both the Exploration and the Technology elements in what follows.

Consider. Oil companies have not replaced production with exploration-related barrels since the early 1980s . In fact, the peak performance in discovering new fields was in the early 1960s . Of the world’s top 20 fields, only one, the Kashagan Field in Kazakhstan, was discovered in the last ten years.

The oil industry has always tended to find the largest fields first, simply because these structures are more visible on seismic surveys. Oil companies found more than they could produce from the 1950s to the early 1980s. The oil companies sat on these exploration finds, only moving them forward to development when they were needed. In between, they waited for extraction technologies to improve and for the oil consumption demand to develop.

The reserve booking process only allows exploration finds to be recognized when a field is deemed commercial (usually when the decision is taken to develop that field), so oil companies have been able to live off their inventories of past exploration successes. Unfortunately, much of the remaining inventory of exploration finds is composed of heavier or sour crudes, a lower quality feedstock that the industry cannot adequately process without complex refining capacity, which is already fully utilized.

The fact that the industry has found the majority of the large, higher quality fields means that, even with technology increasing the find rates, the volumes of useable oil found per well and in total each year are decreasing, just as demand is increasing. As such, and unlike some have suggested, increasing investment in exploration will not result in appreciable new supplies.


The annual reserve bookings made by oil companies have two main components. One is the movement of exploration barrels into the development category. The second component is generally captured under the heading of “revisions”; this covers the change in the expected ultimate recovery from a field through time, as technology allows improved recovery.

Indeed, this latter category historically has been the largest component, but is now decreasing with time. The reason for this is simply that the huge leaps forward in technology that emerged in the late 1970s through the 1990s are not currently being replicated. The industry has in fact so optimized recovery factors that there is not the pore space left in the reservoir to support further step changes in recovery.

The key step changes in technology have been:

· The growth in extended, directional well drilling. This allowed both greater reach and more oil well productivity enabling increased recovery, particularly with offshore fields.
· The many leaps forward in computing power have allowed more efficient data collection and ever-larger datasets to be manipulated, the major beneficiary being more complex seismic surveys. As well as improving exploration success rates, this, in turn, allowed for better definition of oil fields and more complex reservoir modeling, leading to improved field management and recovery mechanisms.

There have been, and continue to be, many incremental technology initiatives, but nothing that is likely to have the same step change impact, which has increased the recovery rates for the best fields, from 30% of oil in place just a few years ago, to upwards of 65%, currently. Perceived wisdom in the oil industry is that “Good fields become better; poor fields become worse”. There is a significant element of truth to this. Firstly, it is the larger fields that allow extended life reservoir optimization. Secondly, the “poor fields” often tend to refer to the more recent development of more marginally economic or smaller fields. These fields have been developed with the benefit of modern technologies, so optimized recovery factors are assumed. This leaves less room for positive reserve ‘revisions’; indeed as recovery expectations grow, we have noticed a growing number of field disappointments, yielding negative reserve revisions, a situation that is likely to be exaggerated in the short term as the SEC ensures more rigorous enforcement of reserve booking guidelines.

The improvements in oil well productivity, combined with smaller developments where production is unconstrained by surface facilities, means that depletion (the production rate at which oil is removed from a field) has been increasing. This is good news initially, but it creates an ever-higher reserve replacement threshold, meaning that the industry needs to run faster simply to stay in place, as a greater proportion of reserves are produced each year.

Replacing reserves is becoming more difficult, at a time when reserve growth is needed to satisfy demand. So, as North American and North Sea reserves continue to mature, we will grow increasingly dependent on the five Persian Gulf countries that control approximately two-thirds of the world’s oil reserves: Iran, Iraq, Saudi Arabia, Kuwait and the United Arab Emirates.


Normally, when dealing with natural resources, the more history we have, the more confidence we have in predicting the future. Certainly, the history is there, with more than 100 years of oil exploration and production data. The problem is that some have used this data to extrapolate a continuing “bottomless” energy resource. The oil companies have continued to support this view as it suites their purposes in their illustrations of sustainable business models.

This extrapolation is naïve; instead, we need to appreciate this data for what it is, an illustration of the dislocation between what we have experienced in the past and what we will most likely experience in the future. This increasing concentration of the remaining reserves in OPEC countries increases OPEC’s ability to manage the oil price downside. What has been evident in 2004 is that, as demand surprises to the upside, it is increasingly difficult for the production system to respond.

Rather that returning to a historical mean, the price spike we experienced during the latter half of 2004 is now the new baseline for the price of oil; the $35/barrel environment has, in effect, replaced the $20/barrel oil world of the past, with the potential for the price to spiral inevitably upward as the years progress.

What does this mean for investors in oil companies? It is clear that the competitive landscape for new development opportunities will become tighter as China, India and other energy-short economies seek to address their national energy security by tying up oil reserves abroad. Those oil companies that have already made aggressive moves to access reserves will likely prove to be the winners; but, as importantly, companies that have developed the skills to embrace the globalization of natural gas as a commodity have the potential for exceptional earnings growth in a higher energy price environment.

With technology unable to solve the problem of diminishing oil supplies, we must seek realistic alternatives to balance energy supply with consumer demand. Weaning global consumers from their false sense of security will require bold action, most probably in the form of much more restrictive conservation measures (i.e. ever stricter fuel efficiency standards), and fiscal stimuli needed to accelerate the implementation of alternate energy technologies.

Otherwise, in the not too distant future, energy consumers will face an unprecedented “Super Price Spike”, with potentially devastating economic disruptions.

We believe this is an environment that is wholly positive for the more commercially creative oil and gas companies, and one that also provides exceptional opportunities for businesses that address the shortfall in the fossil-fueled energy supply.

Monday, February 21, 2005

Oil Crisis: Technocracy Inc. Predicted Oil Crisis 50 years ago

ModBlog - Red Bewtween the Lines

 By Eugene Plawiuk

Recently a discussion on M.K.Hubbert arose on the marxism discussion list. This in itself was rather surprizing since Hubbert is a technocrat, and Technocracy Inc. is usually dismissed by the left as being some utopian scheme, or some kind of strange sect or cult. They were the original scientists and engineers for social responsibility, and being ahead of their time their theories appear to read like science fiction.

Hubbert is a favorite reference for my uncle, John Gregory, a professional engineer and geologist who worked for the National Research Council of Canada and is a long time member of Technocracy Inc here in Edmonton. As a social democratic technocrat living in the energy capital of Canada, his promotion of Hubberts therom was downright heresy. I grew up with a political understanding of technocracy as a progressive movement thanks to my uncle. Technocrats in Edmonton have always been activists appearing at all the progressive rallies and forums promoting their form of planned industrial/energy economy.

M. K. Hubbert predicated the Oil Crisis of 1972, waaaay back in the Fifties. He predicts that we will face a further oil crisis in the early part of this Century as reserve stocks decline along with increased demand.
Hubbert was dismissed at the time as a technocrat and his work is still villified in some circles today.Hubbert's work however has gained further legitimacy as oil prices have rocketed, and the Imperialist oil wars have drawn attention to this ongoing crisis.

Hubberts solution to this crisis was his theory of steady state economics. What was once thought of as crackpot theories of Technocracy, Hubbert has gained with new respect for his predictive analysis. Especially now that the impact of oil culture on the biosphere has been documented. Hubbert had already predicted that increasing reliance on oil would lead to an evironmental crisis in 1974.

Before dismissing Technocracy, one should review their work on economics needing to be energy based, actual credits based on the total value of physical energy available in an industrialized society. Not wage based, in other words they call for abolishing the wage system! Technocracy opposes capitalisms m-c-m formula (money-capital-money, or as we would call it today the Casino Capitalism of the Stockmarket) they oppose this money economy or price economy as they call it and propose replacing it with an energy economy.

Technocracy is a left wing industrial/social planning model , once banned at the same time as other left wing groups in the US and Canada. They promoted the theories ofthe Icelandic/American socialist Thorstein Veblen, author of the Leisure Class which gave us the term 'conspicious consumption'. Spefically Technocracy was influenced by his work: The Engineers And The Price System, regarding the social responsibilities of Science and Engineering which were direclty linked to the radical workers movement of the 1920's. The opening chapter is about Sabotage in the work place, the workers dissastisfaction with work and their alienation in industrial societies.

Technocracy Inc. from its beginings had friendly relations with the IWW, and was influenced by its unique form of North American syndicalism. Howard Scott was a friend of IWW General Secretary Vincent St. John, who got him to write articles for the union. Like other brain workers Technocrats viewed themsleves as workers, not a professional managment class as scientists and engineers have become today.

Unfortunately like left wing ideas of workers control, or self management which have been recuperated by capitalism and its managment theorists, technocracy and the term technocrat have been used as a prejorative for years. The reality is that technocrats are not just social engineers but socialist engineers, and an open organization to everyone, except politicians. Why thats downright anarchist of them.

Which may explain why politicians use technocrat as prejorative, they don't like being left out of anything.

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This work is licensed under a Creative Commons License.

Sunday, February 20, 2005

Group looks to educate others about potential energy crisis

Kennebec Journal


Herman Hughes drives his C.N. Brown tanker truck 300 to 350 miles a day, stopping three times, in separate trips, to unload his 8,000-gallon load of gasoline at service stations around the state.

By the end of the week, Hughes' single tanker has pumped another 120,000 gallons of petroleum into the energy stream of America. In one year, that amounts to 6.2 million gallons -- a scenario the Maine Oil Dealers Association said is typical.

Multiply that by all the tanker trucks making deliveries in each of the 50 states.

That consumption is beginning to make some people nervous -- but not Hughes.

"I don't think we are going to run out," the 42-year-old Hughes said as he filled the underground tanks at the Truckers International station in Fairfield on a bitter cold January day.

"I think we have enough reserves here. We just aren't drilling because of the environmentalists. We are using everybody else's supply."

Others think differently. A fringe community has formed that believes the well will run dry, and they are talking years, not centuries.

About 5 miles from Truckers International, a local contingent of this fringe community meets once a month at the Unitarian-Universalist Church in Waterville.

Members of the Peak Oil Group subscribe to the prediction made by the late M. King Hubbert, a geologist with Shell Oil Co., that oil production will reach its worldwide peak as soon as this year -- hence the term "Hubbert's Peak."

There's not an SUV to be found among the 10 in the group.

Dick Thomas traded in his Cadillac for a Toyota Prius. Iver Lofving swapped his 4-wheel-drive Toyota T100 truck for a smaller 2-wheel drive Ford Ranger.

For most people, the move would be about saving money at the gas station.

But for Thomas and Lofving, the objective is to save gas.

Both men -- Thomas a Waterville resident, Lofving from Skowhegan -- are convinced that world oil production will soon be on a downward slope and that an energy catastrophe is inevitable unless action is taken soon.

Given that demand for petroleum increases exponentially each year, Hubbert argued that the world would virtually be out of oil by 2040.

"We can't expand infinitely in a finite world," Lofving said.

The Peak Oil group formed last fall.

They have adopted a bible of sorts, a book by a North Waterford engineer named John Howe called "The End of Fossil Energy."

The subtitle of the self-published book is "A Plan for Sustainability."

Those in the Peak Oil group are hard to dismiss as crackpots. They are well-educated people with curious minds who read extensively and care deeply about the world their children will inherit.

Thomas is a psychologist, Lofving a high school teacher. Another member, Leonard Reich of Belgrade, is a professor at Colby College who teaches a history course about oil.

Thomas said the group will work on two fronts.

On a personal level, each is committed to a transition to a less energy-dependent lifestyle, but they also have a greater purpose: They are determined to wake the rest of the world to the looming crisis.

"We want to increase public awareness about the issue," Thomas said. "Our thought is that I don't think we can count on politicians to do very much."

Thomas said each member of the group has downsized the car he or she had been driving.

In Lofving's case, the downsizing extended to his wife, who went from a Subaru Outback to a Toyota Echo -- the Echo is Toyota's most fuel-efficient traditional car.

Lofving said the vehicle changes enabled them to increase their family fuel efficiency by about 25 miles per gallon.

The Lofvings are not limiting their conservation plan to transportation. They also have picked up two solar panels that they plan to install on their house this spring.

Lofving said those panels will be used to provide hot water for the household.

A harder task, members agree, is the effort to make others understand the coming crisis and convince them to join the initiative. And yet this is the most vital objective. If it takes a village to raise a child, then it takes a society to preserve a finite natural resource.

A common complaint in the Peak Oil movement is that the mainstream media has largely ignored the broader issue of the world's ever increasing energy consumption.

Without that media attention, they argue, creating an awareness of the problem is impossible and that awareness is critical to mobilize people to the cause.

That cause essentially is about buying time. The plan for sustainability that Howe describes in his book calls for people to reduce their energy consumption by 5 percent a year, a plan that he estimates would save the equivalent of 200 billion barrels of oil over a 35-year period -- each barrel holds 42 gallons of oil.

"We want to focus more on the solution than we do the problem," Lofving said, "though at first we have to make people aware of the problem."

But that solution amounts to convincing people to adopt an entirely different paradigm when it comes to energy consumption. In the United States in particular, that will be a hard sell.

In his history class, Reich tells the story of America's evolution into the land of muscle cars and SUVs. Abundant energy fueled America's rise to industrial powerhouse and international superpower.

In Europe, energy has always been a national security issue, Reich said. Not so in the United States. Americans, Reich said, have always viewed cheap energy as an entitlement, as a way of life.

Under Howe's 5 percent solution, people would have to reduce their energy consumption dramatically.

They would have to switch to smaller, more fuel-efficient vehicles and drive less as well. Airline travel would also have to be cut in half immediately.

Say goodbye, moreover, to NASCAR and any other sport that involves the use of the internal combustion engine. The Tour de France, on the other hand, could continue.

No more Rose Bowl games with 100,000 spectators in the stands either. Too much gas is consumed getting those fans to the stadium, Howe argues. Instead people will have to rely on their television to cheer on their favorite team unless they can walk or bike to the stadium.

For the household, one multipurpose electric utility vehicle, or EUV, would take the place of the SUV. Showers would have to be rationed strictly -- hot water takes energy -- and families would have to get used to cooler houses and reducing their living space to a central core during winter months.

The washing machine could remain, but get used to hanging clothes year-round, and forget about motorized toys such as snowmobiles, ATVs and motorboats.

Kitchens would have one high-efficiency full-size refrigerator, two small cooking burners and one well-insulated oven and perhaps a toaster.

The goal would be to limit kilowatt hours to 400 per month, with all that energy generated by 40 square meters -- a typical roof side -- of electricity-generating panels.

Lofving admits that selling people on such a lifestyle change won't be easy, but there is a strategy.

"No. 1, it is good for the environment," he said. "No. 2, it is good for the wallet."

And the third variable, Lofving said, is the most intangible of the bunch, but one that could be just as influential as the other two.

"There is a big cool factor here," he said of adopting the energy conservation lifestyle, "whether putting solar panels on the roof or whatever."

An electric car in the driveway, solar panels on the roof, a clothes line in the back yard and a bicycle for every family member. Could this be the definition of cool in the 21st century?

The Peak Oil group hopes so.

Energy industry: Oil crisis years away

Kennebec Journal


Larry Goldstein, president of the Petroleum Industry Research Foundation Inc., makes his living by studying the oil industry and reporting what he finds.

He has yet to announce that world oil production is headed downward.

But Goldstein is familiar with Hubbert's Peak and calls it a valid construct conceptually -- Goldstein's foundation is an independent group that researches and analyzes the petroleum industry.

"(Oil) is a finite natural resource," Goldstein said from his New York City office. "Are we running out of oil in the broadest sense? Yes, we are. Absolutely."

But the question, he said, is when world oil production will begin its downward slope.

"It is a serious issue because oil is critical for global economics and U.S. economics," he said.

Serious enough that the Petroleum Industry Research Foundation joined forces with the James A. Baker III Institute for Public Policy to host a conference titled "Running on Empty? Prospects for Future World Oil Supplies" back in November 2000.

The conclusion at that time was that the world had entered "an oil supply situation that is more precarious than at any other time since the 1973 oil shock."

Conference participants, however, rejected the Hubbert's Peak viewpoint and instead argued that "the oil market's current tight supply situation stems mainly from transitory political and other factors and does not reflect evidence that we are "running out of oil."

Goldstein said his own view has shifted from faith-based believer that oil is still plentiful enough not to worry, to a full-fledged agnostic.

"I don't know," he said. "There is nobody who knows."

Still, Goldstein said, a distinction should be made between resource constraint and effort constraint in regard to oil production.

The former refers to the remaining supply of untapped oil. The latter refers to the effort taken to extract that untapped oil.

Oil, he said, is difficult to extract from its underground wells. In most cases, only about 35 percent is collected. The rest, he said, stays in the ground, the cost of harvesting too exorbitant to make economic sense.

With the price of oil continuing to rise, however, Goldstein said, oil companies might soon have a financial incentive to revisit their existing petroleum holdings.

And that, Goldstein argued, could have a considerable impact on Hubbert's prediction, as could discovery of oil reserves Hubbert did not anticipate.

"What I'm suggesting is we probably have a lot more time than those on the Hubbert wavelength are suggesting," he said.

Expert says Saudi oil may have peaked


Expert says Saudi oil may have peaked
By Adam Porter

Sunday 20 February 2005, 10:58 Makka Time, 7:58 GMT

As oil stubbornly refuses to fall below $45 a barrel, a major market mover has cast a worrying future prediction.

Energy investment banker Matthew Simmons, of Simmons & Co International, has been outspoken in his warnings about peak oil before. His new statement is his strongest yet, "we may have already passed peak oil".

The subject of peak oil, the point at which the world's finite supply of oil begins to decline, is a hot topic in the industry.

Arguments are commonplace over whether it will happen at all, when it will happen or whether it has already happened. Simmons, a Republican adviser to the Bush-Cheney energy plan, believes it "is the world's number one problem, far more serious than global warming".

Saudi oil peaking?

Speaking exclusively to Aljazeera, Simmons came out with a statement that, if proven true over time, could herald by far the biggest energy crisis mankind has known.

"If Saudi Arabia have damaged their fields, accidentally or not, by overproducing them, then we may have already passed peak oil. Iran has certainly peaked, there is no way on Earth they can ever get back to their production of six million barrels per day (mbpd)."

Simmons believes Iran's oilproduction has also peaked

The technical term for damaging an oilfield by overproduction is rate sensitivity. In other words, if the oil is pulled out of the ground too fast, it damages the fragile geological structure of the field. This can make as much as 80% of the oil within the field unextractable. Of course, at the moment, virtually every producer is at full tilt. The most important among them is Saudi Arabia; their Gharwar field is the world's biggest.

One of the first hints that Simmons got over possible Saudi Arabian overproduction was from researching an obscure US Senate committee meeting in 1974.

Field damage

"A whistleblower in Saudi Aramco, Saudi Arabia's oil company, was first reported in The Washington Post. He had claimed that Aramco had been overproducing the giant Gharwar field and that if they did not slow down, they would damage the reservoirs.

"The committee, which swore witnesses in under oath, produced over 1400 pages of documentation on the subject, it included some specialist advice which advised cutting Saudi production to 4mbpd to maintain production levels."

Currently, at near maximum production, Saudi Arabia is producing about 9mbpd, though recently they claimed they could potentially produce 12mbpd or even as much as 20mbpd. A claim Simmons called "pie in the sky".

"The faster you pull a reservoir, the faster you pull out all of the easy-to-produce oil," explains Simmons. "What happens is that you lose massive amounts of what the oil industry calls oil-left-behind still inside the field. These issues, as you can see, have been known about for years."


"If you look at what Iran is doing, they are actually going to inject natural gas to the tune of 2bcf (billion cubic feet), through a 72in pipe into their Aghajari oilfield. It is a $2bn project. This is in order just to boost production from 200,000bpd to 300,000bpd. In the 1970s Aghajari was producing 1mbpd. It has been overproduced."

In 2004 Shell said it had lost 20% of its reserves Simmons also says the same thing happened with the oil company El Paso last year.

"At the same time as the Shell write-off, El Paso realised they had been producing their fields too hard. As a result they had to write off 41% of their reserves." In 2004 Shell first announced it had lost about 20% of its oil reserves.

Another clue came as Simmons discovered a ferocious debate that had been going on inside Saudi Aramco about overproduction.

"The company claimed in the early 1970s that it would be able to produce 20 to 25 mbpd, then by 1978 it was 12mbpd. Now it looks like 9.8mbpd is the maximum," he says.

Precious resource

"Luckily for them, demand quietened down in the 1980s. People thought when they cut production that they were simply trying to drive up oil prices, but in fact they were resting their fields to limit the damage.

"But then came the first Gulf war and they were forced to crank production up again and they have been fighting the problem ever since.

"In 1981 in their own book, Aramco and its World, something they give out to new employees and such, they openly talked about how maximising production would permanently harm their fields and that maximum production could not continue. They thought demand would fall and the fields would be sustained. Unfortunately that has not been the case."

The reasons for maximising production are not always obvious, they can be technical, but also geo-political.

"There is always a balance for producers. Do you want to conserve your fields and produce slowly? Or do you want to be a statesman? Would you rather be a market leader with all that brings, or a smaller, less powerful producer?"

The idea that Saudi Arabia could force its production up to 12mbpd or higher is met with scorn by Simmons.

"This is dangerous stuff," warns Simmons. "If we say they have not peaked and then they choose to further increase production, they will only hasten their field decline, and waste huge amounts of valuable oil into the bargain. And oil, as we are only now coming to realise, is the world's most precious resource."

The Global Nutcracker Called Peak Oil

EV World

By Jan Lundberg

Essay on the consequences to the world's economy when the realization finally strikes home that global oil production has begun its inevitable decline

February 20, 2005

Mr. Lundberg is the former publisher of the oil industry Lundberg Letter, from which he resigned to pursue a less fossil-fuel intensive lifestyle. He directs the efforts of Culture Change, a grass-roots effort to wean America off its over-dependence on oil and the automobile.

The end of abundant, affordable oil is in sight, and the implications are colossal. About now in our hydrocarbon phase of human history, we have pulled out of the Earth approximately half of the available petroleum (crude oil and natural gas). The other half still in the ground is harder to extract and may not - as assumed - fuel the global economy or even provide a transition to another phase.

To hope for an increase in discoveries is to turn a blind eye to the world trend in declining oil extraction which has been relentless for the past four decades. The approximate bell curve of petroleum extraction cannot be changed by any one big new discovery. Yet, the idea of "the Caspian" or any other mega-field du jour is an example of the constant hope for perpetual energy for high living in contradiction with nature.

The same can be said of the dominant assumption that petroleum will be replaced by other "technologies." This ignores the overwhelming petroleum-based infrastructure we have, and neglects to account for the lesser return on energy from non-petroleum sources of energy. But, "they" (scientists, leaders, corporations) will "think of something." Another common assumption popular among "radicals" is that "the ruling elite will refuse" to allow the global economy or the lucrative capitalist system to collapse.

If peak oil means we are at a half-way point, does this mean we now have years to either plan energy use or get used to recession, as claimed by many a writer on peak oil? Before the reader makes assumptions on how society may utilize the remaining store of petroleum, let me repeat what I told The Institute of Petroleum in London two years ago (on February 17, 2003):

"What the world went through in 1979’s oil crisis, which my former company warned of in the U.S., based on our projection of a 9% shortfall in gasoline deliveries, can happen again. The difference will be that global production of oil will be falling instead of increasing."

This means that the next tough oil shortage, even if it is not acknowledged as a post-peak oil extraction phenomenon of diminishing supply, will cripple the globalized economy. Understanding of both the economics and social dynamics of collapse is rare, and even when it is present there is an absence of taking into account the "market factor" in ushering in collapse.

Despite the need to be prepared for imminent, final energy shortage - which could happen now or in several years at the latest - people persist in focusing too much on the likely date of the passing of the peak. It is already clear that the oil industry and OPEC numbers on oil reserves are suspect. So we can simply offer a range of oft-quoted peak-oil arrival times: 2005-2012. Some more distant figures such as 2020 are based on infinite technological improvements on extraction and removing the problematic sulfur, for example. Factoring in the "irregular" petroleum sources, the peak year of world oil extraction is to be 2007, according to the Association for the Study of Peak Oil and Gas.

A flurry of peak oil stories hit last fall. But in general, the price of oil is deliberately about where the main players want it, as it is so profitable. So let us not look at the $50 price neighborhood as proof of peak oil being here now - although it may be a factor.

Taking peak oil doctrine further

The bell curve of oil "production" was devised by Marion King Hubbert, a Shell Oil and U.S. government geologist. Although Hubbert has on the whole been borne out except in the minds of fundamentalist-classical economists, what he did not factor in was collapse. Therefore, the curve will be truncated to a cliff just as the gap between supply and demand is felt and hits.

The scenario I foresee is that market-based panic will, within a few days, drive prices up skyward. And as supplies can no longer slake daily world demand of over 80 million barrels a day, the market will become paralyzed at prices too high for the wheels of commerce and even daily living in "advanced" societies. There may be an event that appears to trigger this final energy crash, but the overall cause will be the huge consumption on a finite planet.

The trucks will no longer pull into Wal-Mart. Or Safeway or other food stores. The freighters bringing packaged techno-toys and whatnot from China will have no fuel. There will be fuel in many places, but hoarding and uncertainty will trigger outages, violence and chaos. For only a short time will the police and military be able to maintain order, if at all. The damage that several days' oil shortage and outage will do will soon wreak permanent damage that starts with companies and consumers not paying their bills and not going to work.

After an almost instant depression seizes the modern industrialized world, and nation-states break down, the frantic attempts of people to feed themselves, stay warm and obtain fresh water (pumped presently via petroleum to a great extent), there will be no rescue. Die-off begins. The least petroleum-dependent communities will survive best. These "backward" nations will be emulated by the scrounging survivors of the U.S. and the rest of the "developed" world, as far as local food production will be tried - in a paved-over, toxic landscape by people who have lost touch with the land.

What about renewable energy and other alternatives? They are not ready, and will never be as long as oil is king. This is something not acknowledged by the boosters of the technofix. When oil abdicates, no one can fill the shoes. (See Culture Change Letters on the Technofixsuch as #77)

However, there will be replacement societies, starting with bands, tribes and rural communities that will start cooperating with each other as never before. The age of the bioregional country, based on cooperation and mutual aid will begin. A main job-category will be restoration of the land so as to provide a semblance of the diversity of food that Earth provided prior to petroleum farming. Social structures will no longer lend themselves to overcrowded workforces dependent on the dollar to buy goods and services from huge, distant and unaccountable corporations. Argentina may be a guide to post collapse society, with its egalitarian and worker/citizen controlled systems.

Awareness of the expected peak in global oil extraction is on the rise, but a debate on when the peak will hit has drowned out larger questions: How hard will the loss of abundant oil hit the economy? Can the consumer culture continue if the collapse includes die-off?

The reasons for not asking those questions in polite corporate company - on the mainstream news or in foundation-funded reports - include the blind faith in renewable energy as a cure-all, and the lack of understanding of petroleum's hold on daily lifestyles. Even if these factors are recognized, a news organization does not want to appear alarmist, and at the same time wants to cling to society's myths of progress and order forever.

The prospects of mitigating peak oil or avoiding collapse are almost nil. U.S. petroleum demand in 2004 grew at its strongest rate in five years. In December the daily consumption of refined oil was 21 million barrels in the U.S, a quarter of world use. The U.S. leads the industrialized world in population growth, part of a domestic policy to assure more car and oil sales.

More evidence of insanity by the world's biggest consumer, the U.S., is that the breaking point is flaunted: refinery utilization rate last year was the highest annual rate in six years at 92.8 percent of capacity. Lower 48 output of crude oil extraction declined the most ever in 2004 since 1999, and Alaskan production experienced its largest drop since 2000, declining 5.5 percent - peak oil "production" happened in the U.S. over three decades ago.

With the worldwide oil industry emulating these trends of maxing out, the still surging demand - China is the leader - strains production and hastens the day when the system can no longer accommodate growth. The Earth cannot, as of the world oil peak in extraction, give up ever greater quantities of black gold. Most of the world exporting companies are now reducing extraction rates due to fewer discoveries and depleted fields. Oil production in 18 producer countries has passed its peak and is declining faster than previously thought: at about 1.14 million barrels a day.

"International Energy Agency figures put the total spare capacity of all 11 countries in OPEC at just 330,000 bpd (down from 6 million bpd in 2002). Conventional Saudi spare capacity is zero... An IEA report from August 2004 indicates Saudi Arabia needs up to 800,000 bpd of newly discovered oil each year just to offset declining fields and maintain its current production level." [Al-jazeera] - this can't happen, so watch for the ensuing energy crisis.

More evidence that demand is out of control and pushing up the day of peak oil: "There is no spare refinery capacity, demand has outstripped all expectations." - Deborah White, Societe Generale bank, Paris

The world needs to produce another 2,723,530.2 barrels per day by the end of 2005 just in order to stand still, even by the IEA demand figures considered low by analysts.


We live in strange times: global warming from petroleum and other fuels is acknowledged as a certain and extremely grave threat, but we allow "policy" to continue holding above all else the maximum burning of petroleum. More roads are built for the guzzling coffins on wheels, even though road-repair funds (and library funds) go lacking as a result. The viciousness of the invasion of Iraq and the attempt to foil the designs of the great powers should serve to wake people up to wean themselves off petroleum. Nothing may finally tip public sentiment over to abandoning the oil life. People have already forgotten the huge oil spill off Unalaska Island, Alaska. But neither genocide, climate distortion, nor loss of wildlife habitat and fisheries - or that more nebulous concept of peak oil - have people thinking far ahead in the dominant culture, except in terms of self-aggrandizement. Fortunately, the loss of petroleum will probably mean the loss of the global culture of plastic materialism.

Petroleum is the Great Leveler, in the sense of "leveling" or flattening oil civilization. But petroleum will also be the Great Leveler in terms of equalizing everyone: People will go through a final, grasping petroleum grab with whatever funds and connections they have, before the attempt fails for good. Then all people will have no choice but to work together or perish. Until then, we have skewed values: for example, when a kindly old lady drives to a shop and has her charitable concerns, the use of oil makes her a killer of the planet and she is not pursuing a sustainable form of transportation. Meanwhile, a mean old man who scowls at little children who walks to the shop might be a much more valuable citizen in a practical fashion that matters to the world.

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