Peak Oil News: 11/01/2005 - 12/01/2005

Tuesday, November 29, 2005

Energy: The Bottomless Well

By Bill Walker

Governments exist on a foundation of fear. The more fear they can generate, the bigger they can grow. Fears of terrorists, of WMDS, of bird flu, of Global Warming (or Global Cooling), of nuclear power, etc. etc. etc. Any fear is a good fear for government. Popular support for wars is based on fear.

The Iraq war was originally supported on a basis of fear of nonexistent WMDs. As that fear has receded, new fears are used as supplements. One of the most popular is the fear of "Peak Oil." The idea is that America must fight over the little pool of oil in the Middle East, because that is all the energy in the universe and we have to have it to drive to the mall. One is supposed to picture your great great grandchildren in 2100 driving to malls in Chevrolet Suburbans, fueled by the last dregs of Iraqi oil. They will, of course, but only in historical reenactments (and the Suburbans will probably be powered by "Mr. Fusion" He-3 units).

The truth is that our current energy use is minuscule. The entire world burns about 345 Quads of fossil fuel every year. Known coal reserves contain 200,000 Quads, oil shales 10 million quads, the deuterium in the ocean 10 trillion Quads. (Of course we are no longer allowed to think about using the huge thorium reserves… if you are younger than 30, you probably don’t even know what thorium is). To believe that energy shortages are our biggest problem requires very special blinders.

People have been panicking about "energy crises" since Og the cave man noticed that the supply of fallen branches near the cave was dwindling. There was a panic about "running out of wood"; Watt developed an efficient steam engine and England switched to coal. There was a whale oil shortage in the 1800s; Drake developed oil drilling. There were multiple panics in the 20th Century about running out of oil; we developed nuclear fission, offshore natural gas, efficient solar cells, fuel cells, hybrids, better wind turbines… and then continued to find oil anyway, but when we do need to switch there are multiple technologies available and more on the way.

Energy produces new energy; Watt’s steam engines were used to pump out coal mines to produce more coal. Today’s reactors and drill rigs produce the energy to make mining equipment and develop new power sources.

Huber and Mills make several points in The Bottomless Well. One is that we don’t really want "energy," we want useful order ("negentropy" in physics). Order can only be produced by creating disorder somewhere else, by having energy flow from more concentrated to less concentrated states. If you don’t have a good grip on the concept of entropy, then read this; you can’t talk effectively about "energy" if you don’t know what it is.

This is why talk of "conserving energy instead of producing" is self-contradictory. If we want a clean environment, we have to use energy flowing from a more concentrated source to a more dispersed state to power the separating and recycling of pollutants. Now, this flow could occur in the Sun and be collected by rooftop solar panels, or it could occur in a space-based reactor and be transmitted via microwave and then high-tension line to your house. But life doesn’t exist without that energy flow.

Any successful "energy-conserving" technology in fact leads to the consumption of more energy. The authors point out that more energy now goes into lighting after the invention of energy-conserving bulbs; people make more use of the superior technology and outpace the savings of each individual bulb. The same is true in computers; the energy per logic gate keeps falling, but the overall energy use for computers and Internet keeps rising as the superior technology is more useful and runs more of the time. In fact, the Internet and supporting infrastructure may consume over 10% of our power already. As computers get more useful, more of them will be demanded; any good economist could have predicted that.

The "silicon car" will further increase the efficiency of the internal combustion engine by 20%, prevent traffic accidents, and do nothing whatever to reduce energy use. Since the vehicles will be safer and more useful, more people worldwide will adopt them. The authors don’t point this out, but only the FAA has prevented development of practical personal flying vehicles and flying taxis, which will of course use even more energy than cars (but be less useful for terrorists than today’s 200-ton 747s and 767s).

Another point well made is that only concentrated energy sources allowed Western nations to restore their forests. We get more crops out of smaller areas, where peasant societies just cut down every tree and plow up every acre.

Besides allowing us to leave the energy of sunlight for the natural environment, our "wasteful" energy systems actually let us produce more and more order for human purposes. The book traces the "inefficient" trail of energy that starts out as a pile of coal or uranium and ends up saving someone’s eyesight at the tip of an ophthalmologic surgical laser. Kilowatts have been transmuted into watts, but the watts carry useful order to where it is needed.

The public’s confusion over energy, entropy, and economics has led to a lot of counterproductive, even outright destructive effects. Huber summarizes the effect of the anti-nuclear movement thusly: "400 million more tons of coal have been burned." (Never forget, coal produces over 100 times more radiation per kilowatt-hour than nuclear plants!)

Was this what those who funded the "environmental" organizations wanted? Maybe, but I doubt it was the objective of most environmentalists. The moral is that putting your efforts into depriving other people of the freedom to innovate probably isn’t going to achieve your goal, no matter what your goal is.

There is no reason to fear "Peak Oil," "Peak Coal," "Peak Uranium," "Peak Deuterium," "Peak Antimatter," etc. Free human beings will not run out of energy for billions of years, even if we never learn any more physics in all that time. Our only shortage is of freedom itself. And that is something to fear.

Sunday, November 27, 2005

Scoop: Fitzsimons: Surely the time is now?


Jeanette Fitzsimons, Green Party Co-Leader

Opening address of 'Solar 2005' - the Australian and New Zealand Solar Energy Society conference at the University of Otago, Dunedin, delivered 8.45am, 28 November 2005.

Thank you for the invitation to open your conference, and welcome to those of you who have travelled from overseas to be with us. I hope you enjoy your time in New Zealand.

In the thirty years that I've been working to advance sustainable energy, it would seem there has never been a more propitious time to get the solar future seriously underway.

Oil prices have doubled in 18 months. Our oil dependence is showing up in the current account deficit and in the inflation rate. During the last few months I've been meeting with groups of 100 or so people around the country and showing The End of Suburbia. Citizens, unlike governments, are taking it seriously and are deep in discussion about what we should do.

New Zealand has passed peak gas. Our gas reserves peaked in 2001 and Maui is in rapid decline. New finds are likely but uncertain and will almost certainly be much smaller and much more expensive.

Energy demand is growing at an alarming rate, fuelled by rapid and, in my view, unsustainable economic growth, but outstripping even that. The growth is especially fast in transport fuel, the hardest of all to supply in a post-oil economy.

Electricity prices are rising in real terms and wind farms are becoming a highly visible flagship for renewable energy.

Awareness of climate change is growing and there is less debate about its reality, as New Zealand suffers severe weather events consistent with a climate-changing future.

The economic costs of not responding to climate change have been quantified as our projected surplus of carbon credits has turned into a projected deficit because of high growth in energy emissions, low forest plantings and conversion of forested land to dairying.

There is strong local opposition to proposals like the Happy Valley coal mine, which would destroy pristine biodiversity, the Marsden Point coal-fired power station, whose greenhouse gases cannot even legally be considered in the planning process now, and the 400 kV power lines in the Waikato which would perpetuate the centralised electricity generation model.

It would seem we have everything going for us.

But, despite all these indicators, the combination of fight back and head-in-the-sand is still preventing progress. Renewables are growing fast in absolute terms, but reducing as a percentage of total energy use. Energy efficiency has hardly progressed beyond the 'business as usual' scenario. We are going backwards in the phase out of fossil fuels.

While Treasury no longer holds to its forecast in the 2004 Budget that oil prices would return to $19/bbl by the end of last year and stay there indefinitely, they still see much of the recent rise as temporary and caused by short term perturbations like Katrina and the Iraq invasion. I cannot find any government decision-making that has been seriously changed as a result of awareness of Peak Oil.

One new gas-fired power station is being built, and another planned, for which there is no assured gas supply. The Government has underwritten the first, passing the risk to taxpayers rather than electricity consumers.

Proposals for LNG import would, if they proceed, choke off renewables and efficiency investments for many years as promotion of wasteful uses of gas becomes necessary to justify the large initial investment. We've had 30 years of energy policy being driven by a glut of gas and contracts that obliged us to use it or lose it. We don't need another Maui gas contract all over again.

Coal mining and use is on the increase and there is a strong push from industry to ignore climate change issues and burn more coal. Proposals have been floated to make transport fuels from coal with no apparent consideration of carbon emissions.

New transport legislation and institutional arrangements, developed by the previous government and the Green Party, have brought public transport, cycle ways, rail and traffic demand management into the planning frame, and I'm hugely optimistic about where this will eventually lead, but the bulk of money still goes on big new roads. There is strong lobby group for still more roading which is blind to the likely effects of oil prices and depletion.

Perhaps most worrying of all is the fight back that is underway on climate change policy.

Amory Lovins used to say that it is always either too soon, or too late, to invest in energy efficiency. He meant that as long as there is surplus supply capacity it was too soon, and as soon as there wasn't, it was too late to avoid building new supply. Some commentators have taken the same approach to climate policy. For years they head-butted the science, saying there is not enough proof to change the way we do things, or it was so far in the future we didn't need to do anything yet.

Now I've heard the first comments starting - that climate change is so far advanced that it is too late to stop it and we should instead adapt to the new situation rather than try to curb emissions. The ignorance that betrays is dangerous. It suggests there is some new stable state into which climate change will propel us and we can just adjust to it. The reality is that there is no new stable state as long as greenhouse gas emissions keep rising. Stabilising then reducing emissions is just the first step to stabilising climate in some new state, provided we don't trigger runaway feedback effects, some of which seem to have already started.

Other arguments advanced are even more self-serving. New Zealand is too small to matter - never mind that our greenhouse emissions per capita are high by world standards and far above those of China, which comes in for so much criticism. In absolute terms they are small so some argue that we should derive a competitive advantage from free riding on the rest of the Kyoto countries.

There has been much approval among media commentators of the so-called 'alternative' approach to Kyoto put forward by the United States, Australia, Japan, China, India and South Korea, who propose to use technology to solve the problem. Most of our media are too uninformed to know, or too lazy to find out, that Kyoto was always - and remains - about using better technology to reduce emissions. There is nothing proposed in this 'alternative' that could not be done under the Kyoto agreement as it stands. What they are really saying is that they refuse to accept a mandatory target. All care, no responsibility. If the technology doesn't work out, it's no skin off our nose.

The current review of New Zealand climate change policy is both an opportunity and a threat. Some of the settings obviously do need to be changed. New forest plantings have virtually dried up and conversion of forest to dairying has accelerated. While I believe this is the result of market prices rather than government management of the carbon sink credits, it is clear that we need a market incentive to plant and retain more forest if we are to counter the current low prices for forest products compared with dairy products.

Biomass fuels are our biggest strategic advantage in reducing net emissions and we need to move now towards a wood-based energy system. I remain unconvinced that simply handing the credits to the owners of the existing forests will achieve this, but we do need to use the return to New Zealand from any Kyoto forests we still have, to incentivise retaining them and planting more. The best mechanism to achieve Peter Read's vision of balancing land uses should be under active discussion.

The review appears to have begun under the previous government as an effort to find the best policies to turn the projected Kyoto deficit into a surplus - or at least to neutralise it. There are worrying signs that it is now driven by post-election commitments to Winston Peters and Peter Dunne, both determined to abolish the proposed carbon tax, and Dunne even seeking our withdrawal from Kyoto itself.

A carbon tax has been proposed by successive ministers since the early nineties when Simon Upton failed to get support from his Cabinet. It was signalled as policy under the previous government, when there was a clear parliamentary majority in favour, but delayed till now, when there may not be, although that is not yet established.

The current mix of regulation and the market in the energy sector is not working well and also needs review. But if we are to retain any market elements, and I strongly believe we should, then any economist will tell you it is essential to get the pricing right. Users of fossil fuels currently pay nothing for the environmental damage caused by their emissions, so compete unfairly with investments in renewables and efficiency, which have no emissions. The carbon tax is designed to level this playing field.

It is valid to examine at this stage whether the carbon tax is the best way to give this economic signal. Many things have changed since the Green Party advocated it in 1992 and costed it in terms of both revenue and prices. Rising oil prices are now giving a strong signal to motorists to economise on the use of transport fuel and an extra two to four cents-a-litre would be hardly felt against the noise of fluctuating crude prices. Major energy-intensive industry has been offered negotiated greenhouse agreements that achieve world best practice in that industry and exempt it from tax. However that process will stall without a carbon tax and there will be no further incentive to upgrade plant.

The three areas where a carbon tax is capable of influencing investment decisions, which are much more important than day-to-day decisions, are electricity generation, process heat and freight transport. Here a pricing mechanism is essential to ensure that all the costs of choosing coal are internalised, so that wind, wood, efficiency investments and co-generation can compete fairly. There are signs that planning for increased use of coal has proceeded because industry has been convinced they would be able to knock out the carbon tax with heavy lobbying. That appears to be working. Diesel is a much larger component of the price of trucking than it is of rail. While rebuilding our rail system is the primary tool to ensure freight goes by the most efficient mode, true cost pricing would also help.

Opponents of true cost pricing label the carbon tax as punitive, and a drag on the economy. They ignore the fact that the money does not go into a black hole, but is recycled into the economy. I believe we need to make it far more explicit that taxing carbon enables us to reduce other taxes. Ecological tax reform will create the incentives to reduce our use of environmentally damaging goods and services and have more to spend on benign ones. Public opinion will be with us if we link eco-taxes to tax reductions for everyone.

Thanks to Kyoto, the costs of carbon emissions can now be seen to be in real dollars - a projected deficit of half-a-billion real dollars - rather than 'just' environmental costs, which are so easily ignored. But it is still valid to discuss whether a carbon tax is the best instrument to internalise the costs of carbon. I wish this was the review we were having. There are some who argue an emissions trading system - either just among energy users or also including methane emitters, or also including carbon sinks, would be more economically efficient. That would mimic internally the instrument used internationally under Kyoto, and as with Kyoto there would be major concerns about how the initial units for trading would be allocated. But it is a debate we should have. Instead I hear no acknowledgement that if the carbon tax goes, we must replace it with another economic instrument.

I have dwelt on pricing at some length because I know many of you who are trying to operate in this current unfair market know how important it is. But there are other obstacles we must overcome as well. The main one, in my view, is the public perception of energy efficiency and renewable energy.

Energy efficiency is seen as boring. I've seen so many boring presentations - earnest, fact-filled, admonishing, but nothing to fire the imagination. No-one gets excited about wrapping their water cylinder. They may do it, but it's not what they get out of bed for. Energy conservation has an even worse press. It is seen as 'going without', a miserable existence of cold baths and candles. That has not been helped by government announcements in the last term that new security of supply arrangements - for which read costly, rarely used fossil-fired plant - aimed to ensure there would never again have to be a public conservation campaign. Never again should we have to tell you to turn your computer screen off at night! This is despite the duty the Act imposes on the minister to promote energy conservation, as well as energy efficiency and renewables.

Renewable energy has a better image, but is still seen as fringe and expensive. Wind has captured the public imagination and over 80 percent of New Zealanders want to see wind as the next power station fuel. But energy analysts spend all their time telling us it won't be enough, it needs storage, it's ugly, it's noisy, it kills birds, none of which needs to be true. Firewood is invisible, because so much of it is not traded, or traded locally and unreported. Yet the recent HEEP figures show that more than half our households have a solid fuel burner and these are mainly wood.

Public reaction to my own house has been instructive. The 1kW wind turbine is what excites people, though it makes the smallest contribution to our energy use. PV panels also look interesting and fit the model of the consumer society where if you want energy efficiency there has to be a gizmo you buy. The wood stove is less admired though it provides at least five times the energy the turbine does - cooking, top-up space heating and top-up water heating. The passive solar house design inspires no great interest, even though it is the major contributor to comfort and cost saving, with almost instantaneous payback. Insulation is out of sight, out of mind. Living very comfortably within 2kWh/day by understanding where to cut waste is seen as rather bizarre.

Motor vehicle sales are also instructive. The industry reports an increase in the demand for smaller more efficient cars when petrol and diesel prices peaked, but this has dropped away as prices have eased a little. Proposals first from the Green Party then from the Business Council for Sustainable Development for a feebate system to encourage import of more efficient vehicles was greeted with anger by those who claim they get a better ride in a V8 and fervently believe their right to this should be subsidised by the climate. There is a lot of interest in hybrids, clever but complex and expensive technology, but not a lot in the impressive fuel efficiency that can now be achieved, along with safety and space, in an ordinary five-seater small car like the Jazz.

We have to turn these attitudes around.

We need to make energy efficiency a selling point for all buildings. Home energy labelling will help. We can use the new perception of Peak Oil to drive home the message that cars we import today will have to be run for years in the future on increasingly expensive fuel.

Can I remark at this point on the dearth of papers about transport at this conference? It is the hardest, the most neglected, but by far the most important challenge in the transition to a sustainable energy future. Electricity is the easy bit.

I'd like to finish by telling you a little about my plans for the next three years.

Under the post-election agreement between the Greens and Labour the new Minister of Energy has effectively delegated me the job of working directly with officials in EECA and elsewhere to enhance the operation of the Energy Efficiency and Conservation Act. The Greens are not part of Cabinet or the Executive, as dictated by the Government's support parties, so Cabinet decisions will be through the Minister of Energy, but on a day-to-day basis I will be doing the work.

The Government recognises that energy will be a crunch issue in this term and plans to give it special attention. I have always believed that energy efficiency, energy conservation and renewables are a major component of the work needed to turn around our climate changing emissions and prepare for Peak Oil. The two keys to that are getting the pricing right and building public confidence in, and excitement about, a sustainable energy future.

A new, flagship project will be to build capacity in the solar water heating industry in order to get half-a-million square metres of collector installed on roofs over the next five years. The purpose is not just the energy savings to be gained from those installations. My mailbox over the last few years has made it very clear that there is strong support from the public for solar water heating; they cannot understand why it is not compulsory for new homes, and routine on prisons, hospitals and other large buildings. They want to buy one for themselves, but find the price just a bit too high at present.

If we want to create some excitement around sustainable energy, with a technology that is proven and cost effective, I believe solar water heating can do it. It accepts that people want something visible and purchased to show they are making an effort to be sustainable. So it panders in one sense to consumerism. But at the same time, it demonstrates that you don't have to generate additional electricity to be ahead - technologies that save it or substitute for it are just as good. So it may prepare the ground for grid-connected PV when that becomes economic.

My current view is that to build capacity we need to build the confidence of firms to invest in expansion and I doubt that incremental support will do that. I have asked officials to come back to me with an analysis of a different approach - a bulk government tender to supply and install this greatly increased quantity over five years, with a place for all market players who can use this opportunity to plan, expand, meet quality requirements, ensure there are adequate trained installers, and bring their price down with economies of scale.

As the units are on-sold to the public with the resulting price saving, it presents an opportunity for education in the host of energy efficiency improvements they could also make to their homes and their behaviour.

Along with this I want to see efficiency standards for vehicles and for more appliances; more urgency in the finalisation of the household building standard; and a step-up in retrofitting home insulation and damp proofing.

This focus on the household is deliberate. If we want to change a culture we can do it best where people live. The family is still the foundation of culture. I cannot believe that people who accept this new view of sustainable energy in their homes will fail to carry it over into their businesses. Even in business, while the bottom line apparently drives everything, in fact it does not. There are so many business opportunities to reduce energy bills through efficiency investments that are ignored. Even business has a prevailing culture and it is that culture that regards energy efficiency and renewables as boring, marginal or unreliable that needs to change. Along with our efforts to demonstrate it is cost-effective and profitable, we must also demonstrate that it is modern, fashionable, and fun.

Best wishes for the conference. I'm looking forward to hearing the other speakers and hope to catch up with many of you during the two days I am here.

Time running out for oil, gas reserves

By Jessica L. Aberle

World oil discoveries have been steadily declining for decades, while oil consumption has continued to increase dramatically.

Individual oil fields reach a point of peak production, where about half the oil has been retrieved, and production, though it does not stop, declines. And no one argues that only a finite amount of oil exists in the world and that our consumption of it continues to rise.

So, at some point the world's oil production, the sum of all the individual fields, will peak and demand will exceed production. When that peaking will occur has been the subject of much debate in recent decades. Some experts say the reserves are peaking now. Others argue demand won't exceed production for another 20 or 30 years.

Regardless of the timing, the known oil reserves will not last through the next 50 years and natural gas reserves are predicted to last only another 80 years, according to Tomasz Wiltowski, an associate director of the Coal Research Center and a professor of mechanical engineering and energy process at Southern Illinois University.

"The only solution right now for today and for the energy industry's future is coal," said Wiltowski, who has received more than $3 million in grant money to produce transportation fuels from coal.

If you assume we know all the reserves for oil, coal and natural gas, in Illinois alone at current production levels there is more than 300 years of coal, he said. "The future of coal also is transportation fuel," he said. With the implementation of clean coal technologies, all of this is good news for the high-energy coal found in Illinois.

Wiltowski said recent research shows the known oil reserves currently are peaking and will be depleted 30 to 40 years from now at the current rate of consumption. "It's a simple mathematical equation," he said. "Not rocket science."

And even if new reservoirs are found, they won't keep up with the ever growing demand, Wiltowski said, adding demand has outpaced discovery for decades.

"We are approaching peak oil," according to Stephen Andrews, co-founder of the Association for the Study of Peak Oil and Gas - USA. "Although political and economic events could shift the timing, we are nearing the date when there will not be enough oil left in the ground to permit a continuing increase in oil production. After that point, oil production must inevitably decline," Andrews says in an introduction to the group's Web site.

Geologists view peak oil in terms of resource depletion, with annual production depending on how many recoverable barrels of this finite resource there are on the planet, according to ASPO. For economists, it means the demand for gasoline, diesel, propane, heating oil and thousands of other petroleum-based products will exceed the supply of oil.

"Shortages of these commodities are inevitable," according to Andrews, who says resource depletion ranks in the top three issues facing humanity.

In 2005, the United States is predicted to consume an average of about 21 million barrels of oil per day, according to the U.S. Department of Energy. And even with high crude oil costs - currently below $60 a barrel but as high as $70 after hurricanes decimated the Gulf Coast - the demand continued to rise at a rate of about 1.4 percent over 2004.

As of Jan. 1, the U.S. had 21.9 billion barrels of proved oil reserves, according to the Oil and Gas Journal, the 11th highest in the world. The reserves are concentrated overwhelmingly in Texas, Louisiana, Alaska and California. And these reserves, according to the DOE, have declined 17 percent since 1990, with the U.S. still importing about 60 percent of its oil demand.

World oil demand is forecast to grow 50 percent by 2025, according to the DOE.

"If large quantities of new oil are not discovered and brought into production somewhere in the world, then world oil production will no longer satisfy demand," Robert L. Hirsch, the lead author of the 91-page DOE study on peak oil, explains in his nine-page oil primer, "The Inevitable Peaking of World Oil Production."

Peaking, however, does not mean production will suddenly stop, or that the reserves are depleted, only that production cannot increase and will decline.

Peak oil opponents argue the current crisis marks the fifth time the world has "run out of oil," and each time more oil suddenly was found. However, the world's last super giant oil field, like those in Saudi Arabia, was discovered in the 1960s, Hirsch said.

"The era of plentiful, low-cost petroleum is approaching an end," Hirsch says. "The good news is that commercially viable mitigation options are ready for implementation.

"The bad news is that unless mitigation is orchestrated on a timely basis, the economic damage to the world economy will be dire and long-lasting."

The technology exists or is on the verge to temporarily replace oil and oil-based products and fuels with coal. Chemical feed stocks, plastics, dyes, fertilizers all were once produced from coal tar and coal gasification. Significant progress already has been made into developing transportation fuels - diesel and hydrogen - efficiently and cleanly from coal.

"If we don't do something about it, in a few years when you go to the supermarket there won't be an option of paper or plastic," SIU coal researcher Ken Anderson said of the peaking of oil supplies.

"If we're smart we can use coal to fill in that gap. Because it's still cheap, it's available and it's available here on our own soil," he said. "We just have to use it. We've got to be smart."

Peak Oil: What We Know Now

By Bill Henderson

The momentous challenge facing the Bush Administration and America is the very real danger to the continuing supply of America's very lifeblood: oil.

Global oil production will peak (or has already possibly peaked) within several decades. Already, growing oil demand - from China and India especially, joining ever increasing American (20% of global demand) and other developed world usage - has created a very tight market with the price for benchmark crude oil staying above $50US. Some market analysts see US$100 oil in our immediate future and pessimists direly predict the mother of all depressions, a new dark age and even human die-off as we go over the cliff past Hubbert's Peak down the steep slopes of rapidly diminishing global oil production.

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

The Bush Administration didn't attempt regime change in Iraq just to protect America and its hegemony from the threat of WMDs and terrorism; it wasn't entirely 'a new crusade lead by geopolitical fantasists' against radical Islam and in support of America's Middle East ally Israel; it didn't try to form a coalition of the willing like in the first Gulf War just to confront Iraqi aggression.

The permanent military bases and Pentagon sized American consul offices in Iraq are being built because 60% of the world's crude comes from an increasingly hostile Middle East - this percentage of the supply of the world's most valuable commodity will increase over the next decade - and because control of Iraq is the decisive high ground for control of the Middle East..

American troops are not in Iraq for ideological reasons; this is not a replay of the domino theory in Vietnam. Whether or not the neocon dream of nation building succeeds - emulating the success of American leadership in postwar Japan and Germany - is secondary to continued American military control of the key strategic area of the most important geo-strategic area on the globe.

America has more than 800 military bases globally and awesome military imperial power. Protection of American interests, especially American business and the flow of commodities vital to America, is the US military mandate. Given globalization and the building oil supply realities, traditional Republican isolationism is not even a consideration.

After the first Gulf War, then Secretary of Defense Dick Cheney agreed with a traditional Republican foreign policy non-interventionist response to Saddam's Iraq: The US and coalition did not push into Iraq initiating regime change, occupation and nation building. They withdrew, banking upon military and multilateral containment, and continuing US economic control of oil supply (supported, of course, by a century old American military presence).

But by 1999 there was a new more pressing reality. In a speech to Institute of Petroleum in November 1999 Dick Cheney showed a keen appreciation of the building problem:

"For the world as a whole, oil companies are expected to keep finding and developing enough oil to offset our seventy one million plus barrel a day of oil depletion, but also to meet new demand. By some estimates there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from? Governments and the national oil companies are obviously controlling about ninety per cent of the assets. Oil remains fundamentally a government business. While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world’s oil and the lowest cost, is still where the prize ultimately lies..."

Access to oil is the IMPORTANT problem. And it is a US government problem. At the beginning of Bush Jr's first Administration, long before 9/11, Cheney was now a leading advocate of regime change. On hindsight, Saddam's WMD threat and the war on terror were just inflated excuses: optical, political practicalities to hide the real underlying reasons for US actions.

American choice of what can only be perceived as a military grab-the-oil policy path to the coming end of oil will no doubt engender responses - unpredictable perhaps very surprising responses - from a new growing world power, China, from a still nuclear armed Russia, and from the wider world community who will become increasingly concerned about American leadership and their own position within or without the military fortress controlling access to oil.

Given the momentous problem of peak oil and the oil importance of the Middle East and their choice of the grab-the-oil policy path, the Bush Administration has little choice but to stay in Iraq, must keep building American military bases there, must continue the neocon dream of nation building in spite of the insurgency. In spite of American casualties; in spite of the building Islamic backlash. Losing Iraq, unlike retreat from Vietnam, is not an option.

UK citizens fear the terminal decline in global oil supply

A series of events in the UK in December aimed at raising awareness of the imminent peak and decline of global oil supply looks to press ‘Peak Oil’ onto the national consciousness, culminating in a large conference at the London School of Economics on December 14th.

We have already seen the end of ‘cheap’ oil as supply has struggled to meet demand. ‘Peak Oil’ means demand will have to be destroyed as it is the point of maximum global oil supply, followed by a terminal decline which will present significant challenges for the oil-based way of living, and according to an increasing number of analysts, we can expect it very soon. With no combination of alternatives able to make up for the shortfall, everything from trade and agriculture to plastics and healthcare will be affected.

Events start on December 3rd at the Campaign against Climate Change march in London, where Peak Oil campaigners will team up with Climate Change protestors. The alliance between the climate change and peak oil movements is a natural one as the methods of mitigation for both are very similar with the key mantra being “Reduce, reuse and recycle”.

The Green Party will then host two ‘Peak Oil’ events in Brixton, London on December 5th and December 7th. The Green Party has recently taken Peak Oil on board as an important issue facing the world. On December 5th at 7pm there will be a showing of the important documentary ‘End of Suburbia’ at The Ritzy Cinema, Brixton and a discussion afterwards led by Green Party Energy Spokesman Tom Tibbets. On the 7th December there will be a Peak Oil talk at the Vida Walsh Centre in Brixton from 7.30pm.

Also on December 7th, there will be an End of Suburbia showing in Totnes, followed by a look on December 14th at the positive things we can take from the second half of the oil age. It will be led by Rob Hopkins. Rob has been a permaculture teacher in Ireland for the last 10 years. He developed and taught the first 2 year full-time permaculture course in the world at Kinsale FEC, and also is a founding director of The Hollies Centre for Practical Sustainability, where he pioneered many natural building techniques in Ireland. He developed a process called ‘Energy Descent Action Planning’ in Kinsale, whereby a community action plan for a designed transition to localization was developed. He is now designing a similar process for Totnes. His talk will explore the challenge that peak oil presents, and how if properly planned, the journey away from oil could be the great opportunity to design the world we have always sought.

The final ‘Peak Oil’ events of the year takes place at The London School of Economic, which will be hosting a debate entitled ‘Peak Oil - A Global Impact’ on Wednesday 14th December at 6.30pm at the Old Theatre. Chris Skrebowski, whose field-by-field analysis suggests we already be at ‘Peak’ will give a talk on ‘Peak Oil’ followed by a panel discussion including John Hemming MP and Paul Mobbs, author of Energy Beyond Oil. Entry to this event is free.

With the decline of global oil supply set to shape the 21st century, these are events you will not want to miss. For further information about these events, please visit

Can oil production satisfy rising demand?

By David J. Lynch

Energy Secretary Samuel Bodman has asked a high-level advisory board to answer one of the toughest questions dogging the U.S. economy: Can world oil production meet steadily rising demand?

In a previously unreleased Oct. 5 letter to ExxonMobil CEO Lee Raymond, chairman of the National Petroleum Council, Bodman asked for a study of the industry's ability to produce enough oil and natural gas at prices that won't cripple the economy.

"He's asked them to take a big-picture look out several years. ... He wants to get some definitive information," says Craig Stevens, an Energy Department spokesman.

The most noteworthy aspect of Bodman's request is a reference to the "peak oil" debate. At issue: the claim by a vocal minority of energy experts that the world is at, or near, maximum oil production.

That doesn't mean the world is running out of oil. But as booming economies in China and India boost demand, and production levels off, prices will rise. "Oil isn't a concept. It needs to be discovered and produced," says Matthew Simmons, author of a recent book questioning the extent of Saudi Arabia's oil reserves.

Avoiding economic turmoil will require more than a decade of "intense, expensive effort," according to a February study by Science Applications International for the Energy Department. The U.S. would need to build alternative fuel plants and greatly increase vehicle fuel efficiency.

"If peaking is imminent, failure to initiate timely mitigation could be extremely damaging," the report warned.

Many oil industry figures scoff at the peak oil theory, saying rising prices will spur exploration. The International Energy Agency last month agreed, saying oil reserves in the Middle East are "relatively underexploited and are sufficient to meet rising global demand for the next quarter-century and beyond."

Some also doubt that consumption will rise in line with current forecasts of 2% annual growth. China's economy could stumble and American consumers could ditch their gas-guzzlers for more-efficient vehicles. "People will react. They're not going to keep doing what they're doing," says Jim Parkman, an investment banker at Petrie Parkman in Houston.

But the debate is affecting oil company marketing. A Chevron ad asks: "The world consumes two barrels of oil for every barrel discovered. So is this something you should be worried about?"

The NPC study is intended to answer that question. The roster of the 175-member body, created in 1947 by President Truman, reads like a "who's who" of the petroleum industry. The council is chaired by Raymond, CEO of the nation's largest oil company.

That causes Simmons to doubt whether the NPC will endorse the peak oil camp. But Rep. Roscoe Bartlett, R-Md., who met with President Bush this summer to urge government action, says: "Any thinking person has to recognize at some point the world is going to face a crisis."

Oil expert warns of recession


By Brian O’Mahony, Chief Business Correspondent

AN oil expert warned yesterday falling oil reserves could trigger a major global economic recession in the longer term.

The warning came as the global economy faced into an uncertain winter. Markets fear prices are likely to rise again as shortage drives up demand.

Crude oil futures rose in Tokyo on expectations cold weather will increase demand for heating fuel while oil prices in New York have risen 2.7% this week as colder weather hit the US and Europe.

Experts warned colder snaps wold push prices higher in the weeks ahead.

Brent crude oil futures in London rose as much as 24 cents, or 0.4% yesterday to $56.45 (€47.89) a barrel as prices firmed.

In Britain the price of gas for delivery in January has risen sharply to well over £1 (€1.45) per therm. Some months back it was selling for 44p per therm for delivery in the New Year.

Dr Colin Campbell, chairman of the Association for the Study of Peak Oil (ASPO), said oil production would peak in 2010.

From then production will decline 2-3% a year.

Dr Campbell, a former exploration geologist who worked for Texaco and BP, was addressing a seminar in Dublin sponsored by AIB Capital markets.

“Notwithstanding reports to the contrary, discovery has been in relentless decline for the last 40 years despite a worldwide search aimed at the best prospects,” he said, adding analysts have been misled by over-generous reporting of reserves.

While oil supply will not immediately reach a critical level in Ireland, he said: “It is crucial that stringent policies be put in place to ensure more efficient energy usage in Ireland and to create a shift towards use of renewable energy.”

The Peak Oil Crisis: Solutions a First Cut

Falls Church News-Press

By Tom Whipple

After a thorough airing of "whether" and "when", the Denver peak oil conference moved to the murkier issue of "So, what do we do about it?"

The current answer, of course, is to keep drilling. Do whatever it takes — cut taxes, forget air quality, drill in the parks, drill on the seacoasts, drill in the arctic, drill everywhere there is a hint of more oil. As the "more drilling" policy has limited prospects, the Denver conference explored the four major alternatives that could produce large quantities of liquid fuel— shale, tar sands, coal to liquid, and biomass.

Shale can be dismissed quickly as being impractical for the foreseeable future on a large scale because it requires too much energy and entails too much of a threat to the environment.

Meanwhile, billions continue to be spent to increase oil production from the Alberta tar sands. Current plans call for 2 million barrels a day by 2010 and perhaps 5 million by 2030. For a world which currently consumes 84 million b/d, the tar sands, which have all sorts of environmental issues connected with extracting the oil, will never replace conventional oil on the scale it is currently being consumed.

Large-scale conversion of coal to liquid fuel is the first alternative source showing promise to produce liquid fuels on the scale of millions of barrels per day in the next decade or two. The technology has been around for 60 years and was used extensively by Germany during World War II and more recently by South Africa . Although the process relies on non-renewable fossil coal as a feedstock, the world still has large coal reserves. Moreover, modern conversion methods can do much to remove air-polluting impurities during the processing into liquid fuels. A number of organizations are beginning to plan for large-scale coal conversion facilities, and this will only be accelerated as the price of conventional oil climbs higher and higher.

One of the highlights of the oil conference was a report from the National Renewable Energy Laboratory (NREL) about the progress being made on producing liquid fuels from renewable biomass. For those not familiar with the concept, fuels and chemicals can be made from trees, grasses, agricultural crops, animal and human wastes, and algae.

Recently, research has focused on using enzymes to convert non-edible plants such as trees and grasses into ethanol. Studies have shown that some 1 billion tons of lignocellulosic biomass (trees, grasses, etc.) could be grown in the US each year. The NREL believes the conversion of this amount of renewable grass and trees to liquid fuels could supply 50-70 percent of the US 's requirements.

New sources of biomass, along with increased use of conventional biodiesel and ethanol produced from soybean and corns as gasoline substitutes, suggests the future for the farmer and the agriculture industry in general looks brighter than it has for decades. Indeed, if a significant part of liquid fuel production becomes the responsibility of farmers, we could see a conflict between food and biomass-for-fuel production that would drive food prices significantly higher.

However, the major problem with large-scale production of liquid fuels from coal and biomass is the massive amounts of capital and the years required to build the plants to do the conversion. If worldwide oil depletion sets in within the next five years, there is likely to be a period of many years during which there will be major shortages of liquid fuels in the quantities we have been consuming.

During the coming decades, we are going to have to make decisions about how to allocate decreased amounts of liquid fuels among many competing uses. One of the guidelines will be to reduce the use of high-energy liquid fuels wherever there is an acceptable substitute.

For example, electric or even coal-powered trains could replace a large portion of long-haul truck traffic. The advent of lightweight electric or ultra-high mileage hybrid cars could eliminate a significant portion of the gasoline consumption. On the other hand, it is difficult to imagine the technology that would allow a large airplane to fly on coal or electricity. There will clearly be a need for some liquid fuels many years into the future.

One thing becoming clearer all the time is that better electric storage batteries are going to make a big difference. Should a reliable battery with much denser energy storage and much faster recharge times become available (at affordable prices), it would go a long ways to smoothing the transition from petroleum based liquid fuels to renewables. Lithium-ion batteries are already demonstrating that currently available cars can achieve more than 100 miles per gallon for large portions of their daily use. Cars optimized for these batteries could presumably do much better.

One of the more interesting presentations at the conference was the role electric vehicles with big rechargeable batteries could play when paired to interact with a residence. A large car battery could help store excess solar and wind electricity, coming only intermittently, for use around a home at night. The same batteries could be recharged off the grid during the night when the power company has excess capacity.

At the moment, our future transportation is starting to look like biomass and big batteries.

Oil Expert To Address Theory That Peak Oil Has Arrived

Princeton University emeritus professor and renowned oil analyst Ken Deffeyes thinks that the all-time production peak for petroleum, or "peak oil," will occur on or around this Thanksgiving.

The peak oil theory predicts that the world's oil production output, like any nonrenewable resource, will eventually reach an all-time high and afterward gradually decline. Although it will be impossible to tell precisely when the peak occurs until it has already occurred and the world is in a definite production decrease, many experts are already predicting that the moment will happen in a few short years.

Deffeyes is one of the more pessimistic of the prognosticators. If he is correct, the global oil peak will just have occurred when he presents his Caltech lecture on December 1. Afterward, the commodity will become more and more scarce--and therefore more and more expensive and hard to obtain. The end result will be massive economic and social disruptions in a 21st-century world that has fueled itself for decades with cheap and plentiful energy.

Deffeyes has spent a lifetime in the oil business and the academic study of petroleum. Born in the middle of an Oklahoma City oilfield to a pioneering petroleum engineer, Deffeyes joined the Shell research lab in Houston after graduate school. At Shell he was a colleague of M. King Hubbert, who was the first person to predict that production peaks were even possible.

Hubbert's prediction that U.S. oil production would peak around 1970 was at first laughed at by industry analysts, but was later taken quite seriously when domestic production indeed peaked in much the manner that he had forecasted. Experts then realized that the entire planet would eventually reach a production peak, and that the effects would be highly disruptive.

Deffeyes joined the Princeton faculty in 1967 and continued to be involved in the oil industry as a consultant and expert witness. After his retirement in 1998, he published two books on the subject, Hubbert's Peak and Beyond Oil.

His prediction that the global oil peak will occur at Thanksgiving comes with stern warnings that severe consequences are to be expected for transportation and agriculture. In fact, he advises that the possibility of a "soft landing" may have already passed.

Ken Deffeyes will discuss the evidence supporting his theory at the Lauritsen Memorial Lecture, to take place at 8 p.m. on Thursday, December 1, in Beckman Auditorium on the California Institute of Technology campus.

The Lauritsen Memorial Lecture at Caltech commemorates two former professors of physics at Caltech, Charles C. and Thomas Lauritsen. Together, they served the Institute for more than 68 years, playing a significant role in Caltech's development and accomplishments.

'Black Gold' strikes Big Oil 'nerve'


Responding to complaints from customers, a leading petroleum industry website stopped its sale of WND Books' "Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil," which challenges the conventional wisdom on the commodity's origin and supply.

Houston-based also pulled from its site a related column by a co-author of the book, Jerome Corsi, after receiving about a dozen complaints from subscribers, who include leading figures in the oil exploration community.

Corsi said the incident, along with many ad hominem attacks he and co-author Craig R. Smith have received, illustrate the general unwillingness of opponents to address the book's arguments.

"They don't want to debate us, they want to shut it out," Corsi said.

He added, "It's usually a good indication you're on to something."

Building on the conclusions of Cornell University Professor Thomas Gold, Corsi and Smith argue oil is not a fossil fuel and – contrary to the popular "peak oil" theory – is not running out. Gold's "abiotic" theory asserts oil is a product of a continuing biochemical reaction below the earth's surface that is brought to attainable depths by the centrifugal forces of the earth's rotation.

Smith, CEO of Swiss America Trading Corp., said all he wants is an honest debate.

"The peak oil theorists have a wrap on this," he said. "Show us the science that proves we're idiots and we'll shut up and go away." President David Kent told WND he was caught in the middle of a controversy he's not "up to speed on" and discovered just how sensitive the issue is to people in the industry.

"A nerve has been struck," said Kent, who describes his website as the " of oil and gas."

The e-mail responses came after he distributed Corsi's column in a newsletter last week sent to about 100,000 customers. Kent said if he had to do it over again, he would have included a disclaimer stating the views of the book and column do not represent

"I definitely knew it was on the edge," he said of the column. "But I didn't know what kind of response it would get."

Kent said he is considering holding an online forum on the topic.

A man who identified himself as a project engineer posted a copy of his letter to Rigzone on a community Web forum called The Oil Drum, saying, "I just wanted to let you know that with your recent 'insight' article by Jerome Corsi espousing abiotic oil and bashing peak oil and Democrats, you have damaged your reputation with me and others and I will no longer be using your site. That you would give a man with no engineering background, and the man responsible for the swift boat veterans book, space on your website beggars belief."

The letter followed a posting of a column by Stuart Staniford, who claimed fired the editors responsible for posting Corsi's column.

But Kent denied that, explaining the erroneous report came from a misinterpretation of an e-mail that was meant in jest.

Staniford's column is titled "The Swiftboating of Peak Oil," an allusion to Corsi's co-authorship of "Unfit for Command," the New York Times No. 1 best-seller during the 2004 presidential campaign that challenged Sen. John Kerry's claims about his Navy swiftboat service in Vietnam.

Staniford said Corsi "can perhaps be forgiven for his … allegiance to the abiotic theory which has roughly zero support amongst working exploration geologists. … But what on earth are the editors of Rigzone thinking?"

Secondly, Staniford writes, "given Dr Corsi's recent history of involvement with well-funded extreme right-wing causes, are we seeing the start of a comparable campaign against peak oil?"

On a weblog called Peak Energy, a contributor posted a sarcastic response to "Black Gold": "Good heavens. Saint Jerome Corsi, paid liar and all around greaseball has found a sustainable, non-finite source of oil amongst the seminal soaked pages of Thomas Gold's masterwork?"

A contributor to a forum called took a swipe at Smith and Corsi.

"Craig Smith is a gold bug. He would much prefer the U.S. dollar to be based on gold, not oil. (For 'black gold' read 'false gold'). Given the combination of authors, this book would seem to be little more than propaganda."

Smith contends the book is based on "rock-solid science" and that his and Corsi's research only serves to strengthen Gold's work.

In a WND column today, Corsi examines "fossil fuel" theory, arguing its assertions never have been scientifically proven.

Smith believes the oil industry has a "vested interest in having people believe [oil] is a very scarce commodity."

"It's only to the benefit of anybody who sells a commodity to have people believe it's running out," he said.

Knowing the origin of oil and its expected supply is crucial to the nation's policymaking, Smith argued, pointing out the U.S. economy is "absolutely predicated on having supplies of reasonably priced energy."

"If in fact we're running out of oil, then we are making good decisions about the political and economic impact that oil will have in our society," he said. "But if in fact it's not running out, we're making bad decisions."

Smith added that on one hand, the nation owes the oil industry a great debt of gratitude for all it has delivered.

"But by the same token, are they telling us the truth about supplies?"

Smith pointed out that from 1970 to 2005, the demand for oil increased 200 percent, yet today, there are at least 1 trillion barrels of proven reserves and as many as 7 trillion, according to one estimate.

"We're finding new oil fields every day of the week," he said.

Tuesday, November 22, 2005

Oil prices surge overnight

ABC Radio, Australia

Reporter: Andrew Geoghegan

TONY EASTLEY: World oil prices surged overnight prompted by forecasts that the northern hemisphere may be in for a harsh winter that would stretch oil supplies.

But this may just be a sign of things to come, with some oil analysts predicting that the global supply of oil may be about to peak as early as next year.

The Association for the Study of Peak Oil and Gas is an international organisation of scientists, which is working to determine the timing and effect of the oil peak and subsequent decline in production.

The Association has just been launched in Australia by its international President, Swedish physicist Kjell Aleklett.

Professor Aleklett has been speaking to our reporter Andrew Geoghegan.

ANDREW GEOGHEGAN: Professor Aleklett, you're talking about a permanent shortfall in global oil supply. Just explain to us the concept of peak oil.

KJELL ALEKLETT: That's the time when the production cannot keep up with what demand is. That means that you will get a lower production some year compared to the year before, even if you like to buy more. And that of course means that it will be harder and harder to get the oil, and the price probably will go up.

ANDREW GEOGHEGAN: So when do you think this is likely to happen?

KJELL ALEKLETT: It will happen some time between now and 2020. And it will probably hit around 2010.

ANDREW GEOGHEGAN: We've already seen the effect high supply and short demand have on oil prices. What effect will this have?

KJELL ALEKLETT: It depends on how you prepare for this. If you prepare for this the effect might not be so hard, and that's one reason why we in ASPOG like to get people aware about this future.

ANDREW GEOGHEGAN: So what is your organisation set up to do?

KJELL ALEKLETT: First of all, we like to inform people as much as possible about this future and that it's coming, because when you talk about energy, it's long-term planning. And I can mention, for instance, that the Government in Sweden now has decided to put up a committee that will try to make Sweden less dependent on oil in the year 2020.

ANDREW GEOGHEGAN: Taking a look at Australia, for instance, what effect is this having, particularly when we have such a great dependence on oil?

KJELL ALEKLETT: It is harder, probably, for you to fix this, and if you don't start now, it will be even harder in the future to do it.

ANDREW GEOGHEGAN: So is this simply a matter of finding alternative energy sources?

KJELL ALEKLETT: That's one big thing, the other thing is that you have to find an alternative way to live sometimes also, and try to be more careful when you use fossil fuel and coal and oil in the future.

TONY EASTLEY: Professor Kjell Aleklett speaking there, with Andrew Geoghegan.

Is UK oil output running on empty?


By Adam Porter

How much will you pay for fuel?

This is a question people often ask themselves. How much will it cost to fill my car? How much will it cost to heat my home?

But are there more hidden costs to the British citizen other than just the cash they hand over to oil companies, gas providers and electricity generators?

British North Sea oil output has declined steadily since 1999.

This, accentuated by the sharp rise in global crude prices, is now taking a big chunk out of Gordon Brown's budget. That missing chunk has to be met by the UK taxpayer.

Gordon Brown recently called on the eleven nations of OPEC to increase their supply capacity.

However, as OPEC was quick to point out the biggest fall in production by any major producer since 1999 is not an OPEC nation. It is the UK.

Steady decline

"Maybe politicians have just come to realise the situation," says Mike Wittner, global head of energy market research at Calyon Bank.

"But markets are not really surprised. UK oil production has been declining for several years."

The rate of decline has ranged from 6% to 17%, year-on-year.

Experts say this is not surprising.

"It is because the way offshore fields are developed, [which is] all in one go and produced as fast as possible, for economic reasons," says Dr Michael Smith, head of research analysts EnergyFiles.

"When they start to decline, they do so fairly rapidly. All these big fields came on stream roughly at the same time so they have all tended to reach their maximum at the same time, then combining to decline."

No turning back

The UK produced an average of 2.72 million barrels a day (mbpd) in 1999, hitting a high of 3.1 mbpd in August.

But by June 2005 this had fallen to 1.7 mbpd, a drop of 34%.

"These declines do seem to be irreversible now," says Deborah White, senior energy analyst at Societe Generale.

"In my experience, even when [oil] prices are extremely high and spending [on extraction] is extremely high, it has been virtually impossible to reduce decline rates below 3%."

What is also interesting about the UK's declining oil output is that it has been rather consistent.

In 2000, production was down 8.1% from its 1999 high, then falling 6.8% in 2001.

The decline slowed to 0.5% in 2002, prompting calls that an output 'rebound' was on the cards.

But 2003 saw an 8.8% decline, rising to 10% in 2004.

This year has seen a similarly startling decline. In February, year-on-year levels were down 13%, rising to 17% in March.

Discovery shortage

"The UK will eventually have to import," Mike Wittner argues.

"Declines will continue. There is only one new field of any size - the Buzzard field - set to come online. Otherwise it's just bits and pieces."

The International Energy Agency (IEA) has forecast a slight pick-up in UK output next year to 1.85 mbpd but it too sees a continuing decline to 1.66 mbpd in 2007.

Even the UK Offshore Operators Association (UKOOA) says that declines are inevitable. Even with increased spending of about £4.3bn a year, it believes the decline will still be about 7%.

A new round of oil field licences handed out this year may also fail to stem the fall in crude production.

At least that is what the Department of Trade and Industry says.

"Eight new fields started production during the past year," it reported.

"But production from these fields was insufficient to make up the general decline in production from older established fields."

"There might be some reduction in decline [rates]," says Dr Smith.

"But there is unlikely to be any growth because the depletion in big old fields is greater than likely discoveries in the new marginal small fields found under new licences."

Economic impact

Declining oil output has a direct economic impact upon British citizens through lower tax revenues.

Average oil production fell by 940,000 barrels between 1999 and 2005.

Assuming an average oil price of $60 a barrel and using some back of the envelope calculations, that would work out at £33.82 per barrel.

In this scenario, the UK would lose an average of £31.7m a day, equivalent to £11.6bn a year.

This would translate into an annual loss per person of £193.38.

Gordon Brown is, of course, also getting vastly increased tax revenues from the major oil companies as prices have spiralled.

In 1999, oil hovered around $20 per barrel and has since trebled in price.

But the price increases can also be a double-edged sword.

Gas solution?

As Britain becomes a net importer of oil, as it first did this summer, not only does falling output cost money. So does the very expensive energy - oil, gas and liquefied gas - bought to replace it.

In this respect, government figures do not provide much hope for North Sea gas output either.

Output fell 5.5% in the second quarter of 2005, according to DTI figures, while imports increased by 53.5%.

"Gas has replaced nearly all our power generation," says Dr Smith.

"But gas has its own problems. UK gas imports are increasing dramatically but otherwise there is no [other] significant energy source.

For transport, where most of our oil is used, there isn't a viable alternative right now nor will there be one in the next five to ten years."

The UK is facing a sea-change in attitudes towards oil.

Whilst high prices may ease the pain right now by providing extra tax for the chancellor, our own supplies are dwindling.

"I am forecasting that the UK will be a net importer of oil around 2007," says Dr Smith. "By 2015 the UK will need to import between 600-700,000 bpd."

How much those imports will cost you and your family is an open-ended question.

But unlike North Sea oil, it is one that will not simply fade away.

Monday, November 21, 2005

Peak Oil resolution in U.S. House of Representaives

Global Public Media

In Brief: Expressing the sense of the House of Representatives that the United States, in collaboration with other international allies, should establish an energy project with the magnitude, creativity, and sense of urgency that was incorporated in the `Man on the Moon' project to address the inevitable challenges of `Peak Oil'.

A peak oil bill has been filed in the House of Representatives with the support of the newly formed Peak Oil Caucus, founded by Rep. Roscoe Bartlett (Rep, MD) and a number of co-sponsors. The members of the caucus are James McGovern, Vern Ehlers, Tom Udall, Mark Udall, Raul Grijalva, Wayne Gilchrest, Jim Moran, Dennis Moore.

Co-sponsors are Tom Udall, Virgil Goode, Raul Grijalva, Walter Jones, Tom Tancredo, Phil Gingrey, Randy Kuhl, Steve Israel, G.K. Butterfield, Mark Udall, Chris Van Hollen, Wayne Gilchrest, Al Wynn, John McHugh, Jim Moran, and Dennis Moore.

Expressing the sense of the House of Representatives that the United States, in collaboration with other international allies, should establish an energy project with the magnitude, creativity, and sense of urgency that was incorporated in the `Man on the Moon' project to address the inevitable challenges of `Peak Oil'.

October 24, 2005

Mr. BARTLETT of Maryland (for himself, Mr. UDALL of New Mexico, Mr. GOODE, Mr. GRIJALVA, Mr. JONES of North Carolina, Mr. TANCREDO, Mr. GINGREY, Mr. KUHL of New York, Mr. ISRAEL, Mr. BUTTERFIELD, Mr. UDALL of Colorado, Mr. VAN HOLLEN, Mr. GILCHREST, and Mr. WYNN) submitted the following resolution; which was referred to the Committee on Energy and Commerce

Expressing the sense of the House of Representatives that the United States, in collaboration with other international allies, should establish an energy project with the magnitude, creativity, and sense of urgency that was incorporated in the `Man on the Moon' project to address the inevitable challenges of `Peak Oil'.

Whereas the United States has only 2 percent of the world's oil reserves; Whereas the United States produces 8 percent of the world's oil and consumes 25 percent of the world's oil, of which nearly 60 percent is imported from foreign countries;

Whereas developing countries around the world are increasing their demand for oil consumption at rapid rates; for example, the average consumption increase, by percentage, from 2003 to 2004 for the countries of Belarus, Kuwait, China, and Singapore was 15.9 percent;

Whereas the United States consumed more than 937,000,000 tonnes of oil in 2004, and that figure could rise in 2005 given previous projection trends;

Whereas, as fossil energy resources become depleted, new, highly efficient technologies will be required in order to sustainably tap replenishable resources;

Whereas the Shell Oil scientist M. King Hubbert accurately predicted that United States domestic production would peak in 1970, and a growing number of petroleum experts believe that the peak in the world's oil production (Peak Oil) is likely to occur in the next decade while demand continues to rise;

Whereas North American natural gas production has also peaked; Whereas the United States is now the world's largest importer of both petroleum and natural gas;

Whereas the population of the United States is increasing by nearly 30,000,000 persons every decade;

Whereas the energy density in one barrel of oil is the equivalent of eight people working full time for one year;

Whereas affordable supplies of petroleum and natural gas are critical to national security and energy prosperity; and Whereas the United States has approximately 250 years of coal at current consumption rates, but if that consumption rate is increased by 2 percent per year, coal reserves are reduced to 75 years:

Now, therefore, be it Resolved, That it is the sense of the House of Representatives that--
(1) in order to keep energy costs affordable, curb our environmental impact, and safeguard economic prosperity, including our trade deficit, the United States must move rapidly to increase the productivity with which it uses fossil fuel, and to accelerate the transition to renewable fuels and a sustainable, clean energy economy; and
(2) the United States, in collaboration with other international allies, should establish an energy project with the magnitude, creativity, and sense of urgency of the `Man on the Moon' project to develop a comprehensive plan to address the challenges presented by Peak Oil.

Sunday, November 20, 2005

Time to discard fifty years of energy myths

 By Matthew R. Simmons and Stewart Udall

This summer's hurricanes have triggered the most serious energy emergency in the nation's history. With gasoline, natural gas and heating oil at near-record highs, many families face the chilly prospect of much higher energy bills in the future. The entire economy is at risk, but airlines, tourism, farmers, small business, seniors and the poor are particularly threatened.

Katrina and Rita ravaged the Gulf of Mexico's petroleum infrastructure, but a larger, more daunting crisis was already on the horizon.

To craft an intelligent response, we must begin by discarding 50 years of energy myths. Because our continent had huge reserves of oil, coal and natural gas, Americans have nurtured a set of energy illusions that have now come home, in biblical fashion, to haunt us.

The most dangerous myth is that cheap energy is our birthright, that the well would never run dry.

This illusion was born in the early 1950s, when U.S. oil fields provided two-thirds of the planet's petroleum. Oil was so abundant that domestic producers were required to curtail production to prevent a price collapse. For lack of a market, large plumes of natural gas, now our most precious heating fuel, were flared into the sky.

And atomic energy, the new kid on the block, promised an infinite supply of almost-free electricity. In this euphoric moment, our nation began to fashion a new way of living unlike anything ever seen on the planet.

For a half century, we designed skyscrapers, autos, cities and houses on the assumption that energy would remain inexpensive. In the '50s, we invented the suburb, the shopping center and the Interstate Highway System. In the '60s we bought Mustangs. In the '70s we visited the moon, and in the '80s we built the world's most powerful military. Between 1950 and 2005, the country's population doubled and the economy grew sixfold.

Although advanced technology, superb engineering and Yankee ingenuity played vital roles, it was cheap energy that invented U.S. prosperity. Even at today's prices, a dime buys enough electricity to lift a pickup truck 500 feet in the air. A gallon of gasoline contains as much energy as that expended riding a bicycle across the United States or hiking 300 miles across Arizona.

Because energy was affordable and abundant, we learned to consume enormous quantities. In recent decades our "burn rate" has been the equivalent of 100 pounds of coal per person-day. Americans now consume their body weight in petroleum products each week.

Energy may be a sliver of gross domestic product - but try running the rest of the economy without it. Energy, not money, is the original currency, the source of all wealth. We share this view even though we come from vastly different backgrounds.

Stewart Udall was elected to Congress more than 50 years ago, and served as secretary of the Interior during a vast expansion of the nation's wilderness areas. For the last 35 years, Matt Simmons has been one of the world's leading energy investment bankers, while writing widely on energy trends. One of us is a Democrat, one a Republican, but both of us believe that the nation can no longer afford fanciful, indulgent, "Alice in Wonderland" energy policies that place our economic prosperity and national security at risk.

The coming months will pose an enormous challenge, with the highest heating bills in U.S. history and the prospect of natural gas rationing. It is a time for bold, courageous leadership, but to date the political response can be summarized as "pray for a mild winter." Although the near-term challenges are dwarfed by those of the coming decade, our leaders continue sleepwalking.

Katrina showed us what happens when you unplug modern energy: Civilization unravels. Because energy is the prerequisite for economic prosperity, social stability and environmental well-being, we must discard the dangerous myths of the past and embrace the momentous challenges of the future.

Here are the key facts:

? U.S. oil production peaked 35 years ago and no amount of drilling can turn back the clock.

? Depletion rates in natural gas wells have reached alarming levels.

? The nation's energy workforce and infrastructure are aging.

? No new refineries have been built in 30 years.

? Our population is increasing by 30 million each decade.

? Chinese oil demand is surging.

? Finally, the cornucopian assumption that the Middle East holds unlimited amounts of oil is false. Approximately three dozen aging fields produce most of that region's supply. The thesis that the Saudis could open the tap as wide as necessary is appealing but fictitious. As a result, world oil production is likely to peak within the next decade, if not sooner.

In short, the era of cheap energy is over. Where to from here?

More drilling? Of course we will need to do more drilling, if only to stay where we are. But research shows that more than half the energy used in this country is lost in inefficient power plants, buildings and cars.

Efficiency must be the rallying call. Conservation is, well, conservative, the single most patriotic thing we can do. Longer term, we've got to acquire more accurate information about the true state of the world's aging oil fields, reorganize our work patterns, modernize our shipping and transportation systems, refurbish our aging energy infrastructure, weatherize tens of millions of buildings, and exponentially expand the production of domestic biofuels, wind and solar power, while replacing 225 million automobiles and light trucks with far more efficient vehicles. This scope of work is not optional: It is an urgent matter of national preservation.

If we ignore the current crisis or misread its message, the world as we know it is likely to become a far darker place for our children.

Stewart Udall, a former Arizona congressman, served as secretary of Interior in the Kennedy and Johnson administrations. Matthew R. Simmons is chairman of Simmons & Co. International, an energy investment banking firm. His recent book, "Twilight in the Desert," is an investigation of Saudi Arabia's oil industry.

Friday, November 18, 2005

Are we there yet? The prospects for $100 oil

Market Watch

By Myra P. Saefong

When it comes to the prospect of $100 oil prices, it's still a question of when, not if.

Earlier this year, speculation over a spike past $100 a barrel was fed by terrorist activities, severe weather and political and economic uncertainties. In April, Goldman Sachs even warned of a "super-spike" period that could push oil to $105 per barrel.

But by late August, around the time when crude-futures prices reached a record level near $71 a barrel, MarketWatch's editor-in-chief questioned whether Hurricane Katrina had helped mark the peak for oil. And MarketWatch Columnist Tom Kilgore said a technical indicator may be suggesting an end to crude's uptrend.

"The $100 a barrel was never going to be a near-term expectation without a cataclysmic terrorist attack on a significant oil infrastructure," said Jason Schenker, an economist at Wachovia Corp.

Indeed, that price scenario was "always an exaggeration of a low-probability event," said Michael Lynch, president of Strategic Energy & Economic Research.

When it comes down to it, traders must remember the reason crude reached record highs in late August. "There was a massive natural disaster that caused supply lines to shut down and we're still seeing the impact of," said Schenker. So "it would take something significantly greater than Katrina, Rita and Wilma combined" to get prices to $100.

Crude prices are down about 18% from their record high in Katrina's wake.

Even so, some analysts refuse to relinquish that triple-digit price, mainly because the world is depleting its oil reserves and there's never a shortage of price-supporting events.

"What ever happened to $100 crude? It just got postponed," said Agbeli Ameko, a managing partner at First Enercast Financial. "That is, at least until the next hurricane season or some geopolitical bombshell."

"In this 'peak-oil' and 'terror-premium' environment, the market will remain in reach of the $100 barrier," he said.

Risky access, depleting sources

Traders have been keeping a close watch on domestic and international supplies, but it's important to take a closer look at oil reserves and production to calculate just how much oil the world has left.

There's probably about 1 trillion barrels of oil left worldwide -- and 60% of that is in the Middle East, said Dan Hassey, a senior research analyst for Boca Raton, Fla.-based Gold & Energy Advisor.

"Supplies are so tight and demand is growing and unfortunately, a lot of the supplies we get are [from] some very unstable places including ourselves, as we learned in the last couple of summers of hurricanes," he said.

Of the world's total, Saudi Arabia holds 23% of the proved oil reserves, or about 263 billion barrels, according to a report from the Gold & Energy Advisor, which based some of its figures on an article in Barron's. A total of about 30% comes from Iran, Iraq and the United Arab Emirates.

The Gold & Energy Advisor estimates that based on Saudi Arabia's output of 3.6 billion barrels a year in 2003, the country has about 73 years left before depleting its oil reserves.

The U.S. has only about 11 years before depletion of its proved reserves, according to Gold & Energy Advisor.

Americans "take [oil] out of the ground much faster than anybody else of the major producers in the world ... and we're going through it very quickly," Hassey said.

Shifting power

With the U.S. running out of oil, "that means more pricing power to OPEC," which controls around 65% of the world's oil, said Hassey.

The Organization of Petroleum Exporting Countries is an "oligopoly" -- it can control the supply it has and keep prices high, he said.

And "as people start to realize that we are drawing down our reserves, that is going to give more pricing power to OPEC," he added.

One of the big problems with that: many of the countries in the cartel have oil companies that are controlled by the government and that's the "least efficient, and probably more wasteful way to run an oil business," he said.

Two examples of government-run oil are Venezuela and Iran, where production is "erratic and declining," he noted.

Consumption ease?

Oil prices certainly won't see any significant relief from falling demand or alternative-energy sources.

True, the high price of oil is slowing demand right now, but investors tend to concentrate on U.S. demand -- which accounts for 25% of the world's oil, said Hassey.

Global demand is falling, but not as fast as U.S. demand, he said. See Commodities Corner on energy demand.

At the same time, there are questions about whether alternative-energy sources will erode demand. See Commodities Corner on biofuels.

But "I don't think we're going to have enough alternative energies at a good price that's globally distributed within the next two to five years before [the] next global expansion occurs," said Hassey.

There is "no really new alternative is on the horizon," said veteran commodities trader Kevin Kerr.

Given all that, "$100 oil is not that far off" -- in 2 to 30 months without a major terrorist act, and 6 to 12 months with a major terrorist attack, said Kerr, who also edits Global Resources Trader, a service of MarketWatch.

"The bottom line is, the light, sweet, easy-to-get/easy-to-refine oil is much harder to lay your hands on nowadays," he said, and that lack of light, sweet crude to refine "will most certainly drive prices higher overall."

So "for those asking 'are we there yet?' -- be patient. It probably won't happen in 2005, but 2006 or 2007 could be another story," First Enercast's Ameko said.

Building a dream - Brother, sister plan anti-suburb in Colorado

Imagine being able to live, work and play in a place where everything is within walking distance.

The brother and sister duo of Jed and Katie Selby are hoping that recreating homes that are surrounded by parks, commerce and beauty will lure people from the suburban sprawl and the comfort of their cars. South Main is where they hope to do it.

South Main is a city concept created by the Selbys. Its on the edge of Buena Vista, Colorado, and will be a mixed-use development of homes and business space for all walks of life.
Making dreams a reality

The idea for South Main came in 2002, when the siblings purchased about 40 acres of land adjacent to the Buena Vista downtown area. Both siblings are professional kayakers -- she's 29; he's 27 -- and were attracted to the area because of its climate and proximity to the Arkansas River.

Using family money, they initially planned to build only a white-water park. Those plans changed slightly, though, when they took a closer look at the area and saw how close it was to the town center.

"We thought it was a unique opportunity to connect the historic downtown to the river and [to] have permanent public access [to it]," Katie Selby said.

"The reason we chose to do a project in Buena Vista is that it really represents the last [relatively] untouched place in Colorado," Jed added.

Armed with ideas and a vision, the duo embarked on their journey of building South Main. They visited a neighborhood called Prospect New Town in Longmont, Colorado, that shared similarities with their vision. There they met Kiki Wallace, the town's founder and developer. Wallace then became a mentor to the Selbys and also recommended Dover, Kohl & Partners, the planning firm that they ended up using.

"[South Main] is built on the principles of new urbanism, which are nothing new," Jed said. "It's essentially built around basic human needs, including places to work, places to shop, places to gather. The difference is that they're all within walking distance."
Developer who?

One of their first hurdles was coming to terms with their new titles: developers. The Selbys knew that the profession had some negative association, but they were passionate enough about their ideas to deal with the new label.

"Developers are the second lowest on the food chain in the United States," Jed said. "I think the only [profession] lower is the attorney."

In the beginning of their venture, though, Katie was a bit apprehensive about her new title.

"When we first started this, she was like, 'Oh, we're building a sustainable neighborhood community thing,' " Jed said. "She would never say, 'I'm a developer."

They've come a long way since then, though, and they've broken ground on South Main and mapped all of the streets and the one stoplight. The current population is just over 2,000, and they expect another 850.

South Main will include large single-family house lots, small single-family houses, apartments and retail spaces. The Selbys hope to attract a diverse population.

"There's a good mix for people of all different age groups and income categories within the neighborhood," Katie said.

In addition to planning homes and businesses, they've also teamed up with the City of Buena Vista to create the world's largest white-water park. It is scheduled to be completed in the fall.
Best of both worlds

South Main has been designed "for people rather than cars," Katie said.

Within six weeks, they sold 90 percent of the lots in Phase 1 of the community. What they initially thought would take a year or two to sell ended up taking only a-month-and-a-half.

"The people took to this a lot better than we could have ever anticipated," say Jed.

The siblings are counting on a trend toward downtown revitalization and that a better quality of life will attract people and businesses to South Main. With gas prices rising and suburbs becoming more congested, they are trying to create a pleasant alternative.

"One of our biggest goals here is to have the most vibrant, wonderful downtown center while preserving as much of the outlying area as possible," Katie said.

"Our involvement with South Main will be forever. We will always be a part of this neighborhood, of this community. It's a wonderful place."

Wednesday, November 16, 2005

Prepare for Peak Oil Now


By Richard Heinberg

Oil is a finite resource -- and the decline of world oil production is predicted to occur anytime within the next 30 years. To avoid the worst-case scenario, we must begin today to reduce our dependence on oil.

AlterNet Editor’s Note: This paper, exclusively available to AlterNet, was presented at a Reception with Their Royal Highnesses The Prince of Wales and the Duchess of Cornwall, at the California Leaders Round Table Dialogue on Peak Oil, Climate Change and Business Action; November 7, 2005 in San Francisco.

The subject I teach -- human ecology -- is a discipline that largely concerns population and resources. Over the past few years I have chosen to study oil, because it is the most important energy resource of the modern world.

Only 150 years ago, 85 percent of all work being accomplished in the U.S. economy was done by muscle power -- most of that by animal muscle, about a quarter of it by human muscle. Today, that percentage is effectively zero; virtually all of the physical work supporting our economy is done by fuel-fed machines. What caused this transformation? Quite simply, it was oil's comparative cheapness and versatility. Perhaps you have had the experience of running out of gas and having to push your car a few feet to get it off the road. That's hard work. Now imagine pushing your car 20 or 30 miles. That is the service performed for us by a single gallon of gasoline, for which we currently pay $2.65. That gallon of fuel is the energy equivalent of roughly six weeks of hard human labor.

It was inevitable that we would become addicted to this stuff, once we had developed a few tools for using it and for extracting it. Today petroleum provides 97 percent of our transportation fuel, and is also a feedstock for chemicals and plastics.

It is no exaggeration to say that we live in a world that runs on oil.

However, oil is a finite resource. Therefore the peaking and decline of world oil production are inevitable events -- and on that there is scarcely any debate; only the timing is uncertain. Forecast dates for the peak range from this year to 2035.

The peaking phenomenon itself has been observed again and again in individual oil fields and in entire producing nations. One of the first countries to hit its peak was the U.S.. During the 1930s and '40s, half the world’s production of petroleum came from Texas and Oklahoma. However, U.S. production reached its all-time maximum in 1970 and has been declining ever since. Currently the U.S. imports 60 percent of its oil.

Concern over the likelihood of an impending world peak has increased markedly in recent months as global spare production capacity has dwindled and as prices have achieved what seems to be a new baseline of over $50 per barrel.

Evidence that we are approaching peak includes the following:

* ExxonMobil documents that global oil discoveries peaked in 1964. Declining rates of discovery are therefore a long-established trend.

* Chevron notes in recent advertisements that 33 of 48 nations are in decline. We have thus seen the peaking of production in a majority of individual nations, including some important producers such as Indonesia, Norway, Great Britain, and Venezuela. Mexico will reach its peak within the next two years.

* As noted by the International Energy Agency, there is evidence that a substantial amount of "proven reserves" in OPEC countries are illusory, the result of a scramble for market share within a cartel that allocates export quotas based on stated reserves.

With regard to this last point it should be noted that reserves figures, even when accurate, have historically given little warning of peaking. The U.S. instance is once again emblematic: in 1970, U.S. oil reserves were higher than ever; so were production rates. But only a year later, American production began its terminal decline. The study of discovery rates and depletion rates gives us a much better idea of when the global peak is likely to occur.

Optimistic estimates of future discovery and production issued by Cambridge Energy Research Associates and the U.S. Geological Survey have been criticized by several analysts. The optimists have generally failed to anticipate peaks, first in the U.S. and repeatedly in the case of other nations around the world.

This morning the International Energy Agency (IEA) issued a statement saying that the world will have sufficient energy supplies for the next quarter century. However, the statement noted the necessity of the investment of $17 trillion in the supply train in order to maintain sufficiency for so long. Also, the IEA anticipates Saudi Arabian production expanding to 18 million barrels per day by 2030—a figure considerably higher than the maximum possible rate of production from that country cited not long ago by Sadad al Husseini, the recently retired head of exploration for Saudi Aramco.

Expressions of concern have been voiced by corporations, prominent organizations, and knowledgeable individuals, including ChevronTexaco, the Royal Swedish Academy of Sciences, Volvo, Ford Motor Company Executive Vice President Mark Fields, the Chinese Offshore Oil Corporation’s chief economist, and numerous petroleum scientists and oil industry analysts.

The question immediately arises: Will alternative sources be able to make up the difference?

Alternative sources often discussed include oil sands from Canada, shale oil in Colorado, coal-to-liquids, gas-to-liquids, nuclear, and renewables such as solar and wind. Each of these will require immense investment and well over a decade of intense effort in order to produce substantial quantities of energy to offset declines from fossil fuels. And in most cases, rates of production are and will be constrained by non-economic factors. Take the oil sands, for example. Currently Canada produces one million barrels of synthetic crude per day from that source. There is expectation of two mb/d by 2010, and perhaps as much as four mb/d by 2025. We are unlikely to see higher numbers than that even with extraordinary capital investment, because the production process requires large amounts of natural gas and fresh water, both in short supply in Alberta. Moreover, according to the IEA, the world needs six mb/d of new production capacity each year (and that number is growing) to meet new demand and to offset depletion from existing fields.

How about increased efficiency -- surely that can offset any potential oil supply problems. In principle, yes, but most efficiency strategies will likewise require significant lead times. For example, we have the technology now to enable all of us who own cars to be driving ones that get up to 100 miles per gallon. If we were, that would obviously save an enormous amount of fuel. But how long would it take to implement that strategy? It would certainly take four or five years for Detroit to begin producing such high-efficiency cars in large numbers.

Then, not everyone buys a new car every year. In fact, it takes about 15 years to change out nearly the entire U.S. car and truck fleet. So, altogether, it would take about 20 years to fully implement this particular efficiency strategy.

Will the market be able to respond quickly enough to forestall serious economic, social, and political impacts? It is often said that the Stone Age did not end for lack of stones, nor will the Oil Age end because we run out of petroleum -- but instead because we find a cheaper source of energy. However, as we have just seen, that cheaper source of energy has yet to be identified.

Early this year a report was released, prepared for the U.S. Department of Energy by a team led by Robert L. Hirsch, who has a distinguished background in the oil industry and is a senior energy analyst at SAIC and the Rand Corporation. The Hirsch Report (titled "Peaking of World Oil Production: Impacts, Mitigation and Risk Management") concludes that price signals will arrive at least ten years too late to enable a gentle, market-led transition away from oil to other energy sources. The report describes Peak Oil as an "unprecedented" challenge for modern societies, and describes economic, social, and political risks if preparation is not undertaken soon enough, or on adequate scale.

Let me read you a few sentences from the Hirsch Report:

The problems associated with world oil production peaking will not be temporary, and past "energy crisis" experience will provide relatively little guidance. The challenge of oil peaking deserves immediate, serious attention, if risks are to be fully understood and mitigation begun on a timely basis. Mitigation will require a minimum of a decade of intense, expensive effort, because the scale of liquid fuels mitigation is inherently extremely large. Intervention by governments will be required, because the economic and social implications of oil peaking would otherwise be chaotic.

The report also concludes that the costs of preparing too late for global oil peak would far outweigh those of preparing too early.

The worst-case scenario for the impact of global production peak is very bad indeed. As I mentioned earlier, we are extremely dependent on oil for transportation, agriculture, plastics, and chemicals. In each area, we are already seeing serious impacts resulting from current prices in the $60-per-barrel range. For example,

Currently tens of thousands of farmers are agonizing over whether they can afford to plant next year’s crop, given high fuel and fertilizer costs.

* Chemicals and plastics industries are already hard hit: In the chemistry industry alone, more than 100 plants have closed and more than 100,000 jobs have been lost just this year.

* In the airline industry, 40 percent of revenues go to pay for jet fuel; most U.S. air carriers are already in bankruptcy or nearing that situation.

* Home heating costs are projected to be 40-50% higher this winter than last.

As prices go even higher, and with actual scarcities of fuel, people will experience difficulties commuting, and the maintenance of our far-flung food distribution systems may become problematic.

On top of all this, oil is a strategic resource: as supplies become scarce, there is increasing likelihood of international conflict.

To avoid the worst-case scenario we must begin today to reduce our dependence on oil. The effort must have top priority. It must focus primarily on reducing demand, and only secondarily on producing large quantities of alternative transportation fuels.

A global Oil Depletion Protocol would reduce price volatility and competition for remaining supplies, while encouraging nations to move quickly to wean themselves from petroleum. In essence, the Protocol would be an agreement whereby producing nations would plan to produce less oil with each passing year (and that will not be so difficult, because few are still capable of maintaining their current rates in any case); and importing nations would agree to import less each year. That may seem a bitter pill to swallow.

However, without a Protocol -- essentially a system for global oil rationing -- we will see extremely volatile prices that will undermine the economies of all nations, and all industries and businesses. We will also see increasing international competition for oil likely leading to conflict; and if a general oil war were to break out, everyone would lose. Given the alternatives, the Protocol clearly seems preferable.

National governments, local municipalities, corporations, and private individuals will all need to contribute to the effort to wean ourselves from oil, an effort that must quickly expand to include a reduction in dependence on other fossil fuels as well.

All of this will constitute an immense challenge for our species in the coming century. We will meet that challenge successfully only if we begin immediately.