Peak Oil News: 05/01/2009 - 06/01/2009

Sunday, May 31, 2009

Top six tips for surviving post-peak oil gas-archy

SF Classic Cars Examiner

By Owen B. Ray

The debate continues to rage as to the exact date when “peak oil” production will occur, and some of the doomsayers claim that oil production may peak during our lifetimes. The resulting decline in reserves will supposedly cause massive shortages, and the world will generally burst into flames and fall into a state of Mad Max-style apocalyptic anarchy. In case you haven’t been watching the Discovery Channel lately, “the term peak oil refers to the maximum rate of the production of oil…recognizing that it is a finite natural resource, subject to depletion," says Colin Campbell, founder of The Association for the Study of Peak Oil and Gas. The day we start to suck the wells dry is open to debate, but there is no doubt that we’ll be bent over again by OPEC and the oil companies as they extract money from our pockets as fast as they pull oil from the ground.

When we have to get all Thunderdome-y to get gas, what are V-8 loving horsepower junkies like ourselves supposed to do? Doing anything with batteries other than using one to start the car is like putting a steak in the microwave, and even thinking about it is cause to be backhanded. (I’m lookin’ at you Neil Young.) The solution has to be loud, go fast, burn something and preferably retain the internal combustion engine. I have come up with the top six totally unscientific and completely non-reality based solutions to get us through dryer times.

6. Bio-ethanol: The only reason that bio-eth is on the list is because standard gasoline engines can be converted to run on it with relative ease. However, that is the end of the appeal to ethanol. Producing fuel from anything that simultaneously jacks the price of food and booze is endlessly stupid no matter how you shake it, and producing ethanol results in a massive net energy loss. Overall ethanol sucks, but it is kind of like drinking Budweiser: you’d do it if it were the only way to get by.

5. Used veggie oil diesel: The veggie oil diesel engine seems like decent idea, and heavily turbocharged, it could even be a little smoke-belching fun. Twin-turbo Powerstoke diesel in a 1966 Lincoln Conti, anyone? Don’t mind if I do. But once everyone catches on and starts pouring yesterday’s tallow in their tanks you won’t be able to get your greasy hands on the stuff no matter how many times a week you try wearing out the fry oil at your neighborhood McDonalds.

4. Drill baby, drill: Peak oil, what peak oil? Drill up the ocean, Lake Tahoe, the Grand Canyon, hell put some wells at 16th and Mission and one in my living room if that is what it takes. Just keep on suckin’ till the world shrivels up like an octogenarian’s butt cheeks. OK, I don’t really approve of this tactic but I really, really love cheap gasoline, but I also really, really think Sarah Palin is Satan’s bastard love child.

3. Hobo-diesel: The most controversial but likely the best local solution to an oil shortage in cities like San Francisco is to make fuel out of the homeless. They are naturally high in alcohol and have a decent 89.4 octane rating, but there are some problems with noxious exhaust before and after refining. Hobo-diesel experts say that we can solve chronic homelessness and a fuel shortage in one fell swoop. However, those pesky “human rights” groups will likely whine about this until we get tired of the smell of patchouli and have to give up.

2. Hoarding: Hoard now and hoard hard. The 100,000 gallon above-ground fuel tank in your backyard will have the landlord and your neighbors up in arms, but give them a ride to Ikea every once and a while and they will pipe down. The big problem here is the initial investment required to start the hoarding, but get some friends together, have a couple of bake sales and prostitute yourself a little bit and you can make it happen. Be sure to have some heavy weaponry to keep the masses away from your stash when all hell breaks loose.

1. Wishful thinking: Gas is going to get more expensive? Dude, how about you put down the crack pipe! This stuff is going to be around forever and it is just going to get cheaper. Mad Max was cool and everything, but we don’t need to get all Al Gore about it. The stuff literally comes out of the freakin’ ground! How much can they possibly charge for it?

An Inconvenient Talk

The Walrus

Dave Hughes’s guide to the end of the fossil fuel age

By Chris Turner

Dave Hughes is driving north on Highway 2. Headed out of Calgary, where he worked for thirty-two years at the Geological Survey of Canada, mapping the nation’s coal reserves. Bound for Edmonton, where he grew up and earned two degrees in geology. It’s not yet dawn, the sky deep black and the windows of his pickup truck like mirrors, the southbound lanes a line of smeared headlights as long-haul commuters make the trek the other way into the capital of the oil patch. Hughes sips coffee from a reusable mug, fighting back sleepiness. Just another commuter trailing a cloud of burnt dinosaur bones on his way to work.

Dave had to start out fifteen minutes earlier than the requisite ungodly hour so he could pick you up at your house. So you wouldn’t drive yourself. Save a few hydrocarbons, he’d joked. He’s a coal man, a geologist, and he always refers to the holy trinity of fossil fuels whose flames have stoked the past 200 years of industrial growth — coal, natural gas, and especially oil — in that same semi-technical way: hydrocarbons. Dave Hughes has a lot to say about hydrocarbons, mainly how there’s no possible way to keep running the engine of a modern global economy for much longer at the pace we’re burning them. Which is why you felt compelled to join him in the black chill of this late-autumn morning. Because that seems like a pretty big deal.

Dave came right to the curb out in front of your house, your personal chauffeur, because you said you were interested in hearing his talk a second time, and he’ll do his level best to bring his talk to just about anyone who asks. The Talk, he usually calls it, and you can tell it has been a proper noun in his head for a good long while now. Somewhere between that first lecture back in 2002 at the University of Calgary and the 155th, the one he’ll give later today at a Natural Resources Canada research facility outside Edmonton, it became his passion, his quiet crusade, his data-freighted inconvenient truth. The Talk. One hundred fifty-four times. Geoscience symposia and energy industry summits and sustainability conferences. The Greater Vancouver Regional District and the Nova Scotia chambers of commerce. A petroleum trade show in Inuvik and a renewable energy confab in Flagstaff, Arizona. The Canadian Institute’s Coalbed Methane Symposium and the annual conference of the Association for the Study of Peak Oil and Gas. The audiences vary, but The Talk only tightens, takes on layers, attains a porous firmness like sedimentary stone. It is crowded with hard facts, and it is intended to overwhelm audiences with its certainty. It’s a reality check, a doozy of a reality check, and Dave doesn’t have much time these days for anyone who won’t face this reality.

Talk No. 147 took place at an urban sustainability forum at the Westin Hotel in Calgary. That’s where you first saw it. The title slide read “The Energy Sustainability Dilemma: Powering the Future in a Finite World,” and identified its presenter as J. David Hughes. Since then, you, too, have come to think of it as The Talk, and its author simply as Dave. Dave was on the bill that day with such dignitaries as the mayor of Calgary and the premier of Alberta. The officials talked about how to turn this boom town into a place that was “all things energy,” but nothing they said had any real resonance after The Talk. When the provincial sustainable resources minister came up to congratulate himself for setting aside some new provincial parkland on the edge of the city, it was as if he’d just awakened from cryogenic freezing, blipped in from some ancient time long before the existence of the world described in The Talk.

The Talk is in essence a constantly updated survey of the state of the planet through a hydrocarbon geologist’s eyes. It plows methodically through reams of energy-geek data. World Conventional Oil and Oil Sands Reserves, 1980–2007. Energy Profit Ratio for Liquid Hydrocarbons. Canadian Gas Deliverability Scenarios from All Sources. The small-font notes at the bottom of each PowerPoint slide enumerate sources that read like a general anaesthetic in print form: BP Statistical Review of World Energy, Proceedings of the National Academy of Sciences, EIA International Energy Outlook. Pie charts and bar graphs with several rainbows’ worth of colour and an overabundance of italicized and all-capped words: “The absolute first priority,” that kind of thing. (By the way, it should be “to reduce energy consumption as soon as possible.”)

The Talk is all kinds of policy-wonky. Your eyes could glaze over. You could even miss the two slides Dave always says are the only ones you must remember. The first is a single-line graph depicting “World Per Capita Annual Primary Energy Consumption by Fuel 1850–2007,” which climbs by 761 percent over its 157-year timeline and flips from 82 percent renewable biomass (mostly wood) at the 1850 end to 89 percent non-renewables (almost entirely fossil fuels) at the 2007 end. The second critical slide has three line graphs in horizontal sequence, all tracking curves that begin in 1850, around the time humanity started drilling for oil in a serious way, and then spiking impossibly high at the right-hand, 2007 termini of their X axes. Global population today: 5.3 times global population in 1850. Per capita energy consumption today: 8.6 times that of 1850. Total energy consumption today: 45 times 1850’s.

You could also miss the way these figures resonate with The Talk’s voluminous data on oil and natural gas and coal reserves. You could miss how our current trajectory obliges us to rely on hydrocarbons for 86 percent of our projected primary energy needs in 2030, and how that fits with the strong case Hughes makes that the global hydrocarbon peak (the point at which global energy supply will begin an irrevocable decline, making the energy price shocks of the past couple of years start to look like the good old days) is estimated to occur nine years before that date.

Here’s the upshot: if you plan to drive a car or heat a house or light a room in 2030, The Talk is telling you your options will be limited, to say the least. Even if you’re convinced climate change is UN-sponsored hysteria or every last puff of greenhouse gas will soon be buried forever a mile underground or ducks look their best choking on tar sands tailings, Dave Hughes is saying your way of life is over. Not because of the clouds of smoke, you understand, but because we’re running out of what makes them.

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Tuesday, May 19, 2009

Brain power can meet the energy crisis

The Guardian

By Larry Elliott

Back in the 1970s, North Sea oil was seen as the saviour of the British ­economy. The money would be spent modernising industry so that it could play in the big league with the ­Germans, the Japanese and the ­Americans. Instead, we spent the money on ­unemployment benefit and tax cuts. The industrial ­renaissance never happened.

By the time the oil started to run out, financial services were the next big thing. The City would be Britain's unique selling point, we would pay our way in the world through banking, insurance, arranging bids and deals and by being better speculators than our rivals. With the banks bust and the financial sector in a state of petrification, we are now going to find out what life is like without artificial stimulants.


It won't be nearly as much fun as the years of living in a dreamland, but stripping away the pretence that there is some easy, painless solution to Britain's long-standing problems represents the first stage to recovery.

Britain has no shortage of talented people. There is plenty of creativity and always has been; the problem is that it has not always been channelled in the right directions. If ever there was a moment to remedy that systemic ­failure, it is now, because this crisis has only just begun. The first phase involved banks; the second phase will be energy.

Oil prices nudged above $60 a barrel briefly last week before falling back on news that inventories are high and that demand for crude is set for its biggest fall this year since 1981. An oil price at these levels looks suspiciously high amid the first fall in global gross domestic product since the second world war, although there are possible explanations. One is that commodity traders believe there will be a more rapid recovery in the global economy than anybody is expecting. A second is that the money central banks are pumping into financial markets through quantitative easing is spilling over into speculation. Third, and most worrying, the days of cheap oil may be a thing of the past. If this is the true explanation, there will be serious consequences.

In the post-war years, there has been a clear link between oil prices and global growth: the long boom of the 1950s and 1960s was an era when crude was dirt cheap; all four major recessions (1974-75, 1980-82, 1990-92 and 2007 to now) followed a spike in oil prices.

The last trough in oil prices occurred at the end of the 1990s, coinciding with the dotcom bubble and talk in the US of the new paradigm economy. Since then, the trend has been inexorably up, with supply struggling to keep up with strong demand from the mature markets of the developed world and the big emerging economies such as China and India.

Chris Sanders, of Sanders Research Associates, traces the origins of the current crisis back to the turn of the millennium, when the fall in production from the big finds of the late 1970s – Alaska, deepwater Mexico and the North Sea – ended the era of cheap oil.

A serious recession in the wake of the dotcom bubble was only averted because policymakers – Alan Greenspan in particular – manipulated interest rates to create another unsustainable boom. This did not mean the problem had been solved; indeed, putting it off for another day simply meant the problem grew bigger. Seen from this ­perspective, what we are witnessing is not the early stages of a new bull market, but a ­temporary lull in a much longer ­crisis that will see recovery hampered by high and volatile energy prices. Indeed, the volatility of crude over the coming years is likely to be as damaging as the fact that fuel will be becoming steadily more expensive.

To envisage this scenario, you don't have to accept that we are at – or close to – peak oil. There are many oil experts who have deep reservations about the notion that the moment of maximum petroleum extraction is at hand; they argue that rising prices will encourage exploration and make it viable for oil companies to extract crude from parts of the globe that were uneconomic at a price of $20-$30 a barrel. New and better technologies will be deployed to keep oil supply in tandem with demand.

Price signals

There is no doubting the economic validity of this case. Price signals do matter, and oil companies are far more likely to beef up their spending on exploration and new refineries if the oil price is $100 a barrel than if it is $10 a barrel. That's the good news.

The bad news is that even if the peak oil sceptics are right and there is plenty of untapped crude in the South Atlantic, Canada's tar sands or Central Asia, it is going to be more expensive to extract it. Oil has been critical to the development of industrial societies but energy firms, unsurprisingly, went for the oil that was easiest to get at and of the highest quality, since that meant low extraction costs and high profits.

In other words, the energy required to get fuel out of the ground was small; the energy return on energy investment (EROI) was high. But as companies have moved to tougher environments, the EROI on oil and gas production has fallen – one estimate is from 33:1 in 1999 to 19:1 in 2005. This global trend mirrors what happened in the US, where oil is still produced in large quantities but much less efficiently than it was 75 years ago. From an estimated 100:1 in 1939, the EROI for American oil production dropped to 30:1 by 1970 and 11:1 in 2000.

As Sanders puts it: "Today we are attempting to extract oil and gas in commercially viable quantities from offshore deposits that lie under more than 25,000 feet of water, rock and hot salt. It may well be possible to do so, but what is highly unlikely is that it will be possible to do so in sufficiently large flows to make a material difference to general prosperity. Another way of putting this is that economic growth rates are going to have to slow."

On the basis of what has happened in the recent past, we are likely to see oil prices on an upward trend but with wild gyrations. Frequent oil spikes when the global ­economy appears to be on the mend will be ­followed by a crash in prices as the impact of dearer energy raises business costs and bites into consumer spending power.

There is a silver lining to this cloud. Another half century of global growth at 5% a year powered by cheap fossil fuels would almost certainly be the death of the planet as we know it. But we are as ill prepared for the post-fossil fuel age as we were for war in 1939.

But we are at our best when we have our backs to the wall: let's ­establish a ­Bletchley Park for renewable energy schemes, where the best ­scientists work out how ­Britain will survive when the oil runs out. And let's do it now.

Friday, May 15, 2009

Moscow warns of future energy wars

Al Jazeera

Russia has warned that military conflicts over energy resources could erupt along its borders in the near future, as the race to secure oil and gas reserves gains momentum.

A Kremlin policy paper, which maps out Russia's main challenges to national security for the next decade, said "problems that involve the use of military force cannot be excluded" in competition for resources.

The National Security Strategy's release coincides with a deadline for countries around the world to submit sea bed ownership claims to a United Nations commission, including for the resource-rich Arctic.

The paper, signed off by Dmitry Medvedev, Russia's president, says international relations in the next 10 years will be shaped by battles over energy reserves.

"The attention of international politics in the long-term perspective will be concentrated on the acquisition of energy resources," it said.

"Amid competitive struggle for resources, attempts to use military force to solve emerging problems can't be excluded.

"The existing balance of forces near the borders of the Russian Federation and its allies can be violated," it added.

The document said regions including the Middle East, the Barents Sea, the Arctic, the Caspian Sea and Central Asia could all be at the centre of competing claims for resources.

Russia, the world's biggest natural gas producer, has already accused the United States, with which it shares a small sea border, of coveting its mineral wealth.

But Moscow is also finding its control over natural gas exports under threat, as the European Union seeks alternative supply routes that would bypass Russia and the Ukraine.

The country is also embroiled in a territorial dispute with Norway over claims to the Arctic sea bed, where around 25 per cent of the world's untapped reserves are believed to lie underneath the ice.

Global security threats

The National Security Strategy also pointed to the US and Nato as major threats to global security.

It criticised a US plan to deploy a global missile shield in Eastern Europe, which has already infuriated Russia.

"The opportunity to uphold global and regional security will substantially narrow if elements of the US worldwide missile defence system are deployed in Europe," the document said.

But it added Russia would pursue a "rational and pragmatic" foreign policy and avoid a new arms race.

The document said Moscow would seek an "equal and full-fledged strategic partnership" with Washington "on the basis on coinciding interests".

Friday, May 08, 2009

How Much Oil Have We Used?

Estimates of how much crude oil we have extracted from the planet vary wildly. Now, UK researchers have published a new estimate in the International Journal of Oil, Gas and Coal Technology that suggests we may have used more than we think.

The idea that we are running out of oil is not a new one, but do we even know how much oil we have extracted from since the first commercial oil wells were sunk in the middle of the nineteenth century? In 2008, chemists Istvan Lakatos and Julianna Lakatos-Szabo of the Hungarian Academy of Sciences theorised that less than 100 billion tonne of crude oil has been produced since 1850 and that the average annual production rate is less than 700 million barrels per year.

They compared proven reserves and estimates of yet-to-find (YTF) resources and echoed the sentiment that we will soon face oil shortages even though a substantial part of those reserves remain in the ground untapped.

Now, John Jones in the School of Engineering, at the University of Aberdeen, UK, suggests that the figures cited by Istvan Lakatos and Julianna Lakatos-Szabo for which they give no references grossly underestimates how much oil we have used already. Jones says that we have used at least 135 billion barrels of oil since 1870, the period during which J.D. Rockefeller established The Standard Oil Company and began drilling in earnest.

The oil industry now spans several generations, says Jones, and has historically been as uninterested in how much oil has been drawn as were economists, day-to-day and annual figures being of much greater concern. However, in 2005, The Oil Depletion Analysis Centre (ODAC) in London provided a total figure of almost 1 trillion barrels of crude oil (944 billion barrels) since commercial drilling began. Even that figure does not add up, Jones explains.

He has calculated a better estimate by using the volume of a barrel (42 US gallons, or 0.16 cubic metres) and a crude oil density of 0.9 tonnes per cubic metre. ODAC's 944 billion barrels is thus the equivalent of 135 billion tonnes.

Jones explains that this figure is of the same order of magnitude as the estimate offered by Lakatos and Lakatos-Szabo, but is nevertheless 35% higher than ODAC's figure. "Their assertion that less than 100 billion tonnes has been produced is significantly inconsistent with the ODAC," says Jones. The implication is that either ODAC or the Hungarian team are incorrect in their estimates, and suggests that clarification of this important figure is now needed.

Journal references:

1. Jones et al. Total amounts of oil produced over the history of the industry. International Journal of Oil Gas and Coal Technology, 2009; 2 (2): 199 DOI: 10.1504/IJOGCT.2009.024887
2. Lakatos et al. Global oil demand and role of chemical EOR methods in the 21st century. International Journal of Oil Gas and Coal Technology, 2008; 1 (1/2): 46 DOI: 10.1504/IJOGCT.2008.016731

Adapted from materials provided by Inderscience, via AlphaGalileo.

Thursday, May 07, 2009

The Bottom

By Jim Kunstler

Euphoria managed to out-run swine flu last week as the epidemic-du-jour, with "consumer" confidence jumping and the big bank stocks nudging up. The H1N1 virus fizzled for now, at least in terms of kill ratio, though we're warned it might boomerang in the fall with a vengeance. No one was surprised to see Chrysler roll over like a possum on a county highway, but the memory of their muscle cars will linger on like a California surfing song. Here in the northeast, where Sundays are not spent at the Nascar oval, the spring foliage reached the tenderly explosive stage and it was hard to feel bad about anything.

For now, the "bottom" is in -- that is, the bottom of this society's ability to process reality. It may continue for a month of so, even after the "stress test" for banks is finally let out of the massage parlor with a "happy ending." But events are underway that are beyond the command of personalities. We're done "doing business" in all the ways that we've been used to, but we just can't get with the new program. Let's count the ways:

1. The revolving credit economy is over. It's over because we can't increase energy inputs to the system, which is one way of saying "peak oil." Of course hardly anybody believes this right now because the price of oil crashed nine months ago, along with global manufacturing and trade. But nothing has changed on the peak oil scene -- except perhaps that ever more new oil projects have been cancelled for lack of financing, which will boomerang on us (even if swine flu doesn't) in the form of much lower future oil production. In any case, the credit fiesta is over, and the "consumer" economy with it, because industrial growth as we have known it is over. It's over globally, too, though all regions of the world will not experience its demise the same way at the same rate.

The Asian nations may swap things around a while longer but China is basically screwed. They have less oil left than we have (which is saying, not much at all) and they won't corner the rest of the global oil market without starting World War Three. Meanwhile, they're running out of water and food. Good luck becoming the next global hegemon. Oh, and Japan imports 90 percent of its energy; India over 80 percent. Fuggeddabowdit.

Credit will not vanish everywhere overnight -- even in the USA -- because it is not distributed equally everywhere. But it will vanish in layers, and here in the USA a very broad layer of the lower and middle classes are now losing their access to it in one way or another -- personally, in small business -- and they will never get it back. Anyone who intends to thrive in the years just ahead had better plan on doing it on the basis of accounts receivable -- and what they receive might not even necessarily come in the form of US dollars. It may come in the form of gold or silver or in the promise of reciprocal services rendered.

This has enormous implications for two of the items in which our credit-dispensing operations are most deeply vested: houses and cars. Unfortunately, these are exactly the things that economic life has been based on for decades in our nation, which leads to the next categories:

2. The suburban living arrangement is over, along with all its accessories and furnishings. Taken as "all of a piece," the suburban expansion was one sixty-year-long orgasm of hypertrophy. We did it because we could. We won a world war and threw a party. We had lots of cheap land and cheap oil. It made lots of people lots of money and all its usufructs have become embedded in our national identity to the dangerous degree that the loss of them will provoke a kind of national psychotic breakdown. In fact, it already has. The completely unrealistic expectation that we can resume this way of life is proof of it.

The immediate problem is that we can't build anymore of it. The next problem will be the failure of the stuff that already exists. The first stage of that is now palpable in the mortgage foreclosure fiasco and, just beginning now, the tanking of malls, strip centers, office parks and other commercial property investments. The latter will accelerate and become visible very quickly as retail tenants bug out and weeds start growing where the Chryslers and Pontiacs once parked. The next stage, which involves large demographic shifts in how we inhabit the landscape, has not quite gotten underway.

3. The Happy Motoring fiesta is over. You'd think that with Chrysler crawling into the bankruptcy court, and GM just weeks away from the same terminal ceremony, the news media would begin to suspect that the foundation of everyday life in this country was cracking. Instead, all we hear is blather about "market share" shifting to Toyota. News flash: not only will we make fewer automobiles in the USA, but Americans will buy far fewer cars made anywhere. We'll keep the current fleet moving a while longer, but when it's too beat to repair, we won't be changing it out for a new fleet -- despite all the fantasies about hybrids, plug-and-drive electrics, and so on. The masses will be too broke to buy these things. What's more, they will be very resentful of the shrinking economic "elite" who can afford them. And, anyway, our roads and highways are destined to fall apart very quickly because there is no way we can sustain the necessary rate of normal maintenance. Meanwhile, we remain completely un-serious about public transit -- even about fixing the vestiges that still exist. The airline industry, of course, will be toast inside of five years.

4. Our food production system is approaching crisis. There's no way we can continue the petro-agriculture system of farming and the Cheez Doodle and Pepsi Cola diet that it services. The public is absolutely zombified in the face of this problem -- perhaps a result of the diet itself. President Obama and Ag Secretary Vilsack have not given a hint that they understand the gravity of the situation. It is probably one of those unfortunate events of history that can only impress a society in the form of a crisis. It also happens to be one of the few problems we face that public policy could affect sharply and broadly -- if we underwrote the reactivation of smaller, local farm operations instead of shoveling money to giant "agribusiness" (or Citibank, or Goldman Sachs, or AIG...). I maintain that this may be the year that the crisis gets our attention, because capital is suddenly harder to get than fossil-fuel-based fertilizer.

All these epochal discontinuities present themselves, for the moment, as a season of muted "hope" and general apathy. The days are suddenly mild. We've resumed old and happy habits of grilling meat outdoors and motoring to those remaining places that were not blanketed with franchised food huts and discount malls. We have a new, charming president with an appealing family. Newly-minted dollars are flowing to the "shovel-ready." The new bad news is less bad than the old bad news (or seems to be). And the year just past has been such a bummer that our hard-wired human nature tells us that good things must be just around the corner.

Personally, I think a lot of good things await us, but not the ones we're expecting -- not a return to buying slurpees on credit cards. It will be very salutary to leave behind the junk empire we've accumulated and move into an epoch of quality and purpose. For the moment, though, our hopes reside elsewhere.

My 2008 novel of the post-oil future, World Made By Hand, is available in paperback at all booksellers.

The return of Peak Oil

Investors Chronicle

By Daniel O'Sullivan

If you thought that the slump in crude prices from their $147 per barrel zenith last July spelled the end of 'peak oil' theories, think again. One US brokerage thinks that, far from approaching the mythical peak, we are in fact already past it.

Peak oil is the notion that the rate of global oil extraction is nearing the absolute limit of what its geology can support, and that declining production is inevitable thereafter. The inference is that new demand from the likes of China and India spells rationing through permanently sky-high prices.

But Marshall Adkins, analyst at Raymond James, thinks the peak was last summer. He cites the behaviour of Saudi Arabia as evidence. The kingdom, which dominates Opec, can usually be relied upon to open the spigots in response to soaring oil prices, as it did in 2005, when oil hit $70 per barrel.

Yet last summer, Saudi Arabian output never exceeded 9.6m barrels per day, the same ceiling it reached in 2005. With massive economic and political incentive to pump as much as it could, the implication is this is actually the limit of what Saudi Arabia can supply to the world market.

There isn't much slack elsewhere. The US, Russia and North Sea producers already pump as much as they can, yet non-Opec production has still declined since 2007. Other Opec members were also pumping as much as possible last summer.

So, if everyone, including the Saudis, was flat out last summer, we have unwittingly already seen the current industry configuration operating at full capacity. And, as Mr Adkins agrees that fresh discoveries will not come onstream fast enough to offset decline rates at existing fields, we are therefore past the historical peak of daily oil supply.

If true, the realisation is too late for many speculators who went long of oil above $100 but have subsequently unwound those positions. Andy Awad of Greenwich Associates says a major contributor to surprisingly strong first-quarter profits from some large US and European banks was financial investors 'restructuring' commodity derivative positions - stumping up losses to date plus 'break fees' to buy themselves out of bets on sky-high prices for commodities, particularly oil.