Peak Oil News: Weathering the oil storm

Sunday, September 04, 2005

Weathering the oil storm


Will tragic Katrina help us kick our oil habit?

By Jack Z. Smith, Star-Telegram Staff Writer

A made-for-TV movie titled Oil Storm, shown nearly three months ago on the FX cable channel, drew little attention when it came out.

Several weeks ago, I picked up a videocassette of the obscure flick from a table of giveaway items at work.

But it was only a week ago, on a Sunday evening as Hurricane Katrina howled toward a violent landfall on the Gulf Coast, that I found time to watch it.

The fictional movie had its shortcomings. But the parallels to Katrina were striking.

In the movie, a Category 4 hurricane named Julia ravages New Orleans and surrounding areas on Labor Day weekend of 2005 -- just a few days later than Katrina's assault.

Just like Katrina, the fictional Julia heavily damaged oil operations in the Gulf of Mexico and forced the shutdown of the huge Louisiana Offshore Oil Port, the nation's biggest terminal for imported oil.

After Julia struck, oil zoomed above $70 a barrel in frenzied trading. Similarly, Katrina forced crude prices above $70 in early trading Monday, only hours after the hurricane came ashore.

In the movie, Julia left 1,476 Louisiana residents dead. As of this writing, officials fear that Katrina might have caused thousands of deaths in Louisiana, Mississippi and Alabama, with New Orleans probably suffering the greatest number.

In Oil Storm, a series of catastrophic oil-related events occur in the months after Julia's onslaught. As a result, crude prices skyrocket above $150 a barrel, gasoline prices top $8 a gallon, and the petroleum-addicted U.S. economy is left in disarray.

The disastrous events in the movie ranged from a shutdown of the Houston Ship Channel (a huge artery for petroleum products) to a devastating attack by Islamic terrorists on Saudi Arabia's Ras Tanura, the world's largest oil terminal.

Since Katrina hit six days ago, U.S. oil, gasoline and natural gas prices have jumped to record highs.

Gasoline prices above $3 a gallon are becoming increasingly commonplace throughout the nation, and shortages are developing in some areas. In a flashback to the 1970s, we again are seeing long lines at service stations.

Katrina slashed oil and natural gas production and drilling in the Gulf of Mexico. Some major pipelines that transport gasoline to Eastern states have been crippled by storm-related electric power failures that disabled pumping equipment. Eight refineries were shut down.

We can only hope that, in coming months, there are no real-life, oil-related terrorist attacks or other disasters that cost lives and send energy prices into the ether, as occurred in Oil Storm in the months after Julia's rampage.

But after 9-11, we would be naive to assume that terrorists wouldn't target the vast oil and petrochemical complexes on the Texas and Louisiana coasts or in the oil-rich Middle East.

And hurricane season isn't over, either.

Both Katrina and Oil Storm make an important common point: With world oil supplies barely capable of meeting record global demand of 84 million barrels per day, energy markets are precarious and unstable.

Prices can skyrocket and supply shortages develop as a result of a single event, whether it be a Gulf Coast hurricane or terrorism in the Middle East. A series of disasters could send oil prices above $100 a barrel and push U.S. gasoline prices close to $5 per gallon, at least on a short-term basis.

We're particularly vulnerable in the United States because of our insatiable lust for fossil fuels -- oil, natural gas and coal.

As a result of our enormously productive economy, personal wealth, conspicuous consumption and loathing of energy efficiency and conservation measures, we 297 million Americans devour 25 percent of the world's oil while constituting less than 5 percent of the global population.

With oil and natural gas prices soaring during the past two years, world petroleum supplies tightening, heavily populated developing nations such as China and India becoming increasingly ravenous energy consumers, big new oil discoveries increasingly hard to come by, forecasts of sharply rising world oil demand in coming years and accumulating evidence of the perils of global warming, there's a mounting concern that something has got to give.

Just how long can the world keep slurping oil at a rate of 84 million barrels every 24 hours? When will the world's supply no longer be capable of matching the demand?

There's a great debate raging over what is referred to in energy world shorthand as "peak oil." The $64,000 question is when global oil production will hit its maximum capacity and then begin a steady, irreversible decline.

Many of the world's biggest reservoirs of cheap, easily recoverable oil already are facing production declines. Much of the globe's remaining oil is in smaller reservoirs and is more costly to extract.

The United States, once the world's top oil producer, saw its production peak more than three decades ago. We now import 60 percent of the oil we consume. No one talks seriously anymore about America achieving "energy independence."

The "peak oil" debate, once confined to narrow circles, is now a regular topic in the mass media.

It has been the subject of several books in recent years, including Hubbert's Peak: The Impending World Oil Shortage by Kenneth S. Deffeyes, The End Of Oil: On The Edge of a Perilous New World by Paul Roberts and Out of Gas: The End of the Age of Oil by David Goodstein. All warn that we must reduce our dependence on fossil fuels and move hastily to develop alternative energy supplies.

Contrastingly, some observers have a vision of an ample energy future, based on expectations of major advancements in energy technology, such as outlined in The Bottomless Well: The Twilight of Fuel, The Virtue of Waste and Why We Will Never Run Out of Energy by Peter W. Huber and Mark P. Mills.

One of the latest books broaching the "peak oil" topic is Twilight in the Desert: The Coming Saudi Oil Shock and The World Economy. Author Matthew R. Simmons, a Houston energy investment banker, has concluded after extensive research that the petroleum reserves of oil-rich Saudi Arabia are significantly overstated and that its largest fields are facing production declines.

In a recent interview on CNN, Simmons warned that the U.S. economy must become "less oil-intensive in its use" because at some future point, "we're not going to have any more."

Contrastingly, Daniel Yergin -- chairman of Cambridge Energy Research Associates and author of The Prize, a Pulitzer Prize-winning history of the oil industry -- is much more bullish on the industry's ability to fuel the world, at least in the next several years.

In an article published several weeks ago in The Washington Post, he said his firm's research showed that there "will be a large, unprecedented buildup of oil supply in the next few years."

Between 2004 and 2010, the world's oil production capacity could grow by approximately 20 percent, from 85 million to 101 million barrels a day, partially by boosting production from unconventional sources such as Canadian oil sands and ultra-deep offshore wells, he said.

Unlike some observers, I doubt that world oil production will hit its final peak in the next few years.

From 1985-1993, I wrote about the energy industry as a business reporter for the Star-Telegram. I gained a healthy respect for oil companies' ability to make persistent technological advances that steadily increased petroleum output.

I wouldn't be surprised if oil production doesn't peak until, say, 2025 -- or perhaps even later.

At the same time, we would be fools to ignore the pessimistic peak-oil theorists and savvy people such as Simmons, who knows the oil industry intimately and thinks on a global scale.

It's not just the finite supply of oil we should worry about. Energy demand is expected to escalate dramatically in coming decades as a result of a ballooning world population that already includes 6.4 billion people -- more than twice the head count when John F. Kennedy was elected president in 1960.

Moreover, per capita energy consumption is expected to jump in heavily populated developing nations such as China and India, where many people are buying cars and other energy-eating products for the first time.

Given all these facts, America's energy mandate should be obvious: We need to accelerate development of new, cleaner and more diverse energy supplies and simultaneously become much more energy-efficient and conservation-minded.

Fossil fuels should remain a vital part of our energy mix for years to come. Our most abundant energy source is coal, but it's also a major polluter. We must speed up efforts to develop affordable "clean coal" technologies that would enable us to tap this enormous resource without doing so much environmental damage.

Building new nuclear power plants should be a serious option. Better, more standardized plant designs are needed to lower costs. And we must deal with nuclear waste, including establishing a national repository for it.

Renewable energy technologies -- including wind, solar and biomass -- should continue to be improved and significantly expanded.

We must have significantly higher federal fuel efficiency standards for vehicles. We could raise standards by five to 10 miles per gallon during the next decade and save an enormous volume of oil.

We should continue turning out more hybrid gasoline-electric cars that get 45-plus mpg and aim for the long-term development of hydrogen-powered vehicles using fuel cells, even though that technology could be 25-plus years away from widespread application.

We must continue promoting more intelligent development policies.

Fort Worth and many other cities have focused in recent years on developing higher-density, mixed-use job centers and "urban villages" that allow people to live closer to where they work, shop and play. That saves scads of energy, as does buying an 1,800-square-foot home instead of a 3,000-square-foot one.

On a global scale, we need to encourage strong family planning programs that ensure that women bear children only when they want them. Bringing more unwanted children into the world escalates population growth and, hence, energy consumption.

Oh, yeah, the little things count, too. Like turning out the lights when you leave a room and raising the home thermostat a few degrees during the summer.

If we diversify our energy supply and make it less oil-reliant, we become less vulnerable to events such as Hurricane Katrina.

Katrina has been a disaster on the human front. But it could be a blessing in disguise on the energy front if $3 gas and long waits at service stations awaken us to the crying need to develop 21st-century energy strategies before the oil wells run dry.


At 4:51 AM, September 06, 2005, Blogger Gerbrand said...

Hello, I reading (and interesting) in peak oil since very recently. It sounds very sound but sligtly frightening.

As for oil prices, in the Netherlands (and rest of Europe) gas-prices are heavily taxed.
Since the use of oil for personal transportation is probably the least useful use of oil, I think this is very good.

At 8:41 AM, September 06, 2005, Anonymous Anonymous said...

It is absurd to say that birth control will be a help in oil reduction. I think that single or married people without children would use more oil resources than those with children. Afterall, which group is more likely to afford larger houses, multiple cars, computers, boats, ATVs, etc. In addition, reducing the number of children born isn't going to change society's focus on "more is better."

How sad it is that oil is more important than children..."wanted" or not.

At 10:39 AM, September 07, 2005, Anonymous Anonymous said...

I strongly agree with the author and strongly disagree with the above anonymous comment about birth control. Clearly, this is an individual who is "pro-life". I too, am pro-life --- ALL LIFE. How egoic to think people have some supreme right to decimate the earth and the many forms of life just so we can have more and more and evermore, children included. Also, this person's argument that childless couples use more oil is absurd! Clearly, the more children, the more energy people use. This is not about anti-children, it is about telling the truth.


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